JSW Steel's Seshagiri Rao on ESG, and why it is important for investors

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26 Aug, 2025 12:21

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Seshagiri Rao remembers a meeting he had attended over 15 years ago, in which GN Bajpai, the then Chairman of Securities and Exchange Board of India, also attended. The topic was corporate governance, a theme that resonated with the SEBI Chairman, who later went on to pen a book on the subject.

"If corporate governance is an important parameter for investors to invest, why is there so much interest in China and Chinese companies," Rao asked Bajpai. It was a relevant question by the Joint Managing Director and Group CFO of JSW Steel. Did investors really value corporate governance?

"Over the years it has been proved that a company needs sound business plan to survive. Just corporate governance won't do. At the same time, there is enough evidence now to say that having a good corporate governance system is a reflection of a good company," says Rao.

A similar discussion is now happening on environment and social footprint of a company. Along with governance, the three now make up for ESG, a subject now increasingly being debated - whether a company's ESG is a relevant factor for an investor.

JSW Steel thinks, it is. That is why the country's leading steelmaker has for the first time shared information on its environment and social footprint with investors, in the third quarter of this financial year.

"This is the first quarter we have done this. We have given information on ESG parameters. From now on in every quarter, we will update on the ESG parameters," Rao told Moneycontrol. JSW Steel is the only second steelmaker in the country to do so. Tata Steel too shares information on the three parameters.

Though the company has been reporting on ESG since the 2018 financial year in its annual reports, this is the first time it is sharing quarterly updates.

Disclosures on ESG is fast becoming a trend globally. "Companies are making the transition from corporate social responsibility to ESG, "as investors are looking beyond numbers  to understand how a company functions," Robert B Hirth, Jr, Senior Managing Director of Protiviti, told Moneycontrol in an earlier interaction. Protiviti is a US-based global consultancy. 

What JSW Steel data says

The steel major has a Board-level committee on Business Responsibility and Sustainability Committee, which includes Rao.

The company has set targets for 2030, with the base year being 2005, just like the Indian government has set, as per the Paris Agreement. "We have set targets on parameters such as carbon emission, water, solid waste and safety. For instance, just like the Indian government has promised to reduce carbon commission by 30 percent by 2030, we have done the same. Our commitment is to reduce it by 41 percent," said Rao.

The company wants to be carbon neutral by 2030. "For instance, the Vijayanagar plant in Karnataka consumes 1,200 MW of power. Out of this, 500 MW is from heat and gas generated from mills. Balance is from fossil fuels. So how do we replace the 700 MW completely with renewable sources?"

The company has several options. It could tap power supply from renewable sources such as solar, or make up for its commitment by buying Renewable Purchase Obligation, or RPO, certificates. Under RPO, companies have to buy 21 percent of their fuel needs from renewable sources.

In all, JSW Steel has "17 focus areas" on the ESG framework.

Investors interested?

In 2020, asset management companies (AMCs) such as ICICI Prudential and Axis Mutual Fund launched ESG schemes, confirming the international trend. The COVID-19 pandemic has increased the focus on ESG, with a global study saying that equity funds focused on these three areas doubling their inflows in 2020.

"The disclosures should reflect the potential impact of the ESG activities of the corporates on the financial statements, to be more relevant to its readers or users. The disclosures further should be aligned to the relevant industry benchmark to reflect a relative progress and performance," said Vishal Seth, Managing Director, Financial Reporting and Transaction Services - Protiviti Member Firm for India

Rao agrees to the trend, and reiterates the importance for an industry like steel that has traditionally been among the most polluting.  And investors, adds the industry veteran, will take notice.

"A company needs a business plan and needs to be structurally strong to be successful. And now, there is good evidence to show that if a company has a good ESG standards, it's a reflection of it doing well," says Rao.