Consultancy companies doubling capacity in sustainability divisions

As the top 1,000 listed companies prepare to submit their business responsibility and sustainability reporting disclosures — made mandatory this financial year onwards — consultancy firms are doubling capacity in their sustainability divisions.

According to industry sources, about 350-400 of the 1,000 companies have already engaged the services of sustainability consultants. Many have appointed chief sustainability officers as well.

“Many global organisations have set up specific targets over the period on ESG-related matters and they seem to be moving ahead with specific action steps and investments. Several Indian companies seem to be in early stages of formulating their ESG strategy,” said Madhu Sudan Kankani, partner, Deloitte India said. 

One of the major challenges consultancy firms are faced with is talent crunch and finding the right manpower, especially with increased demand for such professionals as companies are also hiring them. “With ‘sustainability’ gaining priority and relevance in the business, companies are hiring people with the right skill-sets to take charge, (CSO) and ESG managers. We helped in designing curriculums for sustainability courses for a few colleges to create an industry-ready talent pool,” Chaitanya Kalia, sustainability leader, EY India.

To tackle this, PwC India, for instance, has made sustainability training mandatory for all its employees. “Upskilling around ESG is as important as it was around digital about a decade ago. At PwC, all our people have to go through upskilling on sustainability, it is integral in our mandatory training curriculum,” Sambitosh Mohapatra, partner and leader, ESG PwC India, said.

While some companies are limiting themselves to just reporting the facts as asked by the Securities Exchange Board of India (Sebi), most companies are opting for changing strategy to make their organisations ESG (environmental, social, and corporate governance) compliant. Rating agencies, for instance, no longer confine themselves to annual reports, but are closely looking at sustainability reports of organisations at the same time.

“With increased awareness around sustainability, investors and other stakeholders hold companies to high standards of ESG compliance. ESG ratings are no longer just a sustainability parameter — it has become a business parameter,” Kalia added. 

Industry experts said CEOs are realising that if they want to raise foreign funds and have a licence to operate in international markets such as Europe or the US, then they will have to match the global ESG standards. This means, having sustainable supply chains, gender diversity, emission reduction targets, among various other parameters. 

“Earlier mindset was driven by reporting and disclosure. We are witnessing strategy-led engagements around ESG — businesses having a holistic view around incorporating ESG in their business models to create long-term value and resilience. It is driving enhanced market access, access to sustainable finance, managing talent making them fit for the future,” Mohapatra added.

Currently there are no benchmarks set by the government for sustainability targets and companies are expected to report facts across a list of disclosures. 

Experts said going forward it would be helpful to have a sector-specific guideline. For instance, if a company cannot reduce its travel, it could move to more renewable energy, and offset its consumption. 

“Principles around energy consumption and employee and people related agenda are getting specific attention,” Kankani said. 

While there is more awareness about the concept of ESG goals in the corporate world, many companies, experts said, had to be told that CSR activity is not the same as ESG. 

“CSR was always driven as a mandatory requirement and was an adjacency. ESG is at the core of business strategy, operations and supply chains. Corporates have strategised utilising CSR efforts to strengthen their business core,” Mohapatra added. 

The biggest challenges for CEOs in India are pressing global economic matters when it comes to delivering their ESG strategies, according to KPMG India CEO Outlook 2022. The report said 15 per cent CEOs in India — up from 6 per cent in August 2021 — say there is a lack of an accepted global framework for measuring and disclosing ESG performance.

“CEOs, both global and India, increasingly understand that businesses embracing ESG are best able to secure talent, strengthen employee value proposition, attract loyal customers and raise capital. ESG has gone from a nice-to-have to integral to long-term financial success,” the KPMG report said. 

• 77% CEOs in India see stakeholder demand for increased reporting and transparency on ESG issues, up from 42% in August 2021
• 62% CEOs believe stakeholder scrutiny on ESG will continue to accelerate, up from 59% in August 2021
• 55% CEOs in India compared to 71% CEOs globally, believe the public is looking to businesses to fill the void on societal challenges 

Source: KPMG India CEO Outlook 2022