In a rush, SEBI Unveils Six New ESG Mutual Fund Strategies
Without initiatives to promote mandatory sustainability reporting requirements in place at the business (which is not in SEBI’s hand) level SEBI’s new introduction of Six New MF Strategies Under ESG for Mutual Fund is of no use.
Question SEBI needs to find answered before these new initiations!
1. Which reporting standards or frameworks are the business/industry currently using for their ESG disclosures?
2. Who in their company has management responsibility for ESG disclosure?
3. Have they enhanced their internal goal-setting and accountability mechanisms in recent months to promote preparedness for future disclosure requirements?
4. How likely is those company to invest in new technology or tools to enable more timely data and high-quality disclosure in the next 12 months?
No standard, so clarity yet: Various frameworks and guidelines were being used for sustainability reporting all over the world, but in India, we can see the Global Reporting Initiative (GRI), the United Nations Global Compact (UNGC), and the National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business (NVGs). While some companies adopted internationally recognized frameworks, others tailored their reporting to meet specific industry requirements and stakeholder expectations.
The Indian government and other regulatory bodies started taking steps to encourage sustainability reporting and integrate Environmental, Social, and Governance (ESG) factors into business practices. Few large corporations in India had started voluntarily publishing sustainability reports to showcase their commitment to sustainable practices.
Sustainability Reporting Challenges:
Sample this: Business in the US 52% established and 42% in the process of establishing a cross-functional ESG council or working group for ESG reporting.
Several challenges hindered the effective implementation of sustainability reporting in India:
Data Availability and Quality: Companies struggled to gather accurate and reliable data on their environmental and social impacts. Inadequate data management systems and a lack of standardized metrics made it challenging to measure and report sustainability performance effectively.
Sample this: Business in the US more than a third of executives (35%) cite data quality as their greatest challenge.
Awareness and Training: Many businesses and employees lacked awareness and understanding of sustainability reporting concepts and methodologies. Training and capacity-building initiatives were necessary to facilitate better reporting practices.
Small and Medium-sized Enterprises (SMEs): SMEs faced additional challenges in adopting sustainability reporting due to limited resources and expertise. Encouraging sustainable practices among these enterprises required targeted support and incentives.
Regulatory Frameworks: Although there were initiatives to promote sustainability reporting, there was no mandatory reporting requirement in place. This lack of a comprehensive regulatory framework sometimes resulted in inconsistent reporting practices across industries.
Sustainability Planning and Acting:
Sample this: Not all industries are actively preparing at the same rate. Overall CONSUMER PRODUCT industry appears to lead on the sustained planning to obtain external assurance compared to FINANCIAL SERVICES, OIL & GAS, TECH, MEDIA AND TELECOMMUNICATIONS and LIFE SCIENCES AND HEALTHCARE
Sustainability planning involves the development and implementation of strategies to address ESG issues and create a positive impact. Some key steps to effective sustainability planning and acting include:
Setting Clear Goals: Indian Companies yet to establish specific and measurable sustainability goals aligned with their overall business strategy.
Engaging Stakeholders: Successful sustainability planning involves engaging internal and external stakeholders, including employees, investors, customers, and local communities. This only happens if there is a strict mandatory environment created by Government.,
Monitoring and Reporting Progress: Regular monitoring of sustainability performance and reporting on progress are crucial. Transparent reporting helps build trust and accountability among stakeholders.
Innovation and Technology: Embracing innovation and adopting sustainable technologies can lead to more efficient and eco-friendly business practices.
Supply Chain Management: Companies should assess and engage their supply chains to promote sustainability throughout the value chain.
Public Advocacy: Leading businesses can advocate for sustainable policies and collaborate with industry peers, NGOs, and governments to drive positive change on a larger scale.
Overall, the journey towards sustainability in India requires wider commitment, collaboration, and continuous improvement.
Logu Dhamodaran
Author's Veiw.
