Emerging scope of Environmental, Social and Governance (ESG) – Role of Directors

[2022] 137 taxmann.com 44 (Article)

Introduction

In the current scenario, there can been seen a steep shift in the focus of the Boardroom from merely financial development of the entity towards the environmental, social and governance aspect of the functioning of the entity. The prima-facie notion of an investor on coming across such term, is to run after the feel good stories and more particularly window-dressing.

However, the role of the concept is way beyond just tick-box practise and involves a plethora of issues and risks rather opportunities that can be seized. The Board of Directors being the decision making authority, need to view the ESG aspect of the Company as imperative. This article shall focus on the emerging impact of role of Boardroom in the adoption of ESG aspect as a part and parcel of the Company.

Background

The instances of various scams and mis-happenings on the part of the corporate have led to the push by the investors from speaking about only returns and share price to long-terms vision creation. The stakeholders are now more cautious and are moving their focus from self-good towards the greater good of the society and environment to a larger extent.

The stakeholders are now emphasizing on the concept of “corporate purpose” and hence demand the entity to fulfil the societal good in order to achieve of course the long-term success

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