Expect a Drop in Greenwashing as India Adopts New ESG Reporting Rules
The COVID-19 pandemic has acted as a powerful reminder of the importance of sustainability to countries, governments, businesses, and citizens alike. It has contributed to widespread recognition that environmental, social, and governance (ESG) challenges can no longer be dismissed or ignored. However, the existing emphasis on ESG measurement is still alarmingly inadequate. A greater emphasis on ESG as well as the development of an ESG reporting framework is essential to building a sustainable business ecosystem that ensures future resiliency. Many businesses have been self-motivated to commit to ESG efforts in recent years, which is laudable, but their efforts have so far yielded mixed or limited outcomes.
The new SEBI regulations on good governance going into effect tomorrow will require the top 1000 companies by market cap size to include a mandatory Business Responsibility and Sustainability Report (BRSR) in their annual reports filed with stock exchanges, paving the way for ESG to be formally adopted as a yardstick for gauging company performance on sustainability and good governance in India.
This could also discourage the growing trend of greenwashing (the use of marketing tools and narratives to portray a brand, its products or services, activities, or policies as environmentally friendly when they are not) in order to capitalize on the growing demand for environmentally sound products and services. Anyone who exploits ESG or sustainability as only a marketing tool is heading for trouble as more people, from investors to employees and customers, become aware of the importance of sustainability and companies’ overall sustainability and governance impact.
Photo courtesy of Bud Helisson.