Is ESG just another corporate buzzword, or a fundamental shift in how we do business? At NSB & Co., we believe it's the latter. With the landscape of corporate governance and sustainability rapidly evolving, it's easy to get lost in the noise. We're here to cut through the myths and provide clarity.
As Chartered Accountants, our role has always been to ensure transparency, accuracy and trust in financial information. Today, that responsibility extends to non-financial data as well. We see firsthand how ESG factors are impacting a company’s financial health, risk profile and long-term value.
Let's separate the facts from the fiction and uncover the real story behind ESG.
Fact: This is a common misconception. While large, listed companies face mandatory ESG reporting requirements, a growing number of small and medium-sized enterprises (SMEs) are being asked for ESG data by their stakeholders. This includes investors, banks offering "green" loans, and even large corporate clients who want to ensure their entire supply chain is sustainable. For SMEs, proactively embracing ESG can be a powerful differentiator.
Fact: The "E" often gets all the attention, but ESG is a holistic framework. The S (Social) dimension covers crucial areas like employee well-being, diversity, and community impact. The G (Governance) focuses on corporate ethics, board structure, and executive compensation. A truly resilient business understands that these three pillars are interconnected.
Fact: Decades of research have challenged this myth. Companies with robust ESG practices are often better managed, more resilient to market volatility and more innovative. Their ability to manage long-term risks, from climate change to social unrest, often leads to more stable and sustainable returns. Leading investment funds now see ESG integration not as a compromise, but as a strategy to identify higher-quality companies.
Fact: The global regulatory landscape confirms that ESG is here to stay. In India, the Securities and Exchange Board of India (SEBI) has mandated Business Responsibility and Sustainability Reporting (BRSR) for listed companies. This is a clear signal that ESG reporting is moving from voluntary to mandatory, and as auditors and advisors, we are seeing this shift accelerate.
Fact: While ESG data can be complex, it's becoming more standardized. Global frameworks like the Global Reporting Initiative (GRI) and the International Sustainability Standards Board (ISSB) are creating a common language for sustainability. Our expertise lies in helping companies establish the right internal controls and processes to ensure the data is accurate, reliable, and auditable—just as we do with financial figures.
Fact: Smart businesses view ESG as a source of competitive advantage. Implementing energy efficiency measures can reduce operational costs. A strong social reputation can attract and retain top talent. Robust governance can lower the cost of capital. We help our clients identify these hidden opportunities and build a compelling business case for their ESG initiatives.
Fact: The public is now more savvy than ever. Empty claims are quickly exposed as "greenwashing," which can cause significant reputational and financial damage. Genuine ESG commitment is about tangible actions, not just marketing. As Chartered Accountants, we help companies go beyond rhetoric by providing assurance services that verify their ESG claims, building trust with stakeholders.
Fact: ESG is not a tool for exclusion. Instead, it's a framework for engagement and improvement. The focus is on encouraging companies, even in high-emission sectors, to transition to more sustainable and responsible practices. This forward-looking approach creates a pathway for long-term value creation across the entire economy.
Fact: This is perhaps the most critical myth to debunk. ESG factors are a new type of financial risk and opportunity. A company with poor governance is more susceptible to fraud. A business with a high carbon footprint faces increasing regulatory and transition risks. ESG is about understanding and managing these factors, which are now directly impacting financial statements and valuation.
Fact: The opposite is true. ESG is a natural extension of a Chartered Accountant’s core skills. Their training in assurance, risk management and data analysis makes them uniquely qualified to help businesses navigate the complexities of ESG reporting, compliance and strategy.
They are not just number-crunchers; they are partners in building a sustainable and resilient future.
Curious about how ESG can unlock new value for your business? The conversation starts with clarity.