Sustainability Driver Innovation

7/31/2019 Sustainability Driver Innovation

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Sachin Joshi

Seema Ar or a

Dennis Pamlin

Shir ish Sinha

I NDI AN

COMPANI ES

WI TH SOL UTI ONS

THAT THE

WORL D NEEDS

SUSTAI NABI L I TY

AS A DRI VER FOR

I NNOVATI ON

AND PROFI T

for a living planet


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I NDI ANCOMPANI ES

WITH

SOL UTI ONS

THAT THE

WORL D NEEDS

SUSTAI NABI L I TY AS A DRI VER

FOR I NNOVATI ON AND PROFI T

SACHI N JOSHI

SEEMA ARORA

DENNI S PAML I N

SHI RI SH SI NHA


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Ind ia n C om p a n ies w i th So lu ti o ns tha t the

W o r ld N eed s

SUSTA IN A BILITY AS A D RIVER FO R IN N O VATIO N A N D PRO FIT

Lea d Author : Sa chin Joshi , Depu ty Di rec tor , CII- ITC CESD

Co -a uthors : Seem a Arora , Hea d an d Pr inc ipa l Cou nse l lor , CII- ITC CESD

D e nn i s Pa m l in , G lob a l Po l ic y A d v is o r, W W F- S w e de n

S h ir is h S i nha , H e a d , C lim a te & E ne r gy , W W F- Ind ia

2 0 0 8 , W W F a n d C II- ITC C E SD

This repo r t is pa r t of a s e r i es of s tud ies by W W Fs Tra d e a nd Inves tme nt Poli cy

P rog r a m m e , w h ic h a im s t o i de n t ify a nd c oop e r a te w ith a c to r s i n the B RIC S g r oup o f

key emerging economies (Braz i l , Russ ia , India , China and South Afr i ca ) to

c ha m p i on in t e r na t iona l s u s ta ina b l e tr a de a nd i nve s tm e n t. The P r og r a m m e e xa m i ne s

the s c ope w h i c h e x i sts fo r t he s e c oun tr ie s t o be c om e le a d i ng e xp o r t e r s o f, a nd

inve s to r s i n , s u s ta ina b l e g oo ds a nd s e r v ic e s , w h i ls t e m e r g i ng a s ke y a c to r s i n

p r om ot i ng a p r oa c t i ve i n t e r na t i ona l s u s t a i na b l e de ve l opm e n t a ge nda .

Fo r m or e in f o r m a tion , s e e :

w w w .p a n d a . o rg / in ve s tm e n t

w w w . w w fin d i a . o r g / p u b lic a t io n s

Design & Printed a t: Impress , India

I NDI AN COMPANI ES WIT H SOL UTI ONS THAT THE WORLD NEEDS2


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CONTENTSFOREWORD by Mr Chandr ajit Baner jee, Dir ect or Gener al, CII

FOREWORD by Mr Ravi Singh, Secr et ar y Gener al and CEO, WWF I ndia

ACKNOWLEDGEMENTS

1. I NTRODUCTI ON 11

2 . SUSTAI NABI L I TY DRI VI NG I NNOVATI ON 17

3 . CASE STUDI ES 27

3 .1 BA SIX 2 8

3 .2 C o smo s Ig nite Inno va tions 3 6

3 .3 ITC 4 3

3 .4 L& T 5 3

3 .5 Ta ta C o nsulta ncy Services 6 4

4. SPECI FI C BUSINESS SOLUTIONS TO EMISSIONS REDUCTI ON 73

5 . ROAD TO SUSTAI NABI LI TY- DRI VEN I NNOVATI ON 77

6 . POSSI BLE WAYS FORWARD 89

ANNEX: List of C omp anies and Innovat ions 95

ENDNOTES 99

I N DI A N COM P ANI E S WI T H S OL U T I ONS T HA T T HE WORL D NE EDS 3


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FOREWORDI am pleased t hat CII -ITC Centr e of Excellence for Sustainable Development (the

Centr e) and WWF are jointly br inging out t he publication In dian Com panies with

the Solutions that the World Needs. Today, as we walk the t hin line of managing

climate change, along with continuing on the path of economic development, all of us

must play our part. Sustainable business and social entrepreneurship will shape

futur e economic growth for t he world.

F inding solutions for t he worlds most pr essing problems in part icular, pover ty and

climate change is no longer the exclusive domain of gover nment s, aid agencies and

NGOs. E ntr epreneur s and business leaders t oo are demonstr ating that almost no

problem is too big to be tackled through innovation.

Amidst t he emerging tr ends in process and product innovation, mainly in r esponse to

sustainability drivers, the Cent re and WWF came together to explore how

businesses can use dr ivers such as innovation and profits to t ackle t he t win

challenges of poverty and climate change. The resulting publication brings together

case studies of how businesses have t arget ed sust ainability without losing sight of

core business objectives. It reaches a number of broad conclusions that we believewill assist other companies to formulate their own roadmaps for sustainable growth.

The businesses featur ed in this report reflect t he incredible potent ial of the

alignment of sustainable development needs and business values. The cases outlined

are stories of great deter mination to achieve sustainable practices, but t hey also

showcase th e huge opportunities t hat emerge from such pr actices. Innovations in

these companies have driven down costs and have proved to be crucial to successful

corporate management.

Int erest ingly, India and other emerging regions are br eeding grounds for such

innovative businesses and enterprises. They have recognized the challenge early, andare responding creatively, thus pushing the envelope for t heir pr osperity. Local firms

and multinationals that have localized themselves are most likely to lead and master

the change.

Going forwar d, India and other developing economies need to addr ess povert y

alleviation as well as sustainab le routes to development . Resource-efficient solutions

will help companies cont ribut e to this task , as well as add t o their g lobal


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compet itiveness. E xploring th e conclusions in this repor t would allow

companies to work out st rat egies that make them winners in a low-carboneconomy.

This repor t is the first product of the Cent re-WWF part nership, and we hope

business leaders, change agent s and governments find it thought-provoking

and pr actical. CII believes that sustainable development is the futur e of

enter prise and that this report will act as a change agent to stimulate gr eater

efforts t owards this. We are delighted t o partner with WWF to explore t hese

opportunities.

Chandrajit BanerjeeDirector General

Confederat ion of Indian Industr y



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FOREWORDSust aining global economic development will demand a subst ant ial shift in

the role of industry by br inging innovation t o drive sust ainability and pr ofit.

Indias r apid emer gence as a global economic player is being propelled in

large substance by its business and industry sector, which is increasingly

contributing innovative solutions for integration of development and

environmental sustainability.

Through t his report we ar e att empting t o bring forwar d a special focus on

climate change and the need for rapid global emission reductions as the

driver for new t hinking wher e leading companies are integr ating low carbon

development into their st rat egies. India must ensure resource efficient

development in order to avoid an ecological crisis that would make the

curr ent financial cr isis look pale in compar ison.

This report is the first att empt t o explore how companies can use

sustainability as a dr iver for pr ofit and innovation. It is the fruit of a global

conser vat ion organ izat ion, WWF, working t ogether with one of Indias

leading indust ry associations, CI I , to seek solut ions to one of the mostimport ant challenges of our t ime. This report provides examples from Indian

companies that can be used both by indust ry and government s to make

st rategic decisions from an economic, social and environment al perspective.

Ravi Singh

Secretar y General & CE O

WWF-India



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1.I NTRODUCTI ON


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ACKNOWLEDGEMENTSThis report is a product of collective effor t of a group of except ional people in business. Content s of

the report built on their varied exper iences and their firm belief in doing business different ly. Our

grat itude goes to t hese individuals for sharing t heir exper iences and more important ly, to their

companies for leading change.

We would like t o thank t he following people for t heir gu idance and cont ribut ion to the r eport . Our

sincere thanks go to members of companies featur ed as case studies in the report . These include:Ms Kaushiki Rao, BASIX; Mr Amit Chugh, Cosmos I gnite I nnovations; Mr Subhash R ustagi and

his team at I TC; Mr Anand Kurien and Mr Bikramjit Ray Chaudhur i at L&T; and Mr Pankaj

Baliga and Mr Ant hony Lobo at TCS. We also thank their colleagues who have par ticipated in the

study wh ile being behind t he scenes.

This report is part of WWF s Trade & Investment Pr ogramme and has been made possible due to

its financial support . We would like to thank Mr R avi Singh, Dr Sejal Worah, Mr Alistair Schorn

and Ms Aart i Khosla from WWF for reviewing and providing advice and comments on t his report .

Our gr atitude to Mr Ar okia R aj for design and Ms Sharmila Chandra for editing. As always, all

err ors and unintended omission or misrepresent ation are ours alone.

F inally, we hope that for companies featur ed in t his report and many other s globally, this r eport

offers a validation of their approach and a starting point for new innovations in doing business.


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The fact that rapid economic growth is the only

realist ic means to lift t he poor out of extr eme

pover ty and the fact that most economic

activit ies depend on products and ser vices

provided by the ecosyst ems, necessitat es the

usher ing of a new business paradigm which

enables rapid economic growt h without

compr omising the capacity of the ecosyst em to

sust ain, nur tur e and fuel economic developmentand human well-being.

CII

In the 21st centur y, povert y and nat ural r esource constraints will be two of

the most import ant challenges humanity must come t o grips with. I nstead of

seeing this as a problem, a new gener at ion of companies across t he developed

and developing countries have already begun to tr ansform t hese needs into

opportunities. This report focuses on companies in India with innovative

solutions as dr ivers for sust ainability and pr ofit. With a t hird of the

population under the poverty line and nat ural r esources below the global

average, I ndia in many ways is not only a miniatur e ver sion of the global

economy, but is already in a situ at ion that the world will face in a not too

distant future. So solutions that can be used in a sust ainable way in India are

likely to be ext remely important for the world and also anticipated by it in

the year s to come.

The r eport acknowledges that while a number of interest ing initiatives

exist, but many of them focus on the short-t erm opport unities. Afterenjoying the benefits of low-hanging fruits - like switching t o energy-saving

light ing, buying recycled office supp lies, pr inting double-sided and p roviding

support t hrough philanthr opy- what is the next st ep? There is no doubt that

the low hanging fruits are a good star t, but more is needed to mainstr eam

these measures.

If we ar e to meet the p overty and environmental challenge, mere add-on

measures will not be enough, innovation r egarding both production and

I NDI AN COMPANI ES WI TH SOL UTI ONS THAT THE WORLD NEEDS12


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market s is r equired. Sustainability can, for example, drive cost savings

thr ough efficiencies, creat ing new market s and securing competitiveadvantage. H owever, companies must use t he limits of the planet and needs

of the people as the st art ing point to an even larger degree and ensur e that

the core business is deliver ing on these challenges. It is no longer only about

compliance with r egulations or securing positive pr ess coverage, the next

gerer ation companies th at ar e leaders in the ar ea of sustainability have

already r ealised t hat what is good for t he environment and the society, should

also be good for business. These are the companies that will remain relevant

for fut ure and t his report explores t he various strat egies such companies

could use.

This report also investigates what the steps beyond t he low-hanging

fruit s could be. Based on concrete examples, it outlines a var iety of actionableideas and some inspirations for more dramatic changes. In doing so, this

report hopes to contribut e to t he curr ent dynamic dialogue ar ound business

and sust ainability, part icularly the environment in a rapidly gr owing

economy that must reduce povert y. Above all, the conclusions ar e meant to

star t a pr ocess of bringing best pr actices to light so that they can spread

more rapidly.

The r eport is divided into five key par ts. F irst is t he goal and

methodology where t he scope and limits of the report are outlined. The

second part sets t he conceptual context. The third p art present s five case

studies and two special examples establishing the sustainability-innovation

interface. In t he fourt h par t, t he conclusions are present ed as a five step

circular outline for companies that want to explore ways t o use sust ainability

as driver for profit and innovation. Finally eight suggestions for possible

ways forward are presented.

Goal

The goal of this repor t is to present a r oadmap for how companies can use

sustainability as a dr iver for innovation and profit. I t does so by highlighting

some of the most promising t rends, best practices and innovative ideas that

are ready for wider adoption and, if taken t o scale, have t he potent ial togenerat e significant sustainability benefits.

The r oadmap provides a comprehensive framework to walk the

sustainable innovation path. However, it does not necessarily reflect any

specific company case pr esented in the r eport. The r oadmap is based on th e

experience of CII -ITC CE SD and WWF in helping companies in India and

the world t ransit t o sustainable businesses.

IN DIAN COMPANIES WIT H SOLU T IONS T HAT T HE WORLD NEEDS 13


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Methodology

To ident ify poten t ial innovat ions for inclusion in this report , a wide range of

sustainability innovations across business t ypes, industries and corporat e

functional areas such as operations, manufacturing, marketing, IT, supply

chain management - were considered, and the t ypes of benefits gener ated

were looked at.

Over 50 companies (see A nn ex) were scanned through ext ensive

liter atur e sear ch covering bu siness and sust ainability press, published action

and academic resear ch, librar y at CII -ITC CE SD and relevant industry

report s. Pr actitioners and consultant s wer e also consulted for information.

This data collection was succeeded by a t wo-stage screening and

evaluation process. Both qualitat ive and quantitat ive data were used t oevaluate var ious innovations based on the criter ia established for this r eport.

St age 1: More than 100 innovations from 50 companies gat her ed thr ough

the data collection pr ocess wer e r eviewed for sustainability benefits,

business benefits and replicability. Those that failed to meet these basic

criteria did not move t o the next stage of final evaluation.

St age 2: More informat ion was collected on the innovations selected.

They were closely reviewed for their replication and applicability to other

companies and indust ries. More import ant ly, their innovativeness was

carefully studied.

F inally, 12 companies were identified to be appr oached, with a t arget to

develop eight case st udies in the specified time-line of the p roject . Ten

companies were studied in-depth and approached to develop detailed case

studies. F our more companies wer e found t o be unfit for inclusion on gr ounds

of benefits derived and their innovativeness. One company could not turn in

its r esponse within t he t ime-line of this pr oject due t o schedules that could

not mat ch. In order to include two exciting examples that did not fit within

the framework, the r eport added t hese as Specific Business Solutions t o

emissions reduction.

The new processes, products and t echnologies highlighted in t his report

were selected based on var ious criter ia - sustainability for business,

sustainability for t he environment and society, readiness t o be implemented,and innovat ion along t he four benefits of sustainable innovation

(see Box 1.1). In some cases, innovations wer e selected that have already

been fully test ed and put into commercial use; in other cases, they were

selected to highlight promising early-stage ideas.

The companies included in this r eport belong t o different industry areas

in which CII-ITC CE SD has significant exper tise or wher e ther e are

substant ial opport unities for innovation. However, case st udies featured here



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are only t o provide a convincing case and not necessarily to subst itute more

compelling cases of sustainability dr iving innovation.

Within these case studies, the r eport at tempt s to provide a range of

ideas: from incremental changes t o more r adical business-model innovat ions;

and from th ose that offer quick implementation and a short payback period to

longer-ter m ones.

It is import ant t o note t hat t his repor t is not an inventory of all worthy

innovations. There are simply too many good cases. Nor is it a portrayal of

top sustainable and innovative companies. Companies studied to develop this

report are coping with negat ive sustainability (including environment al)

footprints. It is also not a review of cutting-edge technologies. However, the

innovations they have developed repr esent a positive step in the r ightdirection.

Box 1 .1

Bene fi ts o f Sus ta ina b le Innova tionEnviron me nta l Bene fit s

G r e en h ou se g a s e m iss io n s r ed u ce d

En e r g y u s e r e d u c ed o r e ffic ie n c y in c re a s e d

H a z a r d o u s p o llu ta n ts r e le a s e d in a ir, w a t er

o r la n d r e d u c e d

S o lid w a s te re d u c tio n s , m a t e ria l s u s e

re du c e d o r e f fi ci e nc y inc re a se d

S u p p lie r b e h a v io u r in flu e n c e d , re s u ltin g i n

e nv i ronm e nt a l be ne f it s

N a tu ra l re so u rc es p r o te cte d o r r e sto r e d

So cia l Bene fits S ta k e h o ld e r c o ns ulta tio n

Live lih o o d c re a tio n

C o m m u n ity re la tio n e n h a n ce m e n t/ b e n e fit

S p e c ific im p a c t o n s o c ia l is su e s o f d i re c t

r e l e va nc e

Business Benefits

C o st sa vin g s

In cr ea s ed r e ve n ue s or e a rn in g s

Re d u ce d lia b i lity o r ris k

Re tu r n o n in ve stm e n t/ p a y b a c k p e r io d

N e w ma rke t c re a tio n

In ve stm e n t a ttr a c tive n e ss

Be n e fits fo r cu sto m e rs

Br a nd / r ep u ta tio n e nh a nce me nt

Innovat iveness

Is th e i n n o v a tio n o r i g in a l o r is it a s i g n ific a n t

i m prove m e nt ove r a n e x i sti ng so l u ti on?

Is it s till in s ca r c e u se ?

D o e s it o ffe r ec o no m ic , s o cia l a n d / o r

e nv i ronm e nt a l be ne f it s?

Is it a p p lic a b le to o th e r s e cto r s / a r e a s ?

Is it c o m m e r cia l ly v ia b l e ?



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2 .SUSTAI NABI L I TY

DRI VI NG

I NNOVATI ON


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This r eport , In dian Com panies with the Solutions t hat the World N eeds,

builds on the previous report In dian Com panies in the 21st Century byWWF and explores in a more det ailed manner how some companies in I ndia

are under standing and r esponding to changing sustainability tr ends thr ough

innovation and business st rat egy.1

The five in-depth case st udies and t wo examples in t his report include

companies from diverse economic sectors tha t have var ied economic, social

and environmental concerns and impacts. Never theless, they contain some

common thr eads and lessons t hat can be applied in different context s. The

case studies captur e key initiatives and identify important ways in which

sustainability has affected t he dr ivers of business competitiveness and

success: access t o market s, operat ional efficiency, access t o capit al or super ior

reput ation, and most import antly innovation.

The Corporat e r eality in t he 21st centur y

Recent yea rs have seen a gr owing range of economic, social, environmental

and governance issues push into the mainstream of politics and business. The

priorities for action emer ging from a r ange of summit meetings - such as the

G8 and t he Wor ld Economic F orum - tend t o share one common

characteristic: they all relate t o curr ent m arket failures or dysfunctions.

While most sust ainability challenges such as income dispar ity, loss of

biodiversity and assosiated impacts - are not new; globalisation has directly

or indirectly exacerbated many pr oblems to a degree wher e many of these

questions are now dealt with as matt ers of global and national security, e.g.

climate change and food pr ices. Informat ion t echnology is propelling

increased awareness about the scope of societal needs and the lack of

progress t o date by government s and tr aditional non-government al

organ izat ions. Businesses, civil society and gover nment s, once consider ed

str ange bed-fellows, are now working together to r esolve some of the most

chronic problems.

This tr end was implicit in the 2008 agenda of the World E conomic F orum

annual meet ing at Davos, which closed with a call by business, gover nment

and civil society leader s for a new br and of collaborat ive and innovat iveleaders to address the challenges of globalisation, particularly the pressing

problems of conflict, terrorism, climate change and water conservation.2

Business, polit ical and civil society leaders at the World E conomic

F orums I ndia E conomic Summit 2007, called on I ndia t o focus on skills

development , impr oving gover nance, upgrading of educat ion, forg ing public-

private partnerships in infrastructure and addressing environmental

degradat ion and water scarcity t o sustain the high growth t he countr y



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requires. The theme of the 23rd India Economic Summit, Building Centres of

E xcellence,

3

acknowledged Indias remarkable achievement s in creat inghighly compet itive and innovat ive companies. But more import ant ly, it also

underscored t he challenge of extending t hat success beyond t raditional

industry, urban and academic centr es t o rur al communities, where 70 per

cent of the populat ion st ill re sides.

The discussions at the forum did not focus, as they usually did in the past ,

on how t o achieve great er consensus among industry, state and national

leaders around key gr owth challenges, but wer e directed instead at adopting

and scaling grassroots innovations that ar e delivering faster and gr eater

results on the gr ound. It was in this spirit of gett ing things done faster t hat

the India E conomic Summit 2007 was designed t o tap into t he collective

intellect, on-the-ground experience and global insight from among itscommunity of stakeholders. It was agreed that innovative ideas and

processes can often be applied from one industry to another and t hat

indust ries can learn fr om one another. The concept of innovat ion may by

necessity mean t hat organizations need t o develop new business models to

remain relevant.4

The world is gett ing better, but it is not gett ing better fast enough, and

it is not gett ing bett er for ever yone, argued Bill Gates at t he World

E conomic F orum, Davos 2008.5 He called for creat ive capitalism: an

approach where government s, businesses and nonprofits work t ogether t o

str etch th e reach of market forces so that more people can make a profit, or

gain recognition, doing work that eases the world's inequities.

The inequities between t he haves and the have-nots, most st ark in Ind ia,

need t o be reduced if other key sust ainability challenges are t o be tackled.

Traditional approach of development aid and philanthropy have had limited

success. Povert y is most effectively reduced t hrough engaging t he poor and

the excluded in the economic growth. The businesses, with their increasing

contribution to economic growth with substantial social and enviromental

impacts, ar e best placed t o facilitat e t his enagement.

C K Pr ahalad, in The F ortu ne at t he Bottom of the Pyr amid, present ed

not just th e hidden fort une with t he four billion people who live on less than

$2 per day globally, but how businesses could ident ify, tap into, and expandthis for tune by developing new models of doing bus iness, often us ing new

technology. Pr ahalad proposes that businesses, government s and donor

agencies stop t hinking of the poor as victims and instead star t seeing them as

resilient and creat ive entr epreneur s as well as value-demanding consumers.

He proposes that tr emendous benefits will accrue t o businesses that choose

to serve t hese market s in ways that are r esponsive to their needs. After all

the poor of today can be t he middle-class of tomorrow.6



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Michael Port er and Mark Kr amer sum up t hese new opport unities in

their Harvard Business R eview art icle on the links between competitiveadvantage and corporate social responsibility (CSR). They conclude that

CSR offers many of the gr eatest opport unities for companies to benefit

society.7 F urt her, ifcorporations were to analyse t heir pr ospects for social

responsibility using the same frameworks that guide their core choices, they

would discover t hat CSR can be much more than a cost, a constraint, or a

charit able deed - it can be a sour ce of opport unity, innovat ion, and

competitive advantage.

What all this means is that corpor ations can der ive sustainability value

and increase business value at the same t ime, if they are able to identify

opportunities within the array of risks and challenges. Success of

microfinance in South Asia and par t s of Africa, pr icing and distr ibution ofHI V-ARVs, extending st ripped-down ver sions of FMCG products to t he

poor, community-based waste management, home-cleaning and waste

disposal ser vices in slums, ar e some of the many examples of wher e

companies have begun t o shift from risk and cost approach to opportunity

and profit approach for sustainability.

India poses sustainability challeges of huge scales for businesses t o tackle

thr ough innovative appr oaches. India has a third of its population still under

the poverty line, is amongst t he most vulnerable countr ies to climate change

impacts, and a lso has one of the highest incidences of diseases such as

HI V/AIDS, TB and diabetes. At t he same time, India is among the fastest

gr owing economies in the wor ld, has t he youngest population, and offers one

of the largest mar kets for r enewable energy. This inter esting mix of

str engths and weak ar eas makes the countr y a breeding ground for

innovations. The bott om of the pyr amid, the 800 million I ndians, can become

a major source of breakt hrough innovations.8

Clayton Christensen and his colleagues spotlighted two different forms of

innovation, sustaining and disruptive.9 Susta ining technologiesimpr ove

the performance of established products along the dimensions of performance

that mainstream customers in major mar kets have historically valued. By

contrast, disruptive innovations dont, by traditional measures, meet

existing customers needs as well as currently available products or services.They may lack certain features or capabilities of the established goods.

However, they are typically simpler, more convenient and less expensive, so

they appeal to new or less-demanding customers.10

Christensen and Stuart Hart point out that disruptive innovations are

suitable for developing market s - because they offer a pr oduct or ser vice t o

people who would other wise be left out ent irely or poorly served by existing

products.11 They also talk about a subset of disrupt ive innovations -



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catalytic innovations - wher e social change is the pr imary object ive.

In a situation where greenhouse gas (GHG) emissions, and in particularthat of carbon di-oxide (CO2) emissions need to be dramatically reduced,

efficient use of natur al resources has to be encouraged and a bett er life has to

be pr ovided for billions of people, disrupt ive technologies ar e the most

import ant . Obviously sustaining innovat ions can also help, but if too much

focus is spent on t hem, the really sustainable ideas might get lost.

Sustainability-driven innovation

Innovat ion is crit ical for t he futur e success of any business. Companies who

do not innovate will sooner or later become unsust ainable and irrelevant .

However, for innovations to have sustainability impact and to add to businessvalue, sustainability should be integr ated with t he core business.

With a st rong corporat e commitment to sust ainable development, many

of the st andard tools of management can help t o deliver sustainable

innovation in both senses of the word.

Companies that have a pur e sustainability appr oach pr ovide inter esting

and inspiring examples, but many of them have t heir own set of problems.

Often t hey tr y to create a niche and define themselves not as leaders but as

companies cater ing to an exclusive minority. Thereby they contr ibute t o a

broader development where sustainability is seen as alternat ive instead of

mainstream.

Other companies have att empted to align pr oduct and ser vice innovation

to sustainability objectives but with limited success. Interface, the floorings

company, is perhaps the best known example. The company developed a

ser vice-based business model for corporat e clients b ased on leasing out floor

coverings and retaining the responsibility for replacing worn sections,

avoiding the need to r eplace an ent ire carpet when a small section has worn

through. The approach potentially could save Interface and its clients money

and reduce resource use. But I nter face has str uggled to persuade clients t hat

it wont cost them more. According t o Rebecca Willis and J enny Oldham at

Green Alliance, one of the major barriers the company faces is split budgets.

Typically t he per son who buys the carpets is different from the one whoarr anges for t hem to be cleaned. Neither is asked to think about t he

environment al consequences of their companys flooring either, tha t s left t o

the environment manager who probably has nothing to do with buying

carpets.12

Similar challenges ex ist in different par t s of society. Ener gy efficient

housing is probably one of the most ser ious challenges, but appliances like

referiger ators and even computers suffer from the same drawback. There is a



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lack of life cycle persp ective and ability t o unders tand t he total cost of

ownership (TCO). Too often t he per son buying t hings only looks at theupfront cost, not at the cost over t he lifetime. F or I T solutions the challenge

is even bigger as the ser vice t hat t he product pr ovides is often considered t he

most import ant. A notebook computer can allow people t o work without

being in the office, something that can save travel time and cost and building

space. The distance between a per son looking at t he upfront cost and a total

cost perspective from the company is hard to br idge.

E xamples of business opportunities

The challenges that India faces also present opport unities to tackle them.

Indias curr ent Pr ime Minister, Manmohan Singh has r epeatedly r emindedthe private sector of the need for inclusive gr owth across t he country, while

the 2007 budget provided for a 31 per cent r ise in ru ral infrast ructur e

expenditur e and br oadened the availability of farm credit.13

Much of this hope rest s on t he economic progress India has made,

part icularly in the past few year s. India is among the fastest growing

countr ies in t he world and if estimates ar e t o be believed, it will be the thir d

largest economy in the world by 2050.14 It would have expanded employment

and ent repr eneurial opport unities for t he youngest population in the world

and reduced poverty further.

Cur rent ly, 55 per cent of Indias population is younger than 25 year s.15 By

2025, while 40 per cent of the population will be considered to be middle class

[Rs 200,000-500,000 (US$ 4,440 11,110) Annual H ousehold I ncome], those

ear ning less than $2/day would be 18 per cent, down from curr ent 45 per

cent.16 Consumption pat ter ns ar e already changing and will increasingly

show a trend for convenience and lifestyle products and services. These

volumes provide scope for companies t o develop sustainable consumer

market s. At t hat scale, sustainable products would not have to be expensive.

The innovat ion will be in pr icing for mass affordability.

Growth sectors such as telecom, infrast ructur e, tr ansport, r etail are

not only relevant for t heir double digit g rowth rat es, but also for their

significant sustainability footprint. In a business as usual scenario, thesesectors could have a lopsided impact; impr essive economic benefits at the

cost of environmental degr adation and social unrest .

Overall infrastructure investment is expected to increase from $201

billion in t he 10th plan (F Y02-07) to $492 billion in t he 11th plan (F Y07-12),

which will be nine per cent of GDP.17 Of t his more t han 30 per cent will

come from privat e sector. The const r uction act ivity u rg ent ly needs eco-

friendly mater ial use and t echnology to minimise its su sta inability damage .



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The potent ial for cleaner met hods and mater ials is r eflected in growt h

numbers.Indias r etail market - 5th largest ret ail destination globally - is estimated

to grow from the US$ 330 billion in 2007 to US$ 427 billion by 2010 and US$

637 billion by 2015. Simultaneously, modern r etail is likely t o increase its

share in t he tot al retail market to 22 per cent by 2010.18 Ret ail outlets,

shopping malls and hyper mart s could become gr een buildings or energy

positive buildings. The best of corp orat ions in organised r etail Tata Group,

Aditya Birla Group, Reliance Ind ustr ies, RP G, F utur e Group, Bhart i Group

have the r esource potent ial to set t arget s and deliver on these energy

positive centr es.

The r etail industr y also helps bridge the r ural-urban divide by means of

sustainable livelihoods creat ion, integrat ing farmers and r ural unemployedinto processing industries and extending the F MCG market s to rur al areas.

Media stor ies of Indias mobile telecom revolution abound. The t elecom

industry is gr owing at t he fastest pace in the world and India is expected to

become the s econd largest te lecom mar ket globally by 2010. Almost 10 per

cent of the population became mobile phone user s in the first quart er of

2007.19 India's overall tele-densit y st ood at 26.89 per cent in June 2008, and

the government has plans to raise the t ele-density t o 40-45 per cent by

2010.20 F orthcoming ser vices such as 3G and WiMax will furt her augment the

growth rate.

Cheap mobile ut ility charges for consumers complemented by bett er

technology use is att racting companies and social entr epreneur s t o provide

access t o healthcare , financial services and mar ket connectivity, to the

mar ginalised. The Boston Consulting Group est imates $85 billion revenue by

2015 through mobile banking with those who ar e curr ently unbanked in

China, Ind ia, and Br azil.21 ZMQ Software Systems, a Gurgaon-based mobile

gaming company, will soon start offering prenatal advice via text messages to

women in rur al areas.22 Similar ly, E nableM a mobile-lear ning company -

offers progr ammes ranging from basic English to test pr eparat ion and career

counselling offered at Rs 25-30 (US$ 0.56-0.67) per month , all thr ough mobile

phones, has almost 250,000 subscribers, and expects t o grow th reefold by t he

end of 2009.23

Sustainability Innovation t hrough New Business Models

In a way, social entr epreneur s ar e pur suing a prolonged endeavour of

sustainability t hat bett er aligns societal and environmental needs with

business values. By creating new business models, they are able to deliver

new forms of value by helping meet sust ainability challenges. I nnovat ion,



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apparent ly, runs right across the business model, delivery mechanisms, and

resource mobility and utilisation.In ter estingly, and as showcased in this re port , many social

entr epreneurs are pursuing disrupt ive paths t hat, while focused on new

mar kets , have potent ial implications for t he mainstr eam. This applicability

to t he mainst rea m also creat es t he innovat ors dilemma - how to ensur e

tha t t his disru ptive innovation is tak en ser iously with in the company

without put ting at r isk the needs of pr esent customer s who pr ovide profit

and growth.24

Social entr epreneur s tend to seek opport unity in situat ions of

subopt imal equilibrium. In t hese sit uat ions society is set tling for a poor

solution to a pr oblem because no one has yet come up with an alter native.25

These entr epreneur s are confronted by a suboptimal state in society t hat:causes t he exclusion, marginalisat ion, or suffering of a segment of humanit y

that lacks the financial means or political clout to achieve any transformative

benefit on its own. Such disequilibrium present s the opport unity t o

transform the situation by developing a social value proposition and bringing

to bear inspiration, creativity, direct action, courage, and fortitude, forge a

new, stable equilibrium that releases tr apped potent ial.26

Social entrepr eneurs such as Muhammad Yunus, founder of the Grameen

Bank ident ified such suboptimal equilibrium which was limited or gave no

access t o formal financial serv ices syst em for t he poor in Bangladesh . The

result is not only evident in the success of Grameen Bank and it s var ious

sister concerns but has also inspired other social entr epreneur s t o look at

similar and completely different but critical sustainability challenges. It went

much beyond its br ief to inspire th e pr ivate sector t o resolve sust ainability

challenges, not t hrough philanthropy but thr ough new business models.

The five case studies and two examples present ed in this report at tempt

to unlock t he spirit of innovation and generat e different ideas to t ackle some

of the most chronic social and envir onmental ailment s India is facing. Using

the crite r ia along four dimensional benefits environmen t, social, business

and innovation t he five case st udies are present ed in t he next section. Table

2.1 shows how they were filtered by looking at the approach and solution

mat rix for each of the companies.



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These case s tu dies look at new business model of sustainable livelihood

pr omotion to impr ove the quality of life for t he have-not s (BASIX) and social

entr epreneur ship with poor as the first consumer t o provide access to basic

minimum light ing (Cosmos Ignite). The case studies also looks at exper eince

of scaling-up low-hanging fruits t o creat e sust ainability (I TC); sust ainability

driven oportunit ies thr ough technology products and service delivery (L&T);

and innovat ive solut ions for challenges of sustainability by lever aging IT

innovations (TCS). In addition t o these case studies, this r eport covers two

specific examples of emer ging business solutions developed by I ndian

companies t o reduce GHG emissions - telepr esence ser vices of Tat a

Communications to r educe companies carbon footpr int; and t echnology

leapfrogging for p roviding clean energy solutions of Suzlong E ner gy.


Ta b le 2 .1 :

C o m p a n y - A p p r o a c h - S o l u t i o n M a t r i xAPPRO ACH

N e w b u s in e s s m o d e l :

Sus ta i na b le li ve l ihoo ds p ro m ot i on

Soc i a l e n t re pre ne ur sh i p : p oor a s the f i rs t

c us t om e r

Sc a l e d-up low-ha ng i ng f ru it s to c re a te

sus ta inabi l i ty image

Ide nt i fies sus ta ina bi l ity=driven

oppor t un i t i e s

Inno vat ive solut ion s for sus ta ina bi l ity

c ha l l e nge s

SO LUTIO N

Inn ova t ion to impro ve qu a li ty of l ife for

t he ha ve -no t s

Disrup tive inno va tion : Ligh t Emitting

Di ode (LE D)=ba se d so la r p owe r l igh t i ng

system

Susta inabi l i ty benefi t s across SBUs due

t o in t e gra t e d m a t e r ia l & c om p e t e nc e

flows

Ha s t e c hno l ogy , p rod uc ts & se rv i ce s

de li ve ry i n p l a c e

Sub stant ia l success in levera ging IT-

i nnova t ion c a p a b i li ti e s

BASIX

Cosmos Igni te

Innova t i ons

ITC

L&T

TCS


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3 .CASE STUDI ES


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BASIX1.0 Organisat ional Set -up

BASI X is a livelihood promotion instit ut ion est ablished in 1996, working with

over a million and a half customer s, over 90 per cent of them ar e rur al poor

households and about t en per cent ar e urban slum dwellers. It has

cumulatively disbur sed R s 89.3 million (US$ 200 million) th rough near ly

578,000 cumulative number of loans. BASIX wor ks wit h over one million

households in 100 distr icts in the I ndian stat es of Andhra P radesh,

Karnat aka, Orissa, Jhar khand, Maharashtr a, Madhya Pr adesh, Rajast han,

Bihar, Chhattisgarh, West Bengal, Delhi, Sikkim and Assam.27 BASIX is anintermediar y bet ween mainstr eam capital held by people unfamiliar with

rur al development on one side and low-income rur al entr epreneur s in poor

areas on t he other. BASIX makes loans to r ural businesses in poor areas and

also provides assistance in solving business pr oblems.

BASI X is known for it s scale, innovation, commercial or ientat ion and

part nership approach. It has addressed r isk mitigation and cost reduction to

improve its access to mainstr eam capital mar kets. This has enabled

improved rural sector lending, including agri-based lending in drought-prone

ar eas. The loan out st andings a re about Rs 23.4 million (US $ 52 million) for

the Group with over 347,651 cust omers. As much as 41 per cent of the loans

went to t he farm sector (severely impaired for want of credit) and 59 per cent

to women (who tend to be financially excluded) .28

Through its ar m - Indian Grameen Ser vices BASIX conducts resear ch

and development in livelihood pr omotion, designs and develops financial

products for extending credit, evolves distribution channels for delivery of its

services, and develops necessary systems for service delivery such as

accounting and Management Information System (MIS). The Livelihood

School is promoted for knowledge building and t ra ining of livelihood

pr ofessionals in NGOs, government agencies, banks, Micro-F inance

Inst itutions (MFI s) and the staff at BASIX.

2.0 Str at egy29

BASI Xs str ategy is to pr ovide livelihood financial services, agricultur e and

business development services, and institutional development services, which

together are known as the triad strategy (see Figure 3.1.1).30

The fund-based, fee-based and social businesses of the BASIX group have

a synergy and contr ibute t o each others gr owth and pr osperity (Table 3.1.1).



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Insti tut iona l Develop me nt

Ser vices (IDS)

Agr icul tura l / B us ines s Deve lopme nt

Services (AG/ B DS)

C us tomer

retention

Livelihoo d Fina ncia l

Services (LFS)

R evenue

g e n e r a t i o n

C us tomer a cqui s i ti on

& risk mitiga t ion

F ig u r e 3 . 1 . 1 :

Liveliho o d Tria d

Ta b le 3 .1 .1 :

BASIXs Susta ina b le Se rvices

Ins t itutiona l Develop me nt

Services (IDS)

Form a t i on o f g roups ,

fe d e ra t ions , c oo pe ra t ive s ,

m ut ua l be n e f it s o f p rod uc e r s

A c co u n tin g a n d m a n a g e m e n t

informat ion sys tems, us ing IT

Bui lding col labora t ions to

de l ive r a w i de r a nge o f s e rv ic e s

Se c to r a nd Po li cy wo rk

a n a ly s is a n d a d v o c a c y fo r

c h a n g e s / r e fo r m s

The se s e r v ic e s we re e x t e nde d t o

2 5 , 1 1 0 g r o u p s , w i t h o v e r

6 8 3 , 0 0 0 m e m b e r s . Fe e s

c o l le c t e d t owa rds p rov id i ng suc h

se rv ic e s a m ount e d to Rs . 24

m i l l i on (US$ 53 ,300) .

Ag r ic u ltu ra l/ Bus i ne s s

De ve lop m e nt Se rv ic e s( A G / BD S )

Produc t iv it y e nha nc e m e nt

Risk mi t iga t ion (non-

i nsura nc e )

Loca l va lue a dd i tion

Ma rke t li nka ge s - Inpu t

sup ply, ou tput sa les

These services were

e x te n d e d to 7 2 , 0 0 0

producers . Fees col lec ted

t owa rds p rov i d i ng suc h

se rv ic e s a m ount e d to Rs 16

m i l l i on (US$ 36 ,000) .

Live lihoo d Fina ncia l Services

(LFS)

Sa vings (on ly in three di s t r ic t s

w h e r e w e h a v e a b a n k in g

l icence)

Credi t : agricul tura l , a l l i ed and

n o n - f a r m

Insura nc e , fo r l ive s a nd

l ive l ihoods

Financia l orchest ra t ion

( a r r a n g i n g fu n d i n g fr o m

va r i ous sourc e s )

In 2 0 0 6 - 0 7 , c o v e ra g e

e x te n d e d t o 4 7 3 , 9 3 2 a s s e t

o w n e r s. O v e r 1 0 , 0 0 0

c um ul a t ive c la i m s ha ve be e n

se tt le d a m ou nt ing to Rs.36

m i llio n ( US $ 8 0 0 , 0 0 0 ) .


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The credit business enables customer acquisition, while the insur ance

business mitigates customer and credit r isk, and t he AGBIDS businessenables customer retent ion by enhancing the ir incomes. The consulting and

IT business allows BASIX t o earn r evenues from offering ser vices. The social

businesses enable re search and development , and knowledge building.

3.0 Sustainability Driving Innovation

BASIX is helping rural people build tangible assets, raise incomes, protect

the environment and sust ain community values. It is helping bring

mainst ream capital to rur al communities and foster ing rur al peoples

innovative ideas about equity and economic development.

BASIXs r ural pr oduct innovation is particularly inter esting. It hascreated new insurance products for poor families in part nership with

mainstream insurance companies. This is the kind of innovation for greater

rur al equality t hat at tr acts the investment capital of market institut ions.

BASIX has est ablished part nerships with insurance entities such as

AVIVA Life Insur ance Company (for life insurance product s), Royal

Sundaram Alliance General Insurance Company (for health, livestock and

micro-enter prise insurance), and ICICI Lombard General I nsurance

Company (for weather insurance). In 2003, BASIX part nered with t he World

Bank and ICI CI L ombard to pilot the first weat her insurance product for

farmers.

BASIX saw t hat poor, rur al Indian households have no insurance, slender

earnings with little cushion, and their income is exposed to all sorts of natural

and human r isks, so they need help. BASIX has worked with insur ance

companies t o design insurance for ver y poor families needs - for example,

insurance on livestock holdings, against r ainfall problems and against loss of

income due t o poor h ealth. BASI X set t les claims on life insur ance in 15 days,

livest ock claims with in a month and r ainfall claims before the end of the

harvest.31 It delivers t hese products thr ough its micro-credit outr each

system. This ensur es low t ransaction and operat ing costs, something

mainstream insurance companies cannot achieve on their own.

The other significant innovation is lever aging I T-platform for financialinclusion of the poor. BASI X initiat ed Technology Assisted F inancial

Inclusion in a few low-income neighbourhoods in Delhi and Muzzafarpur,

Bihar. This pilot covers an ur ban and a r ur al locat ion, and can potent ially be

scaled across all BASI X locat ions. This is done as t he Business

Correspondent of Axis Bank, on the basis of a tr ipartit e agreement between

BASIX, Axis Bank and the technology provider, A L ittle World.32

In the first four months of the pilot, BASI X had enr olled over 4000



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customers for no-frills saving bank accounts. After accounts were opened,

customers were t hen issued biometric authentication based smart cards.These customers now have access t o both savings and withdr awal services, in

addition to other financial services insurance, credit, remittances, pensions -

at e ither a SP OT (Specified Point of Transact ion) within five kilomet re s of

their homes, or at their doorstep.

3.1 Scaling-up Innovat ion

In order to incubate fresh innovations and scale-up the Livelihood Triad

Appr oach, BASIX set -up a thr ee-year (2005-08) Livelihood Tr iad F und

(LTF) wor th Rs 99 million (US$ 2.2 million) with t he support of Swiss

Agency for Development and Cooperation (SDC). This supports the

Livelihood Triad strategy of BASIX discussed earlier.Over 70 innovat ive project s took off from the gr ound 33 that included:

Innovat ive g ras sroot s work

Grass root s work at s cale

Sector and policy work, and

Knowledge build ing

These pr ojects are in the areas of agriculture, livestock and diary, non-farm,

co-oper at ives, financial services, technology, gender and nat ur al resour ce

management. Table 3.1.2 captures some of these projects.


Ta b le 3 .1 .2 :

BASIXs Inno va tive Pro jects

Descript ion

These projec t s , implemented in various BASIX

l oc a t i ons , ha ve e na b l e d f a rm e rs t o i nc re a se

produc t i v i t y , c ha nge c ropp i ng pa t t e rns , o r e nga ge

wi th a n a lt e rna t ive l ive li hood . Co ve r s m a rke t

l i nka ge s .

E xpe r i m e nt s wit h low r i sk c om m uni ty go a t insura nc e ,

through pi lot s of three di ffe rent models of a r t i f i c ia li nse m i na t ion a nd i n te gra te d li ve s toc k p rod uc ts w i ll be

d e v e l o p e d .

Projec t s a re in various BASIX loca t ions , and usua l ly

em ploy a ll three vert ica ls of the l ive l iho od t r ia d. They

e i the r c re a t e n e w li ve l ihoo d op po r t un iti e s ( ru ra l

t our ism , BPO , e m p loym e nt e xc ha ng e ) o r im p rove

current l ivelihood activit ies.

c on t i nue d

Sector

Agricul ture

Livestock a nd

D i a r y

N o n - F a r m

Sub-se c t o r

F a r m in g te c h n iq u e s ( p a d d y

SRI, c o t ton , whe a t , g re e n

fodder) , seed mul t ipl ica t ion

(ve ge ta b l e s ), l a c , p re s sm ud ,

oi l seed

Ar tificia l insem ina tion (milch

ca t tle ) , integra ted l ives tockde ve l opm e nt s e rv i ce s ,

i nsura nc e

Ha ndi c ra f ts (b ra s s , l e a t he r,

h a n d l o o m e m b r o i d e r y ) , r a g

p i c k ing , ru ra l tour i sm , ru ra l

e m p l o y m e n t e x c h a n g e


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Many LTF projects actively build knowledge from pr actice, thr ough a

process called accompaniment. These projects encourage project field teams

to syst ematically reflect and learn from t heir work. Accompaniment helps

systematically build knowledge throughout the life-cycle of the project.

4.0 Susta inability I mpact

In a litt le over ten year s of its existence, BASIX h as expanded its ser vices to

over one million households in 100 distr ict s across some 14 sta te s in I ndia.

While its focus continues t o remain on rur al poor and t he excluded sections, it

is now reaching out to the urban poor also. According to Government of India

est imates, in 2007 ther e wer e near ly 220.1 million people living below the

poverty line. Near ly 21.1 per cent of the ent ire r ural population and 15 per

cent of the urban populat ion of India do not have access t o basic physical and

social infrastr ucture.34 About 25 per cent of the poor live in ur ban ar eas.35

BASI Xs vent ur e into urban areas is to provide livelihood options to these

urban poor.

Thr ough its L ivelihood F inancial Serv ices (LF S), 473,932 per sons/assetowners wer e covered in 2006-07. Over 10,000 cumulat ive claims have been

set t led amount ing to Rs 36 million (US$ 800,000). Not only does BASI X

select distr ict s with high pover ty r at io, low HDI and low financial inclusion,

within those distr icts also, it t arget s member s of the socially backward

communit ies, as can be seen fr om the caste -wise classificat ion of its

customers in Table 3.1.3.36

The Agricultur al/Business Development Ser vices (AG/BDS) wer e


Ta b le 3 .1 .2 : c on t inue d

BASIXs Inno va tive Pro jectsDescript ion

Inc lude s bo th p rod uc t de ve lop m e n t (s a v i ngs ,

e duc a t i ona l l oa ns ) a nd e na b l i ng be t t e r a c c e s s t o

e x i s ti ng p ro duc t s

La rge ly LFS-oriented pro jec ts , these use

t e c hno l ogy ba se d s e r v ic e s fo r i nc re a s i ng

f ina nc i a l ou t r e a c h o f ba nks .

In t roduc e s ne w t e c hn i que s o r r e v ive s o l d one s fo r

wa t e r m a na ge m e nt th roug h c o l le c ti ve a c ti on

Sector

F i na nc i a l

Services

Techn olog y

N a t u r a l

Re sourc eM a n a g e m e n t

Sub-se c t o r

Poor - f ri e nd l y s a v i ngs p rodu c ts ,

r e m i tt a nc e s , wa re hou se r e c e i p t s,

c om m od i ty de r i va t ive s ,

e duc a t i ona l l oa ns

Techn olog y ass i s ted f ina nc ia l

inc lus ion, securi ty

I r r i ga t i on , g roundwa t e r

m a n a g e m e n t


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ext ended to 72,000 producers raising fees collect ion of Rs 16 million (US$

355,560). BASIX part ners with pr ivate companies to pr ovide a wide range ofagri ser vices. F or instance, in its collaborat ion with P epsico for F rit o Lays

chip grade pot ato far ming in Jhar khand, it was initiat ed in 2005-06 with 216

farmers and gr ew to 1100 farmer s in 2006-07. These farmer s had an increase

in crop yield, benefited from delivery of quality planting material , got pre-

det ermined pr ice (average pr ice paid was R s 7.60/Kg (US$ 0.17/Kg)), and had

an access t o credit and crop insurance.37

BASIX organises farmer s, livestock r earer s and non-farm sector

producers like handloom weavers into informal and later formal producers'

organisations. BASIX also works with other livelihood promotion

organisations involved in t he development of th e disadvantaged and

marginalised gr oups. It is curr ently working with 37 Non-governmental

Organisations (NGOs) and Community Based MF Is, seven Panchayati Raj

Inst itutions and several government poverty alleviation programmes in

Madhya Pr adesh, Andhra P radesh, Rajast han and Bihar. These organisations

ar e engag ed in var ious aspects of livelihood promotion including

microfinance, handicrafts, promotion of watershed, dairy, natural resource

management and fisheries, among other s. These Inst itutional Development

Ser vices (IDS) were ext ended t o 25,110 groups, with over 683,000 members

generating fees of Rs 24 million (US$ 533,330).38

F rom Risk to Opport unityIncreased regulat ion and local political inter ference keeps compliance r isks

intact for BASI X. Cost competitiveness and building new investment

capacity are key success factors. It has leveraged IT, achieved scale and

maintained impressive repayment rat es. While it has come up with

innovative solut ions for inclusion of poor in mainst ream economic activities,

the next tr anformat ion for BASI X will be when it is able to scale its pilots

and increase t he size of urban poor a s its client ele.


Ta b le 3 .1 .3 :

Custom er Class i fi ca t ionCa ste C la ss i fica t ion

Sc he du le d Sc he d u le d Mi nor i ty O the r Forwa rd

C a sts Trib e s C u sto m e rs Ba ckw a rd Ca ste s

Ca s t e s

Pe r ce n t o f C u sto m e rs 1 8 6 1 1 4 8 1 7

Pe r ce n t O u ts ta n d in g 1 7 5 1 0 4 9 1 8


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The Pat h towards Sust ainable Pr ofit & Innovation

BASIX leverages innovation and new approaches to creat e and pr ovide

sustainable livelihood opportun ities to the poor (see Figu re 3.1.2). It has also

managed t o leverage available IT platforms to maintain cost competitiveness

and impr ove operat ional efficiencies. Alongside these, BASI X has crea ted a

tr usted brand image, engaged in policy advocacy and worked t owards

creating good behaviour st andards for the industry, part icularly

microfinance. These cumulatively have helped the institution convert certain

sustainability challenges into opportunities.


Th e n ext b ig wa ve ? Sca le -u p Bo P m a rke ts ; u rb a n p oo r

C o m p e t itiv e o p p o r t u ni ti e s In c r ea s i ng a c ce s si b ili ty fo r t h e e x clu d e d ; b e s t so lu ti o n to b r id g e

fac i li ta t e / provide a cces s ib i l it y

Bra n d Bo rro w e rs/ e m p lo ye e s/ in s titu tio n s

A na lyst a n d d eb t ra tin g Re p a ym en t r a te s a n d d efa u lte rs

C itiz en sh ip Pro mo tio n o f su sta in a b le live lih oo ds

C o mp e titive r isks C o st c om p e titive n ess a n d in ve vs tm e n t c a p a city

C om p lia n ce Re g ula tio n a n d vo lu nta r y sta n d a rd s; p o litica l in te rfe re nce

F ig u r e 3 . 1 . 2 :

In n o v a t io n in l iv e lih o o d p r o m o t io n sp r e a d s a c r o s s b u s i n e s s d r i ve r s

D e v e lo p b u s i n e s s

P a r t n e r sh i p s

N e w p r o d u c ts d e v e lo p m e n t

En s u r e i m a g e / Br a n d

C u s to m e r r e la t io n

m a n a g e m e n t

In n o v a t io n e d g e

Develop bus iness

C r e a t e g r o w t h

Bo P m a r k e t s

U rb a n p o o r

Low -cost solut ions

H o u s e k e e p i n g

P o li cy a n d g u i d e li n e s

C a p a c i ty b u i ld i n g


O p e r a ti o n a l p la n g o a l, a c t iv iti e s, e tc

G o v e r n a n c e s tr u c tu r e

TIME

Capacity

Profitab

ility

Innovation

Secure d i rec t ion

P u b li c p o li cy a d v o c a c y Econom ic sus t a inab i li ty

F ig u r e 3 . 1 . 3 :

Susta inab i l ty pa th

RI

SK

O

PPO

RTU

N

ITY


37/107

BASIX has been able t o do all this t hrough building its own capacity and

also that of the indust ry. However, as shown in figur e 3.1.3, it needs t ofurt her st rengt hen this resolve to respond to newer challenges and tar get

fresh mar kets such as t he urban poor. Responding to problems of the ur ban

poor is the next significant growt h area t hat BASI X and others could tap.



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Cosmos Ignite Innova tions

1.0 Organisat ional Set -up

Cosmos I gnite I nnovations is a social enter prise using a disrupt ive

technology solution to resolve two key sustainability challenges at the same

time. It was founded on an innovative business model as t he first global

company (as against an N GO or charity), to bring Solar Light E mitting Diode

(LE D) lighting and micro-energy for domestic use thr ough a sustainable

commer cial model, focussed on the poor a t the Bott om of the economic

pyr amid in Ind ia and in par t s of developing world across Africa, Asia and

Lat in America. It developed an innovative product - MightyL ight to helpsolve the light ing pr oblems of millions of poor in these r egions.

Building on the work of Stanford U niversity and LU TW (Light Up The

Wor ld) F oundat ion39, MightyLight uses t he LE D t echnology combined with

solar energy into a product designed as a multi-functional lamp t hat is water-

resistant , break-resistant , and can be used as a r oom light, reading lamp or

flashlight.

It believes t his model pioneers a pat h t o sustainability both for the

users and t he pr oducers thr ough safe, affordable, easy-to-use solutions, that

deliver social benefit s; suppor t economic development ; as well as mitigat e

climate change impact, at the same time.

The Company follows t he vision of Em powering L ives thr ough

I nnovative P roducts , beginning with th e mission to help Rem oval of

Dar kness for millions with out light at t he Bott om of the Py ra mid. It s

mission is t o provide a cheaper alter nat ive for th e 1.6 billion people

without e lectr icity who are dep endent on fuel-based lighting such as

kerosene.40 The Might yLight is used acr oss India, Afghanistan and

Pakistan t hrough to Kenya, Nigeria, Guatemala and Panama, and many

other re gions, with almost 100,000 people being impacted by t he end of th e

year 2008.41

Cosmos has its own design, development, and manufactur ing and works

in partner ship with leaders from t he development, government andcommercial sectors to distribute its solutions.

2.0 Str at egy

Cosmos Ignit es innovation is in t he pr oduct and t he financing model

developed t o make it a market -based sustainable social enter prise. Cosmos

Ignit e consciously chose t o be a pr ofit-oriented ventur e t o make t he pr oject

sust ainable in its aim t o effect social change. This philosophy is based on the



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belief that market s, and not mer e charity, leads to sustainable gr owth.

MightyLight is in use in India, Afghanistan, Pakistan, Cambodia,Niger ia, Kenya, Rwanda, Panama, Guyana, Colombia and has become

integrat ed into numerous inter national projects by NGOs, the U N, the World

Bank, with commercial distribution now underway.42

On account of it being a lean entr epreneur ial ventur e, instead of a large

corporate, it has chosen to design and learn from a large number of pilot

progr ammes t hat support its own financial sustainability as well as provide it

with r eadiness to r apidly scale in t he coming st ages.

Cosmos Ign ites delivery model is based on:

1. P roblem or Market ident ificat ion

2. Technology or Pr oduct development

3. F inancing or Affordability4. Distr ibution or Scale

F ollowing a design-based appr oach, th e company st udied consumer

behaviour as well as the consumer need and t ried t o come up with a pr oduct

that would fit these consumer needs. The need gap could best be met by

disruptive change.

Consequently, Cosmos Ignite developed a product t hat was not

technology- or stat e-dictated, but was dr iven by customer needs.

Might yL ight pr ovides off-the-gr id electr icity using freely available solar

power an d is close to the customer. This also includes huge re sear ch and

development costs, and intellectual pr operty right s.

The key stat istic to appreciate t his innovation is the fact t hat even t he

poorest are already paying heav ily for kerosene oil to the t une of Rs 80-150

per month t hat is US$ 1.78- 3.30 (@ Rs 9/ litr e (US$ 0.2)from the P DS or t he

public distr ibution syst em); while t he nat ion pays almost thr ee t imes as much

per litr e amount ing to R s 30,000 crore s per annum (US$ 6.7 billion) in

ker osene subsidy. This amounts to a spend of up to Rs 2000 (US$ 44) per

annum on ker osene alone, without consider ing the addit ional cost s of black-

market ed ker osene owing to leakages in t he P DS, cost of batter ies for

torches, and cost of damage to health from polluting smoke and eyesight from

dim ker osene oil lamps.St ar ting wit h a pr ice of Rs 1500 (US$ 33) for t he lamp plus R s 1000 (US$

22) for the solar panel, (offering 30 per cent or R s. 1000 (US$ 22) discount

over t he pr ice of the government-supplied lamps43), Cosmos Ignit e has

managed to reduce the pr ice to only Rs 1250 (US$ 28) for t he lamp and R s

750 (US$ 16.67) for t he pane l. This means t hat the cost r eduction is being

passed on to t he user s of almost 40 per cent in t hree years, which is providing

a payback within just a year on actual spend for lighting by the poor.



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It has done t his while simultaneously increasing t he br ightness of light

delivered t o about four t imes of where it st art ed from, being the first todeliver internat ional standar ds of brightness of >300 Lux the recommended

safety stand ard for eyesight for any per son to t he very poor users. This is

almost 100 times t hat of the dim, pollut ing and fire-prone ker osene oil lamp.44

Given t he ver y significant advances made, it is clear t hat even at this

reduced price the poorest cannot afford the up-front acquisition cost, and it is

imperative t hat Cosmos I gnite finds an alter native met hodology t o product

financing for s calability. It is addr essing this problem in t wo ways: micro-

financing and carbon credits.

In order to r ealise minimal profits th at Cosmos Ignite r equires for

sustainability as a social enterprise, and to cover maximum beneficiaries,

scale is a key success factor for t he company. I t will achieve scale and widerdistribut ion thr ough institut ional and market -based networks and

partnerships.

The company achieves some sales t hrough mult ilater al institutions such

as t he U N, t he World Bank, other donor institutions and not-for-profit

projects. In order to increase it s rur al penetr ation, Cosmos I gnite is now

tying up with

MF Is (Micro-Finance Institutions)

SHGs (Self-Help Groups), and

Co-oper at ives

The company is also looking to use t he increasing impor tance of CSR

(Corporat e Social Responsibility) t o part ner delivery of its sustainable

lighting solutions for t he poor with the large corporations addresing t heir

constituencies. In t he next phase it aims to extend t he distr ibution scale to

urban mar kets t hrough organised ret ail or chain stores, stand-alone or brand

stores, direct market ing companies and net -based ret ailing options, to br ing

green energy products t o everyone.

3.0 Sustainability Driving Innovation

MightyL ight is a solar power ed LE D-based port able home lighting syst emconfigured to hang as a light fixtur e in multiple orientat ions. LE D lamps are

believed to produce nearly 200 times more useful light than a kerosene lamp

and almost 50 times t he amount of useful light of a conventional bulb.45 These

lamps also come wit h an economic payback per iod of 12 mont hs or less. The

light is rat ed t o last for mor e than 50,000 hours (which is more than 30 year s

on usage of four hours da ily or more t han 15 years on usage of eight hours

daily). The light is water- and br eak-resistant, low on cost, r equires virt ually



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no maintenance and is environment-friendly.

The light can be delivered a t a high-volume pr ice point of Rs 1000(US$ 25) including the lamp and solar panel, thus opening up a pr eviously un-

served segment of the market (see Figure 3.2.1).

The bus iness model is now being ext ended t o include a car bon financing

plan with br eakthr ough verification t hrough t echnical remote monitoring and

data centre, linked to Gold Standard Voluntary Carbon Market.

MightyL ight is a disruptive pr oduct tar geted t o meet a social need; at

the same t ime, the company is modelled to function not as a char ity, but like

any other business organisation with focus on the bottom-line.

While solar energy and L E D t echnology have been around for a long

time, what is innovative is their use in combination in MightyLight, suddenly

opening up a whole new mar ket to more than 1.6 billion people without

regular lighting around the world. Moreover, this is health friendly,

environment-friendly and contr ibutes t o CO2 reductions.I t could provide the foundat ions for the developing world to leap frog

development to t he next generat ion of lighting, even more efficient t han both

incandescent as well as CF L bu lbs, while avoiding the pitfalls of danger ous

mercury vapour in these bulbs. It could also be the st art for a br oader tr end

of decentralised energy solutions.


F ig u r e 3 . 2 . 1 :

Migh tyLight s Ma rke t Seg me nta t ion

Cost in india

$ 5 0 0

$ 1 7 0

Cur r en t so la r

h o m e s y s t e m s

7 4 W C FL

1 8 W C FL

O p p o r t u n i t y

fo r

Migh ty Ligh t cos t reduct ion suppo r ted by ca rbon p lan

f in a n c in g - t o t a l c o s ts o v e r 1 0 y e a r s

Affluent

> $ 4 0 0 0

Mid- income

$ 2 0 0 0

$ 4 0 0 0

P o o r

$ 3 0 0 $ 2 0 00

Very Poo r

< $ 3 0 0

A n n u a l

lighting

$ 5 0 +

$ 2 5 +


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4.0 Susta inability I mpact

Studies indicate the carbon emission of 134 kg per year per ker osene lamp.46

Ker osene is not only expensive account ing for near ly 20 per cent of global

light ing cost s,47 it is also hugely inefficient , gener at ing only 0.2 per cent of

global lighting output.48 In addit ion to genera t ing millions of tonnes of CO2,

t he social cost s of kerosene are enor mous. Some social costs include

respiratory illnesses, accidental fires and burns, high risk of crime, and

virtually no opportunities for health and education in no or dim lights.

A single MightyLight saves over one tonne of CO2

over t en year s. Given

that 83 million people in India ar e dependent on oil-based lamps,49 Cosmos

Ignite estimates its lighting India programme would only cost about $2

billion, as against th e annual kerosene subsidy of appr oximately $5 billion, aswell as save one to t wo per cent of Indias CO2 emissions.

50 Indias t otal CO2emissions ar e around 1400 million tonnes . MightyLight would ther efore save

14-28 million tonnes of CO2 only in I ndia and among t he poor. This compar es

with Swedens tot al CO2 emissions of appr oxemat ly 50 million t onnes. This

has huge global CO2 reduction potential if extended t o other poor regions of

the world as wells as the affluent populations.

The challenges of carbon aggr egation in a distr ibuted model have been

specifically addressed through a specially-designed version of MightyLight to

enable micro-chip-based assur ed measur ement of usage and carbon

displacement for t ranspar ent carbon financing.

Sustainability benefits of solar-powered LED light are significant

compar ed t o social, economic and envir onmental problems creat ed by

dependency on kerosene lamps. These are briefly captured in the table 3.2.1.


Ta b le 3 .2 .1

Susta ina b i li ty Imp a c t o f So la r -p ow ered LED ligh t ve rsus Kero sene La mp s

P ro b le m : Ke r o se n e La m p s S o lu tio n : S o la r p o w e r e d LED lig h t

Ec o no m ic Ke r o se n e A n n ua l s a vin g s o f Rs 1 2 0 0 (U S$ 2 7 ) o n k er o se n e

e xpe nd i tu re up t o e xpe nd i t u re

Rs 1 0 0 ( US $ 2 ) A llo w s m o n e y to b e s p e n t o n fo o d , c lo t h in g , s c h o o l

p e r m o n th fe e s o r live lih o o d b u ild in g

P ro v id e s li g h t fo r e d u c a t io n a n d i n cr e a s e d i n c o m e

ge n e ra ti on th roug h li ve l ihoo ds suc h a s s e wi ng ,

we a v ing , ha nd i c ra f ts , f ish i ng , food -c a r t s , e tc

En a b l e s m o n e y s a vin g o n r e s p ir a to r y d is e a s e s, a n d

i nc re a se d i nc om e f rom p rod uc ti ve , s i ckne s s - fr e e d a ys

Ex tr a - o r d in a r y s a v in g s to th e e x c h e q u e r d u e to b r e a k -

t h rough e ne rg y e f fi ci e nc y a nd r e duc t ion i n sub s idy

C o n t i n u e d


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F rom Risk to Opport unity

Cosmos has been able to demonstrate how mechanisms (carbon financing)

creat ed to tackle a global issue (climate change ) could be lever aged t o

effectively re solve a socio-economic pr oblem (access t o sust ained light ing)

faced by t he poor (see Figure 3.2.2). While climat e-friendliness of the pr oduct

helps derisk business to a gr eat extent , one could assume future risks, for


Ta b le 3 . 2 . 1 c o n tin u e d

Susta ina b i li ty Imp a c t o f So la r -p ow ered LED ligh t ve rsus Kero sene La mp sPro b le m: Ke ro se ne La m p s S olu tio n: S ola r po w ere d LED lig h t

So cia l Ke ro se ne is p o llu tin g le a din g Elim in a te s d a ng ero us n a ke d fla m e a n d

He a lth to re sp ira to ry d ise a se s p ollu tin g sm oke o f ke ro se n e la m ps

P o o r q u a l ity lig h t a l so Im p r o v e in d o o r a i r q u a l ity

d a m a g e s e y e sig h t

Le a d i n g to e x p e n d itu r e o n

m e di c i ne s a nd l os s o f

i nc om e d ue t o s i c kne s s

Ed u ca tio n Ke ro se ne o fte n ra tio ne d G o o d q u a lity lig h t w he n ch ild re n re a d

re d u cin g tim e fo r stu d y a nd stu d y in th e eve n in g s

Sa fe ty Ke ro se ne is a fire h a z a rd Pro vid es so cia l se cu rity in d a rkn ess

for vi lla ge huts

En viro nm en ta l 3 0 -2 5 0 kg o f C O2

e m is sio n s Re d u c e s d e fo r e sta t io n c a u s e d b y

p e r ye a r p e r la m p d e p e n d e n ce o n w o o d o r ch a rco a l

N o n - p o l lu tin g a n d e n v ir o n m e n t -fr ie n d l y

Re d uce d C O2

emiss ions

Th e ne xt b ig w a ve ? M a ss ma r ke t fo r lo w co st cle a n en er gy so lu tio n s

C o m p e titiv e o p p o rtu n itie s Lo w -c o st so lu tio n s fo r th e p o o r

Bra n d C o n su m e rs/ Pa r tn e rs

C itiz en sh ip So cia l e nte rp rise re so lvin g ke y so cia l issu es

C om pe t it ive Dono r-a ided pro jec ts a nd l a rge ente rpr i s es wi th mo re f ina nc ia l

r isks m u scle

C o mp lia nce Sta nd a rd s a nd re g ula tio ns o n b a tte r y w a ste

F ig u r e 3 . 2 . 2 :

C lim a te c h a n g e a n d so lu tio n s f o r th e p o o r u n d e r p i n s e n t ir e b u s in e s s sp e c t r u m


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instance pile-up of bat te r ies. The next big wave for Cosmos would be t o

pioneer yet another product/solution success st ory and creat e a mass-marketfor these products. Competition for its lighting solutions already comes from

large lighting companies and similar pr oducts distribut ed by NGOs thr ough

donor-aided funds.

The Pat h towards Sust ainable Pr ofit & Innovation

Cosmos began with pr oduct, deliver y and financing innovation. However, as

it pr ogresses in business, securing direction for futur e gr owth t hrough

est ablishing economic sust ainability and policy inter vent ion will become vital

(see Figure 3.2.3). In order to furt her r educe prices so as to make it

financially more attractive to the poor, Cosmos needs to achieve certain

economies of scale. Such a scale cannot be achieved without pr oper policyframework t hat facilitates growth of decentralised home-based energy

systems. At the same time, sett ing plans and compliance with standar ds and

regulat ions will mean bu ilding organ isational capacity and supply chain

net work. F or instan ce, collect ion and safe disposal of batt ery and pr oduct

waste. The next big leap will be to extend its pr oduct-solution to urban poor

as well as the not -so-poor, with different iated design, pricing and dist r ibution

str ategy. Also vital to its gr owth will be to not r emain a one-product success

story, but to develop more product-solutions on similar product-business

model.


D e v e lo p b u s i n e s s

D i srupt ive innova t ion

C a r b o n f in a n c i n gEn s u r e i m a g e / Br a n d

C us tomer re l a t ions wi th

t h e p o o r

S ta k e h o l d e r r e l a t io n s

D e v e lo p b u s i n e s s C r e a t e g r o w t h

M a s s m a r ke t

N e w p r o d u c ts & s o lu t io n s

Pa r tne rs hips to s ca le -up


C o m p li a n c e a n d s ta n d a r d s

O p e r a t io n a l p l a n g o a l, a c t iv it ie s , e tc

LC A

TIME

Capacity

Profitability

Innovation

Secure Di rec tion

Econom ic sus t a inab i li ty

P o li cy i n te r v e n ti o n / a d v o c a c y

F ig u r e 3 . 2 . 3 :

Susta inab i l ty pa th

RISK

O

PPO

RTU

N

ITY


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ITC Limited

1.0 Organisat ional set -up

ITC is one of India's largest privat e sector companies with a market

capitalisation of over US$ 19 billion and a t ur nover of nearly U S$ 5.1 billion.51

It was ranked 14th among the top 40 firms listed by F orbes in 2006.52 The

group has a diversified presence in cigarett es, hotels, paperboards and

specialty pape rs, packaging, agri-business, packaged foods and confectionery,

information technology, branded apparel, personal care, stationery, safety

matches and other F MCG products (see Figure 3.3.1).

ITC's diversified stat us originates from its corporat e str ategy of creat ing

multiple drivers of growth leveraging its core competencies: wide

distr ibution reach, brand-building capabilities, effect ive supply chain

management and ser vice deliver y. The gr oup employs over 25,000 people at

more t han 60 locat ions across India.53

ITC has a sust ainability management str ucture t o develop and review

policies, tar gets, pr ogress, and then r eport (see Figure 3.3.2).This structure

overlaps with t he governance str ucture and business str ucture of the

company, which helps mainstr eam sust ainability into business str ategy and

processes.54

E very Business Division/ SBU at ITC is r un by a Chief Executive also

responsible for t he sust ainability performance of the business unit. E ach

Division/ SBU is also responsible for its innovat ion and crea t ivity for the

competitive edge. This decentralised str ucture with centr al oversight and

accountability p rovides scope for sust ainability and innovation to inter face at

ITC. This is reflected, for instance, thr ough company-level tar gets on energy


FM C G * H o te ls

A g r i B u s i n e s s

Lea f Tob a cco

A g r i C o m m o d i ti e s

* FM C G i n c lu d e s c i g a r e t te s , l if e s ty le r e t a i l in g , b r a n d e d p a c k a g e d f o o d s , p e r s o n a l c a r e p r o d u c t s , m a t c h e s , i n c e n s e s t i ck s

P a p e r b o a r d

P a p e r &

P a c k a g i n g

I n f o r m a t i o n

Te c h n o l o g y

F ig u r e 3 . 3 . 1 :

ITCs Busine ss A rea s

ITC


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efficiency and emission and wast e r eduction, whereas innovation in new

business models such as the e-choupal happens within t he agr i business unit.

ITCs Car bon Commit tee looks after t he company st rategies to red uce

its climate footprint . It comprises E xecutive Vice P residents from F inance

and E nvironment, Health & Safety and t hree Senior Managers from F inance

and Legal functions.

2.0 Str at egy

ITCs str at egy to invest in developing societal capita l and addr ess

environment al challenges th rough large-scale implement at ion of socially-

relevant business models entails costs t hat const

Sustainability Driver Innovation

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