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Author: Varsha Agarwal, IV year of B.A.,LL.B.(Hons.) from National Law University, Jodhpur.


There are no jobs on a dead planet; no equity without rights to decent work and social protection, no social justice without a shift in governance and ambition, and, ultimately, no peace without the guarantees of sustainability.

- Sharan Burrow, General Secretary of the International Trade Union Confederation

Meaning and Existing Framework

ESG refers to the way corporations handle their environmental, social and governance issues. The idea of ESG can be traced to a 2006 report titled “Who Cares Wins” issued by United Nations’ Principles for Responsible Investing (“UNPRI”). In India, ESG-related regulations are specified under various legislations. The E is covered by various Environment statues like Environment Protection Act, 1986, Water Pollution Act,1974, Air Pollution Act, 1981, etc.Section 134(3) of Companies Act, 2013 requires companies to include a report on conservation of energy accompanying their annual financial statement. The S is covered by the four Labour codes and mandatory Corporate Social Responsibility. The G is governed by the concept of independent director, woman director, anti-trust law and such other laws.

The work on ESG reporting formally started with National Voluntary Guidelines (“NVGs”). But being voluntary the issue of companies complying with it arose, consequently, SEBI mandated Business Responsibility Reporting (“BRR”) based on NGVs on certain companies, along with replacing NVGs with National Guidelines on Responsible Business Conduct (NGRBC). In 2014, India became the first country to mandate CSR and finally in 2021, SEBI brought Business Responsibility and Sustainability Reporting (“BRSR”), mandatory on top 1,000 listed companies from the FY2022-23.

Rationale Behind Embracing ESG

I. Climate Change: With the rising number of Environmental conferences happening and news about environmental catastrophe like Australian wild-fire, flooding of low-lying countries due to melting of polar caps, extinction of several species, it is becoming incredibly clear that climate change is very real. The nations must make environmental commitments if they want to combat this. India has established various goals, like becoming carbon neutral by 2070 and producing 500 GW from renewable sources by 2030, which force Indian businesses to start putting more emphasis on the environment. The BRSR framework connects to the 17 SDGs.

With the exhaustion of fossil fuels in near future, starting with the exhaustion of oil by 2052, alternatives to these conventional sources of energy will be forced on the companies, there will be no choice left. The hindi proverb “upar wale ki lathi jab chaltihai, tohawaznahikarti” can be translated as climate concerns should be incorporated now, while there is time.

II. Rising Uncertainties: The very title of the recent Human Development Report 2021-22 “Uncertain Times, Unsettled Lives” is an extremely clear indicator as to how the uncertainties in the present times due to environmental factors, rise in mental distress, social vulnerability, how the lives of people is in jeopardy. The COVID-19 pandemic serves a great example as to how fragile human life is. It showed not just how focusing on short-term economic goals, endangers climate change, but also depicted the inequality wedge. It is a high time to realise that the move should be towards economic development and not simply economic growth. In this, ESG comes handy because it aims to shift the focus to non-financial reporting from merely financial reporting.

III. Future Proofing: It is true that ESG would require companies to incur expenditure to change their operations to be environmentally and socially responsible. However, in the long run, they will repeal profits, because soon non-sustainable companies will become unsustainable. There is a rise in ESG investing, people like to know that the companies they invest in are the ones doing good in the world. Great Depression is a great example depicting how loss of trust of people in the market, can lead to serious crisis.

Using renewable energy, would in long-term reduce cost compared to fossil fuels whose prices would shoot up with the scarcity nearing.WTO and other international platform are now focusing on environment and trade in natural resources. Shell is now acquiring solar power firms because it realizes that oil will exhaust in a few decades.

IV. Jurisprudential Reasons: John Rawls while giving his concept of justice as fairness, emphasizes on the fact that our talents are not ours, but accidentally given to us. Since the reason behind the inequalities are arbitrary differences/ natural inequalities. Since, it is impossible to have a society without any social and economic inequalities, the state must aim to neutralize these differences as much as possible.ESG is a way for corporates and investors to realize that they must aim to neutralize the social inequality and not to pursue on their personal economic goals at the cost of others and the planet.

V. DifficultyShouldn’t Be A Roadblock: The LPG policy of 1990s is an excellent illustration showing how a change imposed externally can be tackled by Indians effectively. When LPG came, India was in a huge debt and today, it stands as the fifth largest economy. United States Trade Representative no longer puts India in the Developing countries list. Jagdish Bhagwati, mentions how today it is the developed countries that live in fear, depicted in their immigration schemesaimed to prevent people of developing countries to take up jobs in their countries (ironic role reversal).

VI. Sociological Reasons: Sociologists consider law not just a means of social control but also a medium of social change. ESG can also be a medium of social change by providing an impetus to the investors to invest more ethically and thereby force corporate to look at the impact of their activities on social, environmental and governance factors.

VII. Younger Generation: Younger generation is the real stakeholder in climate change and they are increasingly becoming more and more woke about the effects of degrading environment and wants to work towards them. In such a situation, implementing ESG framework, would be easier as there will not be much friction between the corporates and the ESG reporting.

VIII. More Than CSR: Darren Walker has very nicely explained the difference between CSR and ESG “It’s not just 5% of your money you give away that matters. Whatyou do with the other 95 per cent is almost more important.” If a company gives donation for building schools, that is CSR but the fact that the firm works on employee training, has a diverse board, is democratic, is sustainable in itself etc. is what ESG is about. Under the garb of CSR, many corporates donated in the making of the statute of Unity, this would not have been the meaning of social under ESG. ESG goes much beyond CSR.

ESG entails how the business operate in a manner that operates in an environmentally friendly way, not just by producing products that are sustainable but also by internalizing the idea of sustainability into their vision, goal, and ambition. The company’s approach to employee care is the focus of the social pillar, and board diversity, anti-trust concerns, transparency, is the concern of the third pillar of governance.

IX. Institutional Support: ESG aims to ensure that the company behaves ethically in terms of decision-making, board diversity, etc. Institutions like CCI, SFIO, IEPFA, IICA, NFRA, etc. help with goodgovernance. RBI is promotingGreen finance. The government also provides various tax benefits to corporates working for sustainability like tax exemptions for use of e-vehicles, etc. The already existing ESG reporting standards like Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) the Sustainability Accounting Standards Board (SASB), etc. are also working to come up with a common metric that combines the advantages of these standards in the report “Toward Common Metrics and Consistent Reporting of Sustainable Value Creation.

X. Identify Previous Ignored Sectors: ESG reporting is such that it shifts the focus on several areas that a company might be ignoring due to focusing simply on economic growth. ESG reporting being detailed starts a thinking process in the minds of the corporates to see how they can do what they do differently.

XI. “Lite”: Currently, the BRSR framework provides two versions: lite and comprehensive, which is a great step to promote ESG. The small unlisted companies don’t have resources equivalent to corporate giants to spend on the reporting can use a lite version instead of completely avoiding the reporting.

XII. Social Contract Theory: Foundation of a company lies inthe social contract theory. The people allowed these huge corporations to use the resources owned by the society, so that the corporates give back to the society. However, today, they take society for granted. Today, they must be forced to go for ESG as without force, no company would do it. The idea of body corporate wasto protect the collective interest of the association of humans not vice-versa and it is high time that the corporates realize the same.

XIII. Financial Burden is Worth-While: The financial cost of ESG reporting is not applicable to one or few companies because BRSR appliesuniformly to all top 1000 listed companies, so no single company is getting a relative disadvantage. Thetop 1000 listed is the main area where most of the public interest lies and where the public invests.


Thus, owing to all these reasons, ESG is a great move from shareholder to stakeholder and a much-needed concept for several reasons explained above.

It is not the strongest species that survives nor the most intelligent, but the one which is most adaptable to change.”

- Darwin

End Notes

· “Who Cares Wins” by United Nations’ Principles for Responsible Investing (“UNPRI”).

· “Uncertain Times, Unsettled Lives”,Human Development Report 2021-22


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