What is Environmental-Social-Governance (ESG)?

About Environmental-Social-Governance (ESG):

• ESG (Environmental, social, and corporate governance) is a term that has been coined to refer to specific data designed to be used by investors for evaluating the material risk that the organization is taking on based on the externalities it is generating.
• Broadly the ESG can be categorised as:
  • Environmental aspect: Data is reported on climate change, greenhouse gas emissions, biodiversity loss, deforestation, pollution, energy efficiency and water management.
  • Social aspect: Data is reported on employee safety and health, working conditions, diversity, equity, and inclusion, conflicts and humanitarian crises and is relevant in risk and return assessments directly through results in enhancing (or destroying) customer satisfaction and employee engagement.
  • Governance aspect: Data is reported on corporate governance such as preventing bribery, corruption, diversity of Board of Directors, executive compensation, cybersecurity and privacy practices, management structure, executive pay, diversity in leadership, manner in which the leadership responds to and interacts with shareholders, audits, internal controls, and shareholder rights.

ESG in India:

• ESG reporting in India commenced in 2009 with the Ministry of Corporate Affairs (MCA) issuing the Voluntary Guidelines on Corporate Social Responsibility.
• With effect from the financial year 2022-2023, filing of Business Responsibility and Sustainability Report (BRSR) has been made mandatory for the top 1000 listed companies (by market capitalization) and has replaced the existing Business Responsibility Reporting ("BRR").

 

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Q1) What is a business responsibility and sustainability report?

SEBI introduced a new reporting requirement called the Business Responsibility and Sustainability Report (BRSR) in May 2021 for sustainability reporting by listed entities with the intent towards having quantitative, qualitative and standardised disclosures on ESG parameters.

Source: Indian Institute of Corporate Affairs launches programme to create Impact Leaders in areas of ESG