A better consideration of environmental, social and governance factors will ultimately contribute to stronger and more resilient investment markets, as well as contribute to the sustainable development of societies, noted the Who Cares Wins report of The Global Impact initiative of the United Nations, published in 2005. However, nearly two decades later, the concept remains restricted to the domain of mandatory compliance, despite the fact that the need to adopt it and the leverage it gives to businesses has only got bigger over time.
Mandatory disclosure requirements have increased since the first time Indian market regulator Securities and Exchange Board of India (SEBI) mandated the Business Responsibility Report (BRR) for top 100 listed companies in India. This was increased to top 500 in 2016–17. The Business Responsibility and Sustainability Report (BRSR), with more disclosure requirements, replaced BRR starting fiscal 2022–23 and was made mandatory for top 1,000 listed companies. This year, SEBI introduced Core BRSR which aims to address concerns related to ESG ratings by improving transparency and reliability in disclosures.
However, not many outside the ambit of law bother about ESG integration into their businesses. The cross-cutting reason is the lack of awareness across companies, particularly of medium and small scale, about the nuances of the ESG ecosystem. Awareness deficit can be due to the ever-evolving nature of regulatory frameworks and public unavailability of good practice templates in policies and operations. Lack of evidences about the costs and benefits of adopting ESG practices and risks of not doing so are other contributing factors towards low adoption.
GOVERNANCE INCONSONANCE
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