Examining the Sectoral Differences in ESG Practices of Select Companies in India- a Comparative Testing Based on Scores

Abstract

A quest for sustainable development has propelled investors and corporates to adopt environmental, social, and governance (ESG) philosophy in their investment and business decisions. In this scenario, ESG scores appear to be an indicator of the sustainable performance of a firm. The present study seeks to compare the ESG practices of 100 top companies (by market capitalization) across 10 sectors in India. For analysis, CRISIL’s overall ESG scores and the scores of each of its dimensions have been used. Application of one way ANOVA and Welch ANOVA reveals that there exist statistically significant differences between sectors on all the three dimensions of ESG viz; environment, social, and governance. Information Technology and Financials sectors turned out to be the leaders in ESG performance owing to low carbon footprints, water consumption and waste generation, and job-related injuries. Companies in cement, metals & mining, and chemicals were found to be underachievers due to their intrinsic nature of production resulting in the emission of toxic gases and a high propensity for energy and power usage. These sectors try to compensate for low environmental performance by undertaking numerous social welfare measures and high disclosures. It was also found that irrespective of the sector, companies’ environmental performance lagged behind social and governance performance.