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Governance, society, environment – Bangalore Business LitFest authors analyse ESG roadmaps >

by Madanmohan Rao [September 10, 2024]

This weekend, the Bangalore Business Literature Festival (BBLF) will kick off its tenth edition at Catholic Club. As network partner for BBLF 2024, MXR.world is delighted to present its third preview article, with insights on India’s ESG journey.

Other themes of BBLF 2024 include digital transformation, career planning, corporate governance, industry leadership, investigative research, urban habitat, and the startup ecosystem.

One of the visionary panels at BBLF 2024 is on Environmental, Social, and Governance (ESG) standards. These criteria are used by investors, lawmakers, and other stakeholders to assess a company's governance and impact on the environment and society.

In this article, we share insights from two speakers on ESG: Vipul Arora (author of The Essence of ESG: A Practitioner’s Perspective) and Radhica Kanniganti (Leader, ESG & Sustainability, Wipro).

The ESG journey

“There are five stages in the ESG life cycle journey. India is at the second stage where the focus is on compliance with standards and regulations,” Arora observes. Most companies are at this stage, though some are at more advanced stages related to value creation.

Wipro’s journey in sustainability began in 2000 when the leadership began asking questions on the purpose of a business, Kanniganti recalls. In 2001, Azim Premji pledged 66% of his ownership to the Azim Premji Foundation.

She divides Wipro’s ESG and sustainability journey into three phases. “We started with philanthropy and disaster management. Wipro Cares was set up as a way for employees to get engaged in making a difference,” she describes. This has now expanded into education, healthcare, and urban ecology.

The second phase included community projects and the publishing of the first Sustainability Report as per the Global Reporting Initiative (GRI) standards in 2007. “Today, we have targets for all our environmental parameters – energy, emissions, water, and waste. We measure, monitor and implement programs to achieve these targets,” Kanniganti says.

There are NetZero goals approved by the Science-Based Targets Initiative (SBTi) to achieve NetZero for Scopes 1, 2 and 3 by 2040. “We have achieved 80% reduction in Scope 1 and 2 emissions from the 2017 baseline, primarily through energy efficiency and transition to renewable energy (RE),” she adds.

Wipro’s current RE use stands at 76% of the total energy consumption. “Similarly, we have targets for social KPIs such as diversity, training and skilling hours, as well as on our community initiatives. Governance KPIs such as ethics and cybersecurity also have internal targets that we work towards,” she says.

Today, Wipro is addressing the need to take a more connected approach to ESG and sustainability. “It is important to integrate individual systems with financial reporting to enable better decision making,” Kanniganti explains.

Wipro has been reporting on Natural Capital Valuation for several years now. “Going forward, we will be taking a more holistic approach to ESG and sustainability and weave it into every business function,” she affirms.

Both speakers identify a range of companies who have outstanding ESG frameworks and practices in place. Kanniganti points to Unilever, Infosys, H&M, and Audi as some exemplars here.

“Globally, Unilever has had an outstanding commitment for over 20 years, though unfortunately there have been some recent changes,” Arora says. The Tata group has had a focus on ESG compliance for decades, and has been featured as a case study in his book.

Myths and misconceptions

Both speakers identify a range of myths and misconceptions around ESG framing and impacts.

“I think there is a myth that having excellent ESG frameworks translates into having superior sustainability practices. At the end of the day, it is the initiatives that a company takes on the ground that matter,” Kanniganti cautions.

These initiatives should address the most material topics for that company. “Sustainability needs to be ingrained into the company’s DNA – that is important,” she affirms.

Another common myth is that ESG ratings accurately measure the quality of ESG or sustainability within a company. “In reality, companies may be doing a lot more than they are putting out in the public domain and vice versa,” she observes.

“Most companies and people think that just reporting and complying with regulations is sufficient. This is not true – it is just a starting point, a baseline,” Arora observes. ESG is more than just a box to be ticked, and should not be seen as purely a cost centre.

“If we want RoI, we have to take the next steps to integrate ESG fully,” he suggests. It is easier, simpler and cheaper to have it embedded in the design and DNA of a growing organisation.

“It is far more costly, complex and cumbersome to implement ESG when an organisation is already big. Would you rather be a fit person from childhood or start exercising only when you reach adulthood?” Arora asks.

And while de-carbonisation is important, it is not the only answer on its own. “We need a holistic approach and people need to drive this,” he advises. ‘Net Zero’ does not make sense if the planet is left empty.

Arora observes that decarbonisation makes more sense in the West since it is more resource intensive. “For countries like India, our per capita resource consumption is very low but we have a lot of people. Our solutions need to be more people focused, while looking at de-carbonisation at an aggregate level,” Arora recommends.

Ecosystem collaboration

Both speakers call for more collaboration between industry, academia and government to advance the ESG agenda.

“This is an often-ignored area of focus. SDG 17 is all about collaboration. However, since most stakeholders and players within that stakeholder group are just focusing on getting their house in order first, collaboration seems to be a later priority,” Arora observes.

Embedding ESG collaboration into the ecosystem can lead to more effective results and greater impact. “Operating in silos will not enable us to bring solutions at the scale and speed at which the world needs them now,” he urges.

“It is important for industry, academia and government to collaborate to arrive at a methodology to assess the ESG/Sustainability performance of a company without being too burdensome,” Kanniganti advises.

Governments can come up with regulations while industry may counter it – academia can play an important role here by showing the middle path. “At the end of the day, industry will benefit in adhering to regulations and being transparent in its disclosures. Understanding the common agenda is very important if the ESG agenda is to move forward,” she adds.

She believes SEBI is doing well by collaborating with industry to streamline Business Responsibility and Sustainability Reports (BRSR) and the requirement for third-party assurance. “Industry, on its part, has not opposed the BRSR regulations, but rather is willing to work together to seek better clarity,” Kanniganti says.

The road ahead

The speakers wrap up with their observations and predictions on the ESG journey ahead, and what may be discussed at BBLF 2025.

“People will start realising the need to go beyond mere reporting and compliance. There will, hopefully, be a lot more focus on creating tangible value through ESG,” Arora suggests. There are structural reasons, however, for the excessive focus on short term thinking.

If sufficient awareness and commitment are raised, the central role of people in ESG transformation will be realised. “People are critical and central to the ESG, sustainability and climate agenda,” he observes.

Value creation leads to healthy enterprises and meaningful jobs. “ESG at its heart is all about people. But this message typically gets lost,” Arora cautions.

He calls for more investment in R&D and innovation to create appropriate solutions for emerging economies. “We cannot expect Western solutions to work for us. This mindset needs to change,” he advises.

“Today, there is a whole slew of regulations around ESG from all corners of the world. I am hoping in about a year, some of the excitement will have settled down,” Kanniganti says.

She foresees more inter-operability between the different regulations and the possibility of more clarity on the way forward for industry so that the burden is reduced.

“One thing is clear – ESG/Sustainability and Climate Action are here to stay. I also believe that in a year or so, it will not be just the big companies talking about it – there will be a reasonable amount of percolation to the mid-size and smaller companies as well,” Kanniganti signs off.

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