Meeting of Chief Sustainability Officers
The Meeting of the Chief Sustainability Officers (CSO), held during delved into the imperatives of integrating sustainability into the core strategy to leverage the array of unparalleled choices and opportunities posed by the climate and sustainability-related risks and threats. The meeting, through topical presentations by Ms Rama Patel, Director - CRISIL Ratings, CRISIL Ltd, Ms Sherry Madera, CEO, CDP and Ms Aditi Jha, Director and Country Lead, Legal & Government Affairs, LinkedIn, provided insights on the ESG Ratings landscape in the context of ESG-conscious investment ecosystem in India, and the role of quality data for enhanced sustainability-focused capital deployment, along with perspectives on the evolving workforce skills and green jobs and the need to address the widening skill gap with respect to the demand for green skills and availability of green talent that needs to be addressed in the global green economy regime.
Attended by Indian Sustainability Officers from leading companies in India representing diverse industry sectors, the meeting highlighted the need for making transparency about economic, environmental, and social impacts a fundamental component in effective stakeholder relations, investment decisions, and other market relations, against the backdrop of the urgency and magnitude of the risks and threats to our collective sustainability, alongside increasing choice and opportunities. The meeting also delved into how skilling India’s workforce on sustainability can unlock opportunities for India and its people to steer India into a green economy regime and expedite its transition to a developed nation; the key constituents of an enabling ecosystem to support the development of the required skillsets and human capital in order to meet the growing demand for green jobs-related workforce for key industry sectors in India that account for majority of GHG emissions globally, and in India, and the Financial sector that is key to enabling the green economy transformation; and the collaborative models required to accelerate green skills development in these select industry sectors in India.
Summary of Discussions
India, like the rest of the world, is witnessing a paradigm shift in the way sustainability is perceived and approached in the new global regime. While conventionally, the focus has primarily been on environmental considerations, changing investor expectations and consumer preferences, has shifted the focus from only ‘environmental’ concerns to including ‘social’ and ‘governance’ considerations as well. Increasingly, the country is witnessing a move from voluntary to a mandatory regime that aims to ensure transparency and accountability on part of businesses in their ESG performance, along with creation of value in a sustainable and responsible manner, aligned with national goals and priorities. Factors such as increased climate and environmental uncertainties, stringent policies and regulatory norms, and greater investor interest and societal expectations, are impacting how businesses report on their sustainability performance integrating ESG concerns, along with articulating and substantiating their business strategy, actions and processes in alignment with national and international climate and sustainable development priorities.
With increased investor interest and focus on impacts of climate change on businesses, their operations and long-term viability, the capital markets landscape too is undergoing evolutionary changes. Besides financial reports, financial players are increasingly relying on organizations’ ESG and sustainability reports and metrics to understand the businesses’ climate strategy towards making informed decisions on capital allocation.
On the regulatory front, the ESG Framework in India is witnessing key reforms and changes with respect to the legislative framework for consolidation and governing of ESG-related matters in India. Moving beyond the realm of sustainable business practices to more quantifiable, accurate and precise measure of how a business impacts the environment and society, the transition from sustainability to ESG metrics is inevitable in today’s world. Businesses are increasingly required to collect and collate timely, precise, complete and auditable ESG data, and make it available in the public domain through an ESG report that conforms to stakeholders’ needs and statutory requirements at various levels. The Securities and Exchange Board of India (SEBI) has mandated the top 1000 listed entities in India by market capitalization to make filings as per the Business Responsibility and Sustainability Report (BRSR) from FY 2023 onwards, gradually extending the mandate to all listed companies in the subsequent years. Upon the recommendations of the ESG Advisory Committee and after conducting public consultations, SEBI is implementing the ‘BRSR Core’ for assurance by specific listed entities, making BRSR Core compliance mandatory for the top 1000 listed entities by FY 2026-27.
Companies in India, in response to changing investor and customer and expectations, stringent regulatory environment, and to align their business actions with national goals and priorities, are increasingly integrating ESG into their strategy and operations. At the same time, there is growing realization within the companies themselves on the benefits of integrating ESG metrics as a means to improve and enhance their sustainability performance and position. While on one hand, data-driven ESG reporting provides credibility to companies’ actions, on the other, a deeper analysis of the stakeholders and their requirements in the process of ESG reporting is helping companies meet their stakeholder needs and expectations more effectively. Encouraging companies to set specific, measurable, and timely goals, and transparently communicate progress toward achieving those goals, reporting on ESG metrics is enabling companies demonstrate their commitment to sustainability along with providing insights on its risks and opportunities.
Furthermore, in 2023 SEBI has introduced disclosures and assurance requirements for the value chain of listed entities. The listed companies are now required to disclose ESG-related information pertaining to their value chain in their Annual Report following the guidelines set out in BRSR Core. The value chain is required to encompass the principal upstream and downstream partners of the listed entity, which collectively account for 75 percent of its purchases or sales (by value). ESG disclosures for the value chain will be mandatory, on a comply-or-explain basis, for the top 250 listed entities (by market capitalization) starting from FY 2024-25, and limited assurance on the same shall be applicable on a comply-or-explain basis from FY 2025-26.
In the light of these recent developments and increased focus on its ESG performance across its value chain, it becomes increasingly important for businesses to engage in mainstreaming sustainability across their value chains from various perspectives. The interactive session highlighted that apart from achieving value chain efficiencies and resilience, managing value chain risks, gaining investor and customer confidence, and ensuring business continuity and long-term viability; the process helps an organization to not only understand the impact of a business on its value chain with respect to ESG considerations; but also helps identify the hot spots and key impact areas across a business’s value chain for focused actions and interventions aligned with corporate climate and sustainability goals; along with ensuring quality data on ESG disclosures by value chain partners for ensuring reporting transparency, accuracy and completeness.
Against this backdrop and the perspectives shared on the ESG ratings landscape in India and the role of quality data for enhanced sustainability-focused capital deployment, the meeting highlighted the key ESG considerations that were top on the priority list of corporates in India with respect to their value chains. For an organization to create long-term shareholder value and build competitive advantage, and reap the tangible long-term benefits of making sustainability an integral part of the organizational structure and culture, it needs to operationalize sustainability across its value chain. Drawing linkages between integrating and mainstreaming sustainability in value chain and the achievement of the organizational climate and sustainability goals and targets, with regard to environmental considerations, key issues for the corporates included – climate change and GHG emissions, energy efficiency, circularity, waste, water, and sustainable transport; while issues such as labor & human rights, workplace health & safety, and diversity, equity and inclusion topped the list of social considerations. With respect to governance, the key issues highlighted include risk management, environmental governance, and transparency & reporting.
But the process is not devoid of challenges. Deliberating on the issues in integrating and mainstreaming sustainability in value chain, the meeting underscored three key challenges at supply chain as well as at the corporate level that primarily affects the effective institutionalization of value chain sustainability, namely: Complex and multi-tier supply chain; Lack of understanding on sustainability imperatives among supply chain partners; and limited organizational capacity and in-house expertise on sustainability.
However, the benefits of embedding and integrating sustainability in the value chain far outweigh the costs, efforts and the challenges in the process, underscoring the significance of value chain sustainability. The session delved into how these issues can be addressed so as sustainability can be operationalized in the value chains in order to augment corporate action on sustainability along with achieving supply chain efficiencies and resilience, and ensuring business continuity and long-term viability. Towards this end, the meeting highlighted the need for developing a guidance framework and approach methodology laying down the steps towards assessing an organization’s supply chain, understanding the key impact areas and the hot spots, and the ways and means to institutionalizing sustainability within the value chain in collaboration with the value chain partners. Human skills and capabilities lie at the heart of the entire sustainability transformation that is required across the length and breadth of an organization and beyond. Thus, a guidance framework outlining the key skills and competencies required of the individuals championing an organization’s sustainability actions to drive its sustainability vision and strategy within the organization and across its value chain becomes imperative.
With this background, the meeting concluded with identifying two key action agenda points for TERI and the sustainability officers to take up immediately in order to address the various challenges at corporate and value chain level towards mainstreaming ESG considerations within an organization and across its value chain, which includes the development of:
- A Guidance document for corporates on operationalizing sustainability in value chain towards integrating and institutionalizing sustainability across their value chain; and
- A Guidance framework on key skills and competencies of sustainability practitioners for driving corporate sustainability performance within and beyond an organization’s boundaries