Sustainable business practices: Navigating India's ESG, energy transition

Mandatory ESG norms mark a shift towards stakeholder capitalism, reflecting global trends in climate governance and moving beyond shareholder- and state-driven business models

The evolution of environmental, social and governance (ESG) disclosure frameworks in India reflects a significant shift towards sustainable business practices and transparency. Over the years, regulatory developments, investor demands and global sustainability trends have influenced the adoption and enhancement of ESG reporting standards in India.

 

Voluntary to Mandatory ESG Disclosure: Driven by Global Sustainability Wave 

India's commitment to the Sustainable Development Goals (SDGs) and the country’s Intended Nationally Determined Contributions (INDCs) following the Paris Agreement have largely influenced the evolution of its ESG reporting framework. This journey began with the endorsement of the United Nations Guiding Principles on Business and Human Rights (UNGPs) by India upon its adoption in 2011. Adhering to these guiding principles, the Ministry of Corporate Affairs (MCA), Government of India, introduced the “National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business,” popularly termed NVGs, nudging corporates to adopt responsible business practices.

 

 

The NVGs were revised on several occasions amidst the global sustainability wave, leading to the expansion of the disclosure bracket by the Securities and Exchange Board of India (Sebi) from 100 to 1,000 listed companies in the Indian stock exchange by market capitalisation under the Business Responsibility Reporting (BRR) framework. One of the revisions in the NVGs led to the development of the National Guidelines on Responsible Business Conduct (NGRBC), which became the cornerstone for the introduction of “Business Responsibility and Sustainability Reporting” (BRSR), making it mandatory for the top 1,000 listed companies in India to report their sustainability-related endeavours from the financial year 2022-23 onwards.

 

Today, BRSR is a comprehensive ESG disclosure framework containing both qualitative and quantitative indicators that must be disclosed as part of the organisation’s annual report, enabling assessment of the social and environmental impact created by business entities. It is aligned with global reporting parameters set by institutions such as the Global Reporting Initiative (GRI) and the Task Force on Climate-related Financial Disclosures (TCFD). Additionally, India's stock exchanges — the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) — have also joined the United Nations Sustainable Stock Exchanges (SSE) initiative, a UN partnership programme organised by UNCTAD, UN Global Compact, UNEP FI and the Principles for Responsible Investment (PRI), showcasing their commitment to enhancing ESG performance and promoting responsible investment among listed business entities.

 

Growth of ESG-related Employment Opportunities 

According to the UN Climate Action report, more than 9,000 companies, over 1,000 cities, more than 1,000 educational institutions and over 600 financial institutions have joined the race to net zero, pledging to take immediate action to halve global emissions by 2030. This requires prioritisation of sustainability practices by business entities globally, which has immense potential to increase demand for ESG professionals across various sectors. Companies have already begun upskilling their employees for roles equivalent to sustainability managers. The role of sustainability professionals in energy companies becomes more important in the context of the ongoing energy transition from fossil fuels to renewable energy sources.

 

It is worth noting that ESG-related employment opportunities have been rising in multiple sectors, including, inter alia, sustainable energy, green building, environmental consulting, waste management and sustainable agriculture. These professionals assist business entities in meeting their organisational ESG objectives, fully aligned with the extant regulatory frameworks. For instance, ESG investing has gained momentum in recent years. This trend is reflected in PwC’s Asset and Wealth Management Revolution 2022 report, which states that the share of ESG assets over total assets under management (AuM) is projected to increase from 14.4 per cent in 2021 to 21.5 per cent in 2026 (base case) at the global level.

 

In addition, sustainable fashion has also witnessed significant growth, averaging around 90 per cent annually between 2016 and 2020, according to the World Economic Forum (WEF) Future of Work. This will, in turn, lead to innovative material design and the adoption of a sustainable lifestyle for a better environment — similar to the tenets of the Government of India’s Mission LiFE initiative.

 

The growth of ESG-related employment opportunities reflects a broader shift towards sustainable and responsible business practices. This may spur the growth of the green-collar workforce, enabling assessment of investment-worthy firms using various factors related to corporate strategy and performance aligned with ESG principles. Hence, the need for specialised skills to thrive in the ESG job market will be instrumental amidst rising demand for such roles across industry.

 

Calibrating the Energy Industry 

Global energy demand is still largely met by fossil fuels such as coal, crude oil and natural gas. This has led to alarming climate change scenarios that we observe today, with the world at the brink of exhausting its carbon budget for the century under business-as-usual projections published by most think tanks. For instance, the Global Carbon Project 2022 predicted that the remaining carbon budget for a 50 per cent likelihood of limiting global warming to 2°C was around 1,230 gigatonnes of CO₂ from the beginning of 2023 — equivalent to around 30 years at 2022 emissions levels. This prognosticates a tectonic shift in the conduct of the fossil fuels business in the years ahead.

 

The global energy industry has gradually shifted towards sustainable business pathways, witnessed over the past decade through increased investments in green energy. Developing countries such as India — where the oil and gas sector accounts for around 30 per cent of greenhouse gas emissions — are anticipated to develop robust long-term ESG plans through regulatory frameworks such as BRSR. This could also attract greater government investment in clean energy, as reflected in the 7 per cent year-on-year growth in government spending on energy R&D during 2015–2023, according to the World Energy Investment Report 2024 by the International Energy Agency (IEA).

 

Further, India’s foray into the sovereign green bond market in January 2023 underscores its commitment to financing a low-carbon transition. The issuance of USD 1 billion (₹80 billion) in sovereign green bonds was oversubscribed more than four times, reflecting strong investor confidence in India’s renewable energy, sustainable transportation and green hydrogen projects.

 

Moreover, the promotion and adoption of biofuels at scale, the proliferation of solar and wind infrastructure, and the use of green hydrogen in hard-to-abate and hard-to-electrify sectors are imperatives for Indian industries striving to improve their performance on global sustainability indices.

 

Organisational initiatives are inextricably linked with the government’s vision for achieving sustainability targets. Notably, Engineers India Limited (EIL), a premier energy consultancy offering concept-to-commissioning services globally, has already diversified into several green energy sectors, including second-generation ethanol, sustainable aviation fuels (SAF) and green hydrogen/green ammonia, to meet the evolving needs of the industry.

 

In recent years, the company has established itself as an ecosystem enabler, assisting clients in meeting their energy transition objectives. For instance, EIL is providing services for the implementation of one of the largest-capacity biorefinery facilities in India — moving directly from demonstration to commercial scale — and has already successfully implemented green hydrogen and green ammonia projects. These initiatives underscore the energy industry’s readiness to develop green infrastructure and reinforce its commitment to sustainability in line with the Government of India’s vision of achieving net-zero emissions by 2070.

 

Concluding Remark 

Mandatory ESG disclosure is a stepping stone for companies to transition gradually into stakeholder capitalism, moving away from shareholder and state capitalism models to serve broader societal interests. This is reflected in the paradigm shift in climate governance practices observed across the world, including India, over the past decade.

 

The quality of environmental disclosure is increasingly becoming a critical factor for financing projects across sectors — going far beyond an organisation’s CSR investment. However, factors such as changes in board characteristics, the impact of ESG-related costs on firm valuation and market response to an expanded disclosure mandate beyond the top 1,000 listed companies will make for an interesting journey for Indian industry in the years ahead.

 

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The author is Chairman & Managing Director Engineers India Limited (EIL)

 

Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper