We are living in critical times where our conduct towards the natural environment over the next few years will decide the fate of humanity on this earth. We are already facing the severe consequences of environmental damage in the form of natural resource depletion, climate change, pollution etc. Having realized the criticality of the situation, stakeholders across the world are focusing on environment protection and resource conservation.
The Business Responsibility and Sustainability Reporting (BRSR) format devised by Securities and Exchange Board of India (SEBI) is an attempt towards ensuring that the businesses remain environment-friendly and responsible in their conduct. Through the mandatory environment, social and governance (ESG) reporting requirement from the current financial year for the top 1000 companies (by market capital) the attempt is to create a culture of conducting business in a responsible manner, towards the society and the environment.
The BRSR format seeks information on various sustainable business practices from the companies, with the impact on natural environment being an integral aspect of the reporting. The environmental regulatory framework has existed in India for decades. Clearly, it has failed to meet the desired goal of environment protection and resource conservation.
While lax enforcement was one of the reasons, it would be unfair to blame just the regulators as all stakeholders including citizens were equally responsible. With the global discourse increasingly focusing on climate change mitigation, achieving the net-zero targets and sustainable development goals (SDGs), pollution control and resource conservation, we in India have thankfully realized the seriousness of the situation, thanks to political leadership, regulators, consumers and most importantly, investors.
The companies are now convinced that their businesses have to be in consonance with nature and the more environment-friendly and responsible they become, the more they will attract investments and thrive.
While ESG as an acronym may be new to India, the inherent focus on environmental, social and governance best practices have been inherent in our laws. Our environmental regulatory framework has always aimed at controlling all forms of pollution, conserving natural resources including water, forests, biodiversity, managing our waste efficiently and ensuring that we keep our natural environment clean and green.
There is now an increased focus on developing ecofriendly products, reusing, recycling and disposing different types of wastes properly, assessing the life cycle of products etc. For example, with the focus on electric vehicles (EVs), there is an increased need to focus on the life-cycle of all kinds of batteries that we have started using or intend to use in the next decade.
Research and innovation by companies is increasingly presenting new opportunities as also the solution to the existing challenges. The ESG reporting framework is an effective tool to help the companies identify such challenges and find sustainable ways to address them.
The six ‘R’s for sustainable development, as laid down by our hon’ble Prime Minister, have a lot of relevance for our country. With a rapidly increasing population consuming natural resources at an even faster pace, we have no option but to adopt the mantra of reduce, recycle, recover, redesign and remanufacture. Companies which are compliant with the ESG parameters will invariably ensure that they are conserving our natural resources.
There is an increased focus on the strategies adopted by companies to manage their waste, be it electronic, plastic, hazardous or others. There is a lot of emphasis on innovation to adopt the mantra of the six ‘R’s. The ESG compliant companies are not just expected to report their waste management practices but are also required to highlight the percentage of recycled and reused materials in their manufacturing processes. They are even expected to report the percentage of the packaging material that is reclaimed.
While environment may appear as just one of the three components of ESG, the best practices in ‘E’ also have a significant bearing on the ‘S’. For example, the forest dwelling communities which rely on our forests and natural resources for their livelihood are significantly impacted by the activities of the industries operating in such areas.
Therefore, any ESG compliant company is expected to ensure that their activities do not adversely impact such communities or compromises with their basic human rights, which in most ways is intertwined with the protection and restoration of our natural environment and resources.
Since the mandatory ESG reporting starts from the current financial year for the top 1000 companies, we are at the beginning of an era which will ensure better conservation of natural resources. The compliant companies will invariably contribute towards energy efficiency, lowering emissions and effluents, better waste management, conserving water resources by adopting practices like zero liquid discharge (ZLD) and focusing on recycling, rain-water harvesting etc.
The ESG compliant companies will ensure that we use our natural resources to their maximum potential, not just for themselves but also for all the companies that form a part of their supply chains.
This article was originally published in The Economic Times on 28 July 2022 Written by: Nawneet Vibhaw, Partner. Click here for original article
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