ESG AND CORPORATE GOVERNANCE : SIGNIFICANCE & SOLUTIONS
Krystahl (A JV of Sanshodhan and GICE&SDGs)
Hyderabad 500091, INDIA
EMAIL: krystahl@Krystahl.in , URL: www.krystahl.in
ESG stands for Environmental, Social, and Governance and refers to non-financial metrics that assess a company's impact on the environment, society, and governance. Corporate governance refers to the systems and processes by which a company is directed, managed and lead for the growth. ESG and corporate governance are closely related.
ESG and corporate governance are becoming increasingly important as consumers, investors, and regulators demand greater accountability from companies. Integrating ESG considerations into corporate governance practices can help companies manage risks, improve their reputation, and increase their long-term financial performance. At the same time, good corporate governance practices can ensure that a company's ESG efforts are transparent, accountable, and sustainable. Good corporate governance practices, if aligned with the ESG considerations, can enhance a company's multi-dimensional sustainability and long-term success.
Corporate governance is very important for ESG funding because it provides assurance to investors that a company's ESG efforts are well-managed, transparent, and aligned with the company's overall strategy. Good corporate governance practices provide the structure and systems needed to effectively manage ESG risks and opportunities. For example, a strong governance structure can ensure that a company's ESG efforts are integrated into its business strategy and that ESG metrics are consistently tracked and reported. This can help to build trust with investors and other stakeholders, and can increase the company's overall competitiveness and long-term success. Investors are becoming increasingly interested in investing in companies with strong ESG profiles, and corporate governance is seen as a key factor in determining a company's overall sustainability and risk profile.
The corporate governance status in India has improved significantly in recent years. The Indian government has implemented a number of reforms to enhance corporate governance, including the introduction of new laws and regulations, as well as the establishment of independent regulators to enforce these rules. For example, the Companies Act of 2013 introduced new requirements for independent directors, better disclosure and transparency, and strengthened the role of audit committees.
The Securities and Exchange Board of India (SEBI) has implemented new rules for corporate governance, including the listing regulations and the Corporate Governance Voluntary Guidelines (2009). In year 2019, Ministry of Corporate Affairs (MCA) introduced National Guidelines for Responsible Business Conduct (NGRBC). In May 2021, SEBI introduced a mandated for top 1000 listed companies, to report on ESG parameters, and introduced the standard format- BRSR, for annual reporting.
Still there are some challenges in this area, like lack of accountability among some directors and executives, weak enforcement of corporate governance rules, and limited public awareness of the importance of corporate governance. The continued development of the corporate governance framework in India is important for attracting investment, building trust, and promoting sustainable and responsible business practices.
Audits play an important role in ensuring the effectiveness of a company's corporate governance practices. An audit can help to evaluate a company's governance structure, processes, and controls, and provide assurance that they are functioning as intended. There are several types of audits that can be performed to assess a company's corporate governance, including:
- Financial audit: A financial audit is an independent examination of a company's financial statements to ensure that they are accurate and comply with accounting standards.
- Internal control audit: An internal control audit evaluates a company's internal controls, including its risk management processes, compliance procedures, and financial reporting systems.
- Compliance audit: A compliance audit assesses whether a company is following applicable laws, regulations, and ethical standards.
- ESG audit: An ESG audit evaluates a company's environmental, social, and governance practices, and provides assurance that they are consistent with best practices and meet stakeholder expectations.
By performing such audits, companies can identify potential weaknesses in their governance processes and make improvements as and when needed. The results of an audit can also provide valuable information to stakeholders, such as investors and regulators, interested in the company's governance practices. Overall, audits are an important tool for promoting transparency and accountability in corporate governance. They help companies to improve their governance processes, manage risks, and demonstrate their ESG commitment to responsible business practices.
Copyright@Krystahl
DATE: 4 FEB. 2023
Website UPCOMING: www.Krystahl.in
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