Welcome to the full Episode 12 of Sustainability Karma, India’s first and only talk show on sustainability on All India Radio.

In this episode of Sustainability Karma, Richard Rekhy, Former CEO, KPMG – India, acknowledges the substantial progress India has made in corporate governance over the years, noting that initially, there was a reliance on international practices. However, despite significant strides, he would not say that India is entirely future-ready due to the rapid pace of global change. Corporate governance now plays a critical role in navigating uncertainties in the business environment, building resilience, and gaining stakeholder trust. The shift from focusing solely on shareholders to considering stakeholders is crucial for creating long-term value.

He points out that good governance isn’t just about making the right decisions but about establishing robust processes to support decision-making. Companies with strong corporate governance are better positioned to adapt to changes, emphasising accountability, transparency, rule of law, and inclusiveness. This framework enhances efficiency and effectiveness, driven largely by economic imperatives.

The evolving global business landscape demands a framework that fosters resilience and transparency. He stresses that trust is now a pivotal element of corporate governance, which, in turn, builds long-term stakeholder value. Companies are shifting their focus from valuation to performance and future-readiness, with Environmental, Social, and Governance (ESG) becoming increasingly significant,

Comparing India to global standards, Richard Rekhy highlights that India is lagging in ESG implementation but is making progress. The SEBI and other regulators are putting norms in place, though challenges remain in creating a cohesive ESG regulatory regime. The US is moving towards mandatory ESG disclosures, while the EU has enacted legally binding targets on emissions, despite recent hesitations. The EU’s directives on human rights and environmental impact are notable, as are Germany’s supply chain act and Norway’s transparency act.

India’s current focus is on basic ESG reporting, which needs to advance to align with global standards like the GRI, SASB, and the Task Force on Climate-related Disclosures. Richard Rekhy emphasises the importance of regular audits, inspections, and penalties for non-compliance. Integrating ESG into corporate governance, conducting climate risk assessments, and promoting green finance initiatives are critical steps for India.

Implementing ESG involves significant capital investment and change management, requiring a shift in mindset and thought. He underlines that the social aspect of ESG, encompassing human rights, diversity, and working conditions, is particularly challenging to measure and integrate into corporate governance.

Good governance is synonymous with good practices. Companies prioritising people, planet, and profit can achieve ESG goals. However, achieving these goals requires collective effort from businesses, governments, and individuals. Strengthening governance practices, ensuring ethical decision-making, and promoting moral business conduct are essential.

He admits that the anti-ESG movement in the US, particularly from oil-producing states, presents challenges. This movement affects financial services and investment flows, with potential negative impacts on developing countries like India. The global push and pull between different ESG perspectives could hinder progress, especially as developing countries bear the brunt of increased costs and regulations.

Richard Rekhy suggests that affirmative action and incentives could help promote ESG adoption. The European Union’s Carbon Border Adjustment Mechanism (CBAM) is a complex tool aimed at levelling the playing field for European companies while imposing additional costs on developing countries. A global standard for ESG, rather than region-specific regulations, is necessary for fair implementation.

Looking ahead, Richard Rekhy hopes for more sustainability-focused investments and incentives in India’s upcoming budget. Emphasising renewable energy, EV vehicles, and hydrogen green initiatives could drive significant progress. He stresses the importance of collective action in addressing environmental challenges, with a final message that while the planet will endure, humanity must adapt to survive.

Richard Rekhy’s insights underscore the importance of robust corporate governance, the integration of ESG principles, and the need for global collaboration to address the challenges of sustainability and corporate governance.