“…The dumbing down of America is most evident in the slow decay of substantive content in the enormously influential media, the 30 second sound bites (now down to 10 seconds or less), lowest common denominator programming, credulous presentations on pseudoscience and superstition, but especially a kind of celebration of ignorance …,” Carl Sagan wrote in Demon-Haunted World, published in 1995. Almost 30 years on, this rings truer and is a precise depiction of not only America but also the world. So, while humanity faces its worst crisis ever with a real possibility of extinction due to climate catastrophe, we continue to delude ourselves by looking away; politicians look for glory as they make tall promises and set incredible deadlines, mostly without any sight of possibilities; activists battle it out for social media fame; and investors and businesses fuss over a three-letter abbreviation that has found global recognition in a post-pandemic world.

The term ESG dates back to 2004, and at the core of its coinage is an attempt to make capitalism look, feel and sound better. In the past few years, it has suddenly caught everyone’s fancy—from management mandarins to political bosses—as a means for businesses to tackle the threats of climate change. Despite the frenzy around ESG compliance—it is the darling of every foreign investment seeking business, the hottest topic of discussion at international forums, the latest craze among woke consumers and the current obsession among scholars—there is no assessment of its impact or success. Without this, ESG strategies continue to be deeply flawed and, sadly, have been reduced to a marketing gimmick. ESG-washing is now a real concern with no immediate regulation to control it. The fundamental problem with the ESG ecosystem is a lack of uniform and universal standard for businesses to abide by; in its absence, a dizzying array of objectives have emerged, as have plethora of parameters to assess them. While this is the biggest hurdle for India Inc., hurting its global competitiveness, the other malaise impacting the ESG factor is the lack of any laid-down correlation between a business trade-off and its impact on sustainability. Till there is no government-backed link between good behaviour and financial outperformance, ESG adoption risks being considered a box-ticking exercise, frustrating businesses which actually made strides in implementing a robust ESG regime. So, the lack of incentives from the government is a big challenge, especially in a country where small and medium enterprises form the bulwark of the economy. Compendiums have been filled about the unease of doing business in India for small and medium enterprises. When the everyday business concern is bare survival, fancy abbreviations, such as ESG, can be implemented only if there are incentives and subsidies.  

With governments often gridlocked over responsibility, and climate change threatening to upend human civilisation in the next 30 years, it is widely believed that stakeholder capitalism can save the world. The genesis of the ESG concept lies in this belief that businesses can solve the society’s problems by taking care of its ecosystem, including employees, communities and its suppliers and buyers. But for that, E, S and G must be unbundled. With years of awareness and policies, E has largely been demystified, but a lot of work needs to be done to clarify and standardise social and governance strategies.

At a time when, in India, we are looking to corporatise every aspect of state organisation, abiding by ESG norms should be a mandate even for local bodies. And to this end, a lot must be done, from defining to standardising the norms. But a good beginning would be to divest SEBI of regulating the ESG ecosystem in favour of creating a new regulator empowered with the wherewithal to implement it across businesses in India. And the time is now; otherwise ESG will remain just that—an abbreviation that has found exalted coinage among marketeers and consultants without any real impact in tackling threats from climate change.