Sus­tain­abil­ity Ser­vices is $ One Bil­lion Op­por­tu­nity

As spend­ing on sus­tain­abil­ity en­gage­ment is ex­pected to touch $1 bil­lion by 2019, Nitin Kalothia, Direc­tor, Sus­tain­abil­ity Ini­tia­tives Prac­tice, Frost & Sul­li­van, dis­cusses op­por­tu­ni­ties and chal­lenges with Sus­tain­abil­i­tyNext

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What’s Frost’s view on how India is tack­ling Cli­mate Change? What are your sug­ges­tions to make it bet­ter?

Cli­mate change is one of the great­est chal­lenges of this era. The con­se­quences of this threat, if not we, will cer­tainly be borne by the fu­ture gen­er­a­tions. Com­bat­ing cli­mate change is there­fore fore­seen as the top pri­or­ity glob­ally. India in this re­gard has long been com­mit­ted to United Na­tions (UN) to­wards tack­ling cli­mate change and has taken cer­tain se­ri­ous steps to ad­dress its own green­house gas emis­sions – Pledge at Copenhagen, Rat­i­fy­ing Paris Cli­mate Change agree­ment. Back home, the fo­cus has been to­wards cre­at­ing ro­bust poli­cies and ac­tion plan.

The Na­tional Ac­tion Plan on Cli­mate Change (NAPCC) is a com­pre­hen­sive ac­tion plan out­lin­ing mea­sures on cli­mate change re­lated adap­tion and mit­i­ga­tion while si­mul­ta­ne­ously ad­vanc­ing de­vel­op­ment. Stud­ies sug­gest that with the ex­ist­ing poli­cies and mea­sures, India is set to achieve its Na­tion­ally De­ter­mined Con­tri­bu­tion (NDC) emis­sion in­ten­sity tar­get. With the con­tin­ued ex­pan­sion of re­new­able ca­pac­ity and im­ple­ment­ing the draft Elec­tric­ity Plan, India could even over­shoot the non-fos­sil ca­pac­ity tar­get set in the NDC and it is ex­pected to achieve 57% against 33% tar­get by 2027.

As India moves into the im­ple­men­ta­tion phase to meet the com­mit­ments, the key ar­eas to be looked at are one the ac­tive par­tic­i­pa­tion from mul­ti­ple stake­hold­ers, both busi­ness and gov­ern­ment sec­tors com­ing to­gether to put so­lu­tions into place. For re­new­able en­ergy, af­ford­able and avail­able fi­nanc­ing is the key to en­able re­new­able en­ergy to com­pete with fos­sil fu­els. India fur­ther needs to strongly push for Cli­mate Tech­nol­ogy Cen­tre and Net­work (CTCN) in or­der to have im­proved ca­pac­ity that would help in gen­er­at­ing good adap­ta­tion ac­tion plans to com­bat cli­mate change.

What are the trends in how In­dian busi­nesses are ad­dress­ing sus­tain­abil­ity – why is the up­take so luke­warm?

In sim­ple terms, sus­tain­abil­ity for busi­nesses means im­prov­ing their bot­tom line re­sults and at the same time not harm­ing the so­ci­ety or the en­vi­ron­ment in which they op­er­ate. Busi­nesses in India across in­dus­try sec­tor (lead by the au­to­mo­tive, oil & gas, engi­neer­ing, IT/ITES sec­tor) are em­pha­siz­ing sus­tain­able op­er­a­tions to op­ti­mize their pro­cesses and lever­age the ad­van­tage in the form of rev­enue growth, cost re­duc­tion and tack­ling reg­u­la­tory risks. Over the last decade, there has been an in­creas­ing trend in sus­tain­abil­ity per­for­mance dis­clo­sure by In­dian en­ter­prises, which is an in­di­ca­tion of how the com­pa­nies are look­ing at evolv­ing as sus­tain­able en­ter­prises. Un­der

the Car­bon Dis­clo­sure Pro­ject (CDP), India saw a 55% in­crease in the re­port­ing from In­dian com­pa­nies in the pe­ri­ods from 2007 to 2015, sim­i­larly the Global Re­port­ing Ini­tia­tive (GRI) re­ceived 88% more sus­tain­abil­ity disclosures from In­dian busi­nesses, in the same pe­riod.

While on one hand we see growth in com­pa­nies be­liev­ing in sus­tain­abil­ity, on the other hand there is still a very large mass of busi­nesses in India that are yet to em­ploy sus­tain­abil­ity method­olo­gies into their op­er­a­tions. The main rea­son for the low ac­cep­tance could be of two-fold, one the lack of un­der­stand­ing on how to col­lect, col­lates and re­port the data. Al­though CSR ini­tia­tives are in­cluded in their an­nual re­ports, the en­vi­ron­men­tal data gath­er­ing is still at a nascent stage. The sec­ond rea­son is the lim­i­ta­tion of the ex­ist­ing in­ter­nal sys­tems to ef­fec­tively mea­sure, track and as­sim­i­late the sus­tain­abil­ity im­pacts into cor­po­rate strat­egy and op­er­a­tional ob­jec­tives.

Should the gov­ern­ment – SEBI make it manda­tory for all listed com­pa­nies to start filing in­te­grated re­ports?

The con­cept of in­te­grated re­port­ing is be­ing dis­cussed at var­i­ous in­ter­na­tional fo­rums. To­day, an in­vestor seeks both fi­nan­cial as well as non-fi­nan­cial in­for­ma­tion to take a well-in­formed in­vest­ment de­ci­sion. SEBI in its re­cent cir­cu­lar in Fe­bru­ary 2017 is un­der­pin­ning the top 500 listed com­pa­nies to vol­un­tar­ily adopt In­te­grated Re­port­ing (IR). The agenda is to pro­vide share­hold­ers and in­ter­ested stake­hold­ers with rel­e­vant in­for­ma­tion that is use­ful for mak­ing in­formed de­ci­sions. This is fore­seen as the next step to move away from com­pa­nies mak­ing sep­a­rate fi­nan­cial and non-fi­nan­cial dis­clo­sure state­ments. Ex­perts see this as path­way for pol­icy-mak­ers and reg­u­la­tors who are seek­ing to in­duce the cor­po­rate sec­tor to ac­knowl­edge and man­age the en­vi­ron­men­tal and so­cial ex­ter­nal­i­ties of their busi­ness op­er­a­tions and to make their gov­er­nance pro­cesses more ro­bust and trans­par­ent. This would also cre­ate the need to adopt re­spon­si­ble busi­ness prac­tices in the in­ter­est of the so­cial set-up and the en­vi­ron­ment which is vi­tal for fi­nan­cial and op­er­a­tional ex­cel­lence.

What is the size of busi­ness op­por­tu­ni­ties em­a­nat­ing from sus­tain­abil­ity ser­vices in the next 5 years?

A decade ago sus­tain­abil­ity ser­vices didn’t ex­ist as a sep­a­rate cat­e­gory of en­gage­ment. The main rea­son be­ing, top emerg­ing economies like India and China were not big spenders on sus­tain­abil­ity. How­ever, to­day with the sus­tain­abil­ity so­lu­tions pro­vid­ing unique, data driven in­sights, the mar­ket is trans­form­ing. The fore­cast show that the spend­ing on sus­tain­abil­ity en­gage­ment will grow from $877 mil­lion in 2015 to $1 bil­lion in 2019 (re­ported by Ver­dan­tix).

To­day, the en­tire busi­ness value chain is in­ter­con­nected, and with the fo­cus on new tech­nol­ogy, in­no­va­tion and prod­uct stew­ard­ship, sus­tain­abil­ity en­gage­ment is per­ceived as an emerg­ing ser­vice of­fer­ing. Fur­ther, the push from reg­u­la­tory poli­cies and gov­ern­ment man­date will pro­vide an im­pe­tus to the trend of adopt­ing sus­tain­abil­ity as a com­pet­i­tive ad­van­tage tool. As more busi­nesses be­come in­formed, and ex­pe­ri­ence the value from sus­tain­abil­ity so­lu­tions, the mar­ket adop­tion of sus­tain­abil­ity en­gage­ments will grow tremen­dously.

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