Introduction: Is India Ready for ESG? Environmental, Social, and Governance Transformation
Imagine there are 2 factories in your town. Both of them are really profitable but they have a small difference between them.
The first factory dumps its waste directly into the main river, the very river from which local families drink water. And, by this action, slowly, people in the area begin to fall sick.
While the second factory has set up a treatment facility outside its plant. No matter, the profit they are earning is really less, but at least they are not harming the environment and people are living happily in that area.
Now, if you were an investor seeking to invest in any one of the two factories. By applying your common sense, think which factory will you choose?
99.99% of the people will choose the second factory as there is less damage to the environment and it has a better chance of surviving in the long run.
Likewise, the answer to this dilemma is ESG which stands for Environmental, Social and Governance. It means that companies do not stick to only profits but they are actually responsible to the environment and society too.
From here onwards, a real question comes to mind, whether India is really ready for such responsible companies?
In the following discussion, we will see how ESG is shaping not just boardroom decisions globally but also how India is preparing to embrace this new era.
What Exactly Is ESG?
Earlier, when someone used to start a business, their main goal was to only earn profit, profit and profit. But today the expectations of investors, governments and the public have totally changed. They want that the main focus of the companies should not be to stick to only profit but also they should have a sense of responsibility towards the environment, society and governance system.
From here itself the concept of ESG has emerged where it stands for Environmental, Social and Governance.
1. Environmental (E)
This particular concept sees how a company is behaving towards the environment. Like, whether:
- They are controlling the pollution or not.
- They are using renewable energy or not.
- They are taking waste management or carbon emission seriously or not.
2. Social (S)
This part of the concept deals with the fair and proper relationship between the employees, customers and society. Like, whether:
- Employees are getting fair wages or not.
- They are promoting gender equality and diversity or not.
- They are contributing towards the local community or not.
3. Governance (G)
This part is about the whole management and ethics of a company. Like, whether:
- The board of directors are transparent or not.
- They are protecting themselves against corruption or fraud.
- They are protecting the rights of shareholders or not.
In simple terms, it means that the work of a company cannot be judged on the basis of financial success but also on the basis of environmental care, social responsibility and ethical governance. True success is not just about making money, but about creating a positive impact on people, planet and policies.
Why Does ESG Matter Globally?
Let’s take the previous example where you are a global investor and you have to invest in 2 companies…
Global Shift
- In countries like Europe and USA, ESG reporting has been becoming mandatory.
- Investors are preferring the “green” and “ethical” companies as they are sustainable in the long run.
- There are trillion dollar investments currently flowing in the ESG funds.
Global Examples
- Volkswagen Dieselgate (2015): Governance cheating resulted in crashing of brand image and share prices.
- Apple and Renewable Energy: Apple committed to using 100% renewable energy, improving brand image and investor trust.
Why Does It Matter?
- ESG compliance helps companies reduce risk and build strong reputations.
- Customers and investors prefer responsible brands.
- ESG-friendly companies are stable and profitable long-term.
The Indian Scenario
India is a developing nation and cannot ignore the concept of ESG…
Key Case Studies
| Case | Company | Outcome |
|---|---|---|
| Sterlite Copper (Vedanta) | Environmental damage and public protest | Plant shut down by authorities in 2018 |
| Infosys ESG Vision 2030 | Commitment to carbon neutrality and diversity | Improved trust and investor confidence |
Current Legal and Regulatory Framework
- BRSR (SEBI): Mandatory ESG reporting for top 1000 listed companies.
- CSR (Companies Act 2013): 2% profit to be spent on social welfare.
- NGRBC: 9 principles for responsible business practices.
- Environmental and Labour Laws: Protection of environment and worker rights.
Challenges in India
- Lack of Awareness – MSMEs often unaware of ESG reporting.
- High Compliance Cost – Eco-friendly technologies are expensive.
- Data Gaps – Poor accuracy in environmental data collection.
- Short-Term Mindset – Focus on immediate profit over sustainability.
- Lack of Skilled Professionals – Shortage of ESG experts in India.
Opportunities Ahead: The Bright Side of ESG
Imagine you are in 2035 in India…
- Flow of Foreign Investment: Global investors prefer sustainable companies.
- New Ideas and New Jobs: Innovation in clean tech and circular economy.
- Customer Satisfaction: Rise in demand for eco-conscious brands.
- Lower Risk and Higher Reputation: Protection from penalties and social backlash.
- Clean Growth Dream: Balancing economic growth with environmental care.
Personal Intake
Honestly speaking, when I heard the concept of ESG for the first time…
For me, ESG is not just a law or a rulebook but it is a responsibility. It is a commitment that we could take care of our planet and people while focusing on growth.
