Indian Firms Leverage ESG for Business Growth

Indian companies are increasingly adopting Environmental, Social, and Governance (ESG) practices to drive growth and ensure long-term resilience. By integrating sustainability into their strategies, firms are addressing risks, enhancing brand value, and accessing new markets. This shift reflects a broader trend where ESG is becoming a key factor in business success and investor confidence.

Indian firms are embedding ESG principles into their operations to navigate a volatile global market and meet rising stakeholder expectations. The focus on sustainability has moved beyond compliance, becoming a strategic tool for growth. In 2021, the Securities and Exchange Board of India (SEBI) introduced the Business Responsibility and Sustainability Report (BRSR) framework, mandating ESG disclosures for the top 1,000 listed companies. This regulation has driven companies to adopt structured approaches to sustainability, aligning with global standards.

ESG practices help Indian firms manage risks associated with climate change, regulatory changes, and societal expectations. For example, businesses in sectors like manufacturing and energy are investing in renewable energy and energy-efficient technologies to reduce carbon emissions. These efforts not only mitigate environmental risks but also lower operational costs. Companies are also addressing social issues, such as labor welfare and community development, to build trust with stakeholders.

The adoption of ESG principles is driven by market demands. Investors are increasingly favoring companies with strong ESG credentials, as evidenced by domestic ESG mutual funds exceeding Rs 10,000 crore in assets under management in 2025. This growth reflects rising investor confidence in sustainable businesses. Firms that prioritize ESG are also better positioned to access global capital, as international investors seek companies aligned with the United Nations Sustainable Development Goals (SDGs).

ESG is a key factor in attracting talent, particularly among younger workers. A 2023 study found that 64% of Gen Z and millennial employees prefer employers whose values align with their own, including a commitment to sustainability. Indian companies are responding by integrating ESG into their corporate culture, offering programs that promote diversity, equity, and environmental responsibility. This helps attract and retain top talent in a competitive job market.

The benefits of ESG extend to brand value and market access. Companies with credible ESG strategies are seeing increased consumer loyalty, as customers prefer products and services from sustainable brands. Internationally, ESG-compliant firms are outperforming competitors, gaining access to new markets in Europe and North America, where sustainability standards are stringent. For example, Indian textile and agricultural firms are adopting sustainable supply chains to meet export requirements.

The BRSR framework has standardized ESG reporting, making it easier for investors to evaluate companies. Firms are required to disclose metrics on emissions, water usage, and social impact, ensuring transparency. This has encouraged businesses to invest in data collection and reporting systems, improving accountability. However, challenges remain, particularly for small and medium enterprises (SMEs) that lack the resources to implement comprehensive ESG programs.

To address these challenges, some companies are partnering with industry bodies and consultancies to develop ESG strategies. Government initiatives, such as incentives for renewable energy adoption, are also supporting firms in their sustainability efforts. The Reserve Bank of India has introduced guidelines to encourage green financing, further aligning the financial sector with ESG goals.

Indian firms are leveraging ESG to innovate and differentiate themselves. For instance, companies in the technology sector are developing sustainable IT solutions, such as energy-efficient data centers. In the agriculture sector, firms are adopting regenerative farming practices to improve soil health and reduce environmental impact. These innovations not only address sustainability goals but also create new revenue streams.

The global context underscores the importance of India’s ESG efforts. As a country highly exposed to climate risks and a major consumer market, India’s sustainability initiatives have strategic significance. Firms that fail to adopt ESG practices risk losing market share and facing regulatory penalties. Conversely, those that integrate sustainability into their core operations are building resilience and positioning themselves as leaders in their industries.

The adoption of ESG is not without challenges. High initial costs for sustainable technologies and a lack of standardized metrics can hinder progress. Additionally, some firms face difficulties in aligning ESG goals with short-term financial objectives. However, the long-term benefits, including cost savings and enhanced reputation, outweigh these challenges. Companies are increasingly viewing ESG as an investment in future-proofing their businesses.

Conclusion
Indian firms are leveraging ESG to drive growth, manage risks, and enhance their global competitiveness. The BRSR framework and rising stakeholder expectations are pushing companies to prioritize sustainability. As ESG becomes integral to business strategy, Indian firms are well-positioned to lead in sustainable development and contribute to global climate goals.

Source: The Economic Times