Walk the Elephant- Environment & Social Governance

Post the Union Budget presentation India Inc.’s growing involvement & concern on sustainability, clean energy and much more all of it falls in the broader ambit of ‘Sustainable Development’ which was reflected in most of CEOs’ statements. It is interesting to note that the pandemic has re-focussed on “basic concerns” that has been systematically crushed for decades and on which the superstructure of capitalism, blatant disregard to environment and governance has led the world to a tipping point, now occupies centre stage. It is not unusual post COP26 climate activist Greta Thunberg summarised the COP26 as “blah blah blah” while leading a massive rally on the climate change at Glasgow. Her single concern how fast can the world act on the climate change and related issues that was created, ignored by those who are taking the lead to address the same.

Under the broad parameter of sustainability, the entire gamut of Environment, Social & Governance (ESG) a fascinating combination of words coined by UNEP Initiative in 2005 with deep rooted connotation which if implemented “a bit” would re-organise the entire fabric of mankind. However, as Paul Polman mentions in “Net Positive” even board members did not understand ESG in its entirety.

A study conducted by Ernst & Young says , as the world approaches the two-year mark of the pandemic, businesses have learned to function within a COVID-19-driven ecosystem, and digital has gone from pandemic necessity to business priority and a growing emphasis on ESG measures is likely compelling companies to consider their sustainability plans. Leading organisations like the Tata Group believe “Being ESG compliant is expected to raise the ratings of Tata group investment opportunities globally while potentially lowering its borrowing costs.” In his New Year address to the employees within the group the Chairman Padmabhusan N Chandrasekaran emphasized “The group must keep pushing itself to be simpler, more sustainable and more technologically advanced products. If we do, we can push our company, and our country, forward"
Today the world’s three biggest asset managing organisation Black Rock, Vanguard and State Street have ESG at the top of their mind. For example, in 2018, Black Rock’s chief executive Larry Fink called on corporations to look beyond profits and consider their contributions to society. More and more investors are voicing concerns about sustainability and are keeping it as major criteria however, sustainability reporting by many organisations has a gap between doing, understanding, and promising. Ernst & Young, found “Environmental, social and governance (ESG) reporting is moving to the centre of the CEO’s radar, joining digital strategy, and leapfrogging the war for talent.” This is where lies the concern towards fulfilling ESG criteria or requirements and bringing in actual changes. It is disheartening to hear that sustainability has got to do with only certain social programmes or measuring emissions, responsible sourcing etc. and surely do not figure in the centre of any business. In simple terms sustainability is an “attitudinal change” urgently needed in today’s global scenario.

In a recently held webinar by Harvard Business Review where Andrew Winston & Paul Polman were talking about how sustainability needs to be practiced at individual level? That set me thinking to count my own carbon emissions at home and how I could reduce that? For example: if we simply follow three small house rules switching off lights when not in need, solid waste management-from source to disposal, put off the tap when not in use, do sound small activities but leads to considerable reduction in carbon footprints. Translate this at the organisational level to address only the Environment aspect and an entire chain of inter-related activities are addressed technically and numbers maybe achievable, however, that is only possible if the Social and Governance aspect move along with Environment.

It is imperative that people are involved at every level across the organisation to understand, coordinate and imbibe the changes and put it in practice. To achieve this let us see what was being done in India so far as ESG was concerned even before the 1990s, the Tata group when planning the steel city of Jamshedpur, founder Jamsetji Tata directed his sons to “be sure to lay wide streets planted with shady trees, every other of a quick-growing variety. Be sure that there is plenty of space for lawns and gardens".

Similarly, when the group decided to set up their chemical works in 1939 in the semi-arid Mithapur area of Gujarat, their innovative genius yielded significant water conservation initiatives that supported not only the new soda ash plant, but also a township of over 10,000 people. Tata Motors built its new automotive plant in 1966 in Pune, a lake was created next to the plant with water entirely supplied by the plant’s effluent treatment system; this is now a haven for many species of rare migratory birds. Several Tata companies have estimated their water footprint and implemented water management levers such as rainwater harvesting, reuse and recycling of treated wastewater, and watershed management.

Aside from the above, Unilever’s Sustainability Living Plan (USLP) is testament to how each of the concept is made operational by having a clear Plan for Environment, Social & Governance as envisaged by Paul Polman and going strong with the current CEO Alan Jope. As mentioned by Polman the purpose of USLP was to “stop the decline in business and re-discover purpose and identity was core to its launch.” At its launch USLP had three audacious goals to achieve in a decade:-

1. Improve health & wellbeing of more than one billion people.
2. Reduce environmental impact by half
3. Enhance millions of livelihoods through the growth of the business

Under the above major goals there were seven subcategories with specific targets for the business that ranged from nutrition, greenhouse gasses, health, responsible sourcing, inclusive business, opportunities for women and many more.

From the above two examples, itcan be inferred, long lasting organisations had a) kept sustainability at the centre of their business b) set bold goals c) built a purpose.

Setting up goals such as the above makes the leadership and employees not only focus to achieve butgives a purpose to the entire organisation. As aptly said by Chairman of IT giant WIPRO Azim Premji “If people are not laughing at your goals, your goals are too small”

It also shows that compliances were not their only aim but bringing definite change and genuine concern made their businesses long lasting and admired around the world. They won people’s admiration, the most telling example being of thetakeover India’s national carrier Air India by the Tata group which is hailed across classes as being in safe hands. To an average citizen Tata means Trust. Similarly, Unilever’s purported takeover by Kraft Heinz was strongly opposed by the public and ultimately given up. Therefore, in the current scenario it is time to walk the Elephant and not make it a compliance game only!

(The paper is the author’s individual scholastic articulation. The author certifies that the article/paper is original in content, unpublished and it has not been submitted for publication/web upload elsewhere, and that the facts and figures quoted are duly referenced, as needed, and are believed to be correct). (The paper does not necessarily represent the organisational stance... More >>