Laksmi Suria V, CHRIST (Deemed to be University), Bangalore
ABSTRACT
Companies must critically evaluate their actions due to past two decades of climate change difficulties along with insufficient employee welfare and unacceptable business practices. The need for ESG principles caused companies to integrate these sustainable frameworks into their operational procedures (Chams & García-Blandón, 2019). The paper defines ESG as a measurable tool for Corporate Social Responsibility which contains three essential elements (De Masi et al. 2021).
Environmental: Evaluating the ecological impact of business activities.
Social: Organizations need to define their approach for engaging and interacting with
employees and suppliers alongside their relationship with local communities.
Governance: Organizations must verify that their corporate activities properly support stakeholder needs.
Business organizations across the world implement ESG strategies to respond to recent changes in the corporate environment. Sustainability reporting methods help businesses to reveal their effects on environmental social and governance elements in an open manner. When a company follows reporting standards its credibility improves significantly among its investors together with critical stakeholders. Organizations operating under the leadership of the board of directors maintain their status as top decision-makers along with shareholder fund guardian role to shape sustainability reporting outcomes. To meet its regulatory duties the board supervises the strategic direction of governance practices which must align with expectations from stakeholders. Through its oversight responsibilities the board implements oversight by utilizing its executive authority to appoint and terminate senior executives and approve their compensation and conduct strategic decision oversight (Fama & Jensen, 2019).
The ESG mandate has found its way into corporate board discussions so that board directors now take ESG factors into account during decision-making processes more frequently than in 2019. They now evaluate ESG factors in 52% of board decisions compared to 34% in 2019. Studies of corporate governance performance relationships concentrate heavily on financial measurements yet dedicate scant attention to non-financial measurements according to Mishra & Mohanty (2014) Shahbaz et al (2020) and Yermack (1996).
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