Just 25% consumer, realty firms aware of ESG norms: Deloitte India survey

Only a fourth of India Inc feels adequately equipped to meet their environmental, social, governance (ESG) strategy and compliance requirements with consumer industry lagging the most, reveals an ESG Preparedness survey by Deloitte India.

The survey, done between March and April this year, found out that less than half of the companies reported being aware of the existing ESG reporting mechanisms and regulations in India.

In the survey of 150 organisations, 68 per cent of firms in the financial services sector were well aware of the ESG regulations while the number for the consumer, real estate and construction sectors stood at only 25 per cent.

The report pointed out that only 7 per cent organisations in the consumer industry indicated robust preparedness for ESG requirements, owing to the lack of investors’ focus on ESG performance in this sector.

However, 80 per cent for organisations in energy, resources, and industrials (ER&I), financial services, life sciences and healthcare industries are either well prepared or moderately prepared.

“A robust ESG culture will translate into better top-line growth, cost reductions, reduced compliance burden, increased productivity, and better investment quality, and asset optimisation. ESG is a significant value driver and embedding it into an enterprise’s operations is a key differentiator,” said Viral Thakker, partner and sustainability leader, Deloitte India.

The Securities and Exchange Board of India (Sebi) has mandated Business Responsibility and Sustainability Report (BRSR) disclosure for the top 1,000 listed organisations (by market capitalisation) from the 2022-23 financial year (FY23). In March, the regulator further mandated a more comprehensive BRSR Core for top 150 companies from FY24.

However, it will be extended to the supply chain of listed companies on a comply-or-explain basis, starting with the top 250 listed companies from FY25 onwards.

The report notes that only 15 percent of surveyed businesses believe their suppliers to be well prepared to comply with the organisations’ ESG requirements and 18 per cent responding that they were not prepared at all.

Deloitte India, in its survey report, has highlighted that despite Sebi implementing sustainability regulations, several mandated disclosures lack clear guidance on responses.

“Unlike other prominent voluntary standards, sectoral guidance is not available and the obligation to disclose the details and methodology used to determine material ESG issues (via a materiality assessment) is absent,” the report added.

Multiple ESG frameworks, evolving ESG regulations, complex data management and managing and quantifying ESG risks have been cited as the major challenges in building ESG preparedness capacity. Due to these challenges, 75 per cent of the organisations are of the opinion that there is a need to simplify ESG compliances or improve ESG reporting procedures.