We need to bridge our ‘social’ deficit in ESG investments

We need similar incentives in the private sector as well. Companies can do this by recruiting apprentices on a short-term basis. Long-term employment is also possible in both cases. However, the objective should not be merely to create jobs, but also to ensure that new jobs are “better and better”. This will require a sustained effort to create an enabling environment that can accommodate such a large workforce and create conditions for quality. jobs in the economy.

A strong Environmental, Social and Governance (ESG) proposal has the potential to build on this.

Rise of ESG in India: The approach of job creation coupled with socially responsible investment has created a paradigm shift in the interests of investors across the globe. The ESG disclosure is an important ally of this change. It provides multifaceted insights into corporate value chains, allowing investors to evaluate the sustainability of their investment opportunities. Now businesses need to make a sustained effort to ensure that their profits are not at the cost of negative environmental or social impact.

According to a circular issued by the Securities and Exchange Board of India (SEBI), a Business Responsibility and Sustainability Report (BRSR) has been compulsorily implemented for the top 1,000 listed companies in the country for 2022-23. This is the first time that ESG compliance reporting has become mandatory in India. This will help standardize disclosure and ascertain the credibility of companies, encouraging investors to improve their investment decisions.

Missing ‘S’ in ESG investments: While there are three pillars of ESG commitments, the social pillars are generally missing in reforms. SEBI has recently constituted an advisory committee on ESG. While it focuses on the growth of BRSR, it also proposes to develop a parallel approach to job creation through a strong ‘S’ factor. The objective of the parameter is to look at the relationship and reputation of the enterprise with stakeholders inside and outside a company. It also gives information about the welfare of workers.

According to CNBC, investors using ESG factors in the US in 2020 focused on environmental criteria for their decisions. The same trend was recorded in India in 2021 as well, where climate technology was the most popular area of ​​investment, said the Impact Investors Council report on Indian investment trends.

One of the main reasons for the marginal attention given to the ‘S’ factor is that social impact is more difficult to measure. A report presented by BNP Paribas in 2021 based on a global ESG survey noted a “sharp lack of standardization around social metrics”. As a result, investors tend to “check the box” related to a company’s social performance because they do not display the appropriate data to evaluate. This. Therefore, it is imperative to create a framework with standardized metrics to assess this.

Work Culture Change: Work culture change is required to support the social dimension of a company. Workers should not be considered a cost burden, but a part of human capital formation, an important factor of production.

Second, the ‘stakeholder capitalism’ orientation would provide fair and equitable treatment to all. It should be part of the corporate strategy and vision.

Third, such a vision for the new work culture can help prevent the loss of talent that can arise from the great reshuffle. Professionals from diverse backgrounds seek job changes for better pay, career path and work-life balance. According to a LinkedIn survey, 82% of Indian employees considered changing their profession in 2022. Another study led by Amazon in 2021 showed that nearly 70% of adult job-seekers wanted to change industries. Fixing the ‘S’ will help in reducing the dropout rate in the company.

Finally, we need to create an ESG culture, an ecosystem where all policies are driven primarily by a sustainable and socially responsible way of conducting a business. No person may be responsible for making this change; It is for all stakeholders to be allies for a better tomorrow. For this, investors need to take center stage and support the adoption of sustainable welfare-enhancing policies by business enterprises in which they invest money.

The focus on human capital formation and skills, along with strengthening safeguards and equal opportunity, is one of the many ways to address the missing ‘S’ of the ESG that has been overshadowed by environmental and governance concerns.

The top ESG issue for India should be its activists. Issues of environment and governance are already under pressure from external factors. Stakeholders should now focus on social issues. This will help create a more inclusive and sustainable model of economic development where profit and welfare coexist as organizational goals.

CUTS’s Tanya Goel contributed to this article, produced as part of the GrowJobs-II project supported by the Ford Foundation.

Pradeep S. Mehta, Secretary General, Cuts International

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