In recent years, the Environmental, Social, and Governance (ESG) framework has emerged as a critical factor for businesses worldwide. In India, the relevance of ESG is underscored by regulatory changes, growing investor interest and heightened awareness among consumers and employees. Companies across sectors are recognizing that adopting ESG principles is not just about compliance but also about building resilience, gaining competitive advantages and contributing to sustainable development.

Why ESG Matters in India

India’s commitment to sustainability is evident in its ambitious targets, such as achieving net-zero emissions by 2070 and generating 50% of its energy from renewable sources by 2030. Regulatory bodies like SEBI have mandated Business Responsibility and Sustainability Reporting (BRSR) for the top 1000 listed companies by market capitalization. These developments reflect the growing importance of ESG considerations in India.

Moreover, global investors increasingly consider ESG metrics when evaluating companies. According to a 2023 report by Morningstar, ESG fund inflows in India crossed INR 11,000 crore, signalling strong interest in sustainable investment opportunities.

1) Understand the Basics of ESG:

Begin by familiarizing yourself with ESG concepts and their relevance to your business. Each pillar of ESG — Environmental, Social, and Governance — addresses specific aspects:

i. Environmental: Water management, GHG emissions and waste management.

ii. Social: Employee welfare, community engagement and customer satisfaction.

iii. Governance: Transparency, ethical practices and robust leadership.

Indian companies like Infosys and Tata Consultancy Services (TCS) have demonstrated leadership in integrating ESG principles into their core strategies. For instance, Infosys has been carbon neutral since 2020 and is actively investing in renewable energy.

2. Assess Your Current Status:

Conduct an ESG baseline assessment to understand your current position. This involves:

i.  Reviewing policies and processes related to sustainability.

ii. Identifying key stakeholders and their expectations.

iii. Benchmarking against industry peers.

Using frameworks like the Global Reporting Initiative (GRI) or the Business Responsibility and Sustainability Reporting (BRSR) can provide a structured approach.

3. Set Clear Goals and Prioritize Issues:

Once you have a baseline, set measurable ESG goals aligned with your business objectives and stakeholder priorities. For example:

i. Reduce greenhouse gas emissions by 30% in five years.

ii. Achieve 40% gender diversity in leadership roles.

iii. Improve supply chain transparency by 2026.

Focus on material issues — those that significantly impact your business and stakeholders. For example, for a manufacturing company, energy efficiency and worker safety might be key priorities, while for a fintech firm, data privacy and governance might take precedence.

4. Develop an ESG Strategy:

Your ESG strategy should outline actions, timelines and responsibilities. Key elements include:

- Policy Development: Create or update policies on climate action, diversity and governance.

- Stakeholder Engagement: Start engaging with employees, investors, customers and communities to align efforts.

- Resource Allocation: Dedicate budgets and teams to implement ESG initiatives.

For example, Mahindra Group’s sustainability strategy focuses on decarbonisation, community development and governance excellence, reflecting its long-term commitment to ESG.

5. Implement Initiatives:

Translate your strategy into tangible actions. Examples include:

- Switching to renewable energy sources.

- Implementing employee wellness programs.

- Enhancing governance practices through digital tools.

Indian start-ups like Zomato and Flipkart have initiated green delivery models and sustainable packaging, showcasing how ESG can drive innovation.

6. Monitor and Report Progress:

Tracking progress is crucial for accountability and continuous improvement. Use key performance indicators (KPIs) to measure outcomes. Adopting digital solutions like ESG management software can streamline data collection and reporting.

Regular reporting builds trust with stakeholders. The BRSR framework mandates disclosures on various ESG metrics, providing a comprehensive platform for Indian companies to showcase their efforts.

Challenges and Opportunities in ESG

Challenges:

(1) Limited Awareness and Expertise: Many Indian SMEs lack ESG knowledge. Solutions include conducting workshops, training sessions, and collaborating with consultants or industry bodies.

(2) Resource Constraints: ESG initiatives require investment. Leverage government schemes like PAT and explore green financing options.

(3) Regulatory Complexity: ESG regulations can be complex. Stay updated on SEBI guidelines and join industry associations like CII or FICCI.

(4) Data Collection and Reporting: Accurate data is crucial but challenging. Automate data collection with AI tools and partner with third-party verifiers.

Opportunities:

(1) Access to Capital: ESG compliance attracts global sustainability-focused investments.

(2) Competitive Advantage: ESG practices enhance brand reputation, as seen with Tata Power and ITC.

(3) Operational Efficiency: Sustainability measures reduce costs through energy efficiency and waste reduction.

(4) Regulatory Readiness: Early ESG adoption ensures compliance and helps shape industry standards.

(5) Enhanced Employee Engagement: ESG commitment boosts morale and attracts talent, especially Millennials and Gen Z.

(6) Community Impact: Addressing social issues strengthens community relations and builds goodwill.

Case Study: Mahindra & Mahindra Limited – ESG and Sustainability Journey

Mahindra & Mahindra (M&M) has been a leader in sustainability, with significant initiatives aimed at environmental conservation, emissions reduction, and community engagement. Mahindra & Mahindra’s (M&M) sustainability initiatives serve as an exemplary case study for organizations embarking on their ESG reporting journey. By proactively integrating environmental and social responsibility into their core business strategy, M&M showcases how structured ESG efforts can drive long-term impact. Their initiatives, from afforestation programs like "Mahindra Hariyali" to pioneering internal carbon pricing and achieving significant reductions in greenhouse gas emissions and initiatives, provide a roadmap for companies looking to align with global sustainability standards.

1) 2007: Launch of "Mahindra Hariyali"

1. Initiative Overview: M&M launched the "Mahindra Hariyali" initiative in 2007, aiming to plant 1 million trees annually to enhance India's green cover and protect biodiversity. 

2.  Impact: By 2022, the company had planted over 20.65 million trees under this program. 

2)  2016: Introduction of Internal Carbon Pricing

1. Initiative Overview: M&M became the first Indian company to implement an internal carbon price of $10 per tonne of CO₂ emitted. 

2. Purpose: This move was designed to drive investments in low-carbon technologies and align with global climate objectives.

3. 2022: 25% Reduction in Greenhouse Gas (GHG) Emissions Intensity

  - Achievement: M&M reported a 25% reduction in GHG emissions intensity compared to its 2016 baseline.

     - Strategies Employed:

1)  Upgrading facilities with energy-efficient systems.

2)  Increasing the adoption of renewable energy in operations.

3)  Streamlining production processes to minimize waste and energy consumption.

4)    Additional Achievements

- Sustainable Products: M&M has been a pioneer in electric vehicles (EVs) in India, introducing models like the e2o and eVerito to reduce vehicular emissions.

- Water Management: The company has implemented measures to significantly reduce water usage across its operations.

-  Social Development: M&M supports various programs focused on education, skill development, and women's empowerment in rural areas.

These initiatives underscore M&M's commitment to integrating sustainability into its business operations and contributing positively to environmental and social well-being.

Conclusion

India's journey toward sustainability is gaining momentum, with businesses increasingly recognizing the importance of adopting ESG principles. By aligning with global sustainability goals, regulatory frameworks, and investor expectations, Indian companies have the opportunity to drive innovation, build resilience, and create lasting positive impacts on the environment and society.

Mahindra & Mahindra's exemplary ESG initiatives demonstrate how Indian companies can lead the way by combining economic growth with environmental and social responsibility. For businesses just beginning their ESG journey, understanding core principles, setting clear goals, and implementing measurable strategies can serve as a foundation for long-term success.

Embracing ESG is not just about meeting compliance but also about future-proofing businesses while contributing to India's sustainable development objectives.

Reference

 https://greenly.earth/en-gb/blog/company-guide/how-to-develop-an-esg-strategy

 https://www.mahindra.com/sites/default/files/2023-10/Mahindra-Sustainability-Report-2022-23.pdf

 https://sciencebasedtargets.org/companies-taking-action/case-studies/mahindra-and-mahindra-ltd