Making Sustainability Work Through Business Transformation

A recent study found India’s economic growth to be at over seven percent, largely led by businesses pursuing innovation activities and automation initiatives that are aimed at sustainable, long-term operations. In a departure from past interventions, businesses in India are making steady progress towards embedding sustainability practices into their overall processes. These efforts are also keeping key stakeholders in mind, while ensuring that operations are able to build long-term values for businesses and also have an impact on broader global challenges. To do so, Indian businesses are deploying instruments to upscale partnerships with local communities, collaborate with the state machinery, and innovate upon existing practices going forward.

Sustainability is good business

Sustainability is a key driver that facilitates a country’s economic growth trajectory, aligning global competitiveness with inclusivity. There is an increasing realisation that the economic and social environments in which a company operates present it with a number of issues that have direct implications for its level of growth. Companies have demonstrated that sustainability of a triple bottom line (the financial, social, and environmental effects of corporate action that determine a form’s viability as a sustainable enterprise) can meet future challenges and help the companies maximise profits on one hand, and address critical social and environmental issues.

Sustainability is not just change in the process, but change in mind-set

Sustainability is not just about the adoption of policies, but also the need to change the mind-set of the public. The success of sustainable business activities is based on people’s perceptions of ‘sustainability’. It is important that sustainability be implemented with a long term and holistic approach, taking into consideration the well-being of all stakeholders, and the environment.

Sustainability is a good model for the creation of social value

More than ever before, businesses now are realising that it is critical for them to build bridges with all key stakeholders, and in particular with the communities that they operate within, in order to create sustainable business propositions. Businesses are also finding that the best way to scale and achieve efficiency, and have large scale impact on communities is by integrating innovation into the design and manufacturing of consumer products. Social value creation also seems to have been working well for companies in terms of correlated business performance as it has related to the transparency of peer appraisal initiatives, where this has had positive repercussions on supply chain improvements and a greater openness to shareholders and other stakeholders.

Community participation is key in driving a sustainability agenda

Businesses have been taking all required steps to engage with the communities that have become so intrinsic in their successful operations. Beyond obtaining the social licence to operate within a community, businesses in India are increasingly looking for new ways to include communities as a part of developing strategic business plans. These interventions are paying off and creating a model that acts as a sounding board for businesses, providing a platform for both listening and taking action. More and more collaboration and partnerships in the form of joint programs, direct participation of community members, and in some cases co-creating sustainable business processes that take into consideration local needs and as well as pragmatic business processes, are resulting in increased trust and appreciation of each other’s styles and points of view.

Voluntary sustainability policies and codes of conduct ensure greater transparency

Companies in India are also adopting relevant and voluntary principles and codes of conduct that are designed for their specific sectors and industries. Some of these principles include Environment, Health and Safety (EHS) policy and supplier codes of conduct. The United Nations Global Compact (UNGC) principles around human rights, labour, anticorruption, and the environment are global, voluntary sustainability initiatives that have, over the last 15 years, been adopted by 9000 businesses and 4000 non-business organisations globally and which are also actively involved in disclosing their performance on these principles through company sustainability reports, which are published annually. Sectors such as automotive, infrastructure, cement, electric utilities, and metals and mining are found to be actively adhering to these reporting frameworks.

The Global Compact’s Ten Universal Principles are driving the sustainability agenda globally

The Global Compact and its ten universal principles on human rights and anticorruption are strategic sustainability initiatives being pursued by businesses committed to identifying key issues and to addressing these in a voluntary yet transparent manner. Many businesses are of the view that voluntary sustainability initiatives and codes of conduct across value chains are more effective in improving business processes. This belief is evident in its voluntary commitment to the ten Global Compact principles and up-scaling of reporting through communication of progress (CoP), and towards responsible business conduct and transparency. This process had led many businesses to take the lead towards embracing transparency and spreading awareness about cross fertilisation of innovations and deep peer learning within and among businesses.

Product responsibility makes a good case for business

Product responsibility requires a combination of three things: customer benefit; the highest safety standards; and maximum environmental and climate compatibility. The companies, especially in the manufacturing sector, realise that it is not only important that production processes are sustainable, but that the product itself is also sustainable. In their operations, companies are increasingly working to address environmental and social issues across the product life cycle.

Leveraging technology and programme innovation for scale and efficiency

Businesses in India are now realising that sustainability can be achieved by reducing its environmental footprint and increasing investments in environment-friendly technologies. Companies have demonstrated improvement in energy efficiency by exploring alternative energy sources and cleaner technologies, such as the use of solar and wind energy, and through water, waste, and energy management. The renewable energy agenda within Indian businesses is gaining traction with a few transformational companies, which have even committed to reaching 100 percent renewable energy goals in the medium to long-term. Action taken to achieving this goal will be a major push towards clean and sustainable growth, in line with the sustainable development goals of the United Nations’ post-2015 architecture.

Extending sustainability to the supply chain is equal to a shared value approach

Pressure from investors, shareholders, customers, and nongovernmental organisations is increasingly pushing businesses to drive sustainability into the supply chain. By managing and improving environmental, social, and economic performance throughout supply chains, businesses can conserve resources, optimise processes, uncover product innovations, save costs, increase productivity, and promote corporate values. Businesses are pushing this agenda by integrating supply chain sustainability criteria into the procurement process, such as policies like supplier codes of conduct and sustainability awareness programs for suppliers. Businesses are also increasingly seen to be encouraging transparency and selecting or awarding more business to suppliers with stronger sustainability performance indicators. Such programmes and policies are generally aimed at driving performance improvements of the company and its supplier.

State incentives can help businesses escalate their sustainability initiatives

The business environment in India is challenging, due to government bureaucracy and administrative processes that reduce efficiency and hinder business development. Most companies mention that existing regulatory policies in India do not offer clear incentives for integrating sustainability across sectors. The incentives currently offered by the government are limited to the integration of technological innovation by companies, with no incentives being offered to businesses for adopting practices that minimise waste and increase efficiency. In order to encourage industry practices that address climate change and sustainability, the government can offer incentives such as tax benefits and water cess benefits.

Provisions have however, been incorporated under various legislation that mandates companies/business organisations to report on specific environmental matters that have adverse impacts on competitiveness. Even so, these provisions do not represent enough, in terms of government activity, in increasing private sector sustainability initiatives.

The adoption of bottom-up approaches will fast track the advantages of social licenses to operate

As employees emerge as a key stakeholder group for sustainability programs and reporting, there is an increasing effort by Indian companies to influence the mind-sets of their employees, in order to achieve higher sustainability goals. Besides employees, companies are also encouraging community participation to increase ownership among the larger community in development initiatives.

The social license to operate (SLO) – granted by local communities and recognised by and binding for governments and multilateral agencies as a means of obliging companies to abide by the wishes of local communities – is essential for reducing the risks of public criticism, social conflicts, and, in general, damage to a company’s reputation. Sustainable practices offer the company the opportunity to win the trust of the larger community and thus make it easier to obtain an SLO. SLOs offer organisations a wide enough platform to shift from a linear obligation that is restricted to shareholders, to a multiple stakeholder model. The sustainability of a business also allows for consistent customer loyalty, a viable social license to operate, and a vibrant environment – all of which lead to a competitive edge.

Robust internal mechanisms are key in increasing operational business efficiency

In their bid to become more sustainable, businesses in India are developing robust internal mechanisms to drive their agendas, such as leadership tenability, and vigorous measuring and mapping exercises to determine their greenhouse gas emissions (GHG) emissions. EHS policies and departments are being established within companies to consider environmental protection, and occupational health and safety of employees. There are evident examples of businesses aligning their processes to ensure rapid response to emergencies. These intiatives result in better inter-departmental coordination for inbuilt efficiency, as well as growing involvement of senior leadership in driving the sustainability agenda.

Sustainability initiatives deepen business brand value and reputation

Manufacturers and retailers are seeing the value that sustainable practices bring to their businesses, and the brand loyalty that it builds. These entities are realising that the assessment and improvement of environmental and social performance through their value chain is adding value to their brands and building consumer confidence in their companies. Business interventions are leveraging community participation at the  grassroots level, and enforcing a positive image that businesses are operating in a transparent and ethical manner. It is quite evident that sustainability initiatives by businesses in partnership with communities are producing new innovative practices within the context of local culture, and are simultaneously more embedded in strategic decisions.

A number of nation-states, now more than ever before, continue to withdraw from welfare measures and direct support for their citizens, while businesses are in an expansion mode of economic growth. This means that together state incentives, business transformation, and community engagement will be key pillars in shaping the next version of the ‘growth model’, one that is both sustainable and people-centric. This approach warrants a composite dialogue and seamless cooperation between and among those who are often conflicting players – states, businesses, and communities.

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Pooran Chandra Pandey

Former CEO of the DOC Research Institute (2016-2018), IN

Pooran Chandra Pandey is one of India’s leading experts on advocacy, economic and social development work, management and the voluntary sector. From 2011 to 2016, he served as Executive Director for UN Global Compact Network India. Prior to taking up that post, he was Director at the Times Foundation, one of India’s leading corporate foundations working in the areas of health, education, environment, women’s empowerment, and disaster management. From 2004 to 2007, he was CEO at Voluntary Action Network India, the country’s largest association of voluntary organizations, comprising 2,400 members within India. Credited with pioneering the notion of involving civil society, businesses and government through a consensus-building approach for inclusive social dividends, Pooran Chandra Pandey has led the launch of national public service campaigns within India such as Lead India, Teach India and the social impact awards. Specialising both in development and humanitarian assistance, he has also chaired and co-chaired a number of Indian Government task forces and committees developing national policy on the voluntary sector, implementing the UN Handbook, non-governmental charter of good governance, rationalisation of policies for NGOs, and the foreign contribution regulation act. Pooran Chandra Pandey holds a BA and MA from the University of Allahabad, an M.Phil in International Studies from Jawaharlal Nehru University in Delhi, and was also a Chevening Scholar in Leadership and Global Organization at the London School of Economics.