In recent years, you must have heard about Environmental, Social and Governance (ESG) and how companies are adopting ESG principles. If you think this trend is just corporate, think again. ESG has direct implications for consumers, shaping purchasing decisions and creating a more sustainable and ethical marketplace. Moreover, in this digital age with all the information at our fingertips, ESG principles are converging with technology to transform the consumer landscape in India.
Recent reports show that ESG investments in India have increased from US$330 million in 2019 to US$1.3 billion in 2023, proving the importance of ESG. Companies need ESG not just to satisfy the consumer; Investors are interested in companies with ESG-focused approaches because the resulting regulatory intervention ensures investor protection. In May 2021, the Securities Exchange Board of India (SEBI) introduced the Business Responsibility and Sustainability Reporting Framework, which will ensure that certain listed companies must disclose their ESG-related information.
According to a study by Avendus Capital, India's ESG is expected to contribute around 34% of total domestic AUM by 2051, in sync with India's 2070 net-zero target.
Why should the Indian consumer care about ESG and how is technology playing a role in the integration of ESG practices in India's business ecosystem?
While India is doing well on ESG, we have a long way to go, says sustainability tech company Google and Qwiklabs Inc. says Jitesh Shetty, founder and CEO of Credibl. “When you look at norms like BRSR reasonable assurance India is doing very well, we are way ahead here than other parts of the world,” said Shetty. “However, our problems are large-scale problems and therefore we have a long way to go.”
He cites the example of TATA Sons, a leader in sustainability, and their company IHCL, the Taj Hotel group, which is doing well with ESG KPIs.
“They care a lot about ESG and don't do it because someone is policing. Their program called PAATHYA has huge user feedback. You walk into any Taj hotel and you see the impact Pathya is making,” he explained.
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Why should consumers care?
ESG is a set of criteria used by investors, companies and consumers to assess how a company impacts the environment, society and its governance structure. Why should consumers think about things like ESG or digital footprint when buying a product or service? As consumers become more socially and environmentally conscious, they increasingly demand products and services that align with their values.
“It's a multi-front problem,” Shetty said. “Corporates need to improve their ESG posture. But consumers also have to do their part. Purchasing decisions have a significant impact on the environmental footprint. For example, you are buying a home textile product. If it is made from organic cotton, green energy is used in the factory and the packaging is green. Then, the overall environmental impact is negligible.
Digital Footprint and Environmental Impact
If we look at the Indian market, it is flooded with digital products and services and the Indian consumer is aware of the environmental implications of this digital transformation. E-waste, energy consumption and sustainable data management practices are, slowly but steadily, becoming part of household discussions.
For example, digital giant Google's commitment to run on 100% renewable energy since 2017 is a statement that environmentally conscious consumers have taken note of. Closer to home, Mumbai-based RPG Group has pledged to conserve, restore and grow one million trees by 2030, according to 1t.org, a Geneva-based World Economic Forum platform that seeks to mobilize a growing and visible global forestry community. After a trillion trees worldwide by 2030.
As issues like climate change and global warming become more pressing, consumers in India are beginning to pay more attention to a company's environmental practices. From carbon footprint to waste management, they are starting to read the labels of the products and services they buy. For proof, look at the arrival of electric car giant Tesla in India. Tesla is banking on Indian consumers' environmental aspirations to own a climate-friendly vehicle.
Social Responsibility in the Digital Sector
The digital space, where every day of our lives interfaces with various digital entities, is a popular platform for companies to learn about what consumers care about.
At the same time, they can demonstrate their own commitment to social responsibility, which ranges from fair labor practices in technology supply chains to diversity and inclusion programs in digital workplaces.
For example, when cloud company Salesforce announced its 1% initiative, a pledge to donate 1% of its product, equity and employees' time, it inspired many other companies to follow suit.
Governance in the Digital Age
With the rise of cyber threats and data privacy concerns, digital governance is not something consumers can afford to ignore. Already, the so-called 'mother of all breaches' happened a few days ago, exposing 26 billion records involving popular and common sites like LinkedIn, Snapchat, Venmo, Adobe and X. That's why consumers are now looking to companies. With strong cyber security measures, transparent data practices and ethical use of technology.
While international tech giants like Apple and Microsoft are known for their digital ethics policy, in India, IT giant Infosys is recognized for its strong governance framework.
Last year, Infosys co-founder Nandan Nilekani spoke about how ESG not only builds trust but also increases brand value.
“Commitment to strong governance is not just compliance; it is a strategic imperative for sustainable success in the dynamic world of startups,” he said.
Role of Technology in Advancing ESG in India
ESG is important, technology is helping the sector so that organizations can integrate ESG principles into their functions as much as possible. How is technology enabling ESG in the Indian landscape? Will it improve in the future?
“Technology is helping in raw materials, energy sources and software,” says Shetty. “Innovation in materials means you can take organic fiber but make it durable for real-world use, use solar energy efficiently in manufacturing and use software for better traceability and ESG data management with automation.”
Following are some key ways technology can help adopt ESG practices:
Data Analytics: With large amounts of data related to their ESG performance, organizations can analyze, find patterns, and identify dos and don'ts in their architecture. It helps in determining future actions that are favorable to the environment and society.
As Nitesh Mehrotra from business consulting firm EY India says, “ESG today is a central boardroom agenda for all leading organizations to create and protect value. And I think it is critical to have a consistent and comparable scientific measurement of sustainability variables across all of our stakeholders. So, clearly, having a single version of the truth with real-time performance analytics to generate actionable insights is critical.
Sharing this data with consumers is imperative and demanding from companies to help consumers make more informed purchasing decisions.
Blockchain for Transparency: Blockchain is an emerging technology that increases transparency in ESG. Its ledger technology enables companies to provide consumers with real-time information about the source, production processes and ethical practices applied in their products and services.
ESG Rating Platforms: The technology has given rise to ESG rating platforms such as MSCI, Sustainablealytics and Bloomberg ESG, which evaluate and score companies based on ESG performance. Anyone, investor or consumer, can access these platforms to make informed decisions, influencing companies to improve their ESG practices.
The Path Forward
As the impact of ESG on Indian consumers continues to grow, the onus is on businesses to adopt sustainable and ethical practices. Companies that prioritize ESG considerations not only contribute to a better planet and society, but also gain a competitive edge in an emerging market.
“When you embed ESG at the core it becomes a differentiator in the marketplace. Also, you start with a green foundation,” advises Shetty.
He also added that ESG can lead to a more equitable society, “In India, citizens face significant environmental issues on a daily basis. Air quality is poor in all tier-1 cities. Waste management is still unregulated and unsolved. When it comes to social indicators, we are far from creating an equal society. The same is true of corporate compliance and governance. ESG compliance can help address all of these issues.
As consumers, the power to drive positive change lies in your purchasing decisions. By choosing products and services from companies that uphold ESG principles, you can be part of a sustainable and socially responsible business environment. As technology helps develop ESG practices, you will see more transparency and accountability in the products and services you choose, ultimately creating a more conscious and responsible marketplace in India.
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