Sankar Chakraborti, Chairman, ESGrisk.ai -; Group CEO Acuité

15 May 2022 , 11:09 AM

In conversation with Sheetal Agarwal of IIFL, Sankar Chakraborti, Chairman ESGrisk.ai & Group CEO Acuité talks about the findings from their deep dive into the ESG practices of Indian PSU companies.

What are your key findings about the ESG performance of PSUs versus that of their private peers?
Private sector has adopted sustainability earlier than the public sector, their progress has been a long time coming. Understanding ESG performance of PSUs and the private players would need one to deep dive into each individual factors and understand how different factors have different level of importance i.e., materiality, and to observe their growth in terms of progress and not comparison. Public sector companies perform better in the material issues of biodiversity and employee development than their private peers.

Share with us the prominent sector specific trends on the ESG strategy and performance
The most recent and commendable industries in public sector companies that have implemented ESG risk management framework is the energy sector including industries like power and oil & gas. Companies such as IOCL, BPCL, and NTPC, etc. have started taking efforts in adapting sustainability in their business operations. In these industries, the most common factor that causes an imbalance in maintaining ESG performance, are the environmental issues such as emissions.

Whereas, in the private sector, banking and financial services industry is at the core of ESG integration. Offering sustainable financing to customers, refinancing existing debts with sustainable instruments, and incorporating positive screening of lending portfolio are some of the significant ESG initiatives.

What role is ESG compliance playing in the divestment process?
ESG compliances and disclosures translate into high ESG scores. Divestment process will only add to improved voluntary disclosures, highlight sustainability initiatives, publicize targets, and build a mechanism for independent audits and ESG assessments.

Share with us top aspects where PSUs are ahead of private companies and the ones where they lag when it comes to ESG performance
Areas where PSUs have performed well are the key issues of employee development and biodiversity impact.
Areas where PSUs lag when compared with its private sector counterparts include water efficiency, human rights, and employee safety.

According to you, how prepared are the top 1000 companies to meet the BRSR requirements?
According to our research, Nifty 50 companies have high BRR disclosures than NSE 500 companies. The move from BRR to BRSR has extended the depth and width of ESG reporting and brought companies’ disclosures easier. Quantitative metrics have also increased, making BRSR more in-line with international frameworks. The integration of new areas like ESG reporting, board and management compensation, initiatives towards waste management have contributed considerably in aligning the BRSR with global frameworks. BRSR successfully maps the ESG risks and sustainable practices of the company in an efficient framework. BRSR reporting is voluntary for FY22 and mandatory from FY23.

Do you think the regulators’ recent measures to reduce greenwashing and enhance focus on ‘impact’ will be enough?
SEBI listing compliances, Companies Act requirements, and recent measures on the adoption of BRSR have increased focus on performance, results and initiatives putting more emphasis on actions towards sustainability as envisioned by Taskforce on Climate-Related Financial Disclosures (TCFD) Framework. The measures taken place to reduce greenwashing amongst companies will be effective after the stringent application of these measures. These measures are constantly changing and being improved to suit the needs of the company in a better way. Focusing on ‘impact’ is a more practical way of understanding the ESG Risk management framework rather than best industry practices. Ratings will help compare companies with their peers and their own performances across the years. Thus, ratings will become the most potent tool to at the least, keep a check on greenwashing if not eliminate the same fully.