Environmental, Social and Governance (ESG) factors are swiftly reshaping the corporate landscape, transcending their niche status to become central pillars for long-term value creation by organisations. This transformation signifies the acknowledgment that sustainable business practices are not merely ethical choices but also catalysts for operational efficiency, innovation and competitive advantage. Emerging from its nascent stage in India, ESG is gaining substantial traction, especially among large corporations and multinational companies (MNCs). While smaller companies are yet to fully embrace it, the mandated ESG reporting under the Companies Act is anticipated to serve as a catalyst for broader adoption in the future.
The financial advantages of ESG are increasingly apparent. Professor George Serafeim of Harvard Business School highlights a robust correlation between strong ESG performance and higher operating margins. This, coupled with the growing significance of ESG for investors and stricter regulatory norms, is prompting businesses to take heed.
Beyond the financial benefits, leading companies are recognising the intrinsic value of ESG. Ashok Leyland, for instance, has seamlessly integrated ESG considerations into key result areas and senior leadership strategies, showcasing a commitment that extends beyond boardroom discussions to tangible actions.
There’s limited awareness among the Indian workforce regarding ESG and its importance. This, coupled with the prevalence of social issues such as low female workforce participation, paints a concerning picture
Varadarajan S, a Tata veteran and former CHRO, Vistara Airlines
Varadarajan S, a Tata veteran and former CHRO, Vistara Airlines, a Tata Group company, articulates the Tata philosophy, stating, “Corporate enterprises must be managed not merely in the interests of their owners but equally in those of their employees, consumers, local communities, and ultimately, the country as a whole.”
Jindal Stainless stands out for its strategic integration of ESG principles into corporate culture. Its initiatives, ranging from plastic waste-collection drives to renewable energy adoption, not only enhance operational resilience but also solidify their position as a leader in sustainable manufacturing.
The ESG Gap Varadarajan highlights the limited ESG adoption in India: “It’s still at a nascent stage, primarily among a few large corporations and MNCs. The lack of clear frameworks and lukewarm implementation of governance principles lead to numerous concerns, including environmental degradation and non- performing assets.”
HR leads initiatives in diversity and inclusion, employee well-being, CSR, ethical training and environmental sustainability. Each programme has specific KPIs to measure success. Metrics such as energy consumption, waste generation and carbon emissions track progress towards environmental sustainability goals
Salil Chinchore, CHRO, ElasticRun
This lack of awareness extends to the workforce. Varadarajan adds, “There’s limited awareness among the Indian workforce regarding ESG and its importance.” This, coupled with the prevalence of social issues such as low female workforce participation, paints a concerning picture. Sushil Baveja, CHRO, Jindal Stainless, emphasises the link between individual values and ESG, stating, “The pursuit of ESG-aligned employment reflects a shift towards self-actualisation, where aligning with personal values becomes crucial.” However, he cautions that this trend, particularly in diverse markets such as India, depends heavily on individuals’ basic needs being met first.
Baveja adds, “While there’s growing interest in ESG investing and sustainability reporting in India, the conversation around ESG in the workplace and its influence on employment choices is nuanced and varies across demographics.” This suggests a complex interplay between personal needs, individual values and the evolving ESG landscape in India.
While there’s growing interest in ESG investing and sustainability reporting in India, the conversation around ESG in the workplace and its influence on employment choices is nuanced, and varies across demographics
Sushil Baveja, CHRO, Jindal Stainless
Despite the challenges, ESG awareness is gradually improving among job seekers. Salil Chinchore, CHRO, ElasticRun, observes, “Candidates are wary of companies lacking ethical or environmental responsibility.” This underscores the growing importance of conducting due diligence on potential employers’ ESG practices, says Chinchore.
Mussarat Hussain, head-HR, Suzuki Research & Development India, reaffirms the significance of ESG beyond boardrooms: “The discussion around ESG is no longer confined to select circles. It’s a topic of genuine interest and concern among employees, job seekers and consumers in India. Organisations need to take it seriously to attract and retain talent and maintain their competitiveness.”
HR: The ESG champion within
Traditionally considered the ‘canary in the coal mine’ in corporate culture, HR departments are the first to encounter emerging employee concerns, whether related to diversity and inclusion, fair compensation, or mental health. As sustainability gains prominence, HR finds itself well placed to champion Environmental, Social and Governance (ESG) initiatives within organisations. However, the question remains—‘Is HR uniquely qualified for this role?’ Experts suggest that the willingness and ability to understand the broad scope of ESG are more crucial than specific professional backgrounds.
The ideal leader, irrespective of their discipline, should possess the following key attributes:
Communication and influence: Effectively communicating with and influencing the board is paramount, as ESG initiatives often require significant investment, discipline and a long-term commitment.
Constant learning: ESG is a rapidly- evolving field demanding continuous learning and awareness of global and local trends, legislative changes and best practices.
Courage and integrity: The ESG leader must have the courage to hold the organisation accountable for its commitments and call out any shortcomings.
HR drives initiatives that impact employee well- being, ethical conduct and environmental sustainability. Quantitative and qualitative metrics are essential to gauge the success and impact of these programmes
Mussarat Hussain, head-HR, Suzuki Research & Development India
While these qualities define an effective ESG leader, their specific position within the organisation is a secondary consideration. Whether it’s an HR professional, a finance head, or a marketing executive, the ability to leverage these skills effectively is what matters.
HR’s multifaceted approach positions it at the heart of successful ESG implementation, bridging the gap between operational practices and societal impact. Environmental leadership can begin with HR itself, promoting sustainable practices through green policies such as adopting electric company vehicles, setting an example for the entire organisation.
Social responsibilities are already deeply ingrained in HR’s traditional domain, encompassing diversity, equity and inclusion (DEI), employee well-being and community engagement. The HR function can leverage this expertiseto foster a more inclusive workplace by ensuring that diversity data informs recruitment, promotion and development strategies.
The CEO or CHRO is ideally positioned to spearhead this transformation. Technical expertise, while valuable, isn’t the sole critical factor. Instead, the key is having someone who comprehensively understands the organisation, recognises the expertise within, identifies key influencers and can adeptly negotiate and convey the organisational perspective to the world
Santanu Ghosal, CHRO & head – CSR, Schaeffler India
Fostering inclusivity and respect enhances employee engagement and satisfaction, which are crucial for long-term success. Governance involves ensuring transparent, ethical and value- aligned management practices. By developing policies and programmes that promote ethical behaviour and accountability among all employees, the HR plays a critical role.
For decades, HR has spearheaded Corporate Social Responsibility (CSR) initiatives, bridging the gap between societal needs and corporate philanthropy. Additionally, HR has anchored employee engagement, morale, retention, health, safety, compliance and regulatory requirements. These core elements align seamlessly with
ESG’s focus on employee well- being, inclusive growth and robust governance. While CSR lacked a unified framework, ESG provides a methodology to drive and measure impact, making it an even more powerful tool. Notably, ESG presents a valuable lever for attracting and retaining talent, especially in today’s job market where individuals increasingly seek ethically and sustainably-focused companies.
The challenge is twofold: percolating ESG principles across the business spectrum, covering medium- and small-scale industries, as well as tiny and cottage industries. Additionally, monitoring lifecycle measurements and product lifecycles, especially for products with extended lifespans such as automobiles, remains a complex but essential aspect of genuine ESG commitment.
Balachandar NV, Consultant CSR and Corp Affairs, Ashok Leyland
Aligning the organisation’s culture with ESG principles is essential for successful implementation.
By leveraging its focus on people and culture, expertise in engagement and change management, influence on talent attraction and retention, stakeholder management skills, policy and process-implementation expertise, and risk-management capabilities, HR is uniquely positioned to champion ESG initiatives within any company. This multifaceted approach ensures that
ESG goes beyond mere compliance, becoming a core value woven into the very fabric of the organisation. Santanu Ghosal, CHRO & head – CSR, Schaeffler India, and sustainability coordinator for Schaeffler AP, emphasises that ESG permeates multiple spheres within an organisation. Given its broad scope, expecting expertise in all areas from a single individual is unrealistic. Ghosal underscores the crucial role of a C-suite leader in driving ESG initiatives. Beyond hard KPIs, this endeavour represents a significant cultural transformation, demanding someone familiar with the organisation’s intricacies, pulse and trigger points.
A strong ESG agenda attracts talent who believe in these principles, enhancing the employee value proposition. Contributing to global sustainability goals and making a positive environmental impact is attractive to many
Siddharthan R, former CHRO, Hippo Stores & Dalmia Cement
In this context, Ghosal argues that the CEO or CHRO is ideally positioned to spearhead this transformation. “Technical expertise, while valuable, isn’t the sole critical factor. Instead, the key is having someone who comprehensively understands the organisation, recognises the expertise within, identifies key influencers in various segments, communicates effectively, inspires others and can adeptly negotiate and convey the organisational perspective to the external world.”
While ESG promotion is crucial across all industries, as Hussain emphasises, “Certain industries require extra attention from HR due to their substantial environmental and societal impacts.” By actively integrating ESG principles into organisational practices and fostering a culture of responsible leadership, HR can ensure that businesses contribute positively to the environment and society, leading to long-term success and a more
sustainable future.
Reaching the second rung: Tiered suppliers and the ESG conundrum
The imperative to infuse ESG principles across the entire business spectrum, including small and medium-sized enterprises (SMEs) and micro-businesses, is pivotal. This transformation necessitates the development of tailored strategies and the promotion of awareness within these segments.
A key challenge lies in disseminating ESG practices to ‘second rung’ companies, such as two-tier and three-tier suppliers, who often lack the resources and expertise of larger firms. These suppliers play a critical role in the manufacturing value chain, and their environmental and social practices can significantly impact the overall ESG footprint of larger corporations.
A cautionary tale is that of Nike, which faced immense backlash for its short-sighted approach. In 2014, the Rana Plaza collapse in Dhaka tragically claimed thousands of lives, many of whom were garment workers producing apparel sourced by Nike under allegedly poor working conditions. This incident exemplifies the reputational risks associated with neglecting ESG considerations throughout the supply chain.
Service organisations encounter a different set of challenges. While compliance with regulations is crucial, embedding the spirit and letter of ESG principles within their operations demands a deeper commitment. This involves fostering sensitivity and maturity towards these principles, translating them into tangible practices.
Balachandar NV, consultant CSR and corp affairs, Ashok Leyland, emphasises the challenges associated with scope 2 and scope 3 emissions. He notes, “In scope 2, at least we have visibility, but scope 3 poses significant challenges due to its complexity and lack of standardised measurement methodologies.” The challenge is twofold: percolating ESG principles across the business spectrum, covering medium- and small-scale industries, as well as tiny and cottage industries.
Additionally, monitoring lifecycle measurements and product lifecycles, especially for products with extended lifespans such as automobiles, remains a complex but essential aspect of genuine ESG commitment.
Cascading ESG principles across the broader business spectrum, encompassing SMEs and even smaller players such as cottage industries, presents a significant challenge. Transforming this into a societal movement requires effective communication, capacity building, and potentially incentivising mechanisms to encourage adoption.
Beyond the immediate challenges, achieving long-term ESG goals necessitates robust lifecycle management and measurement systems. This includes tracking and measuring the environmental impact of products throughout their entire lifecycle – from raw- material extraction and production to usage and disposal.
Effectively addressing these challenges requires a collaborative approach. Larger corporations, industry bodies and policymakers must collaborate to develop practical frameworks, implement capacity-building programmes, and potentially establish standardised reporting formats for smaller organisations. By bridging knowledge and resource gaps, promoting transparency and fostering collaboration, we can collectively ensure that ESG principles permeate every corner of the business landscape, paving the way for a more sustainable and equitable future.
In summary, while numerous hurdles exist on the path to widespread ESG adoption, acknowledging and actively addressing these challenges through collaborative efforts can pave the way for a more inclusive and sustainable future for all. As we strive to ensure that ESG is not just a buzzword but a tangible force for positive change, collaboration and collective action will be essential on this critical journey.
HR’s metrics-driven approach to ESG: Success stories and impact measurement
Environmental, Social and Governance considerations are rapidly evolving from mere compliance mandates to strategic imperatives for businesses. Human resources departments are emerging as key players in driving successful ESG programmes, leveraging their unique position to influence employee behaviour and company culture.
However, measuring social impact remains significantly more complex compared to environmental aspects. Companies are actively innovating to overcome this hurdle, seeking effective ways to define targets and track progress in their social-impact initiatives.
As Varadarajan explains, “ESG metrics are performance indicators that assess a company’s environmental, social and governance practices. Similar to traditional business metrics, they gauge operational performance and risk, often stemming from existing KPIs linked to ESG goals.” These metrics, either quantitative (such as greenhouse gas emissions) or qualitative (such as employee surveys), provide crucial insights into a company’s ESG journey.
Conventionally, investors relied solely on financial data to assess investment viability. Today, they increasingly include ESG metrics alongside traditional ones, recognising their impact on long-term performance and potential risks.
Human resources departments play a vital role in developing and tracking ESG metrics related to social and governance aspects, such as Diversity, Equity and Inclusion (DE&I), employee well-being and ethical conduct.
Several companies demonstrate how effective HR practices can contribute to achieving ESG goals. ITC, for instance, has successfully integrated sustainability into its core strategy, achieving carbon positivity, water positivity and solid waste recycling positivity for consecutive years. This success stems from aligning ESG goals with corporate goals and, crucially, with HR initiatives and practices, ensuring employee alignment with the company’s sustainability vision.
Similarly, JK Group exemplifies how HR practices can be aligned with ESG goals. The Group’s commitment to social development extends beyond operations, focusing on improving the lives of various stakeholders. Focus on the ’triple bottom line’ —economic, environmental and social—ensures responsible business growth while addressing global trends and stakeholder needs. For instance, JK Paper plants more trees than it harvests, achieving net carbon positivity. The company’s social forestry programme has benefited over 65,000 farmers.
Infosys exemplifies successful alignment of HR practices with ESG principles. The firm balances business success with strong governance and a focus on social and environmental needs. This commitment translates into ambitious environmental preservation goals, community-development initiatives and tracking of employee performance against well-defined ESG goals. Infosys’ efforts have been recognised by the UN with the prestigious UN Global Climate Action Award.
There are several other examples where the HR function has driven the ESG agenda in organisations. For instance, JSW’s CARE model focuses on the holistic well-being of employees to drive the organisation’s growth agenda. The basic philosophy behind CARE is— “A well-communicated employee who is agile becomes responsible and elevated.” JSW, as an organisation, drives employee engagement through cross-functional teams across all levels, engaging with India’s premium institutes to develop leaders at all levels. Its special interventions help develop women leaders. It conducts sensitisation workshops to drive behaviours that encourage inclusion, reduce bias, and, in turn, foster creativity across the organisation.
Nike, though facing backlash for the Dhaka incident, has a governance focus on the Pay Equity model. Its multiple interventions across different geographies ensure 100 per cent pay equity across all employee levels on an annual basis, aligning with UN Sustainable Development Goals 5 (Gender Equality) and 8 (Decent Work and Economic Growth).
However, not all companies get it right. Ghosal cautions against ‘greenwashing’, where companies make misleading or unsubstantiated environmental claims, highlighting the case of Vedanta’s ‘Creating Happiness’ campaign, which was criticised for its negative environmental and social impacts.
HR’s dashboard of ESG impact Chinchore elaborates on HR’s key areas of involvement in ESG programmes: “HR leads initiatives in diversity and inclusion, employee well-being, CSR, ethical training and environmental sustainability.
Each programme has specific KPIs to measure success.” Metrics such as energy consumption, waste generation and carbon emissions track progress towards environmental-sustainability goals. Hussain aptly summarises HR’s crucial role in ESG programmes: “They drive initiatives that impact employee well-being, ethical conduct and environmental sustainability. Quantitative and qualitative metrics are essential to gauge the success and impact of these programmes.”
By embracing ESG principles and leveraging their unique capabilities to measure and demonstrate impact, HR departments are poised to play a pivotal role in shaping a more sustainable and responsible future for businesses.
Ghosal emphasises, “One of the key components of any successful ESG initiative is to engage with stakeholders, understand their perspective and make them a part of the transformation. The ‘S’ (Social) component of ESG is becoming the most critical component. The human resources function plays a critical/key role in driving the ‘S’
dimension in ESG in many areas.”
The ESG imperative: Shaping company culture and attracting talent
The entry of millennials and Gen Z into the workforce marks a pivotal moment in employee expectations. These cohorts are in pursuit of meaningful work, purpose-driven brands and companies deeply committed to social responsibility. This dynamic landscape calls for a cultural overhaul within organisations, one that seamlessly integrates ESG principles into their core values.
Multi-generational challenges
Observations reveal a surging trend among Indian professionals, particularly the younger generations, prioritising employment with organisations showcasing a robust commitment to ESG principles. This demand extends beyond high-level executives, encompassing employees across various levels and sectors expressing concern about their employers’ ethical, social and environmental practices. While newer companies may boast a younger workforce, established organisations, especially in manufacturing, may grapple with a larger Gen X or Y population.
Varadarajan emphasises the need for awareness building among these demographics: “While not averse to ESG principles, Gen X and Y employees may require more education compared to Gen Z, who are more exposed to these concepts. Leadership and the HR must focus on building awareness through appropriate training.”
Baveja reinforces the trend of younger generations favouring ESG-conscious companies.“Deloitte’s findings reveal that over 40 per cent of Gen Z and Millennials would switch jobs due to climate concerns. This alignment in values and commitment to long-term sustainability is reshaping how companies approach their Employer Value Proposition (EVP).”
Chinchore emphasises the increasing environmental consciousness, particularly among Gen Z.“Educated on environmental issues from their school days, Gen Z expects employers to be environmentally responsible.” Ghoshal adds, “My observation is that employees, irrespective of age group, show similar interest and engagement in ESG interventions if they are passionate about it or believe in the narratives articulated by company executives. It is crucial to explain the context to win them over.”
ESG and the talent landscape:
Varadarajan sheds light on ESG’s impact on talent acquisition and retention: “ESG will significantly influence talent strategies. The HR plays a crucial role in driving organisational changes around hiring, development and retention, ensuring equitable practices across various demographics.”
Ghosal further explains, “The talent pool demographics are undergoing a clear shift, with a preference for companies that have a clearly-defined purpose and a commitment to creating a better tomorrow. Many are interested in volunteering their time to be part of this movement.”
HR’s role in shaping ESG culture
Siddharthan R, former CHRO, Hippo Stores & Dalmia Cement, emphasises the role of ESG in attracting talent. “A strong ESG agenda attracts talent who believe in these principles, enhancing the employee value proposition. Contributing to global sustainability goals and making a positive environmental impact is attractive to many,” he says.
The role of HR is crucial in establishing a clear connection between the company’s sustainability goals and their societal and environmental impact. Implementing training programmes and fostering a culture of responsible citizenship are essential steps. Measuring progress against ESG goals ensures adherence and institutionalisation of these values throughout the organisation. Human resource policies need to align with ESG values. Linking executive compensation to ESG performance metrics incentivises leadership to prioritise sustainable and socially-responsible decision-making. The HR should collaborate with other departments to develop work practices that minimise environmental impact, promote social responsibility and encourage the development of sustainable solutions.
The HR can act as an ESG partner by engaging with employees, stakeholders and the community to understand their perspectives on ESG matters. This feedback can be used to refine the company’s ESG initiatives, ensuring alignment with stakeholder needs and expectations. Employee well-being programmes and fostering a healthy work environment are the responsibilities of the HR. Aligning these practices with ESG principles is crucial. Focusing on employee health and safety contributes to the social aspect of ESG and helps create a sustainable workforce. Implementing transparent reporting mechanisms ensures that the company is held accountable for its ESG commitments. This involves regularly monitoring metrics such as carbon emissions, diversity ratios and community-engagement initiatives.
Ghosal emphasises, “ESG as an agenda or priority area for the organisation needs to come from the top. Once the initial enthusiasm fades, the HR, along with C-suite executives, must ensure that ESG is embedded into the company’s business strategy and KPIs. The HR’s role is critical in enmeshing ESG into the organisational DNA.”
Challenges and the road ahead
Navigating the integration of ESG principles into HR policies and practices presents several formidable challenges. Striking a delicate balance between ESG and overall business objectives proves intricate, demanding meticulous attention to both financial and ethical goals. The process itself is intricate and time consuming, involving extensive assessments and compliance with stringent standards. Gaining support from senior leadership for the benefits of ESG initiatives can be a challenging task, requiring persuasive communication.
Initiating a cultural shift in established practices and mindsets poses a significant hurdle, necessitating comprehensive change-management strategies. Effectively measuring the impact of ESG initiatives adds complexity, demanding the establishment of new metrics and key performance indicators (KPIs). Additionally, skill development becomes crucial, necessitating tailored training programmes in sustainability and ethics. Ensuring inclusivity, whereby all employees actively engage in ESG initiatives, is paramount for success.
Despite these challenges, prioritising ESG in HR is deemed critical for long-term sustainability and the establishment of ethical practices within organisations. Ghosal notes, “ESG is beneficial in the longer run, requiring investments with a long gestation period. Human resource leaders need to coach high-potential leaders to change their leadership style.”
Expertise of the HR and leadership is crucial for ESG success. They can support businesses and employees in adopting behaviours aligned with ESG principles. This involves creating an ESG-centred business strategy, integrating sustainability measures into performance assessments, and assessing ESG risks and opportunities in investments or mergers and acquisitions.
However, having the appropriate HR leadership is a major challenge. Varadarajan highlights the need for constant communication and training in an easy-to-understand language to enhance employee understanding and commitment to ESG objectives. Establishing a robust data-governance framework is necessary for maintaining data integrity and tracking performance against ESG initiatives.
The adoption of ESG principles in the Indian workplace presents a nuanced picture. While challenges exist, a growing awareness and demand for ESG-aligned employers is evident. As companies embrace responsible business practices and individuals prioritise workplaces aligning with their values, the future of work in India is poised for a positive transformation, driven by a shared commitment to sustainability and ethical conduct.