JOIN USIt is time that ESG is no longer seen as a business practice but business itself
By Sharmila Chandra
Even before COVID-19 upended business, society, and economics, the environmental, social and governance (ESG) movement was gaining steam. Now in the background of an economic slowdown, its importance stands magnified more than ever before.
Far-reaching challenges such as climate change and economic inclusion are concentrated in the minds of investors and executives in India and worldwide.
Given that global economics, thanks to seamless supply chains, are closely interlinked, it can be no other way. The pandemic has helped heightened awareness of how interconnected the world is, how rapidly external shocks can work through the global economy, and how central trust and transparency are to the economy’s operation.
Sustainable investing
The trend of sustainable investing by incorporating environmental, social, and governance factors is gaining traction in India.
For example, there are as many as 10 exclusive ESG-focused funds, of which six were launched in FY21. Globally, the assets under management (AUM) of funds incorporating ESG principles is more than $30 trillion.
From the standpoint of companies too, ESG adoption has moved from being a risk-mitigating tool to a core strategic priority. Indeed, the time has come when ESG is no longer seen as a business practice but business itself!
Stepping up on ESG parameters
Driven by this investor and consumer activism, many industries and large enterprises are now waking up to the importance of stepping up performance on ESG parameters. However, it is a challenge to retrofit ESG into businesses with a legacy of high carbo burden, like some heavy industries.
However, some enterprises had the foresight to anticipate this trend and now enjoy an early mover advantage on ESG parameters.
Diversified conglomerate ITC heads this distinguished list of innovators. The company adopted a triple bottom line growth strategy much before sustainability took center stage in the world of business.
However, everything has a limit and even the best performers must confront this question: how many limits can one push? How much can you give back to the environment, in comparison to what you take from it?
This is where the remarkable role played by ITC’s Chairman, Sanjiv Puri, in charting the company’s next-level strategy and raising the bar to make an impact that goes beyond the organization, comes for special mention.
ITC as ESG behemoth
Sanjiv Puri is doing this by pushing the company on three counts.
Firstly, is to make ESG not a practice or a process but a company culture across the entire value chain – starting from sourcing, manufacturing, storage, distribution, consumer engagement, to responsible end-of-life management of its waste.
Second, to innovate in areas that lead to positive ESG impact beyond the four walls of the organization. For example, innovating with packaging food products, using sustainable packaging, and substituting single-use plastics, which dissolve into the environment. When this new packaging model is adopted by the entire food industry, it will create a positive impact, which will go several times beyond the size of ITC itself!
The third is to connect dots in such a way that ITC’s initiatives lead to not just the creation of sustainable livelihoods, but also build capabilities for tomorrow. In doing so, by involving consumers in its initiatives, ITC ensures that the cascading effect of the behavioural change is unstoppable, leading to a different level of awakening among the stakeholders.
The outcome has been electrifying. ITC is an ESG behemoth today, with its sustainability programmes reaching a scale, which is unprecedented for private sector enterprises.
Other business groups are making rapid progress as well. In line with its ESG thrust, Vedanta Aluminium, the country’s largest producer of aluminium has been progressively including green energy for addressing its massive energy needs. Recently, it became India’s largest green power purchaser at the IEX Green Market, setting a new benchmark for comparable industrial players. Climate action initiatives across its operations have resulted in energy conservation of 1.4 million GJ and GHG savings of 0.32 million tonnes of carbon dioxide equivalent (tCO2e) in FY 20-21. Not just this, Vedanta Aluminium has recycled 16.5 billion litres of water in the last fiscal and conserved nearly 700 million litres of water, a feat for a large continuous process industry player of this scale.
For the company’s iron ore mining business, Vedanta Sesa Goa has been actively focused on mine closure planning, where after a mine has completed its life is converted into arable land or a biodiversity park converting environmental adversity into an opportunity. The company’s reclaiming of an area of 203 Ha at its Sanquelim mines in Goa is a national case study. After operating for almost 4 decades, the mine has been converted into an environmental delight through afforestation, retaining some portions of mine pits as water bodies to harvest rainwater and use of existing building infrastructure to build a skill development school for locals and a football academy.
Water stress
Today, 54% of India is water-stressed. Also, agriculture accounts for 70% of all freshwater usage. Therefore, if India’s water crisis has to be resolved, it will be either by increasing the supply of fresh water for agriculture or reducing the consumption of water by the agriculture sector. To address the critical problem of water stress, ITC has worked on both supply and demand sides. The company spearheaded an extensive watershed development programme covering over 1.2 million acres. Last year, under the guidance of Sanjiv Puri, ITC decided to put additional focus on water efficiency through ITC’s “more crop per drop” programme.
This includes training farmers to focus on efficient water use practices in current crops itself (instead of shifting crops), with resultant better yields and thus income. The result is water savings of 208 million cubic meters of water in 1 year, five times the harvesting could be done in 20 years. Clearly, market-relevant innovations are the way to go to solve complex challenges such as these.
The emerging ESG agenda will eventually encompass reporting, strategic, and business transformation initiatives for corporates. It all adds up to a new equation for business: behaviours based on purpose and trust that create value by finding solutions to the challenges that society is facing.
(Sharmila Chandra is a freelance journalist)