India at Crossroads: Embracing ESG for a sustainable future

India's commitment to decarbonising its energy sector by 50 percent by 2030—expressed during the COP26 summit—is ambitious yet imperative. Image: Shutterstock

As the world pivots towards sustainable development, India finds itself at a critical juncture in the global fight against climate change. The country's current emissions level of 3.6 Gigatons of CO2 is projected to nearly double by 2030, making India the largest emitter on the planet. This alarming trajectory raises concerns about global warming. It draws intense scrutiny from international observers and the global business community, which is increasingly shifting its focus to environmental, social, and governance (ESG) principles. Amid these overarching challenges, opportunities abound for India to redefine its economic landscape by embracing ESG targets.

India's Commitment to Decarbonisation

India's commitment to decarbonising its energy sector by 50 percent by 2030—expressed during the COP26 summit—is ambitious yet imperative. However, this pledge is shadowed by pressing challenges: the country remains heavily reliant on carbon-intensive industries, faces an ever-growing energy demand, and grapples with inadequate renewable energy infrastructure. Moreover, public awareness of ESG principles is startlingly low, creating a multi-faceted dilemma.

The pressure from stakeholders—governments, investors, and civil society—for businesses to adopt ambitious emission reduction targets opens a new chapter in India's economic story. This tension can transform into an opportunity, prompting organisations to rethink and reshape their strategies, harness innovative technologies, and cultivate collaboration for sustainability.

Also read: Are the right ESG risks on your radar? Here's a 4-step framework to find out

Market Dynamics Driving ESG Reporting 

While the globally projected Environmental, Social, and Governance (ESG) consulting market is estimated to skyrocket to around $23.39 billion by 2030, featuring an impressive CAGR of 15.8 percent from 2023 to 2030, India's ESG consulting market, currently valued at approximately $255.21 million, is expected to expand at a CAGR of 7.42 percent until 2030. The transition reflects a growing recognition of corporate responsibility and a regulatory environment increasingly mandating transparency in ESG reporting.

The Securities and Exchange Board of India (SEBI) mandates that the top 1,000 listed companies report on ESG parameters. This regulation sets a vital precedent for corporations to align with global sustainability trends. Moreover, between 2020 and 2022, ESG reporting among India's top 1,000 companies surged over 160 percent, a testament to the urgent need for effective ESG strategies.

Also read: Powering sustainability through partnerships

Pain Points: Bridging Gaps in ESG Knowledge and Implementation

Despite the growing recognition of ESG's importance, significant gaps exist in businesses' awareness and understanding of ESG principles. The challenges are manifold: a shortage of skilled ESG professionals, inadequate data collection and reporting mechanisms, and difficulties aligning with complex evolving regulations all impede progress.

Indian firms pioneering ESG initiatives encounter hurdles in capturing and reporting essential ESG data, notably Scope 3 emissions from their supply chain. The lack of resources and existing knowledge results in a reliance on one-size-fits-all approaches, which fail to meet the unique needs of different sectors or organisations. A critical transformation is required to develop tailored strategies catering to various industry needs, promoting effective decarbonisation and sustainability.

Also read: 'Outsourcing' ESG: How mandatory disclosure is affecting supply chains

Key Strategies for Advancing ESG Practices in India 

Firstly, there is an urgent need for more consulting firms specialising in ESG practices to support Indian organisations aligning with SEBI regulations. Firms can take the lead by offering a complete suite of consulting services that address the unique challenges faced by diverse businesses. Secondly, they can provide a more profound understanding of ESG practices by offering comprehensive education and training programs. The training initiatives should target employees, senior leadership, and stakeholders alike. Firms can work in collaboration with universities to facilitate the development of certified curricula to prepare the next generation of C-suite leaders to champion ESG efforts.

Thirdly, change management frameworks that are the core of ESG must be customised to address the goals effectively and help businesses adapt to adjustments of all kinds. Change management should create the engine room for the ESG strategy by spreading awareness for change, setting realistic targets, enhancing communication and engagement strategies, ensuring effective stakeholder collaboration, monitoring the change, and continuously improving whenever needed. Given India's diverse socio-economic fabric, versatile approaches are necessary to engage multiple stakeholders effectively. Fourthly, specialised knowledge in Business Responsibility and Sustainability Reporting (BRSR) can help organisations navigate regulatory requirements effectively. An expert grasp of data collection and analysis processes is indispensable for transparently showcasing a company's sustainability initiatives.

Furthermore, implementing streamlined and automated data collection processes will significantly enhance the efficiency of ESG reporting. Organisations should adopt ESG management software that simplifies the documentation and reporting process, allowing for more accurate and timely disclosures. Lastly, by consolidating ESG-related data and integrating it into decision-making processes, companies can enhance compliance and optimise their ESG strategies. A data-driven approach to sustainability fosters transparency and fortifies stakeholder confidence, ultimately driving the success of ESG efforts across the Indian corporate landscape.

Also read: Why decarbonisation is so hard

The Global Spotlight on India

As the world increasingly gravitates towards sustainable development, India stands at a pivotal crossroads. The nation's commitment to ambitious ESG targets reflects a response to global climate imperatives and an acknowledgement of the economic and reputational opportunities that arise from responsible governance, environmental stewardship, and social accountability. 

With its projected growth as the largest emitter by 2030, India has a unique chance to redefine what leadership in sustainability looks like transforming its challenges into advantages while positioning itself as a frontrunner in the global ESG landscape. The Indian ESG consulting market is poised for considerable expansion, driven by regulatory mandates and an emerging corporate consciousness regarding environmental and social responsibilities.

However, realising this potential requires concerted action from all sectors—government, industry, and civil society—to bridge existing knowledge, capability, and implementation gaps. By investing in education, fostering tailored strategies for change, and embracing innovative solutions, India can not only meet its decarbonisation targets but also inspire other nations on their sustainability journeys.

In this global moment of urgency and opportunity, India has the chance to shape a sustainable future, showcasing that its path to progress is not just about economic growth but also includes a commitment to preserving the planet for future generations. The world is watching, and India has the opportunity to become a beacon of sustainable development that leads us all towards a brighter, greener future.

 
This write-up is part of the General Management Program (GMP) at the Indian School of Business (ISB). The program is designed to cultivate future-ready leaders with the technological acumen and interpersonal skills to navigate complex business landscapes. 

Anjal Prakash is a Clinical Associate Professor (Research) and Research Director at Bharti Institute of Public Policy, Indian School of Business (ISB). He teaches sustainability at ISB and contributes to IPCC reports.

[This article has been reproduced with permission from the Indian School of Business, India]