Less than a third of Indian businesses confident of ESG preparedness: Deloitte Survey

The survey, which assessed the readiness of 150 organizations for ESG policies, regulations, disclosures, and compliance, highlighted a significant gap between the commitment to these principles and the actual preparedness for implementation. The survey also found that a mere 15% of the surveyed businesses believe their suppliers are adequately prepared to comply with their ESG requirements.

Deloitte India’s survey aimed to evaluate the ESG strategies and efforts of organizations across various sectors.The respondent pool included chief executive officers (CEOs), chief financial officers (CFOs), chief sustainability officers (CSOs), heads of corporate social responsibility (CSR), and management and operations executives. Notably, more than 70% of the organizations surveyed are listed on the Indian stock exchanges.

The survey results revealed a lack of preparedness in the consumer industry, with only 7% of organizations indicating robust readiness for ESG requirements. On the other hand, the energy, resources and industrials (ER&I), financial services, and life sciences and healthcare (LSHC) sectors displayed higher levels of preparedness, with nearly 80% of organizations in these industries categorized as well-prepared or moderately prepared to meet ESG requirements.

Viral Thakker, partner and sustainability leader, Deloitte India, said, “Organizations are grappling with evolving expectations on ESG compliance and disclosure from investors, boards, governments, and consumers. They need to account for emerging global regulations on sustainable finance, climate disclosures, biodiversity, and social and governance dimensions, including gender diversity and living wages, within a couple of years.”

He added that 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.”

The survey findings also shed light on the challenges faced by organizations in terms of evolving ESG regulations and the existence of multiple frameworks. Approximately 65% of the surveyed businesses identified evolving ESG regulations as a major hurdle in building such preparedness, while 62% mentioned the complexity of multiple frameworks as an obstacle. Simplifying ESG compliance and enhancing reporting procedures were deemed necessary by 75% of organizations.

The survey report highlighted the increasing significance of ESG in India, with nearly 88% of organizations perceiving sustainability regulations as directly impacting their businesses. Over 75% of organizations acknowledged that ESG had become an important agenda in their boardrooms, and 90% believed that ESG reporting would enhance their brand reputation.

Socially conscious investors were found to play a significant role in holding businesses accountable for their ESG actions, with 75% of organizations stating that their investors evaluate their ESG performance. Furthermore, voluntary participation in ESG ratings was observed as a growing trend, as indicated by 71% of organizations.

While the survey indicates a resolute commitment to ESG principles, the journey from commitment to action is still a work in progress for Indian businesses. Less than half of the surveyed organizations reported a thorough understanding of ESG reporting mechanisms and regulations in India, highlighting the need for urgent attention. On a positive note, 68% of organizations have made significant progress by integrating ESG strategies and mechanisms into their operations.

ESG reporting practices were also examined, with 80% of organizations actively reporting their ESG efforts. The preferred reporting methods included sustainability reports (81%), ESG reports (50%), and Business Responsibility and Sustainability Reports (BRSR) and integrated reports (44%). Organizations communicated their ESG efforts through awareness programs (85%), annual meetings (76%), and investor decks (50%).

The survey report emphasized that climate change concerns were acknowledged at the boardroom level by 83% of organizations. More than 80% of organizations have made time-bound public commitments to address environmental issues. However, achieving net-zero targets was viewed as challenging, with 78% of participants identifying supply-chain emissions management and 63% citing costs associated with adopting net-zero technologies as potential hurdles.

Regarding social aspects, over 90% of organizations allocated a portion of their investments to community welfare programs. However, readiness to meet increasing expectations around inclusion, diversity, and equity fell short of optimal levels. Only 25% of organizations considered themselves well-prepared, while the majority were moderately prepared (45%) or somewhat prepared (29%).

In terms of governance, only 15% of organizations viewed themselves as industry leaders in governance policies, such as board diversity, executive compensation, and management ownership. Half of the organizations indicated a demand from stakeholders for more ESG reporting and transparency. Approximately 75% agreed that their board had an appropriate governance structure to oversee ESG-related matters. Additionally, over 50% of organizations confirmed the implementation of formal ESG-linked performance incentives.