SABERA‘s main criteria for recognising Responsible and Promising Responsible Businesses in India is ESG. In fact, since inception, we have been highlighting research-based nominations of companies that rank high on their ESG commitments.
A recent article authored by Dr Mukund Rajan, Chair eCube Investment Advisors Pvt Ltd (SABERA Speaker) and Dr (Col) Rajeev Kumar who are also co-authors of the book OUTLAST – How ESG Can Benefit Your Business stated “Boards need to be careful that they do not get accused of greenwashing in their external communication. Forward-looking boards will recognize that these can put the credibility and reputation of these organizations at risk and will ensure that there is no dissonance between their companies’ actions and their communication“
Intrigued, we reached out to Dr Rajan to know more. He shared his latest book, the third chapter specifically focuses on the influential role of the media in shaping attitudes towards corporate responsibility. It stressed the challenges of disinformation and propaganda that can arise from media bias. And leveraging media’s strengths to influence change, Responsibly.
Here, we share the chapter wise summary of the book OUTLAST. SABERA recommends this as a ready reckoner for ALL business and Media owners.
Here’s hoping that this year we see many more companies firming up their resolve committing to ESG best practices and qualifying to receive the SABERA 2022 trophy.
OUTLAST – How ESG Can Benefit Your Business
Authors: Dr Mukund Rajan and Dr Rajeev Kumar
The economic, health and moral crises caused by the pandemic drew our acute attention to the purpose and values espoused by businesses. More so because the COVID-19 catastrophe is a dress rehearsal for other major challenges that lie ahead, especially the climate change crisis.
Far too many Indian enterprises and corporate leaders have been in the news for cutting corners, breaking rules and violating the law to achieve commercial success and personal gains. A number of businesses remain highly irresponsible with resource use, pollution control and environmental compliance. Many companies have been either reluctant to improve their competitiveness or resource-constrained to do so. And multiple examples of crony capitalism and frauds that tend to breed greater inequality in an already poor nation have made the public sceptical about the role of businesses as value creators in society and their sense of responsibility.
In our book, we outline the broad landscape of corporate responsibility that Indian businesses must familiarize themselves with and the critical measures they need to take in order to become successful economic participants and responsible corporate citizens in the markets of tomorrow. In particular, we focus on Environment, Social and Governance (ESG) performance. As our book title suggests, in an uncertain, risky and volatile world, purpose-driven companies that align with ESG demands are more likely to outlast their competition. Our manuscript is replete with case studies and evidence to support our arguments.
In the first chapter, we explain the concept of ESG and the importance of businesses governing themselves well, taking care of the environment and investing in human capital management for their own success and for the good of society. Companies that factor ESG performance improvement into their strategy and decision-making witness more sustainable growth and better financial returns. Meanwhile, the principle of shareholder primacy has been overtaken by a modern standard of corporate responsibility that advocates value creation for all stakeholders. With significant vulnerabilities on material ESG metrics and increased domestic and international scrutiny, Indian businesses are facing pressure to put in place world-class corporate governance practices.
In the second chapter, we elaborate on how embracing the ESG agenda requires businesses to first define their mission or core purpose and thereafter for this to shape their corporate strategy, inspire employees, engage customers and communities and be embedded in their culture. Four important drivers of success in implementing an ESG agenda are: the tone at the top; investing in the people in the organization; walking the talk and demonstrating a commitment to ESG values; and installing systems and processes, including a code of conduct, to monitor progress. We highlight the emerging ESG reporting and assessment frameworks (including the new Business Responsibility and Sustainability Report mandated by SEBI for the top 1000 listed companies in India) and point to the significance of the concept of “materiality” in ESG reporting.
The third chapter focuses on the influential role of the media in shaping attitudes towards corporate responsibility. To drive change, the media offers platforms for critique and protest, nurturing sustainable consumerism, influencing government action, strengthening communities, and shaping investor sentiment. At the same time, we suggest caution on the challenges of disinformation and propaganda that can arise from media bias and intricate webs of media ownership and competitive vested interests. We call for responsible corporate communication that aims for harmonious communication structures and processes to meet the information needs of all stakeholders and continuously scans the environment to address emerging issues and developing crises. By leveraging the media’s strengths and capacity to influence change, corporates can build a more sustainable future for themselves.
In the fourth chapter on corruption and the state, we argue that India’s growth requires weaning businesses away from pro-crony policies that favour specific private interests and undermine the economy’s capacity for wealth creation. With the enormous power wielded by the state, election funding has become the fountainhead of corruption in India, and there is scope for considerable reform in this area. Meanwhile, anti-corruption campaigns by concerned stakeholders and demands for higher standards of ethics, compliance and business conduct by foreign stakeholders and institutional investors are playing a constructive role in the fight against corruption.
The fifth chapter deals with the foreseeable impact of the changing climate and how businesses will be affected by it. We look at ways to address the threat of global warming and climate change, and actions of mitigation and adaptation that companies may be required to undertake. We suggest government-driven regulation combined with market-based incentives to achieve optimal outcomes. Pressure on businesses to change is also emerging from institutional investors, millennials, environmental activists, advocacy groups and retail customers.
In the sixth chapter, we focus on dignity and respect at the workplace as an important element of a human capital strategy that must be included within the ESG initiatives of an organization. Businesses are seen as valuing human resources when they compensate them fairly linking reward with performance and value creation, investing in their development, fostering diversity and inclusion, and assuring dignity and respect. Much more needs to be done by the private sector towards increasing the female labour force participation in India, reducing the gender wage gap, encouraging women business leaders and entrepreneurs, and safeguarding the rights and legal entitlements of women. Businesses must actively adopt affirmative action programmes to remove inequalities and discriminatory practices faced by underprivileged sections of Indian society, including the Scheduled Castes and Scheduled Tribes.
The seventh chapter deals with the importance of codifying conduct so that stakeholders know what an organization stands for, and for what it can be held accountable for. We offer advice on how to design a code of conduct and ensure that it does not fail. Responsible companies would do well to meticulously design codes of conduct that are aligned to their vision, mission and values, besides being in conformity with international principles, guidelines and covenants, and national legal and regulatory frameworks.
In the eighth chapter, the growing phenomenon of shareholder activism in India is discussed. Activist funds are beginning to play an important role in catalysing changes they consider necessary in investee companies. Mandatory Stewardship Codes are propelling hitherto passive institutional investors like mutual funds, insurance companies and pension funds to fulfil their responsibilities by protecting and enhancing value for their clients and increasing the accountability of companies. Proxy advisory firms are also pressing for stronger and more purposive action by Indian businesses. Company boards will have to ensure greater transparency and market disclosures and be prepared to engage with demanding shareholders and proactively address their ESG-linked concerns.
In the conclusion, we caution companies to be prepared for more frequent black swan events and to seriously consider how they can build resilience and de-risk their operations. They will be tested for their long-term orientation, determination to deliver sustainable and profitable growth and performance on material ESG indicators. Enterprises that fail to innovate and transform their business models to be fully aligned with ESG concerns will be replaced by companies that care for the environment, build social capital and are properly governed. Unless India Inc. is able to demonstrate more responsible behaviour, it is likely to attract stakeholder censure and far greater regulatory controls. Business leaders will have to make decisions ‘with the long horizon in mind’.
The Age of Responsibility is well upon us, and the companies that will outlast their competition are the ones that will build resilience and prepare their businesses for long-term success through a holistic adoption of the mantra of ESG.
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