- Education And Career
- Companies & Markets
- Gadgets & Technology
- After Hours
- Banking & Finance
- Energy & Infra
- Case Study
- Web Exclusive
- Property Review
- Digital India
- Work Life Balance
- Test category by sumit
Essay: What Does The Start Of A Movement Look Like?
Indian corporates have traditionally been oriented towards philanthropy and their philanthropic leaning is metamorphosing into the will and ability to go beyond increasing shareholder value.
Photo Credit :
More than 200 years ago, when Thomas Malthus, a British population scientist, wrote that population growth is destined to be checked by natural resource depletion and inevitable human want and misery, he was primarily emphasising on subsistence and food - a topic that hardly features in our discussions around sustainability today.
A discourse that was thereafter mostly buried within academics, especially demographers and economists, found prominence only when The Club of Rome commissioned a study to a team led by Donald and Donella Meadows at the Massachusetts Institute of Technology (MIT) in 1972. The team at MIT simulated a computerised world model and entered into it data assuming that population, industrial production and pollution would continue to grow exponentially in the future as they have in the past. They predicted that as of 1972, the limit was only a generation away.
This MIT study that also advised that for averting catastrophe the world would require radical 'value changes', was distributed in millions worldwide, and made many fear a looming Malthusian crisis of the environment and development. It was immediately published by the London-based journal The Ecologist, who also wrote about it in their issue (and later book titled A Blueprint for Survival that also sold almost a million copies worldwide). It clearly stated that our 'industrial way of life, with its ethos of expansion, is not 'sustainable'.
The role of industries in ensuring a just and healthy ecosystem is paramount. After The Ecologist publication, various United Nations led meetings that brought together nations, set emission targets for countries that relied on industries to be less polluting. By now, the focus of sustainability had shifted towards mitigating climate change and an expectation from industries to be more responsible towards the environment.
Investors and lending institutions demanded greater transparency from companies, leading to the creation of various frameworks for company disclosures, such as the Carbon Disclosure Process, Global Reporting Initiative and the Dow Jones Sustainability Index. Companies were also expected to set internal targets for themselves to reduce Scope 1, Scope 2, Scope 3 emissions and other pollutants in air, water, and land, and report their performance vis-a-vis those targets. National policies set targets for companies to be more energy efficient and less polluting too, and monitored them at varying degrees of success.
In India a few companies such as Godrej Consumer Products Ltd., Tech Mahindra, Infosys, TCS, Tata Motors and Mahindra & Mahindra have stepped up their game in this regard and committed themselves to achieving carbon neutrality. Some, such as TCS, have already met their targets of halving their specific carbon footprint by 2020. Tata Power's serious commitment to achieve carbon neutrality by 2050 led it to take the decision last year to gradually phase out its thermal power business completely by moving into renewable sources of energy by 2050.
A handful of companies such as Ultratech Cement, Tata Chemicals, TCS, have established an internal carbon price that financially incentivises business groups within the company to decrease their carbon footprint while using a markets-based mechanism to penalise business groups who do not. There are a few who are attempting to minimise waste going to landfills.
While achieving 'zero landfill' must certainly be the first step towards environmental responsibility, it is as yet aspirational for Indian companies. Even leading companies such as Wipro have managed to minimise dumping down to three per cent waste that goes to landfills. Overall in India, corporate ethics towards pollution is still at a very nascent stage with a few companies who can be role models for others to follow.
Sustainability vs Philanthropy:
Corporations provide livelihood to employees. By offering products and services to clients, they usually add value to people's lives. If companies are mindful of and ensure the well-being of their employees, customers, local communities, then they immensely contribute to the betterment of society. The more societal well-being is embedded within a company's business model by say, selling products that are good for people, striving for a happy workplace, enhancing production processes that are less polluting, meeting the needs of local communities, the more sustainable it will be. Or else when profitability dips, companies are likely to pull their funds out of philanthropical initiatives, which negatively impact end beneficiaries for no fault of theirs.
Globally there are companies such as the Euro 9.6 billion Dutch State Mines (DSM) employing 25,000 people, that have entirely moved out of polluting businesses and reinvented themselves. "We cannot be successful nor can we call ourselves successful in a society that fails," says Feike Sijbesma, CEO of Royal DSM.
A few years ago DSM transformed from a company that mined coal reserves to a science-based company active in nutrition, health and sustainable living. The Euro 24 billion Veolia is a water management, waste management and energy services company and is another example of a company whose revenues are generated from 'clean' sources.
This practice of generating 'clean revenue' from products and services that are not harmful to people and the environment, from waste to wealth practices, as well as shared platforms and good compliances, is new but catching on in India.
In India, an example of this is the joint venture CERO established in FY 2020 between Mahindra Accelo (a subsidiary of Mahindra & Mahindra) and MSTC (formerly known as Metal Scrap Trade Corporation Limited, a Government of India enterprise under the Ministry of Steel) which is India's maiden organised auto shredding venture at Greater Noida.
The joint venture recycles vehicles as well as facilitates the clean and efficient disposal of vehicles. It handles the entire value chain from collection of the vehicle until its official de-registration at the RTO. Construction of five more recycling facilities at different locations of the country is underway and expected to become operational soon. Maruti Suzuki too has floated a separate company called Maruti Suzuki Toyotsu India Pvt Ltd (MSTI) with the Toyota Tsusho Group to set up a vehicle dismantling and recycling facility in India with an initial capacity of scrapping 24,000 vehicles per annum.
Another example of driving social good through business models is HDFC Ltd's thrust on affordable housing. The Indian government's focus on affordable housing has seen fruition through the increased number of beneficiaries under the Credit Linked Subsidy Scheme (CLSS) which is a component of the government's flagship 'Housing for All' agenda. HDFC has nearly 2,00,000 beneficiaries under the CLSS, which is the highest by any financial institution in the country.
Apathy Towards Diversity:
In all these examples, responsibility towards stakeholders are not an after-thought or a 'nice to do' non-essential activity. Instead the companies' revenues come from activities that are beneficial to people and the earth.
While there is greater momentum for acceptance of products, services, business models that are different from the mainstream, there is as yet slow advancement on acceptance of individuals who have a different gender, age, sexuality, abilities, than the majority at the workplace in Indian companies. Not only are numbers dismal in some sectors such as automotive and infrastructure, where the largest 200 Indian companies have an average of only four per cent women employees, but the reality is even murkier when it comes to gaining access to leadership or even getting paid fairly for those who belong to an age group, gender, sexuality that is different from the mainstream in the company.
With the exception of self-made women managing directors such as Renu Sud Karnad of HDFC Ltd. and women who run their family-owned businesses, there are nearly no women CEOs amongst India's largest 200 companies. We found that companies' apprehension towards women availing their six-month maternity leave and their belief that mothers will be less efficient contributors to organisations, lead to hiring less women and lower retention of pregnant women and mothers.
Some Best Practices:
In this regard, indeed in our study, we also found some best practices. At Reliance Industries, besides 182 days of maternity leave, women employees can avail of six months of half- day leave policy. Godrej Consumer Products Ltd. has a Caregiver Travel Policy, which enables new mothers to bring a care-giver and children up to a year old for necessary work-related travel. Cipla offers six months of paid adoption leave.
The Most Sustainable:
In our study we also found that some of the most sustainable companies in India extend their own values to their supply chain. Building a sustainable supply chain does not have to be a 'next step' to cleaning up one's house first. Instead, establishing a sustainable company and a sustainable supply chain go hand-in-hand at the same time. For example, Godrej Consumer Products Ltd. evaluates its suppliers on quality certification, ethics, green initiatives, social focus.
The company also monitors the suppliers' performance and 81 per cent of these suppliers have shown improvement from previous scores in FY20. The company has made it mandatory for all its suppliers to adhere to certain Environment - Social - Governance parameters and performs external audits for vendor performance on sustainability aspects. It even helps suppliers reduce their carbon emissions, water usage, waste sent to landfills, use of hazardous toxins and their disposal.
A Starting Point:
Overall, the chief executives of several Indian companies are waking up to doing business responsibly. Instead of using 'sustainability' and 'go green' as buzz words or PR pitches, some companies are gradually embracing evidence-driven decisions that genuinely meet the needs of business and stakeholders.
Some corporates are taking steps towards greater climate resilience, an aspect unheard of a decade ago. Companies are building capacity to embed, monitor, improve, and transparently report aspects of their sustainability to all stakeholders and not just to shareholders. There are only three ESG funds in India as yet, but at least that is a starting point.
Cases of fraud and litigations abound - more in certain sectors than in others - but we are now beginning to see these wrongdoings being called out. The media is now playing a role too. Role models amongst Indian corporates are being showcased and celebrated by prominent media platforms such as BW Businessworld.
This is the start of a movement. Indian corporates have traditionally been oriented towards philanthropy and in some ways their philanthropic leaning is metamorphosing into the will and ability to go beyond increasing only shareholder value. Indeed, we might have averted the Malthusian catastrophe of population growth outpacing agricultural production, but there is much more to do.
The ongoing pandemic has shown us now more than ever before, the importance of striving for a safer, healthier, happier world.
The author is CEO, Sustain Labs Paris
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.