Weaving ESG into Business Strategy: Today and Beyond

Mandatory and regulatory compliance

The introduction of regulations like SEBI’s BRSR (business responsibility and sustainability report) reporting framework clearly marks the evolution of voluntary to mandatory reporting on ESG practices in India. This standardization sets benchmarks and creates a level playing field for companies in terms of the metrics that are captured and the way they are measured.

Taking it one step further, companies are mandated to respond to any query on the regulatory front. Over 35 stock exchanges around the world have issued or are committed to issuing ESG reporting guidance to regulate their listed companies, signalling the maturity of matters and making ESG an integral part of business continuity.

Voluntary, with high stakeholder expectations

There is mounting pressure from stakeholders for companies to take a proactive approach to managing ESG risks and opportunities as part of their business strategies. Investors are requiring corporate leaders to improve sustainability practices that benefit both their firms’ bottom lines and create a greater impact on the wider community. These demands are in line with multiple studies suggesting that ESG and corporate performance are intrinsically intertwined. Companies with higher ESG performance are likely to have better financial performance, talent retention, and long-term value creation. As investments dedicated to ESG and sustainability increase, companies will need to hasten their response to the demands placed by institutional investors for transparent and detailed ESG disclosures.

Client and customer scrutiny of a company’s ESG practices has become categorical. To hold an edge over peers in this value-driven market, it does not suffice to have competitive pricing and service quality but also strong ethics, transparency, good governance, social value generation, and a commitment to fight climate change. It is a marked difference from business as usual. The sooner organizations understand this, the quicker they will develop an angle of unique business advantage.

Changes in consumer demand are beginning to affect the corporate bottom line as consumers indulge in mindful buying with a sense of how every action impacts the environment and social elements of ESG. To meet this expectation and gain brand affinity, companies will need to conduct their businesses ethically, responsibly, and transparently.

Beyond compliance and expectations

While compliance brings discipline, walking the talk on ESG efforts will require well-thought-out change management, implementation, measurement, and rollout if it is to achieve long-term goals. These goals must be broken down into activities with clear KRA and governance. Action on key ESG goals like environmental sustainability (through green operations and community projects) has both long-term positive ROIs for businesses as well as the enhancement of natural resources in the community. It also builds long-term resilience against the impacts of climate change on office locations, employee health, the supply chain, and underserved communities.

Ultimately, a well-rounded business strategy that is firmly rooted in ESG can build an institution that has the fundamental ingredients for resilient growth and social license to operate.

Author

Paneesh Rao

Chief Sustainability Officer, LTIMindtree

FOLLOW US ON