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ESG and FM Strategies for Governance
ESG and FM Strategies for Governance

May 3, 2024

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The governance aspect of ESG binds the overall compliances together to ensure more ethical business are conducted in line with the local and statutory rules and regulations.


In our earlier articles we had covered the environmental and social management of the ESG strategies in the facilities management business. In this third and last article of this series, we will focus more on the business governance aspects from Facilities Management perspective. 

Environmental, Social and Governance (ESG) is a framework used by investors & other stakeholders to assess an organization's business practices and performance on various sustainability and ethical issues. It also provides a way to measure business risks and opportunities in those areas.

The governance aspect of ESG binds the overall compliances together to ensure more ethical business are conducted in line with the local and statutory rules and regulations. The governance part under the ESG essentially covers the below mentioned aspects of business management. 

Governance requirements and its key features

To ensure ease of business execution and that the organisation’s efforts are aligned with focus areas, the below parameters must be taken into account while keeping governance in check.

Listed below are some of the governing bodies that aid in ensuring the compliance to the ESG aspects and overall management of the same, thereby ensuring that the organisation is well aligned to the compliance requirements under Governance.

 

In 2021 SEBI came-up with the circular on the Business Responsibility and Sustainability Report (BRSR) wherein, it has mandated top 1000 listed companies by market capitalisation voluntarily from fiscal year 2021-22 and mandatorily from fiscal year 2022-23 to report on the ESG metrics. 

The BRSR has focus under three sections as mentioned below:

Section A: 

Deals with general disclosures of the business such as details of listed entity, products, services, list of operations, market served by the entity, details about employees, holding, subsidiary and associated companies, CSR, transparency and disclosure compliances.


Section B:
Deals with management and process disclosures related to businesses aimed at proving the structure, policies and processes put in place towards adopting the NGRBC (National Guidelines for Responsible Business Conduct) principles and core elements and further focus to understand the overall business governance, leadership and oversight in business management.


Section C:
Deals with disclosure of principle wise performance through principles of NGRBC; these principles set the basis for sustainable developments, desired information is categorised into “essentials” and “leadership indicators”. Essential indicators are expected from every business while leadership indicators are expected of business that aspire to progress to higher levels through ESG mechanism.


Overall ESG management primarily deals with 17 sustainable developmental goals as highlighted below for tracking and monitoring.

We can be encouraged and inspired by a recent organisation we came across that has been very instrumental in ensuring all the compliances of the governance and ESG mechanism. They have made considerable progress during the reporting period towards achieving the target of becoming Net Carbon Zero by 2035. This company focused on reducing its operational GHG footprint in addition to enhancing resource efficiency and energy conservation. This organisation’s operations have captive energy requirement that generate a significant base load demand. The Company has made considerable progress towards meeting the captive energy requirement through renewable energy sources. The company reported 115% increase in renewable energy consumption in FY 2022-23 as compared to FY 2021-22. 

The company aims to set up 20 GW of solar energy generation capacity by 2025, which will be used to fulfil the captive energy requirement. Further, the company is committed to use bioenergy to meet its captive energy demand. Towards this end, company has also replaced almost 5.3% of energy consumed at its critical sites with green power and green steam. The Company is committed to making CO2 a recyclable resource. Its investment in carbon capture and utilisation technology and/or significant strides in harnessing photosynthetic biological pathways will play a pivotal role in utilising CO2 as a valuable resource.

The teams of this organisation engage regularly with communities and key identified beneficiaries to understand their existing needs, resolve any concerns and support their progress and development.

This has given confidence and tremendous inspiration to other organisations to cater to and follow the ESG requirements as an organisation to cover aspects of environment, social and governance.

Efficient and effective governance mechanism would bring in below mentioned benefits to the business and society as whole.

• Attract better customers due to transparency shown through reporting. 
• Attract, Engage & Retain best talent and low employee turnover.
• Competitive advantage & Brand recognition
• Better operational performance
• Reduced environment, social & governance risks and impacts
• Sustainable, long-term financial returns
• Build trust with investors, customers & general public as organization shares values and knowledge through ESG Report

Governance factors shows the rules and procedures for countries and corporations and allow investors to screen for proper governance practices as they would for environmental and social factors.

Businesses would have to act in responsible manner through ensuring the principles of governance to tackle the environmental, social and governance aspects thereby behaving in most responsible way to address environmental, social and governance goals for success of both business and its environment.

About the Author:

Rajesh Shetty | Managing Director | Real Estate Management Services | Colliers

Imran Khan | Sr. Associate Director | Real Estate Management Services | Colliers


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