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Employment generation is one of the biggest challenges in India, especially in the wake of a global economic downturn. As one step forward, Prime Minister Narendra Modi recently announced a mega employment push to create 1 million jobs in the government. This is a welcome step, considering that there are approximately 890,000 vacant posts in ministries and departments at the Centre. Furthermore, to recruit 45,000 youth annually in the armed forces for a limited period will also help lift the mood of the nation.

We need a similar push in the private sector. Companies can do that by recruiting apprentices on a short-term basis. In both cases, long-term employment is also possible. However, the objective should not just be the creation of jobs, but also ensuring that the new jobs are “Good and better". This would require a sustained effort to create an enabling environment that can accommodate such a large workforce and generate conditions for quality jobs in the economy.

A strong Environment, Social and Governance (ESG) proposition has the potential to create that.

The rise of ESG in India: An approach to job creation that goes with socially responsible investments has created a paradigm shift in investor interests across the globe. ESG disclosures are a crucial ally of this change. It offers 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 a negative environmental or social impact.

As per a circular issued by the Securities and Exchange Board of India (Sebi), a Business Responsibility and Sustainability Report (BRSR) has been made mandatorily applicable to the country’s top 1,000 listed companies for 2022-23. It is for the first time that ESG compliance reporting has become mandatory in India. It will help standardize disclosures and ascertain companies’ credibility, encouraging investors to hone their investment decisions.

The missing ‘S’ in ESG investments: While ESG commitments have three pillars, the social pillar is typically missing in reforms. Sebi recently constituted an advisory committee on ESG. While it focuses on the enhancement of BRSR, it also proposes developing a parallel approach for employment generation through a stronger ‘S’ factor. The parameter aims to look at an enterprise’s relationship and reputation with stakeholders inside and outside a company. It also gives an insight into workers’ welfare.

According to CNBC, in 2020 investors in the US who used ESG factors focused on the environmental criterion for their decisions. The same trend was recorded in 2021 in India, where climate tech was the most popular sector of investment as stated by an Impact Investors Council report on Indian investment trends.

One of the main reasons for minor attention to the ‘S’ factor is that social impact is more difficult to quantify. A report presented by BNP Paribas in 2021 based on a global ESG survey noted “an acute lack of standardisation around social metrics". Consequently, investors “check the box" concerning the social performance of a company as they do not display proper data to evaluate it. Therefore, it is urgent to create a framework with standardized metrics to assess it.

The work culture makeover: Supporting the social dimension of a company requires a work culture transformation. Workers should not be considered a cost burden, but a part of human capital formation, a vital factor of production.

Second, ‘stakeholder capitalism’ orientation will offer everyone fairer and equitable treatment. This should be part of the corporate strategy and vision.

Third, such a vision for a new work culture can help stem talent losses arising from the Great Reshuffle. Professionals from diverse backgrounds tend to seek job changes for better salaries, career paths and a work-life balance. According to a LinkedIn survey, 82% of Indian employees considered changing occupations in 2022. Another study led by Amazon in 2021 showed that almost 70% of job-seeking adults wanted to switch industries. Fixing the ‘S’ would help reduce the attrition rate in a company.

In conclusion, what we need is to create an ESG culture, an ecosystem where all policies are primarily driven by a sustainable and socially responsible way of conducting a business. It cannot be an individual’s responsibility to make this change; it is for all stakeholders to ally for a better tomorrow. For this, investors need to take centre stage and support the adoption of sustainable welfare-enhancing policies by business ventures they put money into.

Focusing on human capital formation and skilling along with strengthening safety measures and equal opportunity is one of many ways to address the missing ‘S’ of ESG that has been overshadowed by Environment and Governance concerns.

The top ESG issue for India should be its workers. There is already a push from external factors on matters of Environment and Governance. Stakeholders must now direct attention towards social issues. It will help create a more inclusive and sustainable model of economic growth where profit and welfare co-exist as organizational goals.

Tanya Goyal of CUTS contributed to this article prepared under the GrowJobs-II project supported by Ford Foundation.

Pradeep S. Mehta is secretary general, CUTS International 

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