PwC ESG - Episode 2 transcript

Nisha: Hello and welcome to ESG, a bridge to action, presented by PwC India, in association with Moneycontrol. And today, we are going to discuss, a very important aspect of ESG, which is the ‘G’ part, the governance part. And the topic of discussion today is Better Governance for an Authentic Identity, and the two gentlemen who are going to throw more light on this very important point of ESG are, Nilanjan Roy of Infosys and Vivek Prasad of PwC India.

Gentleman, it is so good to have you on this show. But before we go on with this very interesting discussion, here’s a special message on sustainability.

CP Gurnani: The top five global risks have now shifted from economic focus to environmental and societal. We all know that disruptions are a reality. Tech Mahindra is among the few companies in India that have prioritised ESG at a very early stage; and recognised business profitability with sustainability - can be our motto. Our journey towards sustainable practices started about a decade ago. We have committed to achieve carbon neutrality by 2030, and 50% renewable energy mix by 2025.

Nisha: My first question to you Vivek, while we talk about the ESG standards of the companies, climate consciousness is far and wide known, and many big announcements have been done by many big companies.

But corporate governance standards, that is also something, that has seen a huge amount of clamour especially from the investor class lately, where are we on the journey when it comes to the governance bit of ESG, and do you think enough is being done on that front?

Vivek Prasad: Thank you, Nisha, thank you so much for the question, and thank you for having me over. You have actually absolutely said it rightly, ESG, whether it's environment, social or governance has been taking a lot of mindshare over the last twelve-to-eighteen months.

And very rightfully so, because that is the only way that organizations and companies can drive sustainable value creation. You know matters pertaining to the ‘E’ or the environment, tend to be a lot more long-drawn, capital intensive, and also there's always a tangible measurement, that can be attributed to it and hence always kind of gets covered. But I think we have to focus on an equal balance on both the social and governance aspect as well.

So, as you said focusing on the ‘G’ or the governance, what really is governance? It’s really about transparency, it's about ethical business conduct, it's about how we actually conduct our business. And how do we do that, it's through the board compositions, committees, the policies that we actually put in place around internal controls, and processes. I think the other very important thing to keep in mind when we actually put together, some of these committees and forums is to actually look at the composition of these committees.

And I would actually say that you know there's empirical evidence, to demonstrate that organizations that have invested and paid a lot of attention to the ‘G’ aspect or governance, have been adequately rewarded in terms of the trust and the confidence, that the larger stakeholder group including stock markets, attribute to them.

Nisha: That's right Vivek. It has to be much wider, and the ecosystem needs to be created. Let me ask Nilanjan now and Nilanjan, welcome to the discussion here, and of course, Infosys has been a stalwart, it's a truly global company, and many of these aspects must be coming naturally for a business leader like Infosys. Tell us about some of the tenets that are followed in your company to reach the highest levels of corporate governance standards.

Nilanjan Roy: Thanks thanks Nisha. So, I think this really goes back to the founding of this company itself. In 1981 when the mission which was set out by the founders was that we need to earn the respect of all our stakeholders right and the keyword with stakeholders and not shareholders. Because I think the realization was that, of course, we are there, our existence is to earn profits, but also, profit with a purpose and therefore we need to be very cognizant of the larger ecosystem, which we operate in which is of course shareholders, employees. It's about our clients, it's about the society at large, and of course the environment, right, and the vendor community. So, all of these forces that interact with an organization, you have to be cognizant of that. And at one level deliver value to all of them, and not just think about stakeholders.

And over the years, if you've seen the examples of what we've done, really, the Infosys Foundation as an example way back, it's already been 25 years, when CSR was not even something which was being mandated but this is something we said is important to do to look at more marginalized sections of the society. Way back in 2010 actually we took a carbon neutrality goal. You know when the world was not even looking at these sorts of targets, and by 2020 we will become carbon neutral as a company and actually, we achieved that in October of 2020. One of the first companies in the world with the UN Climate Change Award given to us as well. Of course, from governance and transparency, one of the first companies, which was voluntarily disclosing on various caps, our listing on the NASDAQ as a first time from an Indian company. In 2020 as well and we put it all together, with an ‘ESG 2030’ vision which is really bringing together, what is relevant for our business.

We said we will educate ten million kids in India through digital technologies opening up our internal libraries really, which we use for our internal training to the wider school and college free of cost. Tech for good, of course, gender, we are one of the highest in the world. We are about 39% of our workforce, of two hundred and sixty thousand people are women, and we've taken a target to really grow towards forty-five and then to fifty percent. So, these are the things that we continue to strive towards, and that keeps us really going. Lots of more work done and really we're very proud to see where we've come in the journey ahead.

Nisha: But Nilanjan, I want to understand, the use of technology and how technology can really play an important role in the ESG transition of many of the companies, and businesses as well as the sectors that you cater to at Infosys and the IT solutions that you provide.

Nilanjan Roy: Thanks that's a very very important question Nisha, and I think digital transformation and, helping our clients in the digital transformation journey is at the core of what we do. And there are billions and billions of dollars being spent around this. But I think the realization with our clients, and which also is what we are positioning ourselves with the clients is that sustainability now has to be part of the design phase of your digital transformation, right. It cannot be an afterthought or sitting somewhere outside the core business strategy.

So we have actually launched sustainability as a practice in which we offer services on sustainability to clients. ESG as a service, carbon platform, circular blockchain economy and really from ab initio into the pitches which we do with our clients actually brings sustainability into the thinking.

Nisha: That's right Nilanjan what a great account you gave, and innovation is the cornerstone of the solutions for really embedding ESG, in the systems worldwide as well, so that's a very important point.

But Vivek, I want to ask you while we are talking about climate consciousness, already the topic of ‘greenwashing’ is coming in. So there's clearly a trust deficit and that then again leads us to the corporate governance and the best practices standards, that the companies need to keep. What is it that the companies need to embed in their overall system to be in the highest standards of the ‘G’ part of ESG?

Vivek: I think every company and organization needs to first decide, what is the target and what is the objective that we're trying to achieve, and then use that as a lighthouse I would say, to make sure that all the other operational decisions, that you actually make, given the constraints of resources and technology and the other factors, are working towards that singular objective that, we want to achieve. A few other things, you know, frankly just having the actual policies, and procedures in place, communicating these policies and procedures to the larger stakeholders, so that they know that these things are in place and whenever there are any strategic decisions, capital allocations, portfolio allocations, the ESG component, is kept in mind and integral to that decision-making process as opposed to kind of viewed standalone or separately.

Nisha: But Nilanjan, you have been followijng the global standards, and that is exemplary for a lot of the domestic companies which are just embarking on the ESG journey here. What is the next step forward? Give us a sense of where the world is moving on ESG, and with that Infosys is also marching ahead on that particular front. And what will be some of the learning you want to share with those companies who are just initiating this particular process?

Nilanjan: You need to create value for all those stakeholders, right. You cannot just say this company exists for the sole source of creating shareholder value of creation. So, it has to be beyond that, into employees, it has to be around community, it has to be environment etc. That’s a fundamental realisation, and that’s number one.

Number two is that if you don’t follow an ESG sort of routine, the government is going to take you there. So regulations are coming very very fast. You’ll be pushed to that regime in any case. It’s better to be ahead of that curve. So, as you know, BRSR is coming from 2022 into India, and from 2023 it will be mandatory across, and there are separate regulations there.

I think the most important thing is, what is happening inside the company. You fundamentally realise that sustainability has to be integrated into your business model. It cannot be sitting outside your business model. It has to seep into everything you do, every day. Therefore, you are seeing that across the world how oil and gas companies are moving to renewables, you are seeing automobile sectors moving to EV, you are seeing consumer goods moving away from single-use plastic. These are tectonic shifts which change your entire strategic focus of the company. I think that’s where it has to come from, that is something that also is to be done. It has to be inane, it has to be inside your business model, your risk model. And therefore, it is not something you think about separately. It is something you do every day.

Nisha: I must say that the sustainable journey is a long journey on which one needs to embark early, and also in terms of realization, one aspect that Nilanjan mentioned. But there is also motivation coming in, if the overall ecosystem demands it, and shareholders and the markets attach higher valuations for the companies, which have clearly embedded higher corporate governance standards.

With that, I thank both of you, Nilanjan as well as Vivek for a very interesting conversation, on a very important topic that we are faced with right now, that is on better governance in the companies all across, as they embark on their ESG journey. Thank you so much, gentlemen, for joining us and thanks to all our viewers for tuning in.