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India Inc and its ESG story: 12 interesting insights

CRISIL has analysed 586 companies, across 53 sectors

May 19, 2022 / 04:18 PM IST
Only 23 companies disclosed their exposure to climate risks. (Photo by Gelgas Airlangga/Pexels)

Only 23 companies disclosed their exposure to climate risks. (Photo by Gelgas Airlangga/Pexels)

ESG is a buzzword now. Companies looking to raise money from public markets need to be particularly concerned about their environmental, social and governance (ESG) records.

ESG-focussed funds are growing fast. In November 2021, money flows into these funds hit a record at $649 billion- some 18 percent more than what came in the previous year and 128 percent more than what came in the year before that.

CRISIL analysed 586 companies across 53 sectors on their ESG performance, from FY21 data. The report found that, while “disclosures are improving, there is a long way to go”. The Sustainability Yearbook 2022 found that climate change risk isn’t being sufficiently factored in.

Also read: 57% commercial space occupiers have green certification: JLL

"The uptake of sustainability in decision making is very piecemeal in India Inc because of a lack of stewardship, and fiduciary persuasion to improve the ESG quotient," Amish Mehta, Managing Director and CEO of Crisil, was quoted as saying in a press statement.


CRISIL found only 14 companies in the ‘leadership’ category, 108 in the ‘strong’ category, and as many as 73 in the ‘below average’ and ‘weak’ categories.  “Leaders in ESG have demonstrated a clear commitment towards sustainability, and have consistently delivered superior performance. In contrast, those in the ‘weak’ and ‘below-average’ categories have poor disclosures and inadequate ESG risk-management practices," said Mehta.

Here are 12 interesting trends in India Inc’s ESG performance.

1. 130x is the difference between a CEO's pay and that of a median employee. It is an eye-popping number, but the multiple is much lower than the global average of 250-350x. Indian PSUs have a much better pay parity, with CEOs’s pay only 4.8x the median employee’s pay, while private companies pay their CEOs 137x more.

2. Only 14 percent of the workforce is women. It is a slight improvement from 13 percent the previous year, but significantly lower than the global average of 39 percent. PSUs scored better than private companies on gender diversity, with 15.3 percent of their workforce comprising women against private companies’ 12.7 percent.

3. 23% CAGR was registered between 2019 and 2021 by the top 10 companies with the best governance scores, while a -7 percent CAGR was seen by the bottom 10. The top 10 with best governance scores also outperformed their sector averages by 900 bps and the bottom 10 underperformed their sector averages by 1200bps.

4. 18% growth in profits between FY19 and FY21 in companies that have CEO tenures that were 10 years or less. It is three times that of companies that have CEO tenures that are longer, which saw 6 percent growth in profits.

5. 2x rise in the average proportion of independent directors on PSU boards in CY21, from CY20. In CY21, 41 percent of the PSU boards were on average filled with independent directors, whereas it was 20 percent in CY20. The PSU’s CY21 average is still lower than private companies’ 50 percent. Overall, media and hotels had the highest share of independent directors on their boards at 58 percent, while oil and gas and telecom had the least share. Most DFIs did not have independent directors on the Board, and instead had mostly the mandatory, government nominee directors.

6. 1.3 years is the average tenure of independent directors on PSUs, whereas it is 7.43 years in private companies and the overall average is 6.79 years.

7. Only 50 percent representation of independent directors in audit committees of PSUs, whereas it is 75 percent representation in private companies.

8. 27 percent of the total auditors’ fee is for non-audit work in multi-brand retail, and 26 percent in airlines. These two sectors have the highest share of non-audit fees in the total fee. The average share is 7 percent. Batteries and healthcare had the least non-audit fee to total fee ratio. Most companies did not disclose the nature of the non-audit fees, said the report.

9. 67 percent of the controversies around the companies analysed were governance-related. Only 18 percent were social-related and 15% were environmental.

10. Only 21 percent of the companies provided disclosures on water consumption. “However, companies in sectors such as textiles did not adequately report these numbers, despite the significant materiality of this issue and their dependence on the same,” it said.

 11. Only 25 percent of the water consumed by the thermal power sector gets recycled, though the sector has the highest water consumption levels. In contrast, more than 65 percent of the water used in IT and around 64% used by oil and gas - OMC gets recycled.

12. Only 23 companies disclosed their exposure to physical climate risks. The report writers speculate that this “could be due to lack of technical expertise and internal capability to conduct exercises such as scenario analyses”.

Asha Menon
first published: May 19, 2022 02:45 pm
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