“ESG is not just a cost
It shouldn’t be seen as profits lost.
Now businesses do realise
That profit is a short-term prize.
After all what do companies gain
If they die out and don’t sustain?”
In the first few lines of his poem, Nadir Godrej, chairman & MD, Godrej Industries, puts it very succinctly: the future of every business lies in adopting environmental, social, and governance (ESG) practices.
At a time when every company is trying to find a way to create a sustainable, responsible, and equitable business, the advice from someone whose family has run successful businesses since 1897 is worth its weight in gold.
As part of their efforts to change, companies all over the world, not just in India, are trying to build sustainability and corporate responsibility into their businesses.
Speaking about the experience of European companies in adopting ESG, Julie Teigland, EMEIA Managing Partner, EY, said in an EY panel discussion that most companies are transitioning rapidly to comply with the many EU regulations.
"It was the real first wave that we saw across the EU. It's been followed up quickly now by a wave of companies now moving quickly to assess how they can leverage their need to transition to win much more in the market. Currently, there is a huge focus right now across the EU on all matters concerning the compliance supply chain," she said.
Tiegland said that changing sourcing models and redesigned supply chains are a real opportunity for Indian companies.
Experts also opined that ESG was not just about compliance but the right thing to do for businesses looking to win in the future too.
Zarir Langrana, Executive Director and President-Global Chemicals Business, Tata Chemicals said, "We are seeing that change in attitude towards ESG reflected in actions, in the new policies that are being discussed and rolled out, and essentially, this has been driven by customers, stakeholders, financial bodies, obviously the regulators, but more importantly, the community. I think this has to be people and community-centric if we really want to make a difference.”
Experts also said there was a growing realisation across sectors that they had to change fast.
Kalyan Ram, Chief Operating Officer, Grasim Industries, said that the textile and fashion industries were second in terms of their overall impact on the planet, and they had to change mindsets to think beyond profit.
"I have already started to tell people that our core business is to achieve excellence in water, waste, emissions management, and responsibility. Also, I think purpose is very, very critical. It should be beyond making profits. It's about how you make profits responsibly and make sure society improves," he said.
An important part of the Indian ESG evolution will be the maturing of ESG investing in India.
Navneet Munot, MD & CEO, HDFC Asset Management Company, said that in the last three or four years, the number of ESG equity funds had grown from one or two in 2018 to almost 10 now.
"ESG assets have grown from half a billion dollars in these funds in ESG equity funds to more than 1.2 or $1.3 billion dollars now. So, it's an increase of almost 200% in two years. The factors that have contributed have increased attention and investors' appetite towards ESG," he said. But I think that the success of ESG investing shouldn't just be judged by how much money ESG funds collect or how well they manage it. It should also be judged by how well it fits into the larger ecosystem.
Experts clearly see ESG as a paradigm shift in doing business and not just a tick-the-box exercise.
EY India Partner & Markets Leader, Pankaj Dhandharia, said that three things will continue to drive ESG: regulation, capital markets, and the realisation that ESG is now a business imperative.
To succeed, companies need vision and pragmatism to go hand in hand, and Godrej ended his poem with just the right message.
“Now ESG will take you far.
Don’t just be a shooting star
Rising high before you fall
Instead take the enduring call.
All of us can forge ahead
If we only learn to shed
The barriers that can divide.
And if cooperation's tried,
With the help of business, I foresee
A helpful, thriving society.”
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