Woke capitalism”, “scam”; the recent charges against the ESG concept have been many. From being a craze, it is now the subject of eye-rolling cynicism in many quarters. While studies expect global ESG assets to cross $53 trillion by 2025, there is no defending that the concept is deeply flawed; from reporting standards and ways of evaluation to the actual impact on society and governance, there are several complaints against ESG. But the concerns around sustainability of businesses will only get graver, and so it would be prudent to keep faith in the idea and look for ways of overhauling it rather than to dismiss and dump it.
We weave a strong narrative around the unfairness of the developed countries in using ESG as a tool to discriminate against Indian companies. At the heart of this allegation are the methods of ESG evaluation which, without the consideration of purchase power parity, are against developing nations seeking much-needed Western capital. While the crème de la crème of India Inc. has, as always, set exemplary standards of ESG implementation, the problem lies with the remaining 90% of the businesses. A lack of finance, confused policymaking and absent government incentives make the road to ESG implementation a bumpy one.
In retrospect, India’s globally acclaimed commitments at the climate summit in Paris in 2015 could seem hasty and ill-conceived. Well, it was the need of the hour, and India rose to the challenge, but in the absence of an exhaustive roadmap for policies and businesses, it does seem more like an emotional decision than an astute diplomatic one by Prime Minister Narendra Modi.
In a capital-deficient country such as India, turning the country green has a huge economic and social cost. (Read our September 2022 cover story “ Coal Killer”.) So in hindsight, global financial commitments should have been forced to be more robust with accountability built in.
A bulk of our global commitments are in cutting emissions, hence the push to solar, electric vehicles and now green hydrogen as a fuel. Going by the Indian experience of industrialisation since Independence, the Nehruvian philosophy of seeking the public sector out to lead the mandate of greening the economy would be more prudent. The modern India is just seven decades old. Here, a deep distrust of private capital is still widespread. Here, vote back politics still trumps judicious economic decisions. Here, epic battles between society and businesses are still being fought. These fragilities of our society could have been better served if the public sector was leading the charge in India’s quest for sustainability.
India’s internal dilemmas aside, the focus has to be on the role of developed nations, with its financial and technology might, in making ESG more robust with easier and fairer implementation. According to the World Bank, the small and medium businesses of Asia have a crucial role to play in the battle against climate change. Their lack of access to finance, technology and expertise to turn sustainable could be detrimental to stop climate catastrophes that threaten to upend human civilisation in the next 30 years.
So, it is upon the founder of capitalism, the West, to make stakeholder capitalism the saviour of the world. With optimism, we wait and watch.