Only one-fifth of India Inc publishes sustainability reports in 2021, but ESG disclosures are improving gradually: CRISIL report

Climate change, poverty, inequality, hunger, and multiple other global challenges continue to hamper our journey towards a sustainable future. And businesses play a crucial role in making or breaking the situation. In this regard, sustainability reporting or environmental, social, and governance (ESG) disclosures mirror how the private sector is influencing a positive change.

Fortunately, India Inc's ESG ratings continuously boost, compelled by enhanced disclosures and performance, as reported by CRISIL's analysis. Based on fiscal 2021 data, a risk assessment of 586 Indian firms across 53 industries shows that most of them have improved their ESG ratings compared to the previous year, owing to more important disclosures and improved performance on several factors.

Yet, the fact remains that only one-fifth of the 586 companies assessed published sustainability reports in 2021, shows the report. This is an improvement, as 12 new companies published these disclosures for the first time compared to last year.

In FY 2022-23, the situation is expected to change drastically as the Securities and Exchange Board of India (SEBI) has mandated ESG disclosures for the top 1000 listed companies.
As per the CRISIL report, the hiking ESG scores are visible in renewable energy consumption, gender diversity, and Board independence. When the analytics firm compared this year’s data with the 225 firms analysed last year, 14 exhibited a substantial positive deviation—more significant than a 5-point rise in score. However, three companies showed a significant negative divergence with more than a 5-point decline in the score, while 139 remained generally steady.

According to the most recent evaluation by the firm, just 14 organisations fall under 'leadership' classification, while 108 were classified under 'strong' and 73 under the 'below average' and 'weak' classes.

"Leaders on ESG have demonstrated a clear commitment towards sustainability and have consistently delivered superior performance. For ESG to truly be embedded and practised in spirit, all stakeholders have to work collaboratively and create a favourable environment for ESG in India," says Amish Mehta, Managing Director and CEO of CRISIL Ltd.

Globally, the conversation about the environment has centred on greenhouse gas (GHG) emissions as climate change remains a pressing risk for the business sector. However, only one in five enterprises in India disclosed their Scope 1 and Scope 2 GHG emissions. The report reveals that the disclosure of Scope 3 emissions was worse: just 63 of 586 firms provided this information.

“In addition to focussing in the near term on targeted actions such as decarbonisation, a mindset shift is necessary to transform from merely complying to creating value and structurally mitigating risk,” adds Amish Mehta.

India is one of 80 per cent of the world's countries committed to Net-Zero and the investment required to make this happen will be substantial! It entails minimising GHG emissions in the next 50 years, which have expanded fourfold in the previous 20 years.

Over the next seven years, CRISIL estimates that India will need to invest Rs 22-25 lakh crore in decarbonisation. This involves significant investments in renewable assets and battery technology.

Beyond 2030, investments will more than triple in hydrogen, CCUS, pump hydro, geothermal, and biomass-linked technologies, where India's potential is enormous but primarily untapped, says the report.

As of March 2022, 82 corporations have vowed to follow the path of net-zero emissions, a 50 percent increase from 2019. As per the non-profit Climate Disclosure Project (CDP), India ranks sixth in the world in this category.