MSME businesses are growing at their fastest pace in the post pandemic period.
There have recently been a lot of new registrations for upcoming MSMEs in India.
This is primarily due to the favorable policies set by the Ministry of MSME to
support the activities and operations of the MSMEs in India. The MSME ecosystem
thrives on the give and take policy. The frame work required by the MSMEs to
develop into fully functional multi- level businesses is still at the nascent stages. It
is important for business owners as well as the policymakers to take a note of the
current trends and developments of medium and micro businesses all across the
globe and try to design policies and business ideas on the basis of that research.
There is a rising demand of products from the India’s working middle class. A lot of corporations have stepped inside this game to suffice the demands of a developing
market like India. This is precisely the moment where homegrown MSMEs need to
focus on raising their ESG standards and sort out the challenges of ESG integration.
In today’s world, impact of ESG on companies has become the gold standard of
investing. A lot of Venture Capitalists and private individual investors are constantly
on the lookout for ESG organizations. India has become the most probable play
ground for institutional investors after China. This is partly due to the favorability
of the Indian Government in allowing the influx of foreign capital to invest in Indian businesses. A lot of schemes have been planned and implemented for the welfare
of the SMEs by the Ministry.
ESG stands for three core sets of criteria:
Environmental – How committed a company is to preserving and
conserving natural resources
Social – How committed a company is towards building positive
relationships with employees, suppliers, customers, and the
communities where it operates
Governance – How a company approaches leadership, executive
compensation, internal controls, audits and shareholder rights
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There are three fundamental challenges of ESG integration with
investment decision making:
A.) Keeping up with ESG Regulatory Changes.
B.) Setting Internal ESG Investing Standards and Goals.
C.) Getting Reliable Data.
Many ESG organizations have their presence all across the globe that
are entitled with the responsibility of keeping a tab on the ESG
compliance of companies. They have special teams of ESG supervisors
who are constantly on the lookout for companies that have adapted
themselves as per the ESG standards of their respective region. With
the push for the Sustainable Development Goals and the climate action
movement gaining momentum, the sustainability reporting landscape is
changing rapidly around the globe. It is essential to understand the
concept of business responsibility and the evolution of ESG reporting in
India. Impact of ESG on companies in India started in 2009 with the
Ministry of Corporate Affairs, Government of India, issuing the National
Voluntary Guidelines on Corporate Social Responsibility (NVGs).
Business Responsibility and Sustainability Report (BRSR) was introduced
in 2021. ESG reporting has come a long way from the introduction of
the Business Responsibility Report (BRR) in 2012 to the addition of the
Business Responsibility and Sustainability Report (BRSR) in 2021. BRSR
is a standardized reporting format that will give a baseline to compare
environmental, social and governance goals across companies and
sectors. It is essential to understand the value of the introduction of
BRSR as it embraces and incorporates ESG metrics of international
frameworks as per global ESG trends.
SIDBI, the leading financial institution for MSME development in India have
recently announced the signing of a Memorandum of Understanding with
data and analytics company Dun & Bradstreet to create a quarterly
SIDBI-D & B Sustainability Perception Index (SIDBI–D&B SPeX). The index
will be shared with policymakers as a quantitative measurement of the
adoption of environmental, social, and corporate governance (ESG) measures
among MSMEs and nudge businesses towards adopting an ESG framework in
their business strategy over the coming years.
The index will capture the sentiment of businesses through a survey
about the preceding quarter and outlook for the next quarter on
various business parameters, which will provide valuable insights on
the adoption of an ESG framework, when analyzed at an aggregate
level, SIDBI noted. The index later plans to cover the sectoral and sub-
sectoral perceptions/aspirations and preparedness of where the
sectoral enterprises can track themselves in regard to improvement on
the basis of ESG metrics.
There are many MSMEs in India that are taking ESG very seriously.
Some of the ESG Smes are as follows :
1.) Campus Sutra Retail Pvt Ltd.
2.) Lohum Cleantech Pvt Ltd.
3.) A & S Creations.
4.) Asian Clays.
5.) NavAlt Solar & Electric boats Pvt Ltd.
6.) Pixel Softech Pvt Ltd.
Many more ESG Smes are coming into the limelight as the awareness
regarding ESG is spreading day by day. The level of understanding of
the ESG trends and the ESG metrics are also on the rise.
Majority of the newly developed MSME businesses are guided by the
key stakeholders of the MSME industry regarding the adoption and
maintenance of the ESG standards. This is very much in line with the
goals of the MSMEs to survive and thrive in the long run. The common
means of ESG reporting amongst companies in India is through
publication of integrated annual reports, based on the GRI Standards
and the Integrated Reporting Framework respectively.
Do watch: https://www.youtube.com/shorts/q910Wvu5JwM
It is important for the MSMEs to be forward looking in terms of ESG
metrics and opportunities assessment, business strategy evolution that
indicates an organizations proactive approach to ESG rather than a
reactive approach.
All the ESG goals can be achieved by the MSMEs if there is active
participation of key stakeholders in areas such as − Impact investment
through integration of ESG and materiality, Standardized reporting
across sectors that enable comparable data, Policy regulations around
reporting, Integration of national goals and SDGs in disclosures, Integrated
disclosure of financial and non- financial information; creating the
necessary ecosystem for the systemic shift in ESG reporting.