IntroductiontoSustainableDevelopment&CorporateSustainability

TataL.RaghuRam,XLRI

Why do we degrade the Environment?

Environmental resources are CPRNo well defined property rights

Belongs to all while using, to no-one while paying

Leads to The tragedy of Commons Results in Externalities

Impact on environment is external to the profit & loss calculations of the economic agent - eg. Car users (-ve), plantations (+ve)

Stakeholders polluters, affected, controllers etc..

Sustainable Development Environmental resources are to be

shared across generations Possible that future generations may

prefer natural capital over man made capital

Whydowedegradetheenvironment?

Policyfailure Institutionalfailure Marketfailure OveremphasisonGDP?

DevelopedVs.Developingdebate

Commonbutdifferentiatedresponsibility Technologytransfer?

EnvironmentalKuznetsCurve

PolicyoptionsforSD

Precautionaryprinciple

Command&ControlRegulations: EnvironmentalProtectionAct,1986 TheRighttoFairCompensationandTransparencyinLandAcquisition,RehabilitationandResettlementAct,2013 Indiahasover200SDrelatedregulationsinplace

Economic/marketbasedapproaches PolluterPays;Carboncess Netpresentvalueofforest,JointForestManagement Taxbreaks,accelerateddepreciationontechnology,Subsidies Carbontrading(Kyoto); Renewableenergycertificatestrading(India);Feedintariffs

SD is all about trade-offs

Strong SD Vs. Weak SD Inter & intra generational equity How much to consume? How much to Conserve? How much to pollute? How much to protect?

Savings is the Key to Sustainability

Human Knowledge

Man-made Capital

Natural CapitalSavings

> = Weak Sustainability requires the sum of all forms of capital to

be constant or increasing over time

Strong Sustainability requires each component to beconstant or increasing over time

Marginal abatement cost Vs. Marginal social cost

CORPORATESUSTAINABILITY

INITIATIVES

Stakeholders

Competitiverequirements

Social demand for SD

Changing Customerpreferences

Rejection/reaction toEnvironmental risks

New businessopportunities

International tradeagreements

InternationalVoluntary standardsSpread of

Quality managementprinciples

Regulatory

Stringent regulations

Increasing liabilities

Legal enforcementPIL /RTI / Judicial Activism

Cost factors

Increasing costsOf pollution control

New technologiesFor pollution prevention

Cost savings fromWaste reduction

DriversofCorporateSustainability

Cost of capital

MiltonFriedmansargument

TheNobelPrizewinningeconomistMiltonFriedmanargues:Fewtrendscouldsothoroughlyunderminetheveryfoundationsofourfreesocietyastheacceptancebycorporateofficialsofasocialresponsibilityotherthantomakeasmuchmoneyfortheirstockholdersaspossible

1962

Stakeholdertheory

Thebottomlineorprofitisnottheonlyconcernforthecompany.Stakeholdertheoryintegratesresourcebasedviews,marketbasedviews,politicalviews,andsocietalviews(Freeman,1986).

R.EdwardFreemanisanAmericanphilosopher

CreatingSharedvalueMichaelE.PorterandMarkR.Kramer

Societalneeds,notjustconventionaleconomicneeds,definemarkets,andsocialharmscancreateinternalcostsforfirms.

Companiescancreateeconomicvaluebycreatingsocietalvalue. byreconceivingproductsandmarkets redefiningproductivityinthevaluechain buildingsupportiveindustryclustersatthecompanyslocations

Mutualismisthewaytwoorganismsofdifferentspeciesexistinarelationshipinwhicheachindividualbenefitsfromtheactivityoftheother.

Stakeholders:WinWinoutcomes

Pleasemeetthemeanestshrewdeststrategistontheplanet

SHAREDVALUECREATION Porter&Kramer,2011

SUSTAINABLEDEVELOPMENTisparadoxical;paradoxisitsverycore.Itexiststhroughopposites,itisabalanceintheopposites.Andonewholearnshowtobalancebecomescapableofknowingwhatlifeis,whatexistenceis.Thesecret

keyisbalance."

Costreduction,Riskavoidance,Revenuegeneration,Innovation,ethicalbusiness

+SocialConsent+

TheartandscienceofManagementhastocatchupwithsustainability

Companies evolve in how they manage SD

Environmental Compliance

Risk Management

Sustainable Development

End-of-pipe

Limit impact of current activities

Pollution prevention;Management systems

Redesign to eliminate impacts of activities

Strategic integration

Change activities and design of industrial system

Friedman

Freeman

Porter&Kramer

Gandhian thoughts

Atimeiscomingwhenthosewhoareinmadrushtodayofmultiplyingtheirwants,will

retracetheirstepsandsay;Whathavewedone

IftherewerenoHimalayas,theentireplainlandofIndiawouldhavebeenadesertlike

Sahara

IfeveryIndianaspiresforalifestyleofanEuropean,thenIndiawillbecomethebiggest

LOCUSTonthisplanet

Arrogantassumptiontosaythathumanbeingarelordsandmastersoflowercreatures.Onthecontrary,beingendowedwithgreater

thingsinlife,theyarethetrusteesoftheloweranimalkingdom

Gandhian thoughts