Shift from CSR to ESG in Corporate India

Shift from CSR to ESG in Corporate India


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For entities operating beyond the borders, it’s imperative to understand evolving corporate law in international business avenues. In the corporate business landscape in India, there’s a visible shift from CSR (Corporate Social Responsibilities) to ESG (Environmental, Social, and Governance) in recent years. This shift in paradigm redefines the way businesses operate in the country, besides reshaping regulatory frameworks and standards of accountability.

In this edition, let’s have a comprehensive look into the relationship between corporate law and the sustainability revolution in the country. Foreign companies investing in India presently find themselves at a crossroads as the focus shifts to ESG globally. To make room for new norms, corporate law in India is undergoing a profound transformation. This explains why companies need to fulfil their reporting obligations amidst the growing influence of shareholder activism.

Why is ESG a Cornerstone of Corporate Responsibility?

ESG has proven to be a key progression in corporate sustainability. These standards serve as a parameter to evaluate the commitment of a company to stakeholder engagement, protecting the environment, and effective governance. ESG standards ensure compliance with ethical business practices and enable investors to evaluate companies before investing in them.

Foreign companies operating in India need to understand that establishing and maintaining a comprehensive ESG framework involves certain initial costs. However, this returns a substantial benefit in the long run. Experts recommend against neglecting ESG factors since they can prove detrimental to the finances, reputation, and legal standing of firms expanding to India.

The Shift from CSR to ESG for Better Corporate Accountability

ESG practices in India define a departure from the traditional shareholder-centric approach that CSR initiatives carry. Unlike CSR, ESG comes up with a more holistic focus on all stakeholders. This marks a significant shift in corporate strategies.

Let’s understand this transition based on three key aspects.

1. Evidence-based Accountability

CSR initiatives are often based on marketing narratives and anecdotal evidence. On the other hand, ESG presents a new era of accountability backed by quantifiable metrics. Transparency and specificity in evaluating the performance of a company enhance the credibility of its efforts to maintain sustainability. This significantly addresses concerns of ‘greenwashing’.

2. Integrated Approach to Management

While CSR initiatives present a fragmented nature, ESG issues remain interconnected inherently. Environmental, social, and governance aspects often intersect and require a cohesive approach to management that involves the entire leadership team and board of directors.

3. Strategic Importance

Traditionally, CSR initiatives were often justified by their potential to reduce operational costs. On the other hand, ESG is a strategic approach that enhances performance and opens up new opportunities for growth. Goal-oriented companies with strong ESG profiles can outperform their peers. This demonstrates the strategic importance of integrating ESG.

Best Practices for Corporate Compliance with ESG Regulations

For corporations, it’s imperative to embrace the best ESG principles as they try to consolidate their footprint in India. Here, we have outlined the key steps to realize this goal.

Establishing ESG Committees

Specialized board-level committees go a long way in driving ESG integration within organizations. Establishing such a committee will help corporate entities create, implement, and monitor ESG initiatives, establish goals, ensure compliance, and monitor progress.

Evaluating ESG Risks

For any business, it’s crucial to identify and mitigate ESG risks. Businesses must carry out comprehensive risk assessments to identify risks, evaluate their impact, and come up with effective strategies for mitigation customized to the unique context of the organization.

Engaging Stakeholders

Effective ESG compliance requires an active engagement with stakeholders. Businesses should seek feedback and involve diverse stakeholders in their decision-making processes to boost transparency, trust, and accountability.

Compliance Requirements and Best Practices

With the ESG landscape evolving rapidly in India, businesses need to meet specific compliance requirements. Here’s an overview of the best practices to meet compliance requirements.
1. Mandatory CSR Spending
Companies that meet the necessary criteria are advised to allocate a part of their profits towards CSR activities. This demonstrates their commitment to social and environmental responsibility.
2. ESG Reporting
For top-listed companies, it’s imperative to publish Business Responsibility Reports to disclose their ESG performance as per the disclosure framework of SEBI. This will take them a step forward to promote accountability and transparency.
3. Adhering to Global Frameworks
Corporate firms must align ESG reporting with globally recognized frameworks like the Global Reporting Initiative (GRI). Besides boosting credibility, this facilitates global benchmarking.
It’s time to Pioneer Sustainable Corporate Practices

International brands striving to integrate themselves into the thriving corporate environment in India should adhere to the best ESG practices, respecting the standard regulations in the respective industries. This approach not only streamlines their path to contribute to a more sustainable future but also positions themselves for long-term success and gains the trust of stakeholders.

The IMC Group continues to be one of the most trusted global ESG Consulting firms. The professionals have been collaborating with foreign corporate firms expanding to India over the years, offering comprehensive assistance to ensure ESG compliance.

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