The practice of Environmental, Social, and Governance (ESG) is gaining momentum in India. The global platform for ESG investors, UN PRI (Principles for Responsible Investment), saw 17 sign-ups from India in the last two years. According to the India ESG report, 8 ESG-focused mutual fund schemes out of 10 in India were launched in the same period. Even as the country is waking up to ESG investing, SEBI has asked the top 1000 companies by market capitalization to report ESG performance in a new, more detailed format called Business Responsibility and Sustainability Report (BRSR). Granted, the ESG ecosystem in India is still in the early stages of evolution, the pace of change is rapidly accelerating.
With regulators demanding stronger corporate engagement in social and environmental issues, ESG has become a hot topic in boardrooms. Customers and employees demanding sustainable practices are pressurizing companies to prioritize ESG. A top business consulting firm report has shown that 92% of business leaders in the US, Brazil, UK, Germany, and India agreed that companies with commitments to ESG policies would outlast competitors that don’t have them.
Barriers to ESG compliance
Today’s businesses look at more comprehensive ways to include ESG in their business strategies and supply chains, but barriers are impeding their ESG progress. First, decision-makers struggle to balance the investment needed to fuel growth targets and the investment required for ESG goals. Second, the regulatory complexity and lack of reporting standards can slow ESG progress. Third, the difficulty quantifying the ROI on ESG investments can challenge decision-making, leading to the management losing interest. Fourth, siloed businesses and dependency on manual processes that most companies follow can make accessing data difficult. Manual processes lead to unreliable data and misaligned priorities.
In today’s highly digitized world, ESG is far more than a compliance exercise. Decisions made around ESG can drive growth with purpose – or alternatively, create serious risk and negative business impact. ESG is emerging as a business risk category positioned under the overall risk umbrella of enterprise risk management. Most organizations do not have a clear view of risks and, therefore, cannot manage ESG-related risks and simultaneously perform various assessments across business units and suppliers.
Why businesses need a single integrated technology solution to manage ESG
ESG management isn’t a simple, linear process. So many frameworks, metrics, data sources, cross-functional stakeholders, and risks are involved. Also, to make ESG work, organizations will first need a strong governance, risk management and compliance (GRC) structure. Organizations must integrate ESG into their GRC architecture. Within this architecture, the organization sets clearly defined objectives for ESG. Once the organization establishes its goals, it can assess, monitor, and manage risks to those ESG goals. Within this architecture, the organization can also report its integrity in the context of stated ESG statements, commitments, and obligations.
But how does an organization manage all of this efficiently and intelligently? That’s where technology comes in!
An integrated ESG approach supported by technology can go a long way in overcoming the barriers to an effective ESG strategy. It helps to have a single integrated technology solution designed to leverage the natural connection between ESG and GRC in a simple and streamlined approach. The technology should address an organization’s requirements related to environment, social, governance, risk, and compliance.
Enter MetricStream’s ESGRC solution.
ESGRC – a unified approach to ESG
ESGRC is an advanced technology solution that enables a simplified and streamlined approach towards meeting all organizational requirements relating to Environmental, Social, Governance, Risk and Compliance (ESGRC). ESGRC helps unify all reporting requirements, metrics, and other information in a single source. So, C-suite decision-makers have all the insights they need to report their ESG posture and make better-informed decisions.
ESGRC provides a centralized risk repository to manage ESG-related risks and perform various assessments across business units and suppliers. Organizations can use ESGRC to track any identified ESG-related issue, and remediations can be automated, with the AI-powered engines classifying and recommending remedial actions. The technology eliminates the need for manual processes, thus overcoming the limitations that come with it.
Organizations can use ESGRC to define and manage ESG standards, frameworks, and disclosure requirements. They can also link standards to organizational entities and critical metrics, automate the collection and aggregation of data, and report through real-time analytics and graphical dashboards. These tools enable better decision-making based on insights. The Board of Directors can use these tools to gain comprehensive and real-time visibility into various ESGRC management processes and metrics.
Organizations adopting an integrated ESGRC approach also gain a competitive edge over their peers. This includes better public perception and trust through transparency that comes with effective ESG management. Organizations using ESGRC also save on costs arising from regulatory fines and legal fees due to non-compliance.
Indian companies today are rapidly adopting ESG as a part of their overall business strategy. Many companies have started disclosing their ESG scores and sharing ESG incorporation and improvement roadmaps. In the current business climate, an integrated ESGRC framework can be a powerful enabler in their ESG journey, ensuring organizations are fully equipped and prepared for impending ESG regulations and reporting standards to come.
