Growing a conscience

Current events dictate that ESG considerations are increasing in importance for companies as well as regulators, warns Ashutosh Senger, lead counsel at Florence Capital

The challenges faced by societies due to the pandemic and the climate crisis have reinforced the need to embed environmental, social and governance (ESG) considerations into business decision-making. The pace at which corporations are communicating ESG issues with their shareholders, investors and other stakeholders has seen a significant increase.

ESG regulations enhance transparency and aid investors and other stakeholders in identifying and assessing sustainability-related risks and opportunities. But there are many entities that still underestimate the importance of ESG issues and the impact they have on their business operations. This article discusses the evolving focus of Indian regulators for devising ESG regulations, and finds that more ESG regulations are on their way ‒ and it is in the interest of businesses to pay attention to them.

Taking into consideration the ESG dimension has strong financial, as well as environmental and societal, benefits. A key component of the post-pandemic green economy is the need for transitioning to a sustainable business ecosystem, and making it resilient for the future. A natural consequence of this focus on building sustainable businesses has placed ESG into the mainstay of Indian businesses.

ESG’s regulatory journey

In December 2007, the Reserve Bank of India (RBI) through a circular communicated the concepts of corporate social responsibility (CSR), sustainable development and non-financial reporting to all scheduled commercial banks. This was one of the first efforts by the RBI to initiate discourse on sustainability with banks.

With respect to the concept of business sustainability, the genesis of ESG disclosure efforts in India can be traced back to the Voluntary Guidelines on Corporate Social Responsibility issued by the Ministry of Corporate Affairs in 2009.

Subsequently, after consultations with several stakeholders from business, academia, civil society organisations and the government, these guidelines were revised in 2011 and named the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business.

Ashutosh Senger is the lead counsel of Florence Capital.