Governance

"Governance refers to a set of structures and processes designed to ensure accountability, transparency, fairness, and responsible decision-making within a company."

Governance: The Bedrock of Sustainable Business

Environmental, Social, and Governance (ESG) factors are no longer fringe considerations in the Indian investment landscape. Regulations like the Business Responsibility and Sustainability Report (BRSR) and the proposed climate risk disclosures by the Reserve Bank of India (RBI) underscore the growing importance of ESG, powerful governance practices. Institutions dealing with Banks will be influenced by the Climate disclosure push of RBI

 Governance as the Cornerstone 

While environmental and social factors garner significant attention, governance acts as the foundation upon which a sustainable business is built. Effective governance empowers companies to manage risks, create long-term value, and navigate the complexities of ESG.

A.BRSR and the Pillars of Responsible Business Conduct

The BRSR disclosures are aligned with the nine principles of the National Guidelines on Responsible Business Conduct (NGRBC). These principles emphasize ethical and transparent governance:

• Conduct and Governance with Integrity: Businesses should operate ethically, transparently, and with accountability.

• Provide Goods and Services Sustainably: Products and services should be offered in a way that minimizes environmental impact and ensures safety.

• Respect Human Rights: Businesses must respect human rights throughout their operations and supply chains.

The BRSR Core takes it a step further. It introduces specific Key Performance Indicators (KPIs) under nine ESG attributes. The Governance attribute focuses on:

• Processes for identifying, assessing, managing, and monitoring ESG risks.

• Board oversight and senior management's role in handling ESG issues.

B.RBI and Climate Risk Governance

The RBI's proposed climate risk disclosure framework puts a spotlight on governance related to climate change:

• Board Oversight: Disclosures on the board's role in overseeing climate-related risks and opportunities.

• Senior Management: Transparency around senior management's involvement in assessing and managing climate risks.

• Remuneration: Whether and how climate considerations are factored into the compensation of directors and key personnel.

C.BRSR vs RBI Disclosures: Complementary Focus

The BRSR and NGRBC principles provide a broad framework for responsible business conduct, encompassing social and ethical considerations beyond climate change. The RBI disclosures, on the other hand, target the governance of climate-related risks and opportunities specifically.

The Road to Sustainable Investing

BRSR and the proposed RBI disclosures equip investors and stakeholders with valuable tools to assess a company's commitment to sustainability and responsible business practices. By prioritizing good governance across all ESG aspects, companies can create a future that benefits not just shareholders but society as a whole. As India's ESG journey progresses, robust governance will undoubtedly remain the cornerstone of sustainable business success.