GUEST COLUMN
Radhika Kalia
In any rapidly evolving and competitive business environment, resilience is a fundamental requirement for long-term success. Environmental, Social and Governance (ESG) frameworks have emerged as vital tools for organisations seeking to build this resilience while driving sustainable growth. There is growing realisation among businesses that in the presence of dynamic and developing ESG frameworks, aligning with global sustainability standards while embracing local nuances and adopting responsible practices today would shape resilient and ethical companies for a sustainable tomorrow. To mitigate pressures exerted by climate change, social unrest and economic volatility, developing resilience through ESG practices has become a core component of business strategy and investment decisions.
ESG represents the three factors that businesses must consider to operate responsibly and sustainably, and there has been increasing awareness and focus on the impact of business activities on each factor – environmental (including energy consumption, waste management, water usage, natural habitats, and carbon footprint, among others), social (fair labour practices, employee welfare, human rights, community engagement, and diversity and inclusion), and governance (including leadership structure, shareholder rights, executive compensation, transparency and ethical practices). Various reports and surveys clearly indicate a significant number of institutional investors integrating ESG factors into their investment strategies and substantial engagement with ESG principles in investment decisions.
Resilience refers to the ability of a company to adapt, recover, and continue to operate, innovate, and grow despite disruptions emerging from events such as natural disasters, economic downturns or global crises. For example, the pandemic highlighted the importance of resilient systems. In the context of ESG, organisations that had robust ESG frameworks in place showed greater ability to adapt more quickly and continue operations even amid lockdowns and global supply chain challenges. Thus, businesses can drive resilience through ESG strategies by integrating sustainable practices into their core operations, thereby enhancing their ability to withstand challenges and adapt to changing market conditions.
Integrating ESG factors into risk management frameworks enables companies to anticipate and mitigate potential risks by helping them anticipate, manage and respond to several challenges that might negatively affect them. By addressing environmental, social, and governance risks proactively, companies can safeguard their reputation, ensure compliance with regulations, attract and retain top talent, and build long-term value for stakeholders. This way, companies that focus on environmental sustainability, fair labour practices and robust governance frameworks are better equipped to manage disruptions, attract investment and build long-term resilience, thereby securing a competitive advantage in a competitive and dynamic business environment.
Abiding by ESG principles may lead to greater innovation as ambitious sustainability goals could drive the development of new products and services that meet evolving consumer demands for environmentally-friendly options. Further, optimisation of supply chains to minimise waste and energy consumption in line with ESG principles could offer significant cost savings and improved operational efficiency. Such innovation could result in better brand differentiation for the company and stronger connections with consumers prioritising sustainability.
A robust ESG strategy enhances a company’s reputation and draws investors and customers who value responsible practices. Transparent ESG reporting builds trust with stakeholders, including employees and communities. Companies engaging in social responsibility initiatives foster loyalty among employees and customers. Additionally, prioritising ESG compliance helps businesses navigate evolving regulations, avoid legal risks, and unlock growth opportunities, as investors increasingly favour companies with strong ESG credentials, ensuring long-term resilience, value and sustainability.
(The author is the managing director of RLG Systems India Pvt Limited; views expressed are personal)
