The sustainability factor in Indian businesses
Business Sustainability can be defined as a proactive approach to ensuring a business’ long-term viability and integrity through optimization and management of resource needs and reduction of environmental, energy or social impacts, while not compromising competitiveness or profitability.
As per the definition above, in simple terms, a sustainable business is a business that focuses on improving its bottom line results and at the same time does not harm the society or the environment in which it operates. Indian businesses are taking active steps to ensure sustainability at a company and country level.
The need for Business Sustainability
Pressures from various stakeholders are impelling businesses to take proactive steps to ensure sustainability in their operations. These pressures / incentives can be from the external environment or from within the business enterprise.
The key external environmental influencers are customers and social activist groups who are increasingly becoming anxious about the impact of businesses on the environment. To add to that, the government has also introduced several regulatory guidelines and policies which the businesses are obligated to follow.Some of the recent ones are releases of National Voluntary Guidelines for Social, Environmental, and Economic Responsibilities of Business by the Ministry of Corporate Affairs and a policy mandate for Central Public Sector Enterprises to earmark a part of their net profit for sustainability initiatives. Another strong motivating external influence is the fact that Indian businesses, by following international sustainability standards, can increase their attractiveness to forge partnerships with international companies.
Additionally, the pressure to become sustainable comes also from within the business. Businesses are struggling to find solutions to increasing costs of energy, water and waste management and solutions to the scarcity of natural resources. Any approach to reduce the effects of these on the operations processes will benefit businesses tremendously. Subsequently sustainability can be used as a competitive advantage by introducing innovative environmentally friendly products that leads to additional revenue streams and contributes to increase in brand equity. In the 21st Century, being sustainable is no more an option in business but it is imperative to the growth of the company and the shareholder value.
Sustainability reporting in India
The fact, that there has been an increasing trend in voluntary sustainability reporting by businesses can be taken as a serious indication of their dedication towards evolving into sustainable enterprises. The Carbon Disclosure Project, India saw a 35% increase in the reporting from Indian companies in the periods 2007 to 2011, similarly the Global Reporting Initiative (GRI) received 88% more sustainability disclosures from Indian businesses, in the same period. Sustainability as a concept among Indian businesses caught up only towards the middle of the decade
Other than the increases observed in reporting of sustainability data among Indian companies, there has been notable international recognition for the sustainability efforts that some of these Indian companies have been pursuing. Thirteen Indian companies were ranked among the ‘greenest’ companies in the world, in 2012 by Newsweek, which is an increase of three companies from the previous year. In fact, this year three Indian companies fell within the top 20 Newsweek green rankings. These companies are Wipro (3), Tata Consultancy Services (11) and Infosys (19). Wipro has also been a part of the Dow Jones Sustainability Index (DJSI) for three consecutive years. Similar to the private sector, the Public sector undertakings are also aiming towards more sustainable operations. In 2011, eight PSUs submitted sustainability reports to GRI, which consisted of about 16% of the total submissions in the year 2011.
According to the GRI data, the rate of growth of Indian businesses aiming at sustainable operations are quite impressive, however it is a point to note that the actual number of businesses submitting sustainability reports is quite low. In 2011, there were only 51 Indian businesses that submitted reports on sustainability. It is not sufficient to compare the actual number of submissions as these can vary depending on the number of companies listed in the domestic stock market. Therefore, the percentage of the number of companies disclosing their sustainability data to the total stock exchange listed domestic companies provides the true picture of the state of business sustainability in the region.
Looking at global data of sustainability reporting we see that even businesses in the developed nations like UK and USA are reporting less than 10% of the domestic listing on the stock exchange5. Among the BRIC nations, Brazil has the highest percentage of businesses reporting sustainability data (33%)5; this is also true when compared to the developed nations sample data. India with 1% only reporting, has one of the lowest sustainability reporting percentages and actual reporting numbers among its BRIC peer group (and the Developed nations). Considering the fact, businesses started systematically collecting and reporting sustainability data only in the year 2000, when the GRI reporting guidelines were launched, it will take businesses worldwide and in India, some more time to accept the concept.
Business sustainability initiatives
Pioneering Indian businesses in various industries are using sustainable operations to optimize their processes, with a view to taking advantage of the increase in revenues, reduction in costs and avoidance of regulatory risks.
The table below provides some of the major initiatives undertaken in India by sustainable businesses in selected industries. The initiatives given in the table are not in any priority order.
Major Sustainable Initiatives
|Efficient Supply Chain Management Development of innovative fuel efficient vehicles Green Infrastructure – for offices and factories Conservation of water and energy usage in the processes Optimization of material management process Provision of employee buses to reduce carbon foot print Utilization of alternative sources of energy|
|Smarter Buildings Green IT – virtualization of servers, desktops using Cloud Tree planting at IT campuses Reduction of travel using innovative communication technologies Focus on reduction of paper in the offices|
|Internet and Mobile banking and the introduction of IVR facility has reduced the usage of paper Innovative product offerings – provision of preferential loan rates for the purchase of hybrid vehicles and construction of LEED design buildings Green awareness campaign among employees Solar powered ATMs|
|Eco friendly products and packaging Eco friendly sourcing Recycling initiatives Green Buildings Alternative Energy sources Energy, water and waste management|
Table: Sustainability initiatives by selected industries
Some specific examples of savings from sustainability initiatives implemented by Indian companies are mentioned below:
1. The Chennai based truck manufacturer Ashok Leyland saves about 35-40% on power consumption in their corporate office which is a LEED green certified building.
2. Shoppers Stop deployed energy savings systems that reduced the energy consumption in their stores which resulted in a savings of INR 440 lakhs in the first year.
3. Infosys has gained a 23% reduction in per capita energy consumption on all Indian campuses since 2008, using building energy management solutions
In order to gain the benefits from the sustainability initiatives, there needs to be an effective and integrated plan that the businesses need to follow. Business sustainability should become a part of the corporate cultur
Key challenges in adoption
Few companies in India are engaged in the initiatives mentioned in Table 2 above. There is still a very large mass of businesses in India that could employ sustainability methodologies in their operations. The main reasons for the low acceptance of business sustainability in India are two-fold, one there has been the lack of widespread know-how on how to collect, collate and report the data. Although Indian businesses have been including CSR initiatives in their annual reports, where the focus was more on social responsibility, the environmental data gathering was not given too much of importance. The second main reason is the limitation of the existing internal systems to effectively measure track and assimilate the sustainability impacts into corporate strategy and operational objectives.
The challenges of adopting sustainability initiatives will be addressed through the sustainability solutions providers, that help assess, define and deliver a comprehensive sustainable strategy. As the momentum and awareness, picks up there will be a high demand for sustainability services.
Fostering adoption of Business Sustainability
Several initiatives can facilitate the adoption of business sustainability initiatives, namely
1. Recognition of sustainable businesses through award functions by industry bodies enhances their public image. The CII-ITC Sustainability award and Parivartan Sustainability Leadership award are two of the awards provided by different industrial organizations.
2. Thought leadership papers published and sustainability reporting workshops organized by industry bodies like CII and TERI plays a role in reducing the ignorance about the subject and encourage more participation. There are also industry conferences that provide a platform for partnership or innovative thoughts.
3. Analytics combined with IT solutions facilitate easy measurement and monitoring of sustainability initiatives, making it easier for management to track and realize the benefits.
4. Sustainability guidelines and policies published by the government coax companies into compliance.
5. Initiatives to inform businesses on the advantages of earning additional revenue from carbon credit trading will help increase the number of businesses running sustainable operations.
The Indian industry has just woken up to the concept of business sustainability and its advantages. There are currently only a handful of businesses that are reporting sustainability information. However, the initiatives adopted by the industry organizations and the government are bound to provide an impetus to the trend of adopting business sustainability as a competitive advantage. It is quite evident, from the recent rapid growth in sustainability reporting, that this trend will continue to grow.
In this day and age, when almost everything is interconnected, instrumented and intelligent, it is not inconceivable to attain solutions available for businesses to conduct sustainable operations. As more businesses become informed, and experience the increase in shareholder value, the market adoption of sustainability solutions will grow tremendously. This trend will take the adoption of business sustainability in India much higher.
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