The evolution of ESG in the new normal

Organisations worldwide are developing and implementing environmental, social and governance (ESG) strategies to build sustainable business. With global business operations undergoing significant changes amidst the COVID-19 pandemic, ESG has become a critical agenda for companies as they are focusing on long-term sustainable growth. To shed further light on the ESG question, PwC, in partnership with Moneycontrol, has launched ‘ESG: A bridge to action’, a brand new platform where leaders discuss the multiple aspects of ESG and the key ESG strategies adopted by their organisations.

Sanjeev Krishan, Chairperson, PwC in India, and Koushik Chatterjee, Executive Director and CFO, Tata Steel, were invited for the inaugural episode. Ajay Piramal, Chairman of Piramal Enterprises, shared a short note before the discussion started, highlighting how Piramal Enterprises plans to extend its ESG focus over the next few years and float an ESG fund.

On being asked about why the ESG agenda has gained prominence in recent times, Sanjeev Krishan highlighted the role of stakeholder capitalism and how corporations are focusing on long-term sustainable growth that addresses both ESG requirements as well as caters to the accountability demanded by stakeholders at large. A successful ESG agenda is capable of making organisations resilient, create long-term value and build trust and PwC’s ESG strategy aims to to work on similar lines.

As a concept, ESG focuses on the additional responsibilities of businesses other than generating profits. This view was echoed by Koushik Chatterjee who said that businesses should look to strike a healthy balance between generating profits and maintaining sustainability. In this context, it is important for organisations to work with communities and use structured frameworks to measure their ESG performance. The UN’s 17-point Sustainable Development Goals is a robust framework that can help organisations assess the relevance of the sustainability factors and their roles in developing long-term strategies.

Commending the adoption of the ESG agenda by multiple companies and countries, Sanjeev Krishan said that corporations should look to transform their supply chains and make them ESG compliant. As more organisations become socially responsible, they are embracing diversity at a differentiated pace. They are still exploring how innovation, technology and funding could play critical roles in building an ESG ecosystem. He also said that organisations would incur near-term costs when transforming their supply chains to make them ESG compliant. PwC’s ESG services plays a critical role in helping clients understand ESG requirements and implement the same.    

Koushik Chatterjee further highlighted the fundamental role of reporting and disclosures in the ESG agenda. The risks incurred and opportunities explored in an organisation’s ESG strategy can only be measured through proper disclosure. This further becomes critical for financial stakeholders, such as banks, as going forward, they may want to seek detailed information about a company’s ESG strategy before lending. Financial and non-financial ESG reporting is expected to converge soon, resulting in unified corporate reporting that will help stakeholders understand the multiple aspects of ESG.

The ESG framework is evolving and organisations need to proactively focus on revamping supply chains, working with communities, and reporting and disclosures to further strengthen the role of ESG in the new normal.