Significance of Environmental, Social and Governance (ESG) and Its Reporting

Author Name : Dr. (CS) Anu Bansal

ABSTRACT

Environmental, Social and Governance (ESG) is a framework that covers environmental, social and corporate governance aspects in decision making and organizational objectives for enhancing stakeholder value. As per the World Economic Forum Annual Global Risk Report 2022, environment and social risks was identified as major risk factors. Today world faces several global challenges, be it global climate change, water and waste management crisis, increasing inequality, unprecedented health crisis, balancing economic needs with societal needs, etc.Stakeholders of the company including investors, regulators, as well as consumers and employees are now increasingly demanding that companies should not only be good custodians of capital but also of natural and social capital and have the necessary ESG governance framework in place to support this. While making investment decision making process, more and more investors are incorporating ESG elements for long term. Stakeholders expect that the organization’s business strategy is aligned with its sustainability commitments and requirement. This makes ESG increasingly important from the view of securing capitalfor long term and has emerged as an important factor in decision making and has become business fundamentals for the organization.

Recently, climate change concerns and sustainable development have taken central stage in global and national priorities. Therefore, management of the company has to adopt holistic approach to decision making. All aspects of ESG i.e. socio economic factors, environment factors and governance should be given appropriate weight and consideration. ESG today has progressed into a comprehensive framework across the globe which includes key elements around environmental and social aspects, as well as how governance structures should be amended to enhance stakeholder value.