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    Family-run businesses put more focus on environment, social & governance issues

    Synopsis

    Family-run businesses are turning more conscious of environment, social and governance (ESG) regulations by being more compliant with environmental laws, turning green in operations, increasing diversity in management and improving their corporate governance. Family-run companies are also increasingly watching their carbon footprint.

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    Mumbai: At a recent roadshow, the scion of a leading commodity-focused conglomerate was asked several times by global investors about his group’s multi-continental coal business. While his management team was visibly irritated at the repeated line of questioning, he kept his nerves to convince the investors that along with coal mining, the family’s diversified business interests also included a sprawling clean-energy business that recently got on board a global strategic investor.

    Family-run businesses are turning more conscious of environment, social and governance (ESG) regulations by being more compliant with environmental laws, turning green in operations, increasing diversity in management and improving their corporate governance. This is in the context of increased statutory compulsions towards conservation of environment and resources, as well as the growing global trend of institutional investors pledging to invest in businesses that are high on ESG compliance.

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    “Focus on good corporate governance is a reality across Indian family businesses as the country’s regulatory standards have transformed in the last decade,” Grant Thornton India chief executive Vishesh Chandiok said.

    “Being ESG-compliant is not an option anymore. Companies have to be socially responsible,” said Parle Agro CEO Schauna Chauhan. “There has to be a clear, concise commitment and organisations need to be held accountable for their actions,” said Parle Agro CEO Schauna Chauhan.

    Under ESG, the focus in case of governance is on board structure, independence of board, gender diversity and performancelinked variable pay. On social front, companies' spending towards corporate social responsibility (CSR) initiatives and gender diversity are the main factors that get counted. Besides these parameters, familyrun companies are also increasingly watching their carbon footprint.“The pollution levels maintained by our company at various sites are well within the permissible limits. There has been no instance of any perils of hazards on account of pollution or waste generated,” Shree Cements managing director HM Bangur said.

    The company has an in-house internal audit department and has also engaged the services of a professional firm to carry out internal audit spanning all production units and functions. All business processes are covered in the audit process and controls are continually reviewed and strengthened.

    When it comes to being ESG-conscious, large listed family businesses tend to be much ahead in their journey compared with the ones that are small or unlisted. One of the major reasons for this is the legal requirement of disclosures.

    Mandatory disclosures form part of the business responsibility report, which in turn is a component of the annual reports of companies. Based on the disclosed data, it becomes possible for institutional investors, fund managers and corporate databases to monitor and calculate the ESG scores for each listed company.

    “ESG must not be seen from compliance perspective but more as a business necessity/opportunity. It is increasingly becoming more important for companies who intend to attract investments as investors are keen to know the overall health of the company,” said Anil Rai Gupta, MD of Havells.

    Havells began CSR initiatives way back in 2005 and started reporting sustainability initiatives in 2012, when there was no law around either of these. The chairmen of its board-level committees are independent directors of the company.

    In recent years, most of the family-run, large, listed companies like Godrej Consumer Products, Britannia and Dabur have started publishing separate sustainability reports that reveal the data on their ESG compliance across various parameters. “Over the next three years, we will invest over ?50 crore to implement an end-to-end PET plastic waste management (PWM) programme. Our sustainability efforts are built in three areas namely environment sustainability, skillset development and healthcare,” said Chauhan of Parle Agro.

    “The early focus for Indian family-owned companies was energy conservation. It then moved to water conservation and the ascent is now on reduction of plastic,” said Prasad Deshmukh, research analyst, BofA Securities.

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    1 Comment on this Story

    Valerian Pereira278 days ago
    India should promote Mom and Pop shops than Corporates.
    Right from Rural settings ..Grassroots levels.
    with Modern facilities.
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