Making an impact beyond the obvious, the Covid-19 pandemic is fuelling an interest globally in businesses guided by environmental, social and governance (ESG) considerations and making it an imperative for companies to generate evidences for investors and communities at large. Indian companies are rated well in ESG compliances in a recent report by global data company Refinitiv, but there is scope to do more to integrate their ESG messages in corporate communication strategies as any dipstick survey would reveal.
Though ESG regulatory regime and compliance reporting have evolved significantly over the last decade, the availability of data is mostly from compliance check-the-box reports. The initial due diligence gets limited to figures of compliance reports, filings and corporate websites because supplementary evidences in the form of easily intelligible ESG narratives, which could be a trigger for deep dive into compliance data for taking investment decisions, are sparsely available.
In India, the business and ESG linkage comes directly under the purview of authorities like the Securities and Exchange Board of India (SEBI) and the Ministry of Corporate Affairs (MCA). A recent circular by the SEBI on the Business Responsibility and Sustainability Reporting (BRSR) seeks to bring sustainability reporting at par with financial reporting at 1,000 listed companies in India. The BRSR replaces the Business Responsibility Report (BRR), which mandated ESG disclosures for top 100 listed companies in 2012. The number was increased to 500 listed companies in 2015.
While releasing the BRSR circular, the SEBI noted, the Covid-19 pandemic has accelerated the relevance of ESG considerations for investors, resulting in a shift towards sustainable investing. The BRSR circular also took note of overarching United Nations Sustainable Development Goals (SDGs), which require businesses to play a key role alongside other stakeholders to make the world more sustainable by 2030. The BRSR circular also refers to the Paris Agreement on Climate Change, which seeks to rally the global community, including businesses, to fight global warming.
The BRSR is based on the principles of the National Guidelines on Responsible Business Conduct (NGRBC), 2019, developed by the MCA. The NGRBC is the revised version of the National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business (NVGs) of 2011, which were preceded by the Corporate Voluntary Guidelines of 2009 focusing on good governance. Being in sync with the global ESG discourse, too, the NGRBC factors in the UN Guiding Principles on Business and Human Rights (UNGPs) based on the UN’s ‘Protect, Respect and Remedy’ framework for addressing the issue of human rights and big businesses. The UNGPs were adopted by the United Nations Human Rights Council in 2011 and subsequently endorsed by India.
Besides, the BRSR has also tried to be on the same page as other global reporting mechanisms. Companies in India already making disclosures in their sustainability reports as per international frameworks like the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), the Climate-related Financial Disclosures (TCFD) or the Integrated Reporting are permitted to cross-reference their disclosures.
The disclosure framework of the BSRB is also in keeping with the objectives of the Companies Act, 2013, which makes CSR spending and reporting mandatory for eligible companies. India is the first country in the world to make CSR spend mandatory.
Looking at the evolution of ESG regulatory regime in India and globally, it is obvious that ESG considerations and compliance reporting are getting gradually mainstreamed. ESG performance would continue to be the main criteria for rating companies today, but companies burying disclosures in compliance reports are selling their successes short.
Amplifying available data of yearly shelf life supported by evidences through compelling storytelling showcased in an array of information and knowledge products using multiple mediums can create long-term public memories and amplify the ESG impact of the company. A communication strategy laden with authentic narratives about a company’s ESG impact stories, in addition to the investor communication, could be the differentiator in strengthening stakeholder engagement and public perception in the long run. At the same time it is desirable to avoid the temptation of ESG washing.
Even those companies that are already factoring in ESG considerations in their operations, but are not required to comply and report today could do well to put in place a long-term communication strategy outreaching their future readiness.
If good ESG performance can lead to competitive advantage, lower operational costs, mitigation of non-financial risks, more resilience and less regulatory hindrances, strategic communication can drive home a company’s ESG edge for more value creation in the long run.
Source: The Times of India
Published on 26 July 2021