In India, the Big Four firms are on a drive to recruit more environmental, social and governance (ESG) experts as demand grows for their services in a regulatory regime that has moved up a gear.
From April 2023, it will be mandatory for the country’s top 1,000 listed companies to produce a business responsibility and sustainability report as part of their more traditional annual financial report.
Previously, only the top 500 companies had been required to report on their ESG activities. But now, more companies are being brought into the reporting net and they will be looking to accountancy firms to help them implement the new requirements.
‘We can walk them through their journey and see which ESG levers can drive sustainable outcomes’
Huge step change
‘The Indian regulators had already begun embracing ESG reporting in the last few years,’ says Sai Venkateshwaran, a partner with KPMG in India. ‘Nearly all of India’s top 500 companies complied with the [old] business responsibility report, and we have seen companies starting to adopt international standards and frameworks such as those for integrated reporting, complying with those standards produced by the Global Reporting Initiative or the Sustainability Accounting Standards Board, and their alignment to the UN’s Sustainable Development Goals. But the business responsibility and sustainability report will be a huge step change.’
Sambitosh Mohapatra, PwC partner and the firm’s ESG leader, puts these new requirements into the context of how India’s blue-chip companies are reacting to external pressures. There is, he says, acute recognition of how climate change is affecting the country, from its coastline to its mountains, and the impact that extreme weather patterns are having on the population and the economy.
‘There is the realisation that we need balance,’ he says. ‘The stakeholder ecosystem is asking how companies are making their profits; those with a social conscience are now able to make their voices heard.’
Different drivers
Both Mohapatra and Venkateshwaran see three areas where their firms are being called on to advise clients. Some are looking to embed ESG risks into a strategy-led transformation; some know what is required under the new reporting regulations and are accordingly more transformation-led; while others want to be compliant with the regulations and are therefore reporting-led.
‘Consultants have opportunities across all sectors,’ Mohapatra says. ‘There is baselining and peer comparisons, which identify specifics. We can walk them through their journey and see which ESG levers can drive sustainable outcomes.’
‘There is an alphabet soup of standards out there so we need to help companies choose the relevant set’
Snapdeal, the Indian online retailing giant, recently announced that PwC will be assisting it with its ESG programmes, including defining its overall vision. It will also help the company map its current ESG practices.
‘There is an alphabet soup of standards out there,’ says Venkateshwaran, ‘so we need to help companies choose the relevant set, in line with what investors, analysts and rating agencies are looking for and what their peer group is reporting. And as this becomes as mainstream as financial reporting, companies need to make sure they have the right systems in place to generate the necessary information.’
The right talent
The key issue that accountancy firms face at the moment is getting the right talent on board. In the case of PwC, Mohapatra says that the 1,500-strong workforce is being ‘re-educated and repurposed’ so that they can also offer ESG services.
‘If I am to look at a client’s strategy through an ESG lens, it doesn’t require a sustainability professional, it requires a strategy partner who understands sustainability,’ he says. ‘We believe that each of our individuals should understand what sustainability is and add it to their existing services. We are embedding ESG into every service.’
‘One year down the line there will be further regulatory momentum, and assurance-related requirements will be mandated’
Mohapatra adds that there are certain new competencies and a shortage of talent. ‘There is a huge ecosystem which is building around alliances and broader stakeholders,’ he says. ‘There were always thinktanks and NGOs that are part of this narrative, so now we are aligning with them so that we can work together towards an end objective.’
Growing demand
Venkateshwaran agrees that one of the challenges his firm faces right now is finding the right people with the right skills – KPMG is looking at bringing on board more domain experts to bolster its home-grown talent as it seeks to embed ESG in all of its services. And it is a demand that is only going to get stronger. ‘One year down the line there will be further regulatory momentum, and it is inevitable that assurance-related requirements will be also mandated,’ he says.
Global firms such as KPMG and PwC are also able to draw on their international networks for advice and expertise. Mohapatra says he was able to draw on experience from places as far afield as Brazil, Chile and North America. The increasing use of video calls has helped ensure that these experts are ‘in the room’ without the need for travel.
Both Venkateshwaran and Mohapatra also believe that demand for their ESG services will come from the SME sector. ‘It is possible that all listed companies will be required to file ESG reports in the future, and this will nudge the SME sector,’ says Mohapatra. ‘The government is also trying to encourage SMEs to adopt ESG policies through its own procurement policies.’
Venkateshwaran adds that private equity investors are also pushing for ESG to be built into their portfolio companies. ‘Private companies will have to look more closely at ESG when they need to raise capital,’ he says. ‘The good news is that ESG is now part of the conversation.’
More information
Find a roundup of ACCA’s sustainability resources for SMEs at How SMEs can create a more sustainable world
Read ACCA’s report, Climate action and the accountancy profession: building a sustainable future
