Two years ago, ESG was considered a revolution, yet today, in India, it is a dyiing movement.The Budget remained focused on evolving a sustainable business era, however, the proposition of ESG integration remained rather subdued.

Amidst the ESG phenomenon rapidly gaining ground across the globe, it appears that an ESG Civil War is currently brewing in the United States with the Democrats being pro-ESG while the Republicans voting against it. However still, the past year has witnessed a flurry of activity in the regulatory domain pertaining to ESG. While the EU has been leading on the ESG front, where investor, political, and societal support has generally been strong, India has also not been far behind. India has already launched its sustainability reporting format i.e. the BRSR. Thus,with sustainability dominating every local legislation, G20, and CoP28, given its new quotidian nature, all eyes were set, with much alacrity, on the Indian Interim Budget 2024 for further news on ESG Integration.

Two years ago, ESG was considered a revolution, yet today, in India, it is a dying movement. The Budget remained focused on evolving a sustainable business era, however, the proposition of ESG integration remained rather subdued. Nevertheless, reading between the lines, with the glass-half-full ideology, the Budget has provided a skeletal framework that must be used as a stepping stone for cementing ESG and sustainability in every realm and domain. A glimpse, perhaps is in order.

Extensive rooftop solarization, provision of viability gap funding for harnessing offshore wind energy potential, setting up of coal gasification and liquefaction capacity, phased mandatory blending of compressed biogas (CBG) in compressed natural gas (CNG) for transport and piped natural gas (PNG) for domestic purposes, financial assistance for procurement of biomass aggregation machinery to support collection, expanding the EV ecosystem, and launching of bio-manufacturing, bio-foundry, and Blue Economy 2.0 can be maneuvered to imbue the widely accepted “E” aspect of the fission-ed approach towards ESG. These ambitious targets coupled with infrastructure development can lead to an influx of forex and the bloom of green finance, sustainable finance, climate finance, and transition finance in India which would ultimately and inevitably breed stakeholder capitalism, thereby, paving the way for ESG integration.
 

Next, the sustainability drive in various industries such as tourism, agriculture, dairy, oil, fisheries, and food processing should be used to infuse ESG. If the circular economy and sustainable sourcing and value chains form the heart of this drive, then the ESG agenda, perforce, shall march forward. The establishment of a robust ESG Framework by the concerned ministries and departments backed by fiscal benefits and thereafter, letting the corporate houses spearhead the movement will lead to the trickling of ensuing benefits down the corporate and social pyramid.

The “Social” aspect is also writ large on the Interim Budget. The social goal of Viksit Bharat epitomizes the “S”. Addressing human resource development, consumer protection, improvement in working conditions, employee compensation, diversity, data security/privacy, financial security, financial inclusion, access to healthcare, social justice and equality, education, human rights, product safety, and quality, and supply chain issues at the macro level will indubitably address the “S” concern at the micro level.

In this Kartavaya Kaal, ESG must be unlocked and infused in every sector, domain, and level to build a sustainable future. And yet the pertinent question remains- HOW?

At the outset, it is imperative to distinguish between sustainability and ESG. Sustainability at the macro level shall remain a distant dream in the absence ofa holistic, robust, indigenous, and sector-specific ESG framework, one which is simple in nature and also condemning social and greenwashing, by the ministries and the departments is the need of the hour, followed by an implementation Road-Map. The paucity of knowledge has resulted in painting ESG as a compliance burden for businesses and business leaders, and yet nothing could be farther from the truth. The framework should not be limited to compliance alone but must cultivate ESG practices. For instance, in India, inter-alia, the recyclability plastics through de-inking solutions and circular packaging agenda remain castles in the air, whilst the EU, outranking everyone is regulating byzantine issues such as the use of toxic inks in the food coating industry. Thus, in the name of the greater good, the framework must be institutionalized to cater to sweeping stakeholder interests and must be institutionalized to cater to sweeping stakeholder interests and should foster and not solely penalize.

Secondly, to usher in the Amrit Kaal and/or a sustainable era, the role of finance, at no stage, should be underestimated. Finance has, since the beginning of time, and it shall continue to be the driving force and backbone of every dream, goal, and vision. A macro decarbonization strategy as adopted in the Interim Budget cannot supplant finance. In this race to transition, startups receiving funding from the US and EU have taken the lead, whereas, the pre-existing Goliath-like behemoth business houses, despite being the bigger faction, in the absence of a holistic ESG environment and access to transition finance are caught in the no man’s territory. To them, ESG is the albatross around their necks.

Hence, increased budgetary allocation coupled with tax incentives and easy access to funding for organizations shall bridge the distance towards sustainability and ESG Integration. Reducing the dearth of private sector funding must be THE AGENDA.

And last, but not the least, Advocacy. Fostering support for ESG including influencing policy development and evidencing the strategy collectively, forms a pertinent pillar of Amrit Kaal. Sustainable future demands that ESG must be adopted, immediately, in its fusion-ed form rather thanits notorious fission-ed structure of “Environment/Social/Governance” Therefore, pro-ESG lobbying and active campaigning cannot be overlooked or discounted.

From the last budget to the present, ESG remains at an impasse. While this session we must remain savvy by reading between the lines and contemplating ESG integration, the upcoming budgets must offer a clearer picture with significant emphasis on ESG. ESG infiltration is the need of the hour since all the stakeholders are eyeing every slice of business, policy, and action through the ESG lens.