1. Introduction
Sustainability refers to the practice of meeting present needs without compromising the ability of future generations to meet their own needs. In business, sustainability emphasizes long-term value creation by balancing economic growth with environmental protection and social responsibility.
ESG (Environmental, Social, and Governance) is a framework used to evaluate how responsibly a company operates. It helps investors, regulators, and stakeholders assess a firm’s commitment to sustainable and ethical practices beyond financial performance.
2. Meaning of Sustainability in Business
Business sustainability involves integrating environmental care, social responsibility, and ethical governance into business operations and strategy. Sustainable businesses focus not only on profits but also on people and the planet, often referred to as the Triple Bottom Line – People, Planet, Profit.
Example:
Companies like Unilever focus on sustainable sourcing, waste reduction, and inclusive growth through their Sustainable Living Plan.
3. Understanding ESG (Environmental, Social, Governance)
ESG represents three key dimensions used to assess corporate sustainability and ethical impact.
4. Environmental (E) Factors
Environmental factors examine how a company impacts the natural environment.
Key Environmental Aspects:
-
Climate change and carbon emissions
-
Energy efficiency and renewable energy use
-
Waste management and recycling
-
Water conservation
-
Sustainable sourcing of raw materials
Examples:
-
Tata Power investing heavily in renewable energy projects
-
ITC being carbon-positive, water-positive, and solid-waste recycling positive
-
Tesla promoting electric vehicles to reduce carbon emissions
5. Social (S) Factors
Social factors focus on a company’s relationship with employees, customers, suppliers, and communities.
Key Social Aspects:
-
Employee welfare and workplace safety
-
Diversity, equity, and inclusion
-
Human rights and labor practices
-
Customer satisfaction and data privacy
-
Community development and CSR activities
Examples:
-
Infosys focusing on employee training, diversity, and ethical labor practices
-
HUL supporting rural livelihoods through Project Shakti
-
Microsoft emphasizing data privacy and digital inclusion
6. Governance (G) Factors
Governance refers to the systems, policies, and leadership structures that ensure ethical and transparent decision-making.
Key Governance Aspects:
Examples:
-
Tata Group known for strong corporate governance and ethical leadership
-
Reliance Industries following robust disclosure and compliance practices
-
Companies complying with SEBI’s ESG reporting norms (BRSR) in India
7. Importance of ESG in Business
-
Helps manage environmental and social risks
-
Enhances brand reputation and trust
-
Attracts responsible investors
-
Ensures regulatory compliance
-
Promotes long-term financial stability
8. ESG and Investment Decisions
Investors increasingly use ESG metrics to evaluate companies before investing. ESG-focused funds invest in companies with strong sustainability practices and avoid firms involved in environmental damage, social injustice, or unethical governance.
Example:
Mutual funds and pension funds prefer companies with high ESG scores due to lower risk and stable long-term returns.
9. ESG in the Indian Context
India has strengthened ESG adoption through:
-
Mandatory Business Responsibility and Sustainability Reporting (BRSR) for listed companies
-
Increased focus on renewable energy and clean technology
-
Growing emphasis on CSR under the Companies Act, 2013
Example:
Indian companies like Mahindra & Mahindra focus on electric mobility and sustainability reporting.
10. Challenges in Implementing ESG
11. Benefits of Sustainability and ESG
