Sustainability issues such as natural resource management, water use and climate change mitigation are increasingly becoming critical for the economic performance of India Inc. In other words, environmental and social parameters, in time to come, will turn into financial liabilities for companies if they are not managed well enough, according to the FE-EVI Green Business Survey 2010-11, titled India Inc: Sustainability Matters, conducted by The Financial Express (FE) and Emerging Ventures India (EVI), an integrated climate change and clean energy company.
While the survey questionnaire was sent to 591 largest Indian companies by revenue, only 58 responded in detail. From among those who did not respond, the reason cited most often was lack of well integrated programmes on the issues covered. While India Inc evidently has a long way to go on these issues, the findings of the survey clearly focus on chalking out a plan of action for the future.
According to the survey findings, while absolute carbon emissions for the respondents are growing, there is a significant drop in their emission intensity. Absolute emissions increased 17% (5.6% annually) during 2007-2010, while the carbon intensity came down by 4.11% annually. As many as 81.8% of the respondents saw reduction in carbon intensity. For a group of companies that has averaged a growth rate of 30% over the same time period, energy intensity has decreased by 11%.
In what comes as a heartening sign, 78.57% of the respondents are measuring their carbon footprint, while 21.4% have conducted product-specific life-cycle assessments (LCAs), which is a natural progression from organisation-wide carbon footprint management. This trend is likely to grow in the future as 46.4% of the surveyed companies have plans of conducting LCAs in the future. In fact, two companies ? JK Paper and Hindustan Unilever (HUL) ? cited customer demand as one of the drivers for conducting an LCA.
Clean Development Mechanism (CDM) is the most popular carbon financing mechanism and 17 out of 58 respondent companies have CDM registered projects, with an average size of 64,054 CERs for a CDM project. At Rs 800 per CER, the surveyed companies have earned about Rs 153 crore.
Waste management is also not just a compliance issue anymore with India Inc. According to the findings, a large number of companies are deriving economic benefits from waste by utilising it to produce energy and meet raw material requirements. For instance, in the liquid effluents category, while 14 companies are at the compliance level, 32 are are above the compliance level. Similarly, for solid particulate matter, while 13 companies are at the compliance level, 26 are above the compliance level.
In the area of natural resource management, 79% and 63% of the surveyed companies cite water and fossil fuels as their most critical natural resources, respectively, because of availability concerns and price fluctuations. However, most companies are unable to identify other resources as critical to their businesses, and it reflects in the lack of action to manage other natural resources on their part. Also, while water consumption has gone up by 5.7% annually over the last three years, and despite the high operational risks that water scarcity brings along, the issue has still not been elevated to the board-level yet.
Less than 20% companies view impending regulations as a significant area of concern for the use of natural resources. Such a myopic outlook may result in Indian companies missing natural resources consumption trends.
Companies also seem to be managing water use but on the flip-side, water risk is hardly being managed. 89% of the companies are measuring and managing their water usage and water use intensity has declined by 0.62% despite the annual rise of 5.7% in consumption and absolute ground water consumption having gone up by 9.13%.
The results from the survey on the issue of governance and sustainability highlight the strong correlation between sustainability reporting and corporate performance on sustainability. Companies that do such reporting outperform those that do not by 233% on sustainability indicators. However, except for 16% of the respondents, all other organisations have failed to develop a coherent sustainability vision. For most of them, the key action areas relate only to managing energy, fossil fuel and water usages. Stakeholder engagement is still very rudimentary in nature with 45% of the surveyed companies finding it difficult to clearly identify all relevant stakeholders for their businesses.
Setting an agenda for the time to come, the survey recommends that managing climate change risks and gaining from newer opportunities created due to mitigation efforts should become core to business planning.