ESG: Just not another Buzzword…
In the ever-evolving landscape of corporate jargon, certain terms rose to prominence, shaping the discourse around business practices. In the 1990s, the word “strategy” reigned supreme, followed by the era of the “bottom-of-the-pyramid”. Today, there is a new entrant that is buzzing the lexicon world, ‘ESG’.
The term, Environmental, Social, and Governance (ESG) has garnered a significant attention in the corporate India, with companies emphasising their commitment to the principles. However, it is important to question whether ESG is merely a fashion statement or a meaningful commitment towards sustainable business practices.
Critics argue that ESG has become a fashionable label, a glossy veneer that companies apply to their practices without substantial action. It is rather a matter of concern to witness the commodification of ESG, where some organisations are adopting the terminology without implementing the tangible measures associated with it. For them, ESG is more of a marketing tool rather than a genuine commitment to sustainability.
In the pursuit of branding themselves as ESG-compliant, some companies are merely engaged in a box-ticking exercise, checking off the necessary criteria without deeply embedding sustainability into their core operations. This superficial approach often leads to greenwashing of the real issue, where businesses create an illusion of sustainability without making significant changes. ESG metrics, if not implemented with integrity, can be easily manipulated, resulting in a disconnection between the purported commitment and actual impact.
Measuring the ESG performance is another significant hurdle. While frameworks like the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide guidelines, the absence of standardised metrics and varying reporting methodologies make comparisons difficult. This lack of uniformity allows companies to cherry-pick data, presenting a rosier picture of their ESG efforts. Without robust mechanisms for verification and transparency, the credibility of ESG claims can be called into question.
To differentiate between fashion and genuine commitment, it is crucial to assess the depth and comprehensiveness of a company’s ESG practices. We need to identify whether the companies are embracing ESG principles holistically, integrating them into their strategy and decision-making processes? Also, are they investing in long-term sustainability rather than short-term token gestures? True ESG integration requires a mindset shift, involving a company-wide cultural change, as well as the allocation of resources towards sustainable practices.
“Why did the ESG analyst bring a mobility ladder to work? Because they wanted to reach new heights in sustainable investments!”
Amidst the scepticism surrounding ESG, there are genuine proponents who believe in its long-term value. They argue that ESG is not merely a fad but a necessary evolution in corporate India. As society becomes increasingly conscious of environmental and social issues, companies that genuinely commit to sustainability are likely to gain a competitive edge.
Investors, too, are recognising the importance of ESG, with studies suggesting a positive correlation between sustainable practices and financial performance. It is this small proportion of early adopters who will move us towards positive transformation with their stories of change, filled with vision for positive outcomes around ESG.
Author:
Dr. Srinath Sridharan – Author, Policy Researcher & Corporate advisor
Twitter: @ssmumbai
