Home / Markets / Stock Markets /  ESG integration in business will help create long-term value: EY India

As the covid pandemic has reshaped global economies, exposing fragility of the current businesses, companies are acknowledging the threat posed by these risks and are working to protect the interest of the stakeholders. According to EY India, 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.

It said that Indian businesses are strongly waking up to gear up against the ongoing challenges and the ones that future holds.

Findings from a recent EY’s Global Investor Survey, covering views of 300 institutional investors on ESG performance, show a clear trend towards increasing integration of sustainability or non-financial factors in investment decisions making ESG integration a tool that will pave way for future proofing of business.

On the global front, as indicated by World Economic Forum, over the past decade, the top five global risks have shifted from economic to environmental and social issues.

The top five risks of the decade that can majorly impact the society includes: infectious diseases, climate action failure, weapons of mass destruction, biodiversity loss and natural resource crisis. The likelihood of the extreme weather, climate action failure. human environmental damage, infectious diseases and biodiversity loss becoming a reality is increasing day by day, said EY India.

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. ESG is the tool that categorizes aspects that were conventionally associated with sustainability and corporate responsibility but have material financial impact on the organization’s short and/or long-term value."

The Indian economy is going through a phase of uncertainty coupled by amplification of several natural and social disruption making Indian companies rethink their business strategy. The covid-19 pandemic has been instrumental in reinforcing the importance of ESG framework as a key approach to long-term business resilience.

The report said that 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.

Just last year, India witnessed one of the costliest cyclones – Amphan - which caused a loss of about $14 billion , which is over 35 times Indian environment ministry’s budget for FY22 (environment ministry budget is $396.5 million). India has recently suffered another two such cyclones on both eastern and western coasts, Cyclone Tauktae and Cyclone Yaas, with cyclone Tauktae leading to a death toll estimated at 104, which is higher than the death toll from any single cyclone from the Arabian Sea over the last one decade.

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