In recent years, Environmental, Social, and Governance (ESG) considerations have gained significant momentum as a driving force behind business decisions and investment strategies. ESG refers to the three main factors that are used to measure the sustainability and societal impact of a company or investment: Environmental, which assesses a company's impact on the natural environment; Social, which looks at a company's relationship with its employees, customers, and communities; and Governance, which evaluates a company's leadership, transparency, and accountability.
The genesis of formal application of ESG principles can be traced back to the 1960s and 1970s when concerns about the environment, civil rights, and corporate accountability began to gain traction. However, it was in the 1992 Earth Summit in Rio de Janeiro, which focused on sustainability and climate change, served as a catalyst for the emergence of ESG as a framework for evaluating corporate performance. Over the years, there has been a growing recognition that businesses have a responsibility not only to generate profits but also to address social and environmental challenges.
While ESG is often seen as a modern concept, it is worth noting that these principles have been embedded in the ethos of Indian civilisation for centuries, as reflected in historic scriptures. Indian scriptures, including the Vedas, Upanishads, and Bhagavad Gita, are repositories of profound wisdom that encompass a holistic approach to life, emphasising the interconnectedness of humans, nature, and society. These scriptures provide timeless teachings that can guide us in navigating the complex challenges of the modern world and offer insights into ESG principles.
In the context of India, the genesis of ESG can be traced back to ancient times when the society inherently recognised the importance of environmental stewardship, social cohesion, and meeting social needs. Indian civilisation has a rich history of respecting the environment, social fabric, and social needs, which can be seen as early examples of ESG concepts.
Environmental sustainability has been ingrained in Indian culture for centuries. Ancient texts like the Vedas, Upanishads, and scriptures of Buddhism and Jainism emphasise the interconnectedness of humans with nature and the need to protect the environment. Practices such as ahimsa (non-violence) and aparigraha (non-possessiveness) advocate for living in harmony with nature and avoiding harm to all living beings. Traditional farming methods like organic farming, agroforestry, and water harvesting techniques have been practiced in India for generations, demonstrating a deep respect for the environment and its resources.
Vedas, which are among the oldest scriptures in the world, emphasise the sacredness of nature and the need to protect it. They describe the Earth as our mother, and urge humans to treat it with reverence and care. The concept of "Prakriti" (nature) and "Purusha" (human) are intertwined in the Vedic philosophy, highlighting the deep connection between humans and the environment. The scriptures also highlight the importance of sustainable resource management, conservation of forests and rivers, and practices such as "Yajna" (fire ritual) that promote ecological balance. Historically, India has had a profound connection with nature and recognised the importance of environmental sustainability. Practices such as "Vriksharopan" (tree planting), "Jal Shuddhi" (water purification), and "Bhoomi Poojan" (earth worship) were common rituals in ancient India, emphasising the reverence for nature and its conservation.
Social cohesion and inclusivity have also been integral to Indian society. India is known for its diverse culture, where people from different religions, castes, and ethnicities live together. The principles of tolerance, compassion, and social harmony have been emphasised in Indianphilosophy and religions. Concepts like dharma (righteous duty), seva (selfless service), and vasudhaiva kutumbakam (the world is one family) highlight the importance of social welfare and collective well-being. These scriptures also advocate for social justice, equality, and the well-being of all members of society, including the marginalised and vulnerable.
Meeting social needs has been a priority in Indian society since ancient times. The concept of dana (charity) has been deeply ingrained in Indianculture, with philanthropy and community service being considered virtuous acts. The tradition of providing for the less fortunate, including feeding the hungry, sheltering the homeless, and providing healthcare to the needy, has been practiced by individuals, families, and communities in India for centuries.
Good governance has been deep rooted in ancient Indian texts and practices. For instance, the concept of ‘Rajdharma’, which means the duty of a ruler, highlights the importance of just and responsible governance. Ancient Indian scriptures, such as the Arthashastra, provide insights into principles of governance, including accountability, transparency, and ethical conduct. Indian history also showcases examples of responsible governance and ethical leadership. Emperor Ashoka, a renowned ruler in ancient India, is known for his principles of "Dhamma" (righteous conduct), which included promoting social welfare, environmental conservation, and ethical governance. Raja Ram Mohan Roy, a prominent social reformer in the 19th century, advocated for social and gender equality, education, and environmental conservation, showing the relevance of ESG principles even in the modern context.
While these historical practices in India may not have been explicitly labeled as ESG concepts, they reflect the underlying principles of Environmental, Social, and Governance considerations. These traditional practices align with the importance of environmental sustainability, social cohesion, and meeting social needs, which align with the fundamental pillars of ESG.
In recent times, there has been a renewed focus on integrating ESG practices into the Indian corporate landscape. The Securities and Exchange Board of India (SEBI), the regulatory body for securities markets in India, has mandated the top 1,000 listed companies in India to disclose their ESG performance. Indian companies are increasingly recognising the need to prioritise environmental sustainability, social responsibility, and good governance to create long-term value and mitigate risks. Furthermore, Indian companies are incorporating social and environmental initiatives into the business strategies, such as investing in renewable energy, promoting diversity and inclusion, and engaging in community development programs. Many Indian companies are also actively contributing to social causes through corporate social responsibility (CSR) initiatives, aligning with the concept of meeting social needs.
However, there are challenges that need to be addressed for effective implementation of ESG practices in India. These include the need for standardised reporting frameworks, robust ESG metrics, and increased awareness and education about ESG among stakeholders. There is also a need for companies to integrate ESG considerations into their core business strategies and operations, and not view them as standalone initiatives.
The important need is for the companies to integrate ESG considerations into their core busines strategies and operations, rather than treating them as standalone initiatives. Companies need to embed ESG principles into their decision-making processes, risk management, and performance measurement to ensure that sustainability is truly integrated into their DNA. The teachings from Indian scriptures and the native intelligence offer profound wisdom and practical guidance for modern businesses and investors to embrace ESG principles.
Dr Srinath Sridharan is a corporate adviser and author of Time for Bharat. He tweets @ssmumbai
