A Transition From Profit-First To People-First Business Ecosystem

By Vaibhav Maloo January 24, 2023

India Inc. may easily take advantage of the untapped potential for growth that ESG implementation and integration present

A Transition From Profit-First To People-First Business Ecosystem
Private players are not required to follow government ESG laws other than mandatory reporting regulations Photo: Shutterstock. Photo: Shutterstock

When the term ESG — environmental, social and governance — was coined in the 2004 UN report “Who Cares Wins”, it was merely an acronym that was struggling to find relevance in a profit-first corporate ecosystem. Eighteen years on, the three letters, today, have judiciously cemented their place in corporate speak and are now at the heart of every decision taken by businesses, government stakeholders, industry bodies and even consumers.

And as investors and consumers increasingly back companies that boast of good policies on climate change, environmental sustainability, human rights, business ethics, social responsibility, and transparency, India Inc will need to procure the right set of arsenals to meet this demanding ask.

What’s lacking?

According to the World Economic Forum, climate-related matters constituted the bulk of their 2021 list of the world’s greatest threats, thus pushing countries to take serious action and compelling businesses to maintain transparency, and also mandatorily report related to climate-related risks their business operations pose. The task may seem mammoth, but a very simple way to tackle it is by creating a robust ESG programme driven by data-backed policies.

To stay relevant in the global market and uphold the trust of investors, internally, businesses are taking a slew of measures, but the absence of a centralised ESG law is a noticeable roadblock that possesses the power to derail our endeavour towards reaching the larger 2070 net-zero goals set by Prime Minister Narendra Modi. Currently, aside from mandatory reporting regulations, private players do not have any compulsion to abide by government policies on ESG.

Hence, despite the top-down pressure, ESG execution in India remains a question mark.

India needs an overarching policy listing a standard set of rules that recognize key performance indicators from both internal and external sources of data. This, however, comes at a hefty cost. And with businesses still struggling to keep their flailing heads above water in the post-pandemic economic meltdown, the cost component is yet to find a permanent and solid place in company ledgers. Add to it the dearth of niche industry talent, the integration of ESG for India Inc. seems piecemeal.

Underlying Issue

To tackle the implications of sector-specific regulations seeking compliance on various ESG metrics, firms need talent that not only understands the peculiar business mechanisms and regulatory practices but is also adept in managing multiple stakeholder expectations. From keeping up with changing regulations to driving capital, there is a lot on the plates of ESG professionals.

Given India’s valourous zero-emission goals, regulators expect businesses to comply with Business Responsibility and Sustainability Reporting (BRSR). This sustainability reporting, which is as important as financial reporting these days, pushes companies to disclose not only the ESG risks their business operations pose but also the mitigation strategy and financial implications for each of the risks. In short, there is a growing need for firms to set up dedicated ESG teams that have purpose-driven employees who can bring out measurable outcomes rather than just being goal-driven.

Motivated individuals who understand business practices, regulatory mechanisms, future hurdles, competitive landscapes and upcoming trends of the sector are the kind of talent that is needed in the top 1,000 listed entities to set the ball rolling.

But where is the talent with such a mindset and niche skillset? The answer is simple. We need to start integrating ESG as coursework in our academic training content and further develop it into vocational training content, attitudinal training, and practical frameworks.

A people-first approach

An integral part of ESG is ‘S’ — the social aspect of a business — its people. To handle the purpose-driven employees, a leadership team who is equally motivated will be the key to creating a robust ESG reform. CXOs who understand their team’s abilities, understand strategy, finance, compassion, regulations and the market can build a dedicated ESG talent pool that works with multiple stakeholders. Companies with existing business leaders who are willing to shift to ESG roles will have a crucial role to play as they already understand the business mechanisms better than anyone else.

Nevertheless, if it chooses to, India Inc can seamlessly tap into the yet-to-be-tapped growth opportunities that ESG execution and integration pose. But it will require going beyond doing the bare minimum. Environmental, social and corporate governance will need to be assumed as a way of life and everyday company practices – making it synonymous with ensuring business resilience and conscious growth.

(The author, Vaibhav Maloo is the Managing Director of the Enso Group.)