IN today's corporate landscape, Environmental, Social, and Governance (ESG) is gaining prominence as pillars shaping the way businesses operate, prioritize and are evaluated globally.

ESG is a fundamental shift towards responsible and sustainable business practices.

Chairman, ICRA Rating, Sanjeev Chadha said in a recent interview that investors have recognized that companies that excel in ESG principles tend to perform better over the long term, adding sustainable practices, reducing operational risks, enhancing brand reputation, and attracting investors who prioritize ethical investments.

Chadha the firm is at the forefront of assessing companies' ESG performance. He said their ESG rating process is comprehensive and tailored, providing companies with valuable insights into their environmental impact, social responsibility efforts, and governance practices.

This rating serves as a beacon of transparency, helping investors make informed decisions and encouraging companies to strive for continuous improvement.

“Our ESG vision strengthens our enduring commitments to fundamental areas such as climate change, technology for positive change, diversity and inclusion, local ethical standards, transparency, achieving net zero emissions, sustainable business practices advocating cleaner air and water, as well as the implementation of new regulations and taxes, incentives, and compliance mechanisms that will impact various aspects, ranging from enterprise carbon footprints and their management of land, water, and plastics to the intricacies of their global supply chain, the digital economy, and much more,” he remarked.

He said the environmental aspect focuses on a company's impact on the planet such as carbon emissions reduction, implementing eco-friendly practices and waste management.

On social, he said investors would like to know the company’s relationship with people which includes providing fair wages and benefits, engaging with communities and supporting social causes.

Governance zooms in on how a company is managed and governed and whether it has an independent board and robust risk management.

According to Chadha, embracing ESG principles is not just about ticking boxes; it is about future-proofing operations and contributing to a more sustainable future.

He added: “The era of prioritizing profits at the expense of people and the planet is fading, making room for a new paradigm—responsible capitalism.” Companies that embrace ESG principles are not just doing good; they are securing their place in a rapidly evolving global economy, where sustainability is not just a choice but a necessity.

ICRA has organized a webinar on April 25th this year where experienced speakers will discuss ESG and its role in the financial ecosystem.