With sustainable development and the climate change movement gaining momentum, the sustainability reporting landscape is changing rapidly and there is an increasing demand for companies to be more transparent with stakeholders.
The Five Forces: Planet, People, Customers, Governments and Investors will work on innovation, changed mindset and commitment to a better tomorrow. Unless we all come together, we will not be able to achieve the exponential result that we are capable of delivering. The unified thinking and love for the planet will be fully reflected in the Shangri-La of reporting!
One way by which businesses of all sizes can meet these demands is by adopting the concept of ESG in their operations. The Environment looks at the company’s greenhouse effect (carbon footprint), impact on water consumption and waste management. Social oversees the company’s interactions with stakeholders, both internal and external, and fosters reputation. Governance includes those policies that lead to effective decision making within the organization.
Benefits of ESG practices to investors
Following are the benefits that investors will get if businesses follow ESG practices.
competitive advantageCompanies that take steps to increase diversity, improve health and safety policies, give back to their communities, and adhere to sustainable environmental policies strengthen their competitive position.
Long Term Evolution: Companies with strong ESG initiatives focus on better risk management and innovation. It provides the benefit of security during economic or social crisis.
Increased opportunities for businesses: Pursuing a sustainable and inclusive business model has the potential to unlock economic opportunities of at least $12 trillion per year and create up to 380 million jobs by 2030.
Efficiency and cost savings: ESG promotes cleaner and more efficient practices that reduce a company’s operating costs and environmental footprint.
Corporate India’s readiness for the ESG movement is evidenced by the dynamic launch of the Business Responsibility and Sustainability Report (BRSR) by the Securities and Exchange Board of India (SEBI), which incorporates the requirements of global standards, such as the Global Reporting Initiative. GRI) and Sustainable Development Goals (SDGs). India is certainly enabling corporate commitment to create a better future for our next generations. BRSR is an effective compliance and communication tool to help companies bring comparisons between companies to assist them in their non-financial disclosure and to guide investors and other stakeholders.
These rapid changes demand the creation of tools for companies to help them comply. Here, a stability forum/tool can help:
1]As per the global guidelines on sustainability, companies evaluate where it is in accordance with global best practices.
2]Companies understand the difference between its performance and guidelines.
3]Apply advanced functions to continuously improve and reach global best practices.
The major concerns of the focus are:
1) Science-based commitments and goals.
2) Review of materiality and priorities.
3) Measurement of the data set.
4) Elimination of green washing.
5) Clarity and purpose of procedures, results and final reports.
6) Verify the accuracy of the final results.
The need to harness the benefits provided by technology becomes important as it is one of the biggest drivers of business transformation. Digitization helps to make new age reporting easy and accurate at all times. It enables scalability of solutions. The technology helps facilitate organization-wide participation in forms of digital workflow for execution.
Similarly, the physicality or parameters of the analysis can be customized for each business unit based on their area of operation. It helps in accurate sustainability reporting by companies to all stakeholders. Embracing ML-AI-Analytics, IoT, Web 3.0, and Blockchain and the potential for encouraging results as risks are on the horizon.
One such sustainability tool that is leading the ESG sector is GovEVA. It is an ESG Lifecycle Management software that assists companies in their end-to-end ESG journey through a SaaS-based platform, thereby transforming the value creation power of ESG into measurable results.
Facilitating the concept of ESG in an organization is a very important task for every business that the overall management of the business must understand. From the board of directors to employees, supply chains and end consumers, everyone should be aware of this concept if the business is to truly move in a sustainable direction.
The author is an independent director at L&T Finance Holdings.