Why the Indian consumer should prioritize ESG in the digital age

Over the past few years, you may have come across the term Environmental, Social, and Governance (ESG) and witnessed companies adopting ESG principles. However, if you believe this is solely a corporate phenomenon, reconsider. ESG has a significant impact on consumers, influencing their buying choices and fostering a more sustainable and morally upright market. Furthermore, in today’s digital era where information is readily accessible, the integration of ESG principles with technology is revolutionizing the consumer landscape in India.

Recent reports show that ESG investments in India have grown from US$330 million in 2019 to US$1.3 billion in 2023, demonstrating the importance of ESG. Companies need ESG not only to serve consumers; investors are appropriately interested in companies with ESG-focused practices because the resulting regulatory intervention can ensure investor protection. In May 2021, the Securities Exchange Board of India (SEBI) introduced the Business Responsibility and Sustainability Reporting Framework to ensure that certain listed companies are required to disclose their ESG information.

According to research by Avendus Capital, India’s ESG is expected to account for nearly 34% of the domestic total by 2051, in line with India’s 2070 net-zero goal.

Why should the Indian consumer care about ESG and how does technology play a role in integrating ESG practices into the Indian business ecosystem?

Jitesh Shetty, founder and CEO of Credible, a sustainability technology company and Google-acquired Qwiklabs Inc., says that while India is doing well on ESG, we still have a long way to go. “India is doing very well when you look at regulations like the reasonable certainty of the BRSR, we are quite ahead of the rest of the world here,” says Shetty. “But our problems are also large-scale problems, and so we still have a long way to go.”

He cites sustainability leader TATA Sons and their company IHCL, the Taj hotel group, as an example that does well with ESG KPIs.

“They care deeply about ESG and are not doing this because someone is watching. Their program called PAATHYA has huge consumer opinion. You walk into any Taj hotel and you see PAATHYA’s influence,” he explains.

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Why should consumers care?

ESG is a set of standards that investors, companies and consumers follow to assess how a company affects the environment, society and its governance structure. Why should consumers think about ESG or things like digital footprint when they buy a product or service? As consumers become more socially and environmentally conscious, they are increasingly looking for products and services that match their values.

“This is a multi-pronged problem,” says Shetty. “Companies must improve their ESG position. But consumers also have to do their part. Purchasing decisions can have a significant impact on the environmental footprint. For example, you are buying a home textile product. If it is made of organic cotton, the factory uses green energy and the packaging is green. Then the total environmental impact is very small.”

Digital footprint and environmental impacts

If we look at the Indian market, it is full of digital products and services, and Indian consumers are aware of the environmental impact of this digital shift. E-waste, energy consumption and sustainable information management are slowly but steadily becoming part of the household conversation.

For example, digital giant Google’s commitment to 100 percent renewable energy starting in 2017 is an announcement that environmentally conscious consumers took notice. Closer to home, Mumbai-based RPG Group has pledged to conserve, restore and grow one million trees by 2030 with the Geneva-based World Economic Forum’s 1t.org platform, which wants to bring together a global reforestation community that grows and shows. after a trillion trees worldwide by 2030.

As issues like climate change and global warming become more pressing, consumers in India are beginning to pay more attention to a company’s environmental practices. From carbon footprint to waste management, they start reading the labels of the products and services they buy. For proof, look at the arrival of electric car giant Tesla in India. Tesla invests in the environmental efforts of Indian consumers to own a climate-friendly vehicle.

Social responsibility in the digital world

The digital space, where we encounter the various digital entities of our lives every single day, is a visible platform where companies can learn about what consumers care about.

At the same time, they can demonstrate their own commitment to social responsibility, which can include aspects from fair labor practices in technology supply chains to diversity and inclusion initiatives in digital workplaces.

For example, when cloud company Salesforce announced its Pledge 1% initiative to donate 1% of its products, stock and employee time, it inspired many other companies to follow suit.

Administration in the digital age

With cyber threats and data protection concerns on the rise, consumers cannot ignore digital governance. Already dubbed the “mother of all breaches,” the incident happened a few days ago and exposed 26 billion records that include popular and frequented sites like LinkedIn, Snapchat, Venmo, Adobe, and X. That’s why consumers are now looking to companies. with strong cyber security measures, transparent data practices and ethical use of technology.

International tech giants such as Apple and Microsoft are known for their digital ethical approach, while in India IT giant Infosys has been recognized for its strong governance framework.

Last year, Infosys founder Nandan Nilekani talked about how ESG not only increases trust but also increases brand value.

“A commitment to strong governance is not just about compliance, but a strategic prerequisite for sustainable success in the dynamic world of startups,” he said.

The Role of Technology in Advancing ESG in India

While ESG is significant, technology has helped the industry to allow organizations to integrate ESG principles into their operations as much as possible. How is technology enabling ESG in the Indian landscape? Will it improve in the future?

“Technology of raw materials, energy sources and software helps,” says Shetty. “Materials innovation is where you can take an organic fiber but make it sustainable for real-world use, use solar energy efficiently in manufacturing, and then use software for better traceability and automation of ESG data management.”

Here are some key ways technology is helping the adoption of ESG practices:

Data analytics: The large amount of data associated with their ESG performance allows organizations to analyze, find patterns and identify the dos and don’ts of their structures. This helps to decide on future operating methods that are environmentally and socially friendly.

As Nitesh Mehrotra of business consultancy EY India says, “ESG is now a boardroom agenda for all leading companies to create and protect value. And I think it’s very important to have a consistent and comparable scientific measurement of sustainability variables across all our stakeholders. So it’s clear that one version of the truth is needed and near-real-time performance analytics to generate actionable insights.”

It is imperative that this information is shared with consumers and that consumers themselves demand it from companies in order to make more informed purchasing decisions.

Blockchain for Transparency: An emerging technology that can increase ESG transparency is blockchain. With its ledger technology, companies can offer consumers real-time information about the origin, production processes and ethical practices of their products and services.

ESG Rating Platforms: Technology has spawned ESG rating platforms such as MSCI, Sustainalytics, and Bloomberg ESG, which rate and score companies based on their ESG performance. Anyone, investor or consumer, can use these platforms to make informed decisions that influence companies to improve their ESG practices.

The Path Forward

As the impact of ESG on Indian consumers continues to grow, companies need to adopt sustainable and ethical practices. Companies that prioritize ESG considerations not only contribute to a better planet and society, but also gain a competitive advantage in emerging markets.

“When you start with ESG at the core, that makes it a differentiator in the market. You also start with a green foundation,” advises Shetty.

He also adds that ESG can lead to a fairer society. “Citizens in India face significant environmental problems every day. Air quality in all Tier 1 cities is poor. Waste management has not yet been improved and resolved. As far as social indicators are concerned, we are far from creating a just society. The same applies to corporate compliance and governance. ESG compliance can help solve all these problems.”

As consumers, making a positive change is in your purchasing decisions. By choosing products and services from companies that follow ESG principles, you become part of a sustainable and socially responsible business environment. As technology helps develop ESG practices, you are likely to see more transparency and accountability in the products and services you choose, ultimately creating a more informed and responsible marketplace in India.