COVER STORY

ESG RATING OF INDIAN COMPANIES OF

SELECT SECTORS:
A COMPARATIVE STUDY
Abstract

In the corporate sector, there has been a gradual shift from profit orientation to people orientation
and in this connection ESG framework has captured the attention of policymakers and academicians
since ESG portrays the holistic picture of the performance of companies which is not possible
through historical financial data. This study makes an attempt to compare the ESG scores of Indian
companies of cement, financial and metal sectors.

Dr. Kingshuk Adhikari Ankita Ghosh

Assistant Professor Assistant Professor
Department of Commerce, Assam University Department of Commerce, Cachar College
Silchar Silchar
[Link]@[Link] ankitaghosh9411@[Link]

O
PROLOGUE environmental and social front need especially in developing countries. In
ver the years, there has to be undertaken not only for the some countries, ESG disclosure has
been a gradual shift benefit of the stakeholders but for the been made mandatory while some
from profit-oriented company as well. Apart from these, are on its way to enforce. In India,
management to people- good governance is also a prerequisite it has been made voluntary for 2021-
oriented management in the corporate for sustainable development of the 22 but from 2022-23 it will be made
sector. Policymakers and responsible organization. At present compliance mandatory for the top 1000 companies
business houses are in consensus that with ESG is the most concerning (listed) by market capitalization in a
profit earning objective cannot be the phenomenon all over the world new format of disclosure i.e., Business
sole motto of business concern in the Responsibility and Sustainability
long run and since business entity Report (BRSR) (SEBI, 2021).
exists within the broader society
There has been a ESG captures more extensive
and hence each of the responsible gradual shift from dimensions that are not included in
business entity has a definite role to profit-oriented accounting records as it evaluates the
play towards its internal as well as management to managerial capabilities which support
external stakeholders. people-oriented risk management. The utilization
The environment and society within of environment and society may
management in yield dividend in the short run but
which the business house operates
cannot ignore its responsibility
the corporate organizations with long term goals
and necessary initiatives at the sector having visionary management always

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 COVER STORY
strive for maintaining and restoring functional at present. In January, 2022
the environment and society on the The three- SEBI proposed that only the accredited
one hand and the transparent and entities including rating agencies and
people-oriented policies through good
dimensional research analysts should provide ESG
governance on the other. Due to the concept of ESG ratings to the companies.
prevailing risks, the world is facing .as framework is
reported by the Global Risks Report related to each BRIEF REVIEW OF
2021 of the World Economic Forum, other since all the LITERATURE
the implementation of ESG framework aspects contribute Goyal & Aggarwal (2014) provided
has got added significance in today’s an idea to the investors to invest in
context since each and every aspect
towards the well-
ESG fund portfolio to fetch higher
of the ESG framework affects the being of various return as compared to the market.
stakeholders. stakeholders Buallay (2019) found that there had
been a significant impact of ESG
ESG CONCEPTS / warm relationships with customers, on performance. Drempetic, et al.
FRAMEWORK community as well as business (2020) analyzed the influence of
From the last decade, ESG counterparts. Thus, companies need to firms’ available resources or its size on
(environmental, social and governance) be socially responsible by considering ESG disclosure and found significant
factors have entered into the centre not only employees, customers, and relationship between the two. Tarmuji,
stage from the periphery in the matter others, but also in a wider sense impact et al. (2016) revealed that corporate
of investment decisions across the on the public at large. social practices had significant
nations of the globe. While ‘E’, ‘S’ influence on economic performance
Governance Aspect
and ‘G’ are seen as distinct pillars, while environmental practices had
they are not isolated. Rather they are A good governance system optimizes no significant influence. Sila & Cek
interrelated and most likely to overlap the performance of an organization (2017) also found that social and
when organizations try to comply with to the best interests of stakeholders. environmental performance of a firm
any one of the components of ESG Governance aspect will look after had positive effect on its economic
factors (CRISIL, 2021). composition of board of directors and performance while no significant
auditors in the company which will relationship between economic
Environmental Aspect help controlling business operations performance and governance was
Environmental aspect of ESG taking into account the interests of revealed in the study. Thus, the above
identifies the ways of conserving and the various stakeholders. It considers studies highlight the relationship
preserving the natural world around. transparency and ethical standards of between ESG score and financial and
With the passage of time this concept a company towards various issues as economic performance of companies
entered into the corporate domain well as stakeholders. though such studies for assessing
due to increasing environmental Thus, the three-dimensional concept the relationship is premature at the
concerns and public awareness. of ESG framework is related to each moment.
External stakeholders have interest in other since all the aspects contribute
assessing environmental performance towards the well-being of various OBJECTIVES OF THE STUDY
of corporates due to emission of stakeholders. Various vision and 1. To compare the environmental,
pollutants in the environment. Internal strategies made by the organizations social and governance scores of
stakeholders need clean and hygienic should be coordinated with all the companies in cement, financial
environment in the workplace. aspects of ESG framework. The and metal sectors of India.
Companies can play a great role in level of ESG activities undertaken by
achieving environmental sustainability 2. To compare the composite ESG
a company is measured by awarding
by implementing strategies like scores of companies in cement,
scores against each dimension assigned
energy conservation, green processes, financial and metal sectors of
by rating agencies by evaluating ESG
reducing carbon emission, etc. India
disclosure reports of companies.
Social Aspect The methodology of rating and the
HYPOTHESES OF THE STUDY
components of three aspects differ in
People are at the core of any 1. Environmental, Social and
different rating agencies. Several rating
business organization in the form of Governance scores do not differ
agencies are functional internationally
employees and community. Corporates significantly across the sectors.
like Bloomberg, Thomson Reuters,
should not only be thinking about
MSCI, etc., while in India many 2. ESG scores do not differ
conserving environment but also being
agencies like CRISIL, Edelweiss, significantly across the sectors.
socially responsible by developing
Acuite Ratings and many more are

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 COVER STORY
METHODOLOGY OF THE STUDY
The present study is based on data obtained from CRISIL ESG Compendium, 2021 with respect to ESG score and the
scores of all the three individual components of ESG for Indian companies. Out of 18 sectors only three sectors (viz, Cement,
Financial and Metals) have been randomly selected. From each of the three sectors, five companies have been selected
randomly for the study. Thus, the study is based upon ESG score of fifteen companies from three sectors. For analysing
the data statistical tools like Mean, Standard Deviation and one-way ANOVA have been used.
TABLE 1:
SECTOR WISE ENVIRONMENTAL, SOCIAL AND GOVERNANCE SCORE
Environmental Social Governance
Sector
Mean SD Mean SD Mean SD
Cement 41.8000 13.77316 49.4000 9.83870 60.6000 10.83051
Financial 70.0000 7.58288 64.6000 5.41295 78.4000 3.20936
Metal 46.2000 3.03315 57.4000 5.68331 66.8000 9.06642
F VALUE 13.466 13.466 5.837
P VALUE 0.001 0.001 .017

Note: Based on data obtained from CRISIL ESG Compendium, June, 2021
Table 1 shows the mean score of environmental, social and Compendium, June, 2021
governance aspects of three sectors selected for the study.
With respect to all the three counts, the highest degree of Table 2 shows the mean ESG score of three sectors
initiatives has been noticed in financial sector while the selected for the study. The mean ESG score indicates the
lowest degree of initiative has been observed in cement highest degree of ESG initiatives of the companies under the
sector. With respect to all the three dimensions of ESG the financial sector while the lowest ESG initiatives had been
highest degree of variation has been noticed in the cement noticed in the cement sector. The variation with respect to
sector. ESG initiatives is the lowest in the financial sector while the
Cement industry has the lowest environmental and social highest degree of variation with respect to ESG initiatives
scores as manufacturing process of cement involves emission has been observed in the cement sector.
of various toxic gases, particulate matter, dust, noise and bad Table 2 also shows that the p value is lower than 0.05
odour which poses great threat to the environment. (Devi, et and hence it may be concluded that at 5 per cent level of
al., 2017). In the past, the society has experienced instances significance, there exists a significant difference in the ESG
of frauds and embezzlement in finance companies and from score across the companies of three sectors selected for
time-to-time different committees suggested measures for the study. To put it differently, the ESG initiatives vary
better corporate governance. At present majority of the significantly across the companies of cement, financial and
finance companies generally highlight their activities in the metal sector.
sphere of governance in clear terms at the time of disclosure
and reporting. EPILOGUE
Table 1 further shows that the p value is lower than 0.05 The measurement of performance of companies on the
in case of all the three dimensions of ESG and hence it may environmental, social and governance front is at the stage
be concluded that at 5 per cent level of significance, there of infancy. The concept is of ESG is gradually gaining
exists a significant difference in the environmental, social importance and all the companies sooner or later are
and governance score across the companies of three sectors expected to take certain initiatives for their own survival
selected for the study. To put it differently, the environmental, and growth in the long run. In the present study, ESG score of
social and governance initiatives vary significantly across companies under financial sector is only outstanding among
the companies of cement, financial and metal sector. the three sectors. In fact, the performance of companies in
financial sector has been much better as compared to that
TABLE 2:
of companies in metal and cement sectors on all the three
SECTOR WISE ESG SCORE
dimensions of ESG. The cement companies’ performance
Sector Mean SD F Value P Value appears to be grim on all the three counts of ESG and the
Cement 51.0000 11.40175 values of standard deviation also indicate the existence
Financial 72.0000 1.58114 10.799 .002 of significant variation in ESG within the cement sector.
Metal 57.2000 5.40370
However, in the absence of specific guidelines and uniform
parameters, Indian companies at the moment may not be in
Note: Based on data obtained from CRISIL ESG a position to report their initiatives on different counts of

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 COVER STORY
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all the stakeholders and the business of Business Ethics, 167(2), corporate social responsibility
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5. Goyal, M. M., & Aggarwal, K. Australian evidence. Procedia
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Impacts of cement industry on [Link]/legal/

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