88 per cent of companies in India believe that sustainability regulations will have a direct impact on their businesses, but only 27 per cent believe that they are well-prepared to handle the Environmental, Social and Governance (ESG) requirements, a new report released on Thursday said.
According to the "ESG Preparedness Survey" conducted by Deloitte India to assess the readiness of companies to meet the ESG requirements, nearly half (46 per cent) of companies believe that they are "moderately" prepared to fulfil them.
It added that the consumer industry was the least ready for these requirements, and only 7 per cent of organisations said they have robust preparedness for it.
On a brighter note, nearly 80 per cent of organisations in the Energy, Resources, and Industrials (ER&I), Financial Services, and Life Sciences and Health Care industries (LSHC) were categorised as either well-prepared or moderately prepared to meet ESG requirements.
Most companies felt that India's evolving ESG regulations are a major challenge that comes in the way of implementing them.
"With respect to the challenges, 65 per cent of surveyed businesses highlighted evolving ESG regulations as a major hurdle in building ESG preparedness, followed by the existence of multiple ESG frameworks, as indicated by 62 per cent of organisations," the report said.
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"Organisations 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. A robust ESG culture will translate into better top-line growth, cost reductions, reduced compliance burden, increased productivity, better investment quality, and asset optimisation. ESG is a significant value driver and embedding it into an enterprise's operations is a key differentiator," said Viral Thakker, partner and sustainability leader at Deloitte India.
The report further showed that investors are holding businesses accountable for ESG actions. 75 per cent of organisations stated that their investors rate their ESG performance.
"Moreover, less than half, only 49 per cent, surveyed organisations reported a thorough understanding of ESG reporting mechanisms and regulations in India, signalling the need for urgent attention," it added.
