Businesses cannot succeed in societies that fail

Updated: Mar 10 2008, 04:33am hrs
Geneva-based World Business Council on Sustainable Development (WBCSD) is a CEO-led global network of 200 companies from 35 countries. The platform enables companies to share knowledge and best practices in sustainability and come up with business positions. WBCSD president Bjorn Stigson was in India recently to attend Teris Delhi Sustainable Development Summit 2008. FEs Rajiv Tikoo spoke to him about the growing carbon credits market, major achievements and future challenges. Excerpts:

The carbon trading market is growing like never before. How optimistic are you about a proportionate growth of the Clean Development Mechanism (CDM) component

The carbon market is a substantially big market and it is growing by the day. It nearly tripled to $30 billion in 2006 from $11 billion in 2005. Its biggest component is the European emission trading. The CDM market has the potential to grow to $100 billion. If the governments can send a long-term signal and come up with a clear and stable framework, then you would see a lot of investment coming in. But if you dont have government policies going forward, it holds back investments.

Why should it affect investments CDM is anyway good for businesses.

Uncertainty has clearly a dampening effect on investments. Even the International Energy Agency says that uncertainty has slowed down the upgrade of existing energy systems.

So, what is the global business community doing

There is a clear sense of urgency in the global business community. Leading global companies are ahead of governments. The impression in the business community is that governments are not shouldering their responsibility because they are not laying down global frameworks within which they can do their work.

Many companies are bigger economic entities than some governments today. Why do they need to wait for governments to take the lead

Climate change is an issue that can create substantial tensions and major disruptions in the society. It will impact businesses. We cannot succeed in societies that fail. Besides, there are trade implications, which are not in the interest of global companies. Even the Nobel committee stated that climate change is not just an environmental issue, but also an issue that can be disruptive for societies.

Though global companies are raising the bar abroad, they have lower thresholds in developing countries. Why is it so

I am sure you can find individual cases where it is happening. I dont think it is a general principle. As a global company you want to operate according to global standards. You dont build an inefficient plant because you are building it in India. You build it to the best standards you have. If you do anything else, it would be crazy. In fact, global companies raise local environmental, social and labour standards because they perform to global standards. Global companies cannot afford to have double standards.

We do have examples where MNCs have practised different standards on labour and environmental issues in India.

It would be crazy to claim that everything is nice and shiny. You can find a number of companies that do not perform to the best of standards. That is why we have got police and prisons. Its the exception and not the norm. Today as a global company you are so much under scrutiny by regulators, stock exchanges and rating agencies that you cannot afford to perform to poor standards. You are immediately exposed.

Would you say that the response of Indian companies to environmental issues is at par with that of MNCs

They are now in the same situation in which global companies have been for a long time. We see a lot of Indian companies maturing to become global companies now. So, they care about how they are perceived internationally, particularly when they are looking for investments or acquisitions. Whether its Infosys, ArcelorMittal or the Tatas, they have now the same need to be engaged globally. Besides, you see growing evidence that people are seeing climate change as a business opportunity.

Does it really give Indian companies a competitive edge globally

If you look at the valuation of corporations, it has changed dramatically in the last 25 years. Earlier, most of the valuation was based on fiscal assets. Today most of the valuation is based on intangibles. Brand reputation is important. If you want to access capital from the market, it can give you a competitive edge.

What is your impression about Indias position on climate change treaty negotiations Do you subscribe to it

India is perceived as being very defensive. India wants to do nothing that will hurt its economic growth. Moving to a low-carbon economy will have some costs. It wont be free of cost. Given the size of India and its importance, India has to be part of an agreement. There is already recognition of the common but differentiated responsibilities worldwide. I think India can portray itself in a more positive light than what it has done so far in these global negotiations by not being defensive.

Isnt the Indian point of view justified

India certainly has a lower per capita emission, which is the Indian governments point of view. At the same time, India as a country is on its way to becoming the third biggest emitter in the world. But a part of the Indian society is already having an environmental footprint that is similar to that of the western world.

Can you extrapolate on the basis of the consumption pattern of a small community

That is not the point. India has a low per capita emission and at the same time the country is on its way to becoming the third biggest emitter in the world. I think you have to reconcile these two different ways of defining India. One cant deal with climate change globally without the participation of all countries. India will be hurt more than average by climate change. So, its in Indias self-interest to be part of the global response. India needs to participate to avoid energy insecurity and the consequences of climate change.