Why is ESG important

According to European green deal by 2050 all the member states will reach
net-zero emissions and will have regenerative economies. Even though the
European Union are the front runners, the United states are positive about
decarbonizing the economy and achieve net-zero emission by 2050.
Many countries have imposed rules, such as carbon taxes, the financial
and banking sectors have started using ESG standards in there systems,
so organisations that does not follow the ESG norms have to bear heavy
penalties. To avoid poor financing and get out of capital markets
stakeholders have to show that they have built effective sustainability and
ESG plans and implement them effectively in the company.
The private equity market has also included sustainability and ESG into the
holding strategies. Companies with powerful and convincing ESG strategy
affects ROI and decreases the risk of revenue and lending which attracts
private investors to put in more capital into the market.
ESG issues helps in managing investment risks. So, Investors look for
company’s ESG performance rating and reports to know what the company
is doing to increase sustainable long-term returns and efforts to reduce
risks. Companies that have successfully applied sustainability and ESG
strategies perform better than global giants.

Therefore ESG is one of the major area to focus on for companies in 2021
and beyond.
ESG Issues and Opportunities
As a result, organizations must provide a summary of their key ESG risks
and opportunities, as well as the techniques for managing or adapting to
these risks, as well as the financial consequences. The ESG measures an
organization ’s commitment to eco - friendly business methods, as well as
strong social responsibility and governance practices.
To provide businesses time to adjust to the new rules, BRSR reporting will
be voluntary in FY2022, before becoming obligatory in FY2023. Sebi, on
the other hand, urges businesses to be early adopters in order to be at the
forefront of sustainability reporting. These disclosure standards will
certainly be modified over time to make them more effective and beneficial
for investors and the broader financial community.
For companies around the world ESG is all about imagining numerous
possibilities and coming up with most suitable solution for the most urgent
issues related to innovative business models. When an ESG is well
managed it can help building upon opportunities, managing risk by
predicting the vulnerability curve, and potentially generating business and
capitalising on financials.

Implementation in companies
Companies must immediately implement sustainability and environmental, social, and governance
(ESG) strategies to solve the major issues of net-zero and should have circular flow. Companies who
consider environmental, social, and governance (ESG) factors will be valued more highly than those
who do not.

Because of their supply chain automobile and manufacturing industries will face massive challenges
out of all other industries. They need to direct their investment towards innovative products to
create new technology that will be climate friendly and will give out circular solution to the market.
They should implement strong sustainability and ESG policies, which will help the companies hold
their ground during difficult times.

Finally, the leadership will be responsible for achieving these ESG objectives. Businesses will be
unable to have the industry-wide influence that we require without aggressive leadership. People on
higher positions must focus on sustainability and make well informed and strategized business
decision to see strong bottom-line returns on investment.