Bengaluru leads in ESG practices, but faces key environmental and social hurdles

ESG plays a vital role in performance of sustainable growth. However, governance is key to make Bengaluru ESG compliant.

(This article is part 1 of a two-part series)

Environmental, social, and governance (ESG) is an investing principle that centres on environmental and social issues as well as corporate governance. This article explains what ESG compliance entails and how it is being adopted in corporate social responsibility (CSR).

Bengaluru leads in ESG

As of June 2023, Bengaluru has the highest percentage of green-compliant office buildings among all Indian cities, with almost 30% of the stock across the country. Green roofs, rain water harvesting, energy efficiency, incorporating natural elements like sunlight, ventilation etc. are features of green compliant offices.

ESG compliance in other cities

Delhi-NCR accounted for 21% while Mumbai 17 %, respectively, in terms of the total certified office stock in India, as of June 2023, . Of the overall pan-Indian stock, Hyderabad has 15%, Chennai 9%, and Pune 8% of green office stock (stock is a group or clusters of green office buildings). Bengaluru, Delhi-NCR and Mumbai comprise almost 68% of all green-certified office stock in India.

Medium- to long-term attention on national and international ESG rules is fueling this trend toward contemporary, high-end, and sustainable buildings.

Residents protest against a solid waste management BBMP processing unit in Electronics City
Residents of Electronic City protested against a polluting solid waste processing unit run by BBMP, in December 2018. This plant will soon be replaced by a Waste-to-Energy unit, which, residents believe, will make things worse. Pic courtesy: E-City Rising

Read more: Real estate developers face few hurdles in getting environment clearance


Increase in preference for green-compliant offices

Leading offices across the country have pledged to become net zero by 2050. According to the CBRE Group, Inc (CBRE) analysis, occupiers/users are likely to continue their flight towards better quality assets, with an increase in preference for green-certified buildings, and aim at other sustainability metrics like energy efficiency, water and waste management.

According to the report, the demand for green-compliant real estate has caused the amount of green-certified stock in India to nearly double over the previous seven years, reaching 342 million sq. ft at a 9% compounded annual growth rate (CAGR).

According to the research, both domestic and international occupiers have made sustainability a priority and have committed to goals that will have a significant impact. There are mandates from both national and international bodies, such as India’s Business Responsibility and Sustainability Reports, the Enhancement and Standardization of Climate-related Disclosures, and the Corporate Sustainability Reporting Directive (CSRD).

How ESG is being adopted in Corporate Social Responsibility

In 2014, the Government of India made Corporate Social Responsibility (CSR) mandatory. CSR encompasses integrating social and environmental concerns into business practices. Whilst CSR remains popular in India, following a global trend, Indian companies are shifting towards Environmental, Social, and Governance (ESG) framework.

India’s commitment to ESG

India’s ESG landscape has been undergoing significant transformation.  Some key points:

  1. Global Momentum for ESG:
    • Post-pandemic, global investors have increasingly focused on ESG as they perceive Covid-19 as the century’s first “sustainability” crisis.
    • According to an EY report, 90% of international investors consider a company’s ESG. performance, with 86% prioritising corporate decarbonisation in their investment checklists.
  2. India’s Commitment to ESG:
    • In the Paris Agreement, India’s Prime Minister pledged to achieve net-zero emissions by 2070.
    • Indian companies recognise that ESG principles are essential for safeguarding the environment, stakeholders’ interests, and overall business sustainability.
    • ESG adoption can enhance corporate growth, improve public image, and facilitate capital raising at lower costs.

Here’s a breakdown of key aspects:

Implementation of ESG in India:

Regulations

  • India does not have a uniform law, but one that is spread across various legislations like Companies Act, Environment Protection Act etc.
  • SEBI (Securities and Exchange Board of India) plays a big role, mandating ESG reporting for the top 1,000 listed companies through the Business Responsibility and Sustainability Reporting (BRSR) framework.
  • The Ministry of Environment and Forests, Government of India have classified the following 17 categories of industries as highly polluting industries, which are to be closely monitored such as  petrochemicals, cement, pharmaceuticals, etc.  

Read more: Waste management in Bengaluru: Where do we stand in 2023?


Challenges with ESG adoption in Bengaluru

  • Waste Management: Bengaluru struggles with managing its ever-growing solid waste, with limited landfill capacity and only one operational large-scale waste-to-energy plant (positive impact, but concerns about emissions remain).
  • Water Scarcity: Bengaluru  is water-stressed, relying heavily on groundwater.
  • Air Quality: Traffic congestion and industrial activity contribute to air pollution.
  • Renewable Energy: The city has a growing solar power sector, helping reduce reliance on fossil fuels.
  • Green Buildings: A push for green building certifications can promote energy efficiency.
  • Sustainable Transportation: Investments in public transport and electric vehicles can reduce emissions

Overall, Bengaluru has the potential to be a leader in ESG practices. However, addressing its environmental challenges, promoting social equity, and strengthening governance are crucial steps forward.

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