In a world where the challenges of climate change, resource management, and organisational safety loom large, the imperative for businesses to adopt sustainable practices has never been more pressing. Over the last 15 years, carbon emissions have doubled, underscoring the critical need for organisations to comply with ESG regulations and leverage technology for effective reporting and implementation of sustainable initiatives
ESG goes beyond compliance, evolving into a strategic imperative for organisations.
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The roots of Environment, Social and Governance (ESG) can be traced back to the labour improvements of the Industrial Revolution. The "E" gained prominence in response to the contemporary climate crisis. A significant milestone was the United Nations' "Who Cares Wins" report in 2004, which marked aligning business practices with sustainability. Over the past two decades, the ESG landscape has transformed, influenced by initiatives such as the EU's Sustainable Finance and Disclosure Regulation (SFDR) in 2019.
ESG goes beyond compliance, evolving into a strategic imperative for organisations. Adapting to emerging ESG regulations involves adjustments in data processes, consolidation, disclosure management, and planning. Beyond regulatory adherence, ESG performance crucially shapes an organisation's reputation among stakeholders, impacting investment decisions, financing access, and stock prices. ESG's role in risk management, especially concerning climate change, is pivotal for a company's viability. Monitoring ESG Key Performance Indicators (KPIs) and understanding their link to operations and finance allows organisations to optimise initiatives, fostering positive outcomes for both the planet and society.
ESG is a multifaceted tool for compliance, reputation enhancement, risk mitigation, positive impact, and overall performance optimisation. Its direct influence on the bottom line is evident through effective performance management, facilitating identifying opportunities, underperforming projects, and areas suitable for investment or divestment.
In India, the Companies Act of 2013 introduced one of the first ESG disclosure requirements for companies. Section 134(m) mandates companies to include a report by their Board of Directors on energy conservation. However, the implementation in India faced two challenges: Limited Regulatory Framework and Standardization—comparability of ESG reporting metrics. The steps articulated by the Securities and Exchange Board of India (SEBI) created a strong foothold on which the idea of sustainability was reported through these reports. Even with the dilemma of responsibility created by SEBI, the implementation in India faced challenges related to a limited regulatory framework and the comparability of ESG reporting metrics.
To integrate order and global standards into ESG, the world of technology becomes a heightened value addition in the reporting rules. Integrating technology defines the ongoing digital transformation and offers a definitive approach in which organisations invest less time and generate high-quality, ethically driven ESG reports. In the ever-evolving technical landscape, effective data management is crucial. A proposed Data Management Policy outlines key aspects, including data governance, metadata management, data quality management, data lineage, and data architecture, ensuring a sustainable, consistent, and effective capability to manage data.
[This article has been reproduced with permission from the Indian School of Business, India]