Monday January 5, 02:57 AM

Source: Indian Express Finance

Time to match intent with action

Climate change is a pressing issue of all times. Key stakeholders, regulators, society and the media are putting pressure on businesses and companies to act in a climate-friendly manner. While some companies are addressing the climate change challenges through their corporate social responsibility initiatives, others are taking serious initiatives to optimise the consumption of natural resources, use alternative sources of energy and improve energy efficiency. A few forward-looking companies are even launching green products and services to lay the foundation of an emerging low-carbon economy. The Financial Express and Emerging Ventures India have traced this journey of corporate India in the FE-EVI Green Business Survey, 2008, which was released by Teri director-general RK Pachauri, who is also chair of the Intergovernmental Panel on Climate Change (IPCC), in the Capital on December 19, 2008. The launch was followed by a CEOs Round Table Conference on How Green is Your Business. The panelists included: Harsh Pati Singhania, managing director, JK Paper; Naina Lal Kidwai, group general manager and country head, HSBC India; K Ravi Kumar, CMD, BHEL; Kamal Meattle, CEO, Paharpur Business Centre and Software Technology Incubator Park; Samir Modi, MD, Colorbar; Subir Raha, chairman, Team Raha Ideation Limited; Mark Runacres, director, Creative EcoWorks; Sohinder Gill, CEO, Hero Electric, and Rajdeep Sahrawat, vice-president, Nasscom. While Subhomoy Bhattacharjee, deputy executive editor of The Financial Express and Pranjal Sharma, executive editor, UTVi, moderated the discussion, Vinod Kala, MD, Emergent Ventures India, was the expert. We bring to you the excerpts, which have been edited due to space constraints: SUBHOMOY BHATTACHARJEE: It s probably one of the first occasions when corporate India has got together to discuss how the environment has become much more than a corporate governance issue today. It is a risk and at the same time it is a business opportunity. It is an issue that stands next to the financial crisis, but I think, in a few months, it will be back as the crisis of the century. To get a better understanding of the issues, let us hear from EVI s Vinod Kala about the FE-EVI Green Business Survey. VINOD KALA: I will briefly introduce the findings of this report. It clearly points out that more than 70% companies are pretty aware, especially from this FE-500 group, which we selected. They are pretty aware about the issues involved, the Kyoto Protocol, the regulatory risk as well as the operational risk to businesses. It has also some other interesting findings. For example, the awareness is very high in industries like oil, mining and minerals, but they really do not feel the threats and risks so much when compared to other industries. The other surprising finding is that although people realise that supply chain can have a very important role in cutting down both costs as well as emissions significantly, but not more than 7% of the businesses have actually tried to reengineer the supply chain to make it more efficient. Similarly, while the awareness level is very high, only 25% companies really feel that this will actually impact shareholder wealth. Also, whereas awareness is very high, only 16% companies have done actual assessment of carbon footprinting. It means that people are not yet coming down to take action on it. They are thinking in the boardrooms. The CEOs are aware and more than 60% of them have actually made this as an issue, which is of strategic importance to them. Real action on the ground is yet to begin. But, because the awareness level is high, it will definitely begin. BHATTACHARJEE: To understand the reasons for the gap between awareness and action, let us go where the real action is. Let us find out from Naina Lal Kidwai: How significant is the environment issue in the course of the discussion when a company comes to HSBC with a proposal for raising money? NAINA LAL KIDWAI: There are many issues here. For example, all foreign banks are signatories to various documents such as the Equator Principles, which pretty much define how we should lend responsibly. The challenge in the country right now is that it is just the foreign banks. I think it s important for the finance and banking sector in the country to actually embrace the standards as they exist everywhere else in the world. In the meantime we engage very actively with companies. This despite the fact that it is actually easier to say no, but tougher to engage with a company and say that we will deal with you, if you can indicate to us what you might do in this respect over the next three years and here is why you should do it. Nine out of 10 times, the company actually buys into the plan. In the long run, particularly for larger companies needing to go to the capital markets, the only way is to be sustainable and friendly to the environment. It is because investors are not just activist investors, but they will not invest in projects today that are seen as raping the countryside. PRANJAL SHARMA: Should the pressure be external or internal? HARSH PATI SINGHANIA: It has to be both external as well as internal. The external pressure acts as a catalyst. It is not just the question of whether you will get a loan or not, but it evokes thinking about questions that you might not have thought about earlier. But just external pressure is not adequate for a sustainable situation. I think there has to be internal awareness and a commitment starting from the top and percolating all the way down through the systems and methods. SHARMA: What is the experience of the public sector vis- -vis awareness and practice? Ravi Kumar, are you the change that you want to usher in? K RAVI KUMAR: Power is one of the biggest polluters in the country. So, what we are doing is to improve the technology to deliver more power for the same fuel. We are going for supercritical technology as far as coal is concerned, which burns less fuel for the same output. We are also pushing to sell more efficient power production equipment. If you have taken coal as the basic fuel, then how to burn less fuel for the same output is the issue. Coal is the mainstay in India. So, we have taken up a lot of steps to improve the efficiency of our sets and also reduce CO2 in the atmosphere. We have taken up certain initiatives in wind and solar, too. We are also going for nuclear technology. BHATTACHARJEE: How central is the environmental issue to a company s balance sheet as of now in India, Rajdeep? RAJDEEP SAHRAWAT: Talking from the point of view of the IT industry, green computing or green IT has to move from being a public relation exercise to being an opportunity for it to become more sustainable. Some smart companies are beginning to create business opportunities out of this. It has become an opportunity for growth. Smarter companies are creating products and services around it and that is where it is going to become sustainable and impact the balance sheet. It is not going to become a cost driver; it is going to become a growth driver. While smart companies will see this as a business opportunity, others will see it as a CSR exercise. BHATTACHARJEE: So, the environment is on the asset side, not on the liability side! RAJDEEP SAHRAWAT: Absolutely. It is an opportunity today. SAMIR MODI: I think more and more companies are becoming aware of the environmental issues. For example, whatever we are setting up in terms of manufacturing new or ongoing at the Modi Group, we are going for CFLs. BHATTACHARJEE: Mark, You have been with the British government and Teri and are now in business. Why is corporate India taking time to get into the act, even though it has high awareness level? MARK RUNACRES: Clearly, there is still an enormous job of awareness raising to be done. Besides, there are other issues than looking at it as a business opportunity or brand management exercise. How do they measure their success? It is not a new idea but it is an idea which, I think, people have had a lot of trouble digesting and putting into their institutional accounting structures, which is fundamentally the idea of the triple bottomline or other more developed global reporting initiatives that have come up over the last decade or so. It means corporates don t have only to be successful economically, but they also need to measure their performance by their contribution be it environmental or social. The environment is part of the measurement of how successful your company is. SHARMA: But are companies actually looking at it as a business case or using it as one of the feathers in their cap, which may look good, but without making any difference on the ground, Subir? SUBIR RAHA: People equate being green with being carbon neutral. Being green is much more than being carbon neutral, but there are other issues, which are equally important. Unfortunately, many companies talk about going green essentially for public relations and nothing more or because of getting easier loans or getting a better response at IPO. But let s look at the third angle. What can really make corporates run? It s statutory coercion, the fear and this is lacking when you talk about the price of going green. Here, we are talking about the reward of going green. But what is the price if you do not go green? SHARMA: So, you are saying the carrot is not important, but the stick is more important? SUBIR RAHA: Both are important. But the stick always works faster. SHARMA: Sohinder, is it the stick or the carrot for you? SOHINDER GILL: I come from the transportation sector, which is the worst offender. When the Hero Group tried to make the business green 25 or 30 years back, it was more because of regulatory reasons and also due to management philosophy. So, it was not really too much of a carrot at that point of time; it was more of the stick. But, perhaps because of the Japanese entry, the group slowly graduated into seeing this part of the business as part of your costs and how to reduce it. So, we graduated from simple, earlier days of just diluting the effluents and throwing it into the rivers to making some effluent treatment plants and later on starting heat recovery and metal recovery. That is where the point of inflexion came where it was not taken as a cost, it was taken as an opportunity. Our second strategy is to venture into green products. Two years back, Hero Electric thought of coming out with electric bikes. It is very futuristic, which calls for a risk appetite and investment. Now that is something where it is more of a management philosophy and management strategy and it nothing to do with the compulsion. BHATTACHARJEE: So, going green is making business sense. As one of the first companies to look at it as a business case, Kamal what would you say? KAMAL MEATTLE: I look at it in a different way. I look at it as an issue of body, mind and intellect. Let us start with intellect. It is an issue of your conscience and what you think is right to do. The next issue is in terms of your mind. You can differentiate between the shareholder interest and what you may believe as the right thing to do. As an individual you can write cheques to a charity. We found that being green or caring for the environment has reduced attrition for us, has got us people to work for us (these would not have worked for us otherwise) and we find that our productivity is higher and there is much more of motivation of people working in the organisation. I think, as far as we are concerned, as a service industry we have benefited the most from this particular aspect. I think, whatever we have done, we have got repaid many, many times over by this particular one action besides having a good image among our customers. The third one is, as I mentioned, body. I would say that green is good. I think that as far as we are concerned, good green practices mean money. I will give you one simple example. We are building a new park where the total electricity requirement will be about 4.6 megawatt per 1.75 million sq ft. We think we are going to save something like Rs 75,000 an hour on electricity bills. So, we think, it makes good business sense. BHATTACHARJEE: Vinod, if you were to do this survey again, what are the particular indicators that you would like to change? KALA: As a business we must realise that by 2050 the globe is getting committed to a reduction of carbon dioxide emissions and related kind of issues by almost 80%. It is 50% plus, but people are targeting 80% in many countries. Now, if that kind of a transformation has to take place in the next 40 years, it means almost all aspects of a business will change definitely and the businesses, which actually realise this are therefore on the fast uptake, will explore the possibilities of launching new products and new services. Already, there is a clear realisation that all resources whether finance, people, government support or community support are available to businesses that are actually green. I definitely think going green is not only about reducing carbon dioxide emissions but all other aspects of business. If that is the case and if you are going to transform your business, there is very little time. We would like to see next year some real examples. There are some examples that are already present here. But we would like to definitely bring out next year great examples of innovation and new businesses being created around this threat. For example, when Y2K was there, it was a very simple problem. It created a whole new industry. I think this possibility of a big transformation in all aspects of our life the way we travel, the way we live, the way we consume anything is the biggest transformation that can take place. I think we should get ready much faster. I am really hoping to see much greater examples next year.