Integration of environmental, social and governance (ESG) aspects in the business will help in long-term value creation, thereby decreasing risk factors rising from national and global factors, an EY report ‘Can ESG help future proof your business' says.
The Covid-19 pandemic has been instrumental in reinforcing the importance of ESG framework as a key approach to long-term business resilience, says the report.
The number of Indian signatories to United Nations—Principles of Responsible Investment tripled in 2020, while the number of active ESG mutual funds now total eight. The task force on Climate-related Financial Disclosures supporters from India have grown three times in 2020-21 even as 220 India-based companies are now disclosing to their investors and customers through CDP, a not-for-profit that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impact.
Businesses are thinking to go beyond non-financial reporting and start reporting in an integrated profit and loss approach, which attempts to correlate or monetize the positive and negative impact of business operations and products through a range of capitals, helping in long-term value creation, says the report.
Chaitanya Kalia, Partner and Leader, Climate Change and Sustainability Services (CCaSS), EY India said, “In an increasingly uncertain and volatile world that is throwing up new challenges for the businesses, ESG provides a framework for businesses for staying resilient by holistically safeguarding people, the planet and profits.”
The report talks about a total value method, a concept that allows companies to measure the most material aspects of their value creation, which otherwise go hidden or unmeasured. Further, total value methodology takes an integrated approach of profit and loss and monetizes non-monetary parameters in calculation.
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