With the world facing a number of challenges today – from climate change to the need to balance economic needs with societal needs – ESG or Economic, Social and Governance issues have been assuming top priority for businesses and governments. In order to assess stakeholders’ perceptions on ESG implementation, the Smart City Living Lab at IIITH hosted a roundtable brainstorming meet on 21st January 2023 with participants from the government, academia, startups and other technology partners to understand their responses to ESG and to collate insights on addressing them collaboratively.
IAS Additional Secretary MeiTy Shri Bhuvanesh Kumar, who chaired the session set the theme for the deliberations with the recital of a Sanskrit poem (संगच्छध्वं संवदध्वं सं वो मनांसि जानताम्) stating the importance of Vasudaiva kudumbakam and defining the word LIFE as “Lifestyle for Environment”. He mentioned India’s long term strategy for low carbon development and the country’s target of achieving net zero emissions by 2070 with a 45% reduction in carbon emissions by 2030. Thus, he underscored the importance of changing lifestyles in order to become ESG compliant.
Roadblocks to ESG Compliance
ESG compliance comes with a host of challenges. Some of those listed by the participants include the lack of a common definition for the ESG framework itself. With only a few top industries disclosing their ESG metrics voluntarily, lack of transparency makes it difficult to frame policies and regulations for ESG compliance and creates ambiguity around what exactly needs to be measured and reported. ESG metrics ought to be tailored to meet the needs of every specific community. For instance, is it the same or different for the academic community, the industry, homes and so on. Every domain needs to have not only the parameters defined but also a clear definition on consumption, how it is to be measured, analysed and presented on the dashboard. Mere adoption of global ESG compliance policies and regulations does not cut it in the Indian context. India, with its unique challenges and opportunities that exist across regions and industries, requires a customised approach. Plus, currently there is either a lack of data itself or lack of a single-point access to the data if any. It is understood that close to 450 industrial parks are being monitored, but no clarity on how to access that data. Hence apart from making data available, accessing it in a single place is a major requirement. In cases of existing infrastructure, retrofitting it to make it sustainable can pose significant challenges in terms of ease of transition and expenses incurred. Presently, disclosure of ESG metrics is voluntary but mandatory disclosure is needed to achieve real progress. However with multiple stakeholders in the fray, enforcement is difficult. In order to be ESG compliant, many companies are resorting to CSR funds but the jury is still out on whether that’s the right approach.
Collaborate To Arrive At Consensus
In the light of all the challenges listed, probable approaches were solicited for the future. To arrive at a common definition of ESG and standard metrics, collaboration with industry, government, and academic institutions was mooted. Enhanced industry investment in R&D to develop better methods of measuring and analysing consumption was proposed. For customised ESG compliance criteria, collaborative work with policy makers and industry experts was suggested. To make accurate and granular data easily accessible, the use of advanced technologies such as IoT sensors, blockchain and data analytics could greatly improve data collection and reporting systems. An injectible dose of R&D into technologies such as green building materials, energy-efficient lighting systems, and smart energy management systems should witness an ease in retrofitting of existing infrastructure.
Awareness Is Key
To develop a roadmap for making ESG compliance mandatory, policymakers can work with industry associations and other stakeholders in framing an appropriate policy that includes clear guidelines and timelines for compliance while establishing penalties for non-compliance. With the complexity that ESG entails, a one-size-fits-all approach fails. Typically, a Global Reporting Initiative (GRI) is used for evaluation. A bottom-up approach in lieu of a top-down one can also be used where problems at ground level are identified and addressed before extending solutions beyond it. Additionally, testing out methods on a single municipality before scaling it to others can also be done. From the citizens’ point of view, awareness about ESG is key to ensuring a greater responsibility. By making it an integral part of education, human behaviour can be modified to generate a lower carbon footprint. Policy changes such as tax benefits on ESG-compliant buildings may be used as a motivational tool with penalties in case of non-compliance to foster responsible construction.
Measurement Models and Dashboards
A proper measurement model that can measure, analyse and optimise the implementation of ESG will help increase overall results in the long run. Having a one-stop-shop such as a dashboard to provide valuable insights on factors that are key to ESG reporting such as water and energy consumption, carbon emissions and social and governance aspects is a boon. As a plus, gamifying the dashboard and making it more interactive will motivate people to participate. ESG implementation will get a shot in its arm if it is made cost-effective. For instance, in the case of road construction if some waste materials could be used instead of only saleable waste, it would be more economical. Similarly, non-recyclable waste that could be channelled for cement industries would benefit such companies and motivate them towards ESG adoption.
Based on information obtained from existing dashboards and in order to bring value to companies and consumers alike from ESG implementation, the following activities were identified to be taken up by the respective stakeholders: Technologies promoting ESG to be incentivized with the other technologies conversely being penalised, governmental intervention with regulations and policies necessary to accelerate ESG implementation, ESGs to be made mandatory in education for creating awareness and visibility, hub and spoke model to be implemented before expanding on a large scale, specific goals and objectives to be set in order to measure impact and so on.
Actionable Items For The Living Lab
Summing up the discussion, the panellists were of the opinion that while ESG is an important framework for promoting sustainability, going beyond ESG would help in achieving greater environmental and social outcomes. One of the first steps to be undertaken will be the creation and implementation of an interactive dashboard by the Smart City Living Lab in collaboration with other partners. It will serve as a model to showcase ESG data and compliance. The second is to run an ESG Tech challenge to discover innovative ESG solution providers.