Over 7 in 10 large Indian firms adopt ESG goals in response to regulatory shifts

In a significant stride towards sustainability, over 75% of large Indian companies have set clear environmental, social, and governance (ESG) goals, with 84% voluntarily sharing their targets. This data was revealed in a report by research company IMA India and Uniqus Consultech, highlighting the growing importance of ESG strategies in the corporate sector. The report further revealed that about 61.3% of manufacturing companies expect to see measurable outcomes from their ESG initiatives in the medium to long term, with 13.3% anticipating results in the very near term. This indicates a shift in corporate India’s approach towards sustainability, with a majority of companies embedding ESG into their core strategies and taking concrete steps towards sustainability.

However, the journey towards sustainability is not uniform across all sectors. While large companies have fully integrated ESG strategies into their organisational strategies, small and medium enterprises (SMEs) still have some road to cover. This disparity underscores the need for a more inclusive approach to ESG adoption, ensuring that all businesses, regardless of their size, are part of the sustainability journey. The primary drivers of ESG adoption, as cited by 85% of respondents, are ethical responsibility and corporate citizenship. More than half of the respondents are leveraging or exploring ‘Green Finance’ and technology for their ESG efforts but have not made significant progress yet. This suggests that while the intent to adopt sustainable practices is high, the execution and implementation of these practices remain a challenge for many companies.

The Securities and Exchange Board of India (SEBI) has introduced new ESG reporting requirements for the top 1,000 listed companies in the country by market capitalisation. This move is expected to increase transparency and accountability among companies, encouraging them to adopt more sustainable practices. However, the rapid pace of regulation has left some companies, even early adopters, struggling to meet the new norms. Companies like L&T and ITC, which were early adopters of ESG practices, are now facing challenges in sourcing information from a diverse and often extensive supply chain. For instance, ITC’s interests range from cigarettes to hotels, and it is grappling with how to source similar information from its agri-business suppliers (millions of small farmers) and customers (the thousands of well-heeled individuals in its hotels business).

The HR departments within organisations are playing a crucial role in promoting ESG initiatives. They are leading efforts in diversity and inclusion, employee well-being, and ethical training. By fostering a culture of sustainability, HR can improve the company’s crisis response capabilities through better stakeholder engagement, enhanced reputation, and by ensuring the workforce is educated on ESG matters. The complexities of ESG compliance, especially for multi-jurisdictional operations, and the need for specialised knowledge are additional hurdles. Companies are investing in skill development and data management systems to ensure accurate reporting, while also seeking clarity on legal implications.

In conclusion, the adoption of ESG goals by Indian companies is a testament to the growing importance of sustainability in the corporate sector. While challenges remain, the commitment to ethical responsibility, corporate citizenship, and sustainable practices is driving companies to innovate and adapt. As new technologies and regulations continue to shape the ESG landscape, companies that can effectively integrate sustainability into their core strategies will be better positioned to thrive in the long term. The journey towards sustainability is a collective one, and it is encouraging to see Indian companies taking significant strides in this direction.