-Ramnath Vaidyanathan, AVP and Head - Environmental Sustainability, Godrej Industries Group
Over the past year, large organizations have been seen stepping back from their ESG (Environmental, Social, and Governance) commitments. This includes companies that have rolled back their promises on climate, plastic packaging, and DEI (Diversity, Equity, and Inclusion). The global economic slowdown has been a significant factor, leading the corporate world to scrutinize the returns on sustainability investments more closely.
One reason for the retreat from sustainability goals is the increasingly complex reporting regulations, which are creating a standard where more ambitious targets are not being encouraged. For instance, regarding Scope 3 emissions, obtaining reliable ESG data from vast supply chains within tight deadlines is nearly impossible. Is such granular data truly necessary for practical decision-making?
Recognizing this, regulators have taken steps to make ESG reporting more pragmatic. India’s market regulator, SEBI, has deferred the new BRSR Core value-chain ESG disclosures by a year, making it voluntary until 2026 and limiting its scope to key suppliers covering 75 percent of the expenditure. Similarly, the European Union (EU) delayed the implementation of reporting rules for smaller companies and reduced the number of required data points.
We have witnessed devastating floods in Central Europe and fierce forest fires in Bolivia. These disasters shake economies and transform lives. It is clear that businesses can no longer focus solely on reducing emissions. They must be prepared for the situation that is already here. Most companies are now diversifying their risks and investing in strategies that help them face these challenges. Adaptation is no longer optional but a new reality.
According to World Economic Forum estimates, nearly half of global economic output is dependent on nature. Biodiversity and nature loss remain part of global climate discussions. Most companies are now assessing how their operations impact biodiversity. The Taskforce on Nature-related Financial Disclosures (TNFD) has developed metrics to track and find ways to mitigate biodiversity loss.
Despite strict rules on 'green claims,' some companies will attempt to portray themselves as more sustainable than they truly are. Such 'greenwashing' creates mistrust among people and slows down the pace of real progress. To prevent this, sustainability, legal, compliance, and audit teams will work together to ensure that data is accurate and certified.
As regulations increase, sustainability-related roles are likely to grow within legal and finance departments. General Counsels and CFOs of companies are now showing more interest in sustainability initiatives and reporting. Roles like 'ESG Controller' may become more common, overseeing the systems and processes of sustainability disclosures.
While some companies have scaled back on sustainability due to economic or practical constraints, they are doubling down on aspects that impact their bottom line. Commitments are now more precise; biodiversity and climate risks are becoming part of business plans. Corporate sustainability stands at a critical juncture. There might be fewer steps being taken, but they are more impactful. Companies that manage this transition skillfully will emerge even stronger for future challenges.