Scaling up ‘Social’ Capital: ESG as ‘Beyond Compliance’ Value Creation Framework
ESG Briefings by Lodha & Co LLP
ESG Research and Knowledge sharing Platform
ESG is an investor driven meta conceptual framework to map input risks for investments, as an insurance against black swan events. Environmental Impact Assessments is the epistemic cornerstone for ESG Due Diligence, as the ability to gauge risk and suggest mitigation measures is a key skill. There are two ways in which ESG/Sustainability works in the current zeitgeist:
1. As a transparency and trust play for organizations demonstrating compliance to the emergent risk of sustainability disclosures
2. Thinking new markets and products for the net zero era
ESG works across various scales, as compliance with respect to the emerging demands of the climate era, where new soft law standards are cropping up in every corner of the world, with which global corporations are grappling with. Each jurisdiction and bourse will have its own compliance load. ESG is a continuum of elements, variables, and factors which are independent single-issue topics in themselves however generate bespoke risk profiles for the investor, whether institutional or retail. ESG is thus an ‘Actor Network’ of risk nodes in various dynamic configurations, contingent upon context. ESG is thus an agglomeration or an aggregation of a suite of factors which resemble an archipelago of fragments stitched together or a web of variables joined to paint a picture regarding organizational health. An ESG report consists of a baffling repository of indicators which are a ratings agency analyst’s delight. The data deluge and the aggregate ‘confusion’ resulting from the ESG paradigm is often chided, however as the information environments around us are fluid, so will our non-financial stories, which is a strength as plurality and complexity give the investor the texture to make the right decision.
Over indexing on Carbon is the norm in the climate era, yet the hidden interconnections such as the concealed wiring that will makes the transition a success is hidden. Communities that will drive the transition and make it just are your employees, customers, suppliers, and project impacted people. The social related statistics such as the gender break up or DEI representation data seems stunted when read, as stories of joy, challenges and aspiration is what makes the organization a living organism. Social Capital of a business is beyond indicators embedded in reporting mechanisms. ESG is a framework which unlocks impact by empowering human capital in organisations.
The unquantifiable 'S' in ESG is the operational glue which is the circulatory system at various scales. The numerous studies within the large tent ambit of the Social are:
- Stakeholder Engagement Plan
- Social and Labour Audits
- Human Rights Risk Assessments including Due Diligence
- Worker Well Being Studies
- Social Impact Assessments for Infrastructure Permitting and ESG Compliance for sustainable finance
- DEI Strategy Mapping
- Resettlement Action Plans
- Community Investment Plans
- M&E Studies
- Human Resources Training
Communities of practice include your employees and vendors and motivated people who are good for business. Taking care of employees increases retention and productivity which is invaluable as trained employees are repositories of institutional memory. The talent management professional in the organization is a key ESG resource as human capital is a must for well run businesses. A culture of inclusiveness and trust fostered by the Human Resources team goes a long way in creating value beyond compliance metrics.?
About Lodha&Co
We are one of the oldest and largest Audit firms in India, present across India's major cities.
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Mr. Pradeep Malu, Partner, [email protected]
Mr. Manishankar Prasad, Vice President – ESG Practice, [email protected]
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