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ESG Score of India Inc
The India Responsible Investing Working Group has been tracking the ESG disclosure and performance of India Inc. since 2009. It was in the course of this period that the National Voluntary Guidelines for Social, Environmental and Economic Responsibilities of Businesses was introduced. It was also during this period that India’s indigenous sustainability reporting framework – The Annual Business Responsibility Report – was introduced and thereafter mandated by the Securities and Exchange Board of India (SEBI). The number of Indian companies measuring and managing ESG impacts and publicly disclosing it through Sustainability Reports has increased to 137, which has more than tripled since pre-BRR mandate period.
The aforementioned initiatives have resulted in a substantial increase in both quality and quantity of disclosure. In this context, the working group is releasing the 1st Annual ESG Scorecard of India Inc. – this benchmarking report provides an overview of the ESG disclosure of India Inc.
The transition towards consistent and timely sustainability disclosure and reporting by businesses is firmly underway – and this evolution is getting manifested in the following ways:
Number of companies disclosing has gone up
The number of companies measuring, managing and disclosing the ESG impacts has increased in the past 2 years post SEBI’s mandate for the top 100 listed companies regarding their Business Responsibility Reports (BRR). As of November 2014, 137 companies had released a sustainability report (including the business responsibility reports). This number was 37 for 2011-12 (pre BRR mandate).
Completeness of business disclosure has gone up
The working group, every year has been tracking between 50 and 80 metrics, taken from reporting formats. Post release of BRR, there has also been a marked increase in the average metrics every company has been disclosing on. In 2011, less than 10% of the companies had high disclosure (classified as business disclosing on more than 80% of the metrics. This is has now in 2014 increased to 30%.
More importantly – the number of businesses with low disclosure (identified as disclosure being made on less than 40% of the metrics has dimished
More businesses are prepared to provide sustainability disclosure
A survey of Indian businesses across sectors and sizes (both large corporates and MSMEs) indicates that, even as sustainability disclosure is increasing, the more encouraging trend is that more businesses are prepared to disclose – should investors ask for it.
In this context, the working group also did an analysis to understand what particular parameters and metrics are businesses most prepared to disclose on.
An analysis of the existing quality of disclosure indicates that, as expected, businesses are most prepared to provide information on governance metrics. Environmental issues on the other hand have a mixed response – while businesses are prepared to provide information on their policies and strategies, quantitative disclosure on resource consumption and efficiency has been found to be weak.
Download the complete report here
Moving from disclosure to performance
The ESG Score of India Inc: 2014 compares the sustainability disclosure of over 75 businesses in India. It finds that more than 50% of the businesses have the top management driving sustainability issues which makes it clear that the involvement of top management is an important performance benchmark in making sustainability a priority.
The data also indicates that quantitative data on Environmental, Social and Governance issues is expected to become a part of investor - business dialogue which is manifested in the disclosure metrics llike number of consumer complaints, pending legal notices and others.
A key emerging trend is that measures impacting long term business continuity and performance will start getting benchmarked which is exemplified by the trends of businesses consistently trying to disclose benchmarkable data (on energy consumption and renewable energy) despite overall disparate information on environmental parameters.
ESG Disclosure by India Inc: Metric-wise Analysis
About the India Responsible Investment Working Group
Sustainability disclosure and reporting in India has received a fillip in the last couple of years - driven to a large extent by investors and policy makers. The Sustainable Business Leadership Forum (SBLF) has been working closely with businesses, investors, catalyst organizations and policy makers to identify the link between investment/capital flows and Environmental, Social and Governance (ESG) disclosure in India and have an integrated conversation about the expectations, concerns, challenges and realities surrounding ESG measurement/management/disclosure in the Indian market.
To stay updated with the happenings in this space as it rapidly evolves; and to get involved in the future please visit: http://SBLF.SustainabilityOutlook.in/about-the-forum/sustainability-disclosure-and-reporting
In order to engage with some of the follow-up activities listed above, please contact Sustainability Outlook (Info@SustainabilityOutlook.in) with the subject ES Working Group