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ESG: Striking a Balance Between Regulations and Innovation

Chandrima Chatterjee, Secretary General of Confederation of Indian Textile Industry (CITI)

In recent years, the conversation surrounding corporate social responsibility has significantly evolved. Initially, the focus was primarily on social compliance, emphasising adherence to statutory requirements and maintaining basic standards. However, over the past decade, this dialogue has matured into a more comprehensive discussion about sustainability, encompassing social, environmental, and governance (ESG) aspects of business operations.

This transformation underscores the importance of not only complying with regulations but also demonstrating proactive measures in sustainability. Organizations like the Confederation of Indian Textile Industry (CITI) play a crucial role in guiding their members through this evolving landscape. They help manufacturers understand and implement ESG practices, ensuring that businesses remain sustainable and competitive in the global market.

In a detailed conversation with Team PERFECT SOURCING, Chandrima Chatterjee, Secretary General of Confederation of Indian Textile Industry (CITI) elaborates on the changing dynamics of sustainability and ESG.

She highlights the increasing expectations from stakeholders, the importance of mature disclosure formats, and the unique opportunities for India in the global sustainability arena. Chandrima emphasizes the need for business support organizations to provide the necessary knowledge and capacity-building to help their members navigate these complex requirements.

Chandrima brings with her 24 years of experience of research, policy, advocacy and trade facilitation. Besides working on trade facilitation and competitiveness issues for the textile value chain, she has been associated with skilling, sustainability and responsible business initiatives, recognizing the growing role of these as competitiveness tools.

Excerpts:

PS: How has the focus shifted from social compliance to broader sustainability goals?

Chandrima: Ten years ago, our discussions were primarily about social compliance. As a business support organization, our role was to raise awareness about statutory requirements and compliance processes. Over the past decade, however, this conversation has matured significantly. Today, it’s not just about social compliances, demonstrated through audits, but about a gamut of environmental, and governance (ESG) issues also, demonstrated through continuous improvement plans. Newer requirements like tractability call for a supply chain approach.  Good business continuity plans ensuring growth is critical for suppliers to enhance their capacities to manage and contribute effectively to these requirements.

PS: What is the significance of the supplier’s role in this evolved context?

Chandrima: Suppliers play a crucial role in this new paradigm. Organizations like CITI, which has global or Tier one suppliers and domestic suppliers, who can be tier 2 suppliers in this supply chain need, to help their members understand and navigate this journey from compliance to sustainability. It’s about making them aware of evolving dialogues, from mere compliance to comprehensive ESG reporting. Now, ESG is more about demonstrating your actions through robust reporting frameworks.

PS: Can you elaborate on the importance of these reporting frameworks?

Chandrima: Absolutely. The reporting frameworks have become a critical component of ESG today. It’s a dynamic space where expectations and definitions are constantly shifting, driven by buyers and consumers’ demand. There is a rapid change in both buying and consumption patterns and thus the regulations changing quite fast.

Associations like CITI must stay ahead of these changes, understanding stakeholder expectations throughout the value chain. This involves guiding members on what actions to take, how to document these actions, and how to present them through various disclosure formats.

PS: How have these disclosure formats evolved over time?

Chandrima: Disclosure formats have matured from basic audit reports to more sophisticated documents that capture both risks and opportunities. Globally, there are various formats like GRI, IFRS, and in India, BRSR. They now include geopolitical risks, such as the implications of the Russia-Ukraine war or issues in the Red Sea. These risks have financial implications that stakeholders need to understand and manage as they differ from company to company depending on which market they are targeting and what challenges they are facing.

PS: What specific opportunities do you see for India in this context?

Chandrima: India has significant opportunities, especially in terms of using recycled fibres, alternate material, renewable energy and other sustainable practices. Given our strong position as a producer of raw materials like cotton, the potential for recyclability is high. We need to identify and leverage these opportunities with the right technologies and incentivizing ecosystems.

PS: How is CITI addressing these upcoming requirements?

Chandrima: Our mission is to build institutional knowledge and capacity on these dynamic requirements, so we can effectively communicate and support our members.

This involves understanding contradictory regulations and finding balanced, adoptable technologies. For instance, the requirement for zero liquid discharge can be energy-intensive and impact carbon emissions. Hence waste water management technologies that balance these two requirements need to be adopted.

We need to emphasise on feasible adoptable technologies that are both effective and practical. We aim to establish connections and synergies across various aspects of the operations and thus we are also partnering with organizations like the ILO and Fair Wear Foundation to provide training and address concerns in many areas.

PS: With the rapid changes in international regulations, are Indian manufacturers keeping up the pace?

Chandrima: The industry is aware about the need to adapt, especially as new regulations emerge in Europe and other regions. There is a growing consciousness in India as well, particularly among younger consumers who are more environmentally conscious. Industry associations like CITI play a crucial role in keeping members updated and prepared.

PS: What concrete steps is CITI taking to bridge the gap between current practices and international standards?

Chandrima: We’re conducting ESG webinar series, bringing in flag bearers and enablers to share knowledge and tools. We’ve also initiated the CITI Sustainability Awards to incentivize best practices in critical areas like water, waste and carbon management, alternate material, HR practices, community development etc. Additionally, our MOU with the Fair Wear Foundation helps address suppliers’ concerns and expectations in new frameworks like HRDD.

PS: How are suppliers reacting to these changes?

Chandrima: There’s a mix of reactions. Larger companies are more prepared, with dedicated teams for reporting and compliance. However, smaller companies, especially in the domestic market, face significant challenges due to cost escalation and limited resources. We are working on creating simple, basic frameworks to guide these smaller players.

PS: What are the major challenges in achieving these sustainability goals?

Chandrima: The main challenges are knowledge and skill gaps, as well as the need for appropriate technologies. Measuring energy consumption across supply chains, building energy efficiency, and understanding recyclable materials are complex tasks that require specialized knowledge and capacity.

PS: Does CITI have specific targets or plans for the near future?

Chandrima: Currently, we are focusing on contributing to national targets through the ESG task force rather than setting specific targets. India’s national target is to achieve net zero by 2070. Our role is to help our members align with these broader goals and ensure they are prepared for future challenges.

Importance of ESG Reporting

  • Enhanced Stakeholder Expectations: Stakeholders now expect more detailed and mature disclosure formats.
  • Role of Mature Disclosure: High-quality ESG reporting is crucial for demonstrating a company’s commitment to sustainability.

Role of Business Support Organizations

  • Guidance and Knowledge: Organizations like CITI are essential in guiding manufacturers through ESG requirements.
  • Capacity Building: They help in building the necessary knowledge and capabilities among their members to adhere to sustainability practices.

Need for Proactive Measures

  • Beyond Compliance: Businesses need to go beyond mere compliance and demonstrate proactive sustainability efforts.
  • Long-term Benefits: Engaging in comprehensive ESG practices leads to long-term benefits and sustainable growth.

 

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