What is ESG?
ESG is coming to India but it is not a new concept; the definition has been in use for many years. It is a fundamental part of the social contract between business and society and usually managed as part of “CSR” or Corporate Social Responsibility.
There are a few definitions of ESG circulating, and we prefer: “Environmental”, “Social”, “Governance”. These three terms capture the three major axes of social responsibility that every corporate should be considering as they carry out their day-to-day business. Typically these three ESG concepts are translated into standards that are then applied across a business.
For more information on the detail of “what is ESG?” – please click here to read our one minute guide.
Why is ESG coming to India?
ESG standards are being implemented by companies around the world (EU, North American, Japan, Australia etc) and this is for themselves and their global supply chains.
- New laws and regulations are being passed in many countries requiring companies to take social responsibility for themselves and all companies who are their suppliers.
- This includes laws on forced labour, environment, carbon footprint and net zero, worker treatment and fair pay.
- Breaching the laws can involve goods being impounded at the import border, and significant fines – up to 2% of annual turnover in some cases.
Almost without exception, major corporate groups are hiring ESG professionals, creating new departments or adding significant resources to existing teams, and building out comprehensive policies on their ESG compliance – and announcing ambitious and public targets for ever tightening levels of compliance for themselves and their global supply chains.
And India itself is waking up to the realities of ESG within its own domestic supply chains and for Indian importers – especially listed companies. Climate change is going to affect India and India, in turn, is one of the largest contributors of greenhouse gases. But it goes deeper than that into areas like worker rights, alleviating poverty, building safer and healthier local communities. These are topics increasingly becoming a major focus for the media and for regulators.
What initiatives are happening in India around ESG?
The profile of ESG is rising rapidly.
- Prime Minister Modi has voiced India’s position clearly at the recent COP26 forum in the UK, especially around commitments to reach a net zero position for the Indian economy by 2070. Whilst this may be a long way off, there is a lot of work to do – and we can expect the commitment to be backed up by regulations and law changes in the near future.
- The Securities and Exchange Board of India (SEBI) just issued a circular implementing new sustainability related reporting requirements for the top 1000 listed companies by market capitalization. New disclosure will be made in the format of the Business Responsibility and Sustainability Report (BRSR), BRSR reporting will be mandatory from FY 2022-23 for the top 1,000 listed companies.
- And the top 1,000 listed companies include most of the Indian domestic supply chain in their footprint. What happens at the top has to be implemented all the way down. As the top 1000 companies are required to report on business sustainability, we will see smaller businesses and SMEs being brought up to the same standards as a natural part of the reporting process.
- Most exporters are already familiar with the principles of ESG, submitting to annual compliance audits and increasing amounts of paperwork in support of their international customers. This process will be continuing and expanding – but perhaps also getting easier as technology improves. One big breakthrough is the PrimaDollar social score system which allows a workplace (factory, field or farm) to implement a single reporting technology that all of its international and domestic customers can use simultaneously and in a standard format. This is a breakthrough for the workplace, as it reduces the number and complexity of ESG reporting processes that it has to cope with.
How does PrimaDollar help with ESG?
Our technology forms the backbone of compliance reporting on the “S” and the “G” of ESG – social and governance. These are just as important as “E” – especially in terms of the day-to-day lives of millions of workers in large companies and their global supply chains. And our technology is very simple to implement and delivers immediate, continuous and real-time results that can be used with regulators, domestic and international corporate customers – and directly with consumers.
We provide a mobile app that workers can use, by invitation, to report on their conditions, pay, freedoms, health and safety. This is real-time, anonymous reporting that delivers a “social score” on a workplace. Social scores are standardised and comparable – a bit like a “Trustpilot” or “Yelp” rating on a company – except it is on a workplace and provided by workers rather than customers. This is a very powerful tool and the social score can be shared all the way through the supply chain to the end-consumer of a product or service in the shop or online.
- See more about our worker app: here.
- See why the social score is revolutionising workplace reporting: here.
- Read more about recent news on the worker app: here.
ESG is coming to India – and our worker voice app is already in multiple Indian languages such as Hindi, Gujarati, Tamil, Marathi, Bengali. Click here for a podcast on the worker voice app and how it transforms relationships between suppliers and their international customers.
Deliver a return on compliance investments
The social score / worker app system really matters. It delivers an independent and comparable measure of a workplace. It means each workplace can understand itself better – and then compare its position with its peers in the country and internationally.
Sharing the social score with corporate buyers – and then finally with consumers – means that more workplaces that have made investments in compliance can finally showcase what they have done and earn a return on that effort.
This is a measurement and communication problem. Until the arrival of our worker app and social score system, it was difficult to measure compliance with social and governance standards in workplaces and in the supply chain. Now this can be measured, in real-time and continuously – and the result communicated to buyers and consumers as the “social score”.
Workplaces with higher social scores can command better prices for their products and services – reflecting the investments that they make in their workplaces for the benefit of their workers.
ESG is coming to India – supported by the political will of the government and regulators – and demanded by the informed population inside India and internationally.
There will be an increasing focus on delivering environmental improvements – the “E” of ESG. This is a macro problem for India as a whole, given its reliance on coal – and is a micro problem for individual businesses across the country. New regulations are coming that require environmental performance to be measured and reported – and then change will start to come.
And on the “S” and the “G” of ESG – social and governance – our worker app / social score system will allow compliance with standards to be measured, managed and then improved. And crucially, investments made to make workplaces better can be recovered via the communication of the social score to corporate buyers and through to consumers.