Understanding ESG in India, a commitment to Sustainable Development

We recently took a look at sustainability developments in China. According to estimates, India recently surpassed China as the world’s most populous country, with roughly 1.4 billion inhabitants (World Bank Group). India is still a developing country, characterized by its significant economic growth and also by a range of problems, from widespread poverty and inequality to challenges to infrastructure and public services.

India faces some large-scale challenges when it comes to climate change and the future. Firstly, more than 80 percent of India’s population lives in areas that are at risk of disaster due to rising temperatures and extreme weather due to the subcontinent's unique location at the foot of the Himalayas and massive coastline. Rising temperatures, changing rainfall patterns, declining groundwater levels, shrinking glaciers and sea level rise are all risks to food security and economic stability, impacting the growing population.

India faces significant sustainability challenges, including rapid urbanization, which strains natural resources and infrastructure. The population struggles with air and water pollution, largely due to industrial emissions and untreated waste. Over reliance on fossil fuels hampers efforts to transition to renewable energy. Water-intensive agriculture exacerbates water scarcity and soil degradation. Additionally, deforestation and loss of biodiversity threaten ecosystems. Economic inequality further complicates sustainable development. We know that poverty can be a driver of unsustainable practices as people will always look to ensure their own survival before they are susceptible to change.

So what is being done?

Sustainability can appear to be overly focused on challenges, but India is also making real progress in many fields. India has expanded its solar capacity greatly in recent years, is currently the world’s fifth largest solar market and on track to generate 30% of its power needs by solar in by 2040. This sort of progress would be difficult without a joint effort by policymakers on a federal, state and local level, investment in the tens of billions of dollars by the government and private sector participation which entails the creation of green jobs in local production of solar panels and infrastructure (World Economic Forum).

Policy plays a large role in reducing particle pollution and promoting air quality. The National Clean Air Programme (NCAP) is an initiative by the Government of India aimed at reducing air pollution across the country, particularly in 132 cities. Launched by the Ministry of Environment, Forest and Climate Change in 2019, the program sets a target of a 20-30% reduction in PM2.5 and PM10 levels by 2024, compared to 2017 levels. The NCAP focuses on multi-sectoral collaboration, stringent monitoring, and public participation. While there has clearly already been some progress, the program would benefit from more data transparency (CSE India)

The Clean India Mission (see Swachh Bharat Mission Official Site) is a nationwide campaign launched by the Government of India on October 2, 2014, aimed at improving solid waste management across the country and improving access to hygiene and sanitation, especially in rural areas. It focuses on building household and public toilets, promoting cleanliness, and encouraging behavioral change towards sanitation practices. The mission, led by the Ministry of Housing and Urban Affairs, has seen significant progress, particularly in rural sanitation.

The National Action Plan on Climate Change (NAPCC) is India's strategic initiative launched in 2008 to address climate change through eight national missions. These missions focus on sustainable development, enhancing energy efficiency, promoting renewable energy, and conserving natural resources. The NAPCC emphasizes adapting to climate impacts, improving water and agricultural practices, protecting ecosystems, and increasing awareness. It aims to achieve sustainable development while aligning with global climate goals. The missions’ names are all indicative of their respective subject matters:

1. National Solar Mission
2. National Mission for Enhanced Energy Efficiency
3. National Mission on Sustainable Habitat
4. National Water Mission
5. National Mission for Sustaining the Himalayan Eco-system
6. National Mission for a Green India
7. National Mission for Sustainable Agriculture
8. National Mission on Strategic Knowledge for Climate Change

More information can be found on the Department of Science and Technology’s Climate Change Program webpage.

Sustainability Reporting

Technology for sustainability reporting and accounting is Klappir’s bread and butter. It is encouraging to see that India has taken significant steps towards sustainability reporting for companies in recent years. Since the financial years 2022-23, the Securities and Exchange Board of India (SEBI) has mandated the top 1,000 listed companies by market capitalization to prepare a Business Responsibility and Sustainability Report (BRSR). This initiative is part of a broader effort to integrate sustainability into corporate governance and ensure that companies contribute to India’s sustainable development goals. Let’s take a closer look:

Metrics and Disclosures

The BRSR framework is divided into three sections:

• General Disclosures: This section covers the basic information about the company, including its products, services, operations, and workforce composition.
• Management and Process Disclosures: This part focuses on the governance structure and processes the company follows to ensure responsible business conduct. It includes details on the company's ESG risk management practices, policies, and initiatives.
• Principle-wise Performance Disclosures: The core of BRSR, this section is based on nine principles outlined in the National Guidelines on Responsible Business Conduct (NGRBC). These principles cover a wide range of topics, including business ethics, product lifecycle sustainability, employee well-being, stakeholder engagement, human rights, and community development.

Key metrics measured under BRSR should be familiar to anyone who has experience in sustainability reporting:

• Environmental Metrics: These include greenhouse gas emissions, energy consumption, water usage, waste management practices, and biodiversity conservation efforts.
• Social Metrics: These cover workforce diversity, employee welfare, occupational health and safety, training and development, and community engagement.
• Governance Metrics: These include board diversity, ethical business practices, anti-corruption measures, and supply chain transparency.

The BRSR can be compared to the European Union’s Corporate Sustainability Reporting Directive (CSRD), which is currently the most comprehensive standard for sustainability reporting in the world.

• Scope: The BRSR has a much more limited scope than the CSRD, as it only applies to the top 1000 companies in India by market cap. As might be expected, Indian companies don’t need to report as extensively.
• Granularity: The CSRD is also more prescriptive and detailed in the way that it mandates reporting companies to report on double materiality—considering both the impact of the company on the environment and society, as well as how ESG factors affect the company. BRSR, while comprehensive, does not mandate this double materiality approach as explicitly.
• Assurance: CSRD mandates third-party assurance for reported information, while BRSR does not yet require such assurance, although SEBI is encouraging higher levels of disclosure and transparency.

(SEBI Circular on BRSR) (National Guidelines on Responsible Business Conduct (NGRBC) - Ministry of Corporate Affairs, Government of India)

All in all, these efforts give reason for optimism that India will align with global sustainability goals and choose a path toward more responsible and inclusive growth. The BRSR will play a role in guiding companies to adopt better practices, ultimately contributing to long-term sustainability objectives.

As these initiatives unfold, it will be exciting to follow how businesses adapt to these new standards and the positive ripple effects they create across the economy. India's proactive approach in integrating sustainability into the core of its corporate sector signals a transformative shift, one that will shape the future of business and contribute to a more sustainable world. Hopefully we will see real progress in this critical area to watch in the coming years.

Related articles:
A Growing Focus on Sustainability in China
What is the difference between Sustainability and ESG
What is CSRD - Corporate Sustainability Reporting Directive