Environmental, Social and

Governance (ESG) Compliance (For

Beginners)
History
• Th e co n cep t ar o s e i n 2 0 0 1 , f o l l o wi n g t h e l au n ch o f t h e "F TS E4 Go o d I n d ex S er i es ," wi t h t h e g o al o f
en co u r ag i n g UK p en s i o n f u n d s t o co n s i d er s o ci al , et h i cal , o r en v i r o n men t al ( S S E) i s s u es .

• I n 2 0 0 2 , t h ey i mp l emen t ed en v i r o n men t al man ag emen t cr i t er i a, f o l l o wed b y h u man r i g h t s cr i t er i a i n 2 0 0 3

an d s u p p l y ch ai n l ab o r s t an d ar d s i n 2 0 0 5 . As a f o u n d i n g s i g n at o r y, t h e F TS E4 Go o d t h en i n t r o d u ced t h e
Un i t ed Nat i o n s P r i n ci p l es f o r Res p o n s i b l e I n v es t men t ( P RI ) i n 2 0 0 6 .

• Th e 2 0 0 6 P RI r ep o r t , co mp o s ed o f t h e F r es h f i el d Rep o r t an d W h o Car es Wi n s , ci t ed f i r s t o f al l ES G
i s s u es . ES G i s s u es . F o r t h e f i r s t t i me, ES G cr i t er i a h ad t o b e i n co r p o r at ed i n co mp an i es ' f i n an ci al
as s es s men t s . Th e s u s t ai n ab l e i n v es t men t was a p r i o r i t y o f t h i s eff o r t .

• Vi d eo

• https:/ / yo utu.be / b_ e73rg AH w w

ESG Criteria
• ES G – En v i ro n m en t a l

• En v i r o n men t al cr i t er i a i n cl u d e: r en ewab l e en erg y u s e b y a co mp an y, i t s was t e man ag emen t p r o g r amme,

h o w t h e co mp an y h an d l es t h e p o t en t i al p r o b l ems o f ai r o r wat er p o l l u t i o n r es u l t i n g f r o m i t s o p er at i o n s ,
p r o b l ems o f d ef o r es t at i o n ( wh er e ap p r o p r i at e) an d t h e at t i t u d e an d act i o n s o f t h e co mp an y i n r el at i o n t o
cl i mat i c ch an g es i s s u es .

• ES G – S o ci a l

• S o ci al cr i t er i a co v er a wi d e v ar i et y o f p o t en t i al p r o b l ems . Th er e ar e man y d i ff er en t s o ci al as p ect s o f

ES G, b u t t h ey ar e es s en t i al l y s o ci al . On e o f t h e mai n co n n ect i o n s f o r a b u s i n es s i s t h e r el at i o n s h i p o f t h e
co mp an y wi t h i t s emp l o y ees , f r o m t h e p o i n t o f v i ew o f man y s o ci al l y r es p o n s i b l e i n v es t o r s . Th i s i s a
b r i ef o v er v i ew o f o n l y s o me o f t h e p r o b l ems t h at can b e ad d r es s ed wh en co n s i d er i n g h o w a co mp an y
h an d l es i t s s o ci al r el at i o n s h i p s :
• I s emp l o y ee p ay r eas o n ab l e, i f n o t g en er o u s , wh en co mp ar ed t o co mp ar ab l e j o b s o r p o s i t i o n s i n t h e
i n d u s t r y ? W h at t y p es o f r et i r emen t p l an s ar e av ai l ab l e t o emp l o y ees ? Do es t h e co mp an y co n t r i b u t e t o t h e
r et i r emen t p l an s o f i t s emp l o y ees ?

• W h at b en ef i t s o r p er k s ar e p r o v i d ed t o emp l o y ees i n ad d i t i o n t o t h ei r b as i c wag es o r s al ar y ? Wi t h ES G-

co n s ci o u s i n v es t o r s , i t can mak e a b i g d i ff er en ce i n y o u r co mp an y ' s ev al u at i o n i f y o u d o t h i n g s l i k e
p r o v i d e a f r ee, v er y l av i s h b u ff et l u n ch f o r al l emp l o y ees ev er y F r i d ay – o r p r o v i d e o t h er t y p es o f
b en ef i t s t h at ar en ' t ex act l y co mmo n at al l wo r k p l aces , l i k e an o n - s i t e f i t n es s cen t r e.

• P o l i ci es i n t h e f i el d o f d i v er s i t y, i n cl u s i o n an d p r ev en t i o n o f s ex u al h ar as s men t ar e al s o co mmo n f act o r s .

ESG – Governance
• Th e man ag emen t o f a f i r m i n t h e t o p - l ev el o ff i ces i s es s en t i al l y an i s s u e o f ES G g o v er n an ce. Ho w wel l d o
t h e man ag emen t an d ex ecu t i v e b o ar d s l o o k at d i ff er en t s t ak eh o l d er s - emp l o y ees , s h ar eh o l d er s an d cl i en t s
– f o r t h e b en ef i t o f t h e co mp an y ? Do es t h e en t er p r i s e r et u r n t o i t s l o cat i o n i n t h e co mmu n i t y ?

• Co r e el emen t s o f g o o d co r p o r at e g o v er n an ce ar e o f t en r eg ar d ed as f i n an ci al an d acco u n t i n g t r an s p ar en cy
an d f u l l an d h o n es t f i n an ci al r ep o r t i n g . Bo ar d memb er s wh o act i n a r eal f i d u ci ar y r el at i o n s h i p wi t h
s t o ck h o l d er s an d ar e at t en t i v e t o p r ev en t an y co n f l i ct o f i n t er es t wi t h t h i s o b l i g at i o n ar e al s o o f
i mp o r t an ce. Ar e memb er s o f t h e b o ar d an d man ag er s o f co mp an i es a d i v er s e an d i n cl u s i v e g r o u p ?

• Man ag emen t co mp en s at i o n h as b een a k ey co n cer n f o r man y ES G i n v es t o r s wh o d o n o t t en d , f o r ex amp l e,

t o f av o u r mu l t i - mi l l i o n d o l l ar b o n u s es f o r man ag emen t wh i l e f o r al l o t h er emp l o y ees t h e co mp an y
i mp o s es s al ar y f r eezes . I s ad d i t i o n al co mp en s at i o n t o man ag er s ap p r o p r i at el y b o u n d t o i n cr eas e t h e l o n g -
t er m v al u e, v i ab i l i t y an d p r o f i t ab i l i t y o f t h e co mp an y ?
Strong and Weak ESG Propositions
Why ESG
History
• Environmental destruction and societal imbalances, not only harm corporations, but also all living creatures, including people. Climate
change, global warming, resulting sea levels rising as well as droughts and floods commonly influence investors by disrupting economic
activities and supply chains as well as adversely affecting human capital. It is a vicious cycle; damage to the environment leads to
global warming and in turn to further damage to the environment. It is easy to notice the extent of adverse effects on the environment.

• 3 billion animals in Australian bush fires have been destroyed. Changing weather patterns have caused floods, drought, and water level
d e c r e a s e s . E r r a t i c w e a t h e r h a s r a v a g e d t h e c r o p c y c l e , e v e n t u a l l y a f f e c t i n g t h e f o o d s u p p l y, j e o p a r d i z i n g e v e r y o n e ' s l i f e . T h e r e f o r e E S G
cannot just be considered in conferences, research studies, and brilliant annual reports as three alphabets that are worthy of discussion
in the English language.

• If the human race is to survive and thrive, planet Earth must be preserved in its natural state. ESG must be ingrained in the DNA of
corporations and businesses all over the world for this to happen, especially if the goal is to sustain business in the long run.
B u s i n e s s e s s h o u l d a d o p t o n l y p r a c t i c e s t h a t a r e e n v i r o n m e n t a l l y f r i e n d l y, s o c i a l l y r e s p o n s i b l e , a n d a d h e r e t o h i g h g o v e r n a n c e s t a n d a r d s .

• In order for ESG to be more than just a piece of literature or a decorative accent, it must be evaluated on a regular basis. For such an
evaluation to be effective, an evaluation framework along with benchmarks for three factors – environmental, social, and governance –
must be established.

• Life and safety are currently being disrupted all over the world as a result of COVID-19. so, Health and safety are important from an
ESG perspective.
What is an ESG Framework?
History
• ES G f r amewo r k s p r o v i d e l o g i c t o ex ami n e d i ff er en t ES G s u b - cat eg o r i es , g i v e t h em t h e wei g h t t o
d et er mi n e a p er cen t i l e o f ES G co mp l i an ce f o r an en t i t y b as ed o n t h ei r r el ev an ce an d i mp o r t an ce. Th e ES G
r at i n g f o r t h i s en t i t y i s al s o meas u r ed u s i n g t h i s p er cen t i l e.

• Th e Gl o b al Rep o r t i n g I n i t i at i v e ( GRI ) f r amewo r k , f o r ex amp l e, i s o n e o f t h e mo s t wi d el y u s ed ES G

f r amewo r k s . I t i s a s et o f s t an d ar d s r es p o n s i b l e f o r en v i r o n men t al , s o ci al , eco n o mi c, an d g o v er n an ce
co n d u ct t h at co v er s a wi d e r an g e o f t o p i cs . Th e GRI f r amewo r k i s u s ed b y 7 3 p er cen t o f t h e wo r l d ' s 2 5 0
l arg es t co mp an i es t o r ep o r t o n s u s t ai n ab i l i t y.
Importance of ESG Framework
• ES G f r amewo r k s as s i s t b u s i n es s es i n mak i n g a p o s i t i v e i mp act o n t h e wo r l d . F u r t h er mo r e, r ep o r t i n g o n
ES G h as b een s h o wn to h av e ad d i t i o n al b en ef i t s for the o rg an i zat i o n . As an ex amp l e:

• S t r o n g ES G p o l i ci es can h el p b u s i n es s es s av e mo n ey o n en erg y, wat er, an d was t e wh i l e al s o d r i v i n g mo r e

s t r at eg i c r es o u r ce al l o cat i o n .

• Co n s u mer s ar e i n cr eas i n g t h ei r p r es s u r e o n b u s i n es s es t o b e mo r e s o ci al l y an d en v i r o n men t al l y

r es p o n s i b l e.

• ES G i s b eco mi n g mo r e i mp o r t an t t o i n v es t o r s as a s t an d ar d co mp o n en t o f t h e i n v es t men t p r o ces s .

Challenges When Adopting ESG Frameworks
• 1 . Va r i o u s M e t h o d o l o g i e s a n d S c o r i n g S y s t e m s

• E S G f r a m e w o r k s a l l f o l l o w a d i ff e r e n t a p p r o a c h , w h i c h l e a d t o n u m e r o u s s c o r i n g s y s t e m s a n d d a t a i n t e r p r e t a t i o n s . I f
you decide to use just one, it is crucial to determine the impact of every metric of your business and your objectives.

• Notes could vary significantly among frameworks, thus, losing the value of their insight, as if we compared a
baseball team's performance to a volleyball team.

• 2. Lack of Harmonization

• T h e h a r m o n i z e d s t a n d a r d s o f E S G r a t i n g f r a m e w o r k s a r e c l e a r l y l a c k i n g , w h i c h m a y m a k e i t m o r e d i ff i c u l t t o
operate on a global scale. Are special reporting requirements in a country where you operate attached to ESG?

• To u n d e r s t a n d f u l l y h o w E S G r e p o r t i n g c a n l e a d t o p r o b l e m s , y o u m u s t u n d e r s t a n d t h a t i f y o u d e c i d e t o r e p o r t , y o u
are liable for your business. Even voluntary disclosures will be examined, questioned, or legally repercussion by
becoming public.

• Source of Image -
https://deborahgraywine.com/2018/04/02/relationships-in-the-wine-industry-and-about-coming-full-circle/
Number of ESG Frameworks
S o me p o p u l ar ES G F r amewo r k s i n cl u d e:

• CDP

• Cl i mat e Di s cl o s u r e S t an d ar d s Bo ar d ( CDS B)

• Gl o b al Rep o r t i n g I n i t i at i v e ( GRI )

• S ci en ce Bas ed Targ et s i n i t i at i v e ( S BTi )

• S u s t ai n ab i l i t y Acco u n t i n g S t an d ar d s Bo ar d ( S AS B)

• Tas k F o r ce o n Cl i mat e- r el at ed F i n an ci al Di s cl o s u r es ( TCF D)

• UN P r i n ci p l es f o r Res p o n s i b l e I n v es t men t ( P RI )

• Wo r l d Eco n o mi c F o r u m ( WEF ) S t ak eh o l d er Cap i t al i s m Met r i cs

ESG Rating
• E SG r at i ng s see k t o asse ss a c ompa ny' s exp osur e t o E S G r i sks, as wel l as ho w eff ecti v el y t hose r i sk s ar e
managed .

• Unl i ke f r am ewor ks, whi c h r ec omme nd wha t t o r e por t on and how t o r epor t i t , E S G r ati n gs assi gn a speci f i c
scor e t o a c omp an y ba sed on i t s E S G pe r f or man ce .

• T he E S G i nf o r ma t i on wou l d ge ne r a l l y be use d b y i nv est or s, i nst i t ut i o nal i nst i t ut i ons, et c, f or i nvest men t

deci si o ns by mea ns o f E S G r a t i ngs p r ov i ded by t h e E S G r at i ng agenci es. T h e eval uat i on and measur ement i s
of t en t he ba si s f o r i n f or ma l an d sha r e ho l d er pr opo sal i n vol vement of i nvest or s i n E S G- r el at ed i ssu es wi t h
compa ni e s. Gi ven t he i r i mp ac t a nd d epe nde nc e on t h e envi r onm ent and soci et y, E SG f act or s can pr o vi de
val ua bl e i nsi ght s i nt o cu r r en t an d f ut ur e e nv i r on men t a l and so ci al r i sk s and op por t uni t i es f o r cor por at i on s.
T hese E S G p r ob l e ms, i n t ur n, cou l d ha ve an i mpa ct on t h e p r of i t s and r et u r ns on i n vest ment s d i r ect l y or
i ndi r e ct l y.
History

For more details on ESG Rating Click Here

Another reference material on ESG Rating -
1. https://www.sesgovernance.com/pdf/home-reports/1594458276_ESG-Analysis-on-50-Listed-Companies-in-India_2020.pdf
Source of Image - https://www.oecd.org/finance/ESG-Investing-Practices-Progress-Challenges.pdf
What is ESG Reporting
• An ES G i s a r ep o r t o n en v i r o n men t al , s o ci al , an d g o v er n an ce ( ES G) eff ect s p u b l i s h ed b y a co mp an y o r
o rg an i zat i o n . I t en ab l es t h e co mp an y t o mak e t h e r i s k s an d o p p o r t u n i t i es i t f aces mo r e t r an s p ar en t . I t i s a
co mmu n i cat i o n t o o l t o co n v i n ce s k ep t i cal o b s er v er s t h at t h e act i o n s o f t h e co mp an y ar e h o n es t .

• S o u r ce of I mag e-
h t t p s : / / g en u s cap .co m/ wh at - i s - es g - h o w- d o es - i t - f act o r- i n t o - y o u r- s u s t ai n ab l e- i n v es t i n g - s t r at eg y /
What is an ESG Disclosure?
Th e ES G Di s cl o s u r e p r o v i d es g u i d an ce t o as s i s t co mp an i es i n n av i g at i n g t h e ch o i ces as s o ci at ed wi t h ES G
r ep o r t i n g , s u ch as :

• Mu l t i p l e s t ak eh o l d er s ' ES G i n f o r mat i o n n eed s ;

• Mu l t i p l e r ep o r t i n g p r o v i s i o n s ;

• I n t er n al o b j ect i v es f o r r ep o r t i n g ; Ex t er n al o b j ect i v es f o r r ep o r t i n g ( e.g ., meas u r i n g i mp act , co mp l i an ce,

et c.) ;

• Co n cer n s ab o u t r ep o r t i n g “v o l u me an d cl u t t er ” o b s cu r i n g i mp o r t an t i n f o r mat i o n .
 The audience for ESG disclosures

Source of Image - https://docs.wbcsd.org/2019/04/ESG_Disclosure_Handbook.pdf

ESG Process
ESG Process
Three process steps (assess, decide, document) and six essential questions make up the ESG disclosure judgment
process. The process phases and key questions provide a straightforward, practical method for increasing confidence
in externally reported ESG data. The following are the main concerns:

1. Why report ESG information?

2. For whom should ESG information be reported?
3. Where should ESG information be reported?
4. What ESG information should be reported?
5. How should ESG information be prepared and presented?
6. How much ESG information should be reported?
ESG Process
• The process steps are:

• 1 . A s s e s s o p t i o n s n e u t r a l l y, o b j e c t i v e l y, a n d i n a c c o r d a n c e w i t h a l i s t o f c r i t e r i a t o i d e n t i f y i n f o r m a t i o n w h i c h :

• Supports reporting goals and purposes

• Has business value

• Meets the needs of the primary intended audience(s)

• Is supportable

• Can be clearly communicated

• 2. Decide on the basis of management and experts' evaluations, assumptions, opinions, and subjective assessments (if
appropriate).

• 3. Document the process, the decision, and any uncertainties or sensitivities concerning the judgment.

• Source of Image- https://docs.wbcsd.org/2019/04/ESG_Disclosure_Handbook.pdf

Importance of ESG Reporting
• 1 . I n c r e a s e s t h e Tr a n s p a r e n c y o f C o r p o r a t i o n s

• It expands corporate disclosure beyond traditional financial metrics and increases corporate transparency on environmental and
social metrics. Sustainability reporting enables stakeholders to assess the company's performance in a balanced and
u n d e r s t a n d a b l e m a n n e r, f a c i l i t a t i n g c o r p o r a t e a c c o u n t a b i l i t y, a s p r o m u l g a t e d b y o n e o f t h e p r i n c i p l e s o f t h e C o d e o f C o r p o r a t e
Governance.

• 2. Enhances Risk Management

• Sustainability reports allow publicly traded companies to investigate emerging areas of risk and identify opportunities that
would otherwise go unnoticed by other analytical and system-based approaches. A sustainable risk management approach
provides useful information to management in order to identify emerging issues and develop adequate solutions to protect the
company's reputation and increase shareholder value.

• 3. Encourages Stakeholder Engagement

• Identification and engagement with stakeholders are critical steps in sustainability reporting, as cited by various international
sustainability frameworks. Companies that are publicly traded must identify their stakeholders in order to effectively engage
those who are interested in and affected by the company's sustainability performance. Given the diverse nature and interests of
stakeholders such as shareholders, employees, customers, suppliers, and communities, stakeholder engagement allows the
company to consider the information needs of various stakeholders when disclosing sustainability-related information.
• 4 . En h a n ces S t a k eh o l d er Co m mu n i ca t i o n

• Th e co mp an y p r o v i d es a f r amewo r k f o r meas u r i n g n o n - f i n an ci al p er f o r man ce b y ex t en d i n g p u b l i c

d i s cl o s u r es b ey o n d f i n an ci al d i s cl o s u r e t o i n cl u d e n o n - f i n an ci al d i s cl o s u r e o f s o ci al , en v i r o n men t al , an d
i mp act i n t er act i o n s an d i mp act . I t al s o p r o v i d es g u i d an ce o n o p p o r t u n i t i es an d t h r eat s t o n o n - f i n an ci al
risk man ag emen t . For b en ch mar k i n g an d as s es s i n g s u s t ai n ab i l i t y p er f o r man ce ag ai n s t ex i s t i n g
f r amewo r k s , s u s t ai n ab i l i t y r ep o r t s can b e emp l o y ed t o s h o w h o w t h e o rg an i zat i o n i n f l u en ces an d i s
i n f l u en ced b y s u s t ai n ab l e d ev el o p men t ex p ect at i o n s an d t o h el p p eer co mp ar i s o n i n t i me an d t o al l o w
co mmu n i cat i o n wi t h s t ak eh o l d er s .

• S o u r ce o f I mag e - h t t p s : / / f o cu s mal ay s i a.my / wp - co n t en t / u p l o ad s / ES G.j p g

Sustainability Reporting Frameworks
• T h e Gl o b a l R e p o r t i n g I n i t i a t i v e ( G R I )

• T h e G lo b a l R e p o r t in g I n it i a t iv e ( G R I ) is a n i n d e p e n d e n t w o r l d w i d e o rg a n i z a t i o n w h o s e f r a m e w o r k i s
e x t e n s i v e l y u t i li z e d b y c o r p o r a t i o n s a n d s t a k e h o l d e r s to a n a l y z e a n d d i s c l o s e t h e i r i n f l u e n c e o n s u s t a i n a b i l i t y
concerns such as climate change, human rights, governance, and social well-being4. Under universal and
s p e c i a li z e d r e q u ir e m e n t s , th e s ta n d a r d s p r o v i d e f o r q u a l it a t i v e a n d q u a n t i t a t i v e i n f o r m a t i o n d i s c l o s u r e s . T h e
u n i v e r s a l s t a n d a r d s a r e l o o k i n g f o r d a ta o n g e n e r a l m a n a g e m e n t c h a r a c t e r i s t i c s , w h e r e a s t h e s p e c i f i c
s t a n d a r d s a l lo w f o r r e p o r t i n g b a s e d o n b u s in e s s o p e r a ti o n s .

• F o r m o r e i n f o r ma t io n C li c k H e r e

• T h e S u s t a i n a b i l it y A c c o u n t in g S t a n d a r d s B o a r d ( S A S B )
I n 2 0 1 8 S A S B r e l e a s e d E S G s t a n d a r d s to p r o v id e d e t a i l s a n d i m p l e m e n t a t i o n o f t h e u n d e r l y i n g f i n a n c i a l
m e t r i c s . T h e S A S B E S G f r a m e w o r k i s b e s t s u it e d t o a s s e s s f i n a n c i a l p e r f o r m a n c e o n a b a s i s o f a n e n t i t y ' s
E S G p r a c t ic e s .

• F o r m o r e i n f o r ma t io n C li c k H e r e
• Th e I n t ern a t i o n a l I n t eg ra t ed Rep o rt i n g Co u n ci l ( I I RC)

• Th e "I n t eg r at ed r ep o r t i n g F r amewo r k " i s a g r o u p o f i n t er n at i o n al l ead er s wi t h mi s s i o n . I n a co n ci s e an d

s i mi l ar f o r mat , t h e F r amewo r k o ff er s mat er i al i n f o r mat i o n o n t h e s t r at eg y, g o v er n an ce, p er f o r man ce an d
o u t l o o k o f an o rg an i zat i o n , an es s en t i al ch an g e i n co r p o r at e r ep o r t i n g .

• F o r mo r e i n f o r mat i o n Cl i ck Her e

• CDP ( f o rm erl y t h e Ca rb o n Di s cl o s u re Pro j ect )

• I t was cr eat ed i n 2 0 0 0 i n Lo n d o n an d o p er at es as a wo r l d wi d e, n o n - p r o f i t o rg an i zat i o n . CDP s eek s f r o m

s o me o f t h e wo r l d ' s maj o r l i s t i n g en t er p r i s es s t an d ar d i zed i n f o r mat i o n o n cl i mat e ch an g e, wat er an d
f o r es t r y v i a y ear l y q u es t i o n n ai r es d el i v er ed o n b eh al f o f i n s t i t u t i o n al i n v es t o r s en d o r s i n g t h em as ' CDP '
s i g n at o r i es .

• F o r mo r e i n f o r mat i o n Cl i ck Her e
• Th e Un i t ed Na t i o n s Gl o b a l Co m p a ct ( UNGC)

• I t ' s a s t r at eg i c p o l i cy i n i t i at i v e f o r co mp an i es wh o wan t t o co n n ect t h ei r o p er at i o n s an d s t r at eg i es wi t h 1 0

i n t er n at i o n al l y ack n o wl ed g ed v al u es i n t h e ar eas o f h u man r i g h t s , l ab o r, t h e en v i r o n men t , an d an t i -
co r r u p t i o n . I t i s mad e u p o f o v er 1 3 ,0 0 0 o rg an i zat i o n s i n 8 0 l o cal n et wo r k s al l ar o u n d t h e wo r l d . I n an
an n u al Co mmu n i cat i o n o n S u cces s , b u s i n es s p ar t i ci p an t s ar e ex p ect ed t o p u b l i cl y r ep o r t o n t h ei r p r o g r es s .

• F o r mo r e i n f o r mat i o n Cl i ck Her e

• S o u r ce of I mag e -
h t t p s : / / www.amg f u n d s .co m/ t h eb o u t i q u ei n v es t o r / 2 0 1 9 / 0 6 / t h e- r i s i n g - t i d e- o f - es g - i n v es t i n g .h t ml
ESG Key Performance Indicators
Regulation
• E U l a w r e q u i r e s l a rg e c o m p a n i e s t o c o m m u n i c a t e c e r t a i n d a t a o n t h e i r s o c i a l a n d e n v i r o n m e n t a l m a n a g e m e n t
challenges and how they operate. EU Directive 2014/95/EU also called the Non-financial Reporting Directive (NFRD),
recognizes that the disclosure of non-financial information is essential in order to manage change towards a
sustainable global economy combining long-term profitable with social justice and environmental protection. The
Directive amends accounting Directive 2013/34/EU to the extent necessary to ensure that the company's activity
d e v e l o p s , p e r f o r m s , a n d t a k e s p l a c e a n d h a s i t s e ff e c t o n , a t a m i n i m u m , e n v i r o n m e n t a l , s o c i a l a n d w o r k e r s ' i s s u e s ,
respect of human rights, anti-corruption issues and its activities.

• In order to help companies communicate environmental and social information, the EU has issued guidelines and
published guidelines on the reporting of climate information. Furthermore, the EU has initiated a public consultation
o n t h e N F R D r e v i e w.

• T h e 2 0 1 7 O E C D re p o r t c o m p i l e s ( v o l u n t a r y a n d m a n d a t o r y ) E S G r e p o r t i n g r e q u i r e m e n t s w o r l d w i d e b y i n s t i t u t i o n a l
investors and through company disclosure. The report notes that the reporting requirement is usually voluntary
("observe or explain") and that the methods or metrics that should be used are not prescriptive.

• Source of Image-
https://knowledge.wharton.upenn.edu/article/when-business-blows-up-policy-how-to-regulate-disruptions/
Indian Legislation
• Th e I n d i an l eg i s l at i v e f r amewo r k h as at t emp t ed t o co v er t h e v ar i o u s as p ect s o f ES G i n a f r ag men t ed
man n er.

• Th e Bo ar d ' s r ep o r t , f o r ex amp l e, mu s t d i s cl o s e en erg y co n s er v at i o n , ab s o r p t i o n o f t ech n o l o g y, et c. Th e

as p ect s s h o u l d b e co v er ed i n d et ai l – t h e co mp an y mu s t co mmu n i cat e act i o n s t ak en o r i mp act s o n en erg y
co n s er v at i o n , act i o n s t ak en to u s e al t er n at i v e en erg y s o u r ces , i n v es t men t o f cap i t al in en erg y
co n s er v at i o n f aci l i t i es , eff o r t s t o ab s o r b t ech n o l o g y, et c. F u r t h er mo r e, a d i r ect o r h as a f i d u ci ar y d u t y t o
t h e co mmu n i t y as wel l as t o t h e en v i r o n men t .

• CS R act i v i t i es i n cl u d e d i ff er en t s o ci o - eco n o mi c act i v i t i es wh i ch ar e r eq u i r ed i n t h e an n u al r ep o r t

s ep ar at el y. Nev er t h el es s , t h e cl o s es t r eq u i r emen t i s t h e r ep o r t i n g o f b u s i n es s r es p o n s i b i l i t y ( BRR) , f o r
wh i ch o n l y t h e ES G p er s p ect i v e h as b een man d at ed an d d i s cu s s ed i n t h e n ex t l es s o n .

• S o u r ce o f I mag e -
h t t p s : / / www.p h ar maceu t i cal - t ech n o l o g y.co m/ n ews / en v i r o n men t al - f act o r s - mo s t - i mp o r t an t - amo n g - es g - p o l l /
Business Responsibility Report (BRR)
1. The first step in Indian promotion of non-financial reporting in India can be described as a compulsory BRR or Business Responsibility Report.
The initiative was one of the answers to India's commitment to the UN Business and Human Rights Guiding Principles and sustainable
development goals.

2. T h e B R R i s b a s e d o n 9 p r i n c i p l e s i n a c c o r d a n c e w i t h t h e ' S o c i a l , E c o l o g i c a l a n d B u s i n e s s E c o n o m i c R e s p o n s i b i l i t i e s N a t i o n a l Vo l u n t a r y
Guidelines.'

• BRR 9 Principles-

• 1) Businesses should conduct and govern themselves with ethics, transparency and accountability;

• 2) Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle;

• 3) Businesses should promote the well- being of all the employees;

• 4) Businesses should respect the interests of and be responsive towards all stakeholders, especially those who are disadvantaged,
vulnerable and marginalized;

• 5) Businesses should respect and promote human right;

• 6) Businesses should respect, protect and make efforts to restore the environment;

• 7 ) B u s i n e s s e s w h e n e n g a g e d i n i n f l u e n c i n g p u b l i c a n d r e g u l a t o r y p o l i c y, s h o u l d d o s o i n a r e s p o n s i b l e m a n n e r ;

• 8) Businesses should support inclusive growth and equitable development; and

• 9 ) B u s i n e s s e s s h o u l d e n g a g e w i t h a n d p r o v i d e v a l u e t o t h e i r c u s t o m e r s a n d c o n s u m e r s i n a r e s p o n s i b l e m a n n e r.
• The BRR is published by Ministry of Corporate Affairs (MCA). The guidelines expect companies to develop an improved
u n d e r s t a n d i n g o f t h e t r a n s f o r m a t i o n p r o c e s s w h i c h e n h a n c e s t h e i r a c c o u n t a b i l i t y. T h e N a t i o n a l Vo l u n t a r y G u i d e l i n e s ( N V G )
was further revised and the MCA developed the National Guidelines for Responsible Business Conduct (NGRBC). The
guidelines provided for the enterprises to-

• c o n d u c t i n g a n d g o v e r n i n g i n a n e t h i c a l , t r a n s p a r e n t a n d a c c o u n t a b l e w a y w i t h i n t e g r i t y,

• provide goods and services in a manner that is sustainable and safe,

• respect and promote the well-being of all employees, including those in their value chains,

• respect the interests of and be responsive to all their stakeholders,

• respect and promote human rights,

• respect and make efforts to protect and restore the environment,

• w h e n e n g a g i n g i n i n f l u e n c i n g p u b l i c a n d r e g u l a t o r y p o l i c y, s h o u l d d o s o i n a m a n n e r t h a t i s r e s p o n s i b l e a n d t r a n s p a r e n t ,

• promote inclusive growth and equitable development, and

• e n g a g e w i t h a n d p r o v i d e v a l u e t o t h e i r c o n s u m e r s i n a r e s p o n s i b l e m a n n e r.
The development in the BRR framework is depicted below-
• On Mar ch 2 5 , 2 0 2 1 , S EBI d eci d ed t o r ep l ace t h e ex i s t i n g Bu s i n es s Res p o n s i b i l i t y Rep o r t ( "BRR") , f o r t h e
p u r p o s e o f r ep o r t i n g o n a v o l u n t ar y b as i s f o r F Y 2 0 2 1 - 2 2 an d o n a man d at o r y b as i s f o r F Y2 0 2 2 - 2 3 f o r t h e
t o p 1 ,0 0 0 l i s t ed en t i t i es ( b y mar k et cap i t al i s at i o n ) .

• F o r d et ai l ed I n f o r mat i o n On BRR Cl i ck Her e

• S o u r ce o f BRR 9 P r i n ci p l es - h t t p s : / / t ax g u r u .i n / s eb i / b u s i n es s - r es p o n s i b i l i t y - r ep o r t - b r r.h t ml

• S o u r ce o f I mag e -

• 1 .h t t p : / / v i n o d k o t h ar i .co m/ 2 0 2 1 / 0 3 /es g- co n cer n s - o n - co r p o r at e- g o v er n an ce- i n - i n d i a/

• 2 . h t t p s : / / t ax g u r u .i n / s eb i / amen d men t - b u s i n es s - r es p o n s i b i l i t y - r ep o r t i n g - b r r.h t ml

BRSR | Summary of Disclosures and Principles
Survey
• Th i s s u r v ey r ep o r t i s p u b l i s h ed b y EY o n "Ho w wi l l ES G p er f o r man ce s h ap e y o u r f u t u r e?"

• Bel o w i s t h e d et ai l o f S u r v ey -

• 1 . To d ay, 7 2 % o f i n v es t o r s s u r v ey ed cl ai med t o co n d u ct a s t r u ct u r ed , met h o d o l o g i cal as s es s men t o f n o n -

f i n an ci al d i s cl o s u r e – a maj o r j u mp f r o m t h e 3 2 % wh o r ep o r t ed u s i n g a s t r u ct u r ed ap p r o ach i n 2 0 1 8 .

• Th e v as t maj o r i t y o f i n v es t o r s u s u al l y s ay t h at t h ey car r y o u t a s t r u ct u r ed an d f o r mal ev al u at i o n o f ES G

i n f o r mat i o n .
• 2 . Th e f i v e mo s t s i g n i f i can t ch al l en g es t o t h e eff ect i v en es s an d u t i l i t y o f ES G r ep o r t i n g .

For a detailed information Click Here

KPMG report on ESG Click Here
Source of Image -
https://assets.ey.com/content/dam/ey-site
s/ey-com/en_gl/topics/assurance/assuran
ce-pdfs/ey-global-institutional-investor-s
urvey-2020.pdf
External Links / Reference Material
•h t t p s : / / w w w. g f o a . o rg / m a t e r i a l s / e s g - d i s c l o s u r e
•h t t p s : / / h o m e . k p m g / x x / e n / h o m e / i n s i g h t s / 2 0 1 9 / 0 9 / i m p a c t - o f - e s g - d i s c l o s u r e s . h t m l
•h t t p s : / / h o m e . k p m g / x x / e n / h o m e / i n s i g h t s / 2 0 2 0 / 0 5 / b e g i n n i n g - o f - e s g - r e g u l a t o r y - j o u r n e y. h t m l
•h t t p s : / / i r i s b u s i n e s s . c o m / b l o g / 2 0 2 1 / 4 / e s g - r e p o r t i n g - i n d i a
•h t t p s : / / w w w. p w c . c o m / s k / e n / e n v i r o n m e n t a l - s o c i a l - a n d - c o r p o r a t e - g o v e r n a n c e - e s g / e s g - r e p o r t i n g . h t m l
•h t t p s : / / w w w. c f a i n s t i t u t e . o rg / e n / a d v o c a c y / i s s u e s / e s g - s u s t a i n a b l e - i n v e s t i n g
•h t t p s : / / d o c s . w b c s d . o rg / 2 0 1 9 / 0 4 / E S G _ D i s c l o s u r e _ H a n d b o o k . p d f
•h t t p s : / / c o r p g o v. l a w. h a r v a r d . e d u / 2 0 2 1 / 0 5 / 2 8 / s e c - r e g u l a t i o n - o f - e s g - d i s c l o s u r e s /