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LiFE, or Lifestyle for Environment, is a concept which was first articulated by Prime Minister Narendra Modi at COP26, the Conference of the Parties on climate change, in Glasgow in 2021. Introducing the term, he said: "This One Word, in the context of climate, can become the basic foundation of One World. Today there is a need for all of us to come together, with collective participation, to take LiFE forward as a campaign. What is needed today is mindful and deliberate utilization, instead of mindless and destructive consumption."While broader environmental compulsions guided the prime minister's commentary, the urgent crisis represented by global warming was clearly a key consideration at Glasgow. LiFE spoke directly to the position India has consistently taken on climate justice and per capita equity when seeking to control climate change-inducing carbon emissions. It offered a way to move all humankind towards a universally accepted set of consumption practices that ultimately ushers in a circular global economy.During its presidency of the G20, India seeks to champion this idea and bring it into the frequently used vocabulary of the international community. At its heart, LiFE represents the perspective that every human life matters, and every section of society needs to be included in seeking solutions for climate change. Looking ahead, perhaps the most important voice that needs to be heard in the discourse on climate change in India is that of India's women.Women in Indian SocietyStatistics would suggest that the voice of Indian women may currently be relatively subdued. India ranks 164th among 176 countries in female workforce participation at around 24%. Even societies with relatively weak empowerment of women, such as Saudi Arabia, rank higher than India in their female workforce participation ratio. The multiple challenges that women in India face include early drop-out from school, gender-based discrimination, limited access to resources and services and land ownership constraints. Studies indicate that the world over, women are disproportionately affected by climate change, with one UN study suggesting that women make up 80% of the population displaced by environmental disruption. Indian women, particularly in rural areas, are often responsible for securing food and water for their families as primary caregivers, making them even more vulnerable to the drastic impacts of climate change.Ironically, as a survey by the World Economic Forum in 2021 showed, women outscore men on most leadership qualities, and their management style favours long-term thinking, transparency and inclusion, all of which are necessary skills for pioneering climate change alleviation and sustainable innovation. A recent study conducted by the UN in rural areas suggests that when provided with the same access to resources as men, women farmers could increase agricultural yields by 20% to 30%. An analysis by the World Economic Forum in 2020 found that gender equality was positively correlated with lower greenhouse gas emissions, higher forest cover and greater use of renewable energy.Consequently, empowering women with equal opportunities should be high on the agenda of a collective effort to deal with climate change while generating economic growth in India.The G20 AdvantageThe good news is that we already have several women role models in India helping to transform the sustainability landscape. From women farmers adopting new techniques in agriculture to women entrepreneurs deploying multiple innovations, there are a number of successes that inspire us.Rajkumari Devi, a farmer from Bihar, has been promoting climate-smart agriculture through intercropping, mixed cropping and crop rotation in her community. Her efforts inspired over 200 farmers in her village to adopt crop diversification practices, leading to an increase in crop yields and income. Sabarmati Tiki, a farmer and environmental activist from Odisha, is well known in the region for promoting biodiversity conservation. Thanks to her, over 3,000 farmers in the neighbouring areas chose to adopt organic farming practices and gave up the use of chemical pesticides. Anjali Devi, a farmer from Telangana, deployed a biogas plant powered by cow dung on her property, reducing her overall carbon footprint while saving around Rs. 8,000 every month in cooking fuel costs. Chhavi Rajawat, the youngest ever woman sarpanch of Soda village in Rajasthan, worked to improve access to clean water, sanitation and education for the villagers, and converted her village to 100% solar-powered.Beyond the efforts of these individuals and many more, a number of organisations have also emerged to support the cause of women, such as, in the climate-smart agriculture space, entities like the Mahila Kisan Sashaktikaran Pariyojana and Vanastree, which are working towards promoting women empowerment along with biodiversity conservation by capacity-building training and fair inclusion in the decision-making process. Non-profits, such as the Center for Water and Sanitation, Mahila Housing Trust and Watershed Organization Trust, to name a few, are also actively promoting gender equality in areas such as waste management, climate change adaptation and water harvesting.India's G20 presidency this year puts the country in a unique position to influence the international community by sharing learnings drawn from its own experiences. The G20 summit can serve as a global platform for disseminating important information to educate and raise awareness about the relevance of women's empowerment to broader socio-economic development. Such a broad platform can accelerate the pathway to an equitable society, eventually leading to improved outcomes on climate change for the G20 countries and beyond, hence the reinforcement of this message by the Prime Minister at the G20 Development Ministers meeting this month. In his words, "Women are setting the agenda for development and are also the agents of growth and change. I urge you to adopt a game-changing action plan for women-led development."

India's Global Moment on Women and Climate

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India's Global Moment on Women and Climate

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ESG (Environmental, Social, and Governance) has become a very familiar word with companies and investors these days. There is a huge increase in ESG assets. According to a Bloomberg study, sustainable investing has now gone mainstream, with an estimated $37.8 trillion in assets under management in FY2022.According to the same study, global ESG assets are on track to exceed $53 trillion by FY2025. Companies are also striving to improve their ESG performance to attract investors and meet regulatory requirements and cater to demands of their customers.Whenever ESG is mentioned, and the discussion moves to ‘E’ the primary focus is on global warming which is a major issue in today’s world. The focus centres around what steps companies are taking to curb emissions, carbon and greenhouse gases. &nbsp;While it is important for companies to address the climate issue which is critical, it is also necessary to address the issue of plastic pollution racking the world today.The petrochemical sector is regarded as the backbone of plastic production and a critical sector of any economy. A key output of the petrochemical industry is the production of plastics such as polyethylene, polystyrene, and polypropylene. &nbsp; &nbsp;The growing production and consumption of plastic is resulting in a growing amount of plastic waste being generated every day. India is estimated to generate about 3.4 million tonnes of plastic waste every year and it is estimated that only 30 per cent is recycled (as per a report from Marico Innovation Foundation). As per the Central Pollution Control Board (CPCB) reports, plastic contributes to 8 per cent of the total solid waste, with Delhi producing the maximum quantity followed by Kolkata and Ahmedabad. The major challenge, however, is segregation and re-aggregation of plastic waste streams. Recycling is a preferred way to deal with plastic waste but a key worry is the unsegregated waste that lies untreated in the environment. &nbsp;The major components of plastic waste (in terms of tonnage) are:<ul><li>Polyethylene terephthalate (PET) water and soft drink bottles, food jar</li><li>Polyvinyl chloride (PVC) cables, plumbing pipes</li><li>High-density polyethylene (HDPE) shampoo bottles, packaging</li><li>Low-density polyethylene (LDPE) grocery bags, packaging</li><li>Polypropylene (PP) bottle caps, medicine bottles, chips packs</li><li>Polystyrene (PS) disposal cups, cutlery, packaging foam</li><li>Polycarbonate (PC) food packaging, electronic goods, and defence gadgets</li><li>Nylon fishing nets, clothing, ropes</li></ul>&nbsp;Plastic waste that is not recovered and recycled leads to major issues for the environment. Plastic takes thousands of years to degrade due to its complex polymer structure which is not easily decomposable. Plastic waste impacts all of us in many ways. Some of which are<ol style="list-style-type:lower-latin;"><li>One of the main reasons for flooding we see in most cities and towns is due to clogging of drains by plastic waste.</li><li>A lot of plastic waste ends up in the bellies of animals causing serious hazards to them and to the consumers of animal products.</li><li>Plastic waste entering oceans harms marine life and damages habitats. It directly impacts many species of marine life materially.</li><li>Substantial quantity of plastics has accumulated in the natural environment and in landfills where it is buried. In the process of &nbsp;breaking down, it releases toxic chemicals which make their way into our food chain and water bodies.</li></ol>&nbsp;Why should businesses care about plastic pollution?Businesses especially those who are contributing actively to plastic pollution need to address this issue actively and not just wait for regulations to force them. Embracing sustainable practices and reducing plastic waste can lead to various benefits, including:<ol><li>Enhanced Reputation: Companies that actively work towards reducing plastic pollution and adopting sustainable practices earn goodwill and enhance their reputation among consumers, investors, and communities.</li><li>Risk Mitigation: By addressing plastic pollution, businesses can mitigate regulatory risks, potential fines, and reputational damage associated with unsustainable practices.</li><li>Cost Savings: Adopting measures such as waste reduction, recycling, and using alternative packaging materials can lead to significant cost savings in the long run, improving overall operational efficiency.</li><li>Innovation Opportunities: Addressing plastic pollution challenges stimulates innovation and provides opportunities for companies to develop sustainable alternatives and gain a competitive edge.</li></ol>&nbsp;Companies need to publicly announce their goals for reduction and monitor and report them regularly along with their other ESG efforts. &nbsp; &nbsp;It will also help influence regulation to higher standards they set giving even more competitive advantage and gain traction with ESG focussed investors.The Road To Becoming ESG-Friendly<ol><li>Assess and Measure Plastic Footprint: Companies should conduct a thorough assessment of their plastic usage and waste generation across the value chain. This analysis will help identify hotspots and set targets for reduction.</li><li>Implement Waste Reduction Strategies: Businesses can adopt strategies such as reducing packaging, optimizing product design to minimize plastic use, and implementing circular economy principles to minimize waste generation.</li><li>Promote Recycling and Circular Economy: Companies should encourage recycling by implementing recycling programs within their operations and collaborating with recycling partners. Embracing circular economy models, which emphasize reuse and recycling, can significantly reduce plastic waste.</li><li>Engage in Product Innovation: Companies can invest in research and development to find sustainable alternatives to plastic, such as biodegradable or compostable materials. Encouraging customers to use reusable products can also contribute to reducing plastic waste.</li><li>Collaborate and Advocate: Engaging in industry collaborations, partnerships, and multi-stakeholder initiatives can amplify the impact of efforts to address plastic pollution. Companies should also advocate for policy changes that support sustainable practices and incentivise plastic waste reduction.</li></ol>&nbsp;There are also opportunities to build businesses around plastic collection, monitoring, disposal and recycling. &nbsp;Several startups have gone back to roots to come up with innovative materials for packaging using plantain leaves, bamboo, paper and biodegradable plastic. Natural material is being used to replace plastic furniture etc.Addressing plastic pollution is no longer an option for companies seeking to be ESG-friendly. The imperative to tackle this environmental crisis is increasingly shaping consumer preferences, investor decisions, and regulatory frameworks. By taking concrete steps to reduce plastic waste, companies can enhance their reputation, reduce risks, and unlock innovation opportunities.Embracing sustainable practices and actively working towards a plastic-free future will not only benefit the environment but also contribute to long-term business success in the evolving ESG landscape.

Embracing ESG To Counter&nbsp; Plastic Pollution

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Embracing ESG To Counter Plastic Pollution

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When the topic of ESG (Environment Society and Governance) is raised, the immediate response of companies is to think of E and talk about all the efforts that they are doing or going to do on Environment. It is also a standard assumption that the subject company is also excellent on Governance and hence they only need to address E.While it is true that global warming is something that all of us are facing and hence there is a better understanding of the need to focus on E, there is equally the need to think of S. Society is usually ignored and it is assumed to be CSR or board gender diversity (which they meet for statutory purposes).It is important to address S given the growing inequity and discrimination in the world and in India. If left unaddressed this could become a serious concern. Growth in corporate wealth is leading to income and wealth inequality worldwide. India is also seeing a significant growth in inequality as can be seen from the Table.<img class="image_resized" style="aspect-ratio:730/994;width:54.7%;" src="https://ecube.tinglabs.in/uploads/Wealthinquality_82aeff4bcf.png" alt="Wealthinquality.png" srcset="https://ecube.tinglabs.in/uploads/thumbnail_Wealthinquality_82aeff4bcf.png 115w,https://ecube.tinglabs.in/uploads/small_Wealthinquality_82aeff4bcf.png 367w,https://ecube.tinglabs.in/uploads/medium_Wealthinquality_82aeff4bcf.png 551w," sizes="100vw" width="730" height="994"> ⁠The obvious response is that governments and civil society should address this, and corporates have other things to focus on. This is no longer true. The largest corporations control large portion of the global assets, employ a huge number of people directly and indirectly impact several more through their supply chains.They also supply goods and products directly or indirectly to most of the world’s population.The concentration of economic power also leads to a disproportionate ability to influence policy and society. The long term survival of corporates (their markets primarily) will be severely impacted if they do not address ESG issues either due to global warming or through inadequate income due to income disparities or worse social unrest driven by the inequities. Hence it is critical that corporates look at ESG not just as something that investors are demanding but as their long term survival need.The Society in ESG relates to the impact of the corporation on its immediate and the larger social milieu that it operates within. It covers employee diversity, reducing discrimination, employee safety and health, health and safety of its supply chain employees, sourcing from ethical sources, data protection and privacy, product impact on society, land use and impact on ethnic communities, impact on animal rights, relation with local communities, etc.This article focuses on the employee dimension. The premise is that social harmony can be promoted by ensuring better opportunities to all sections of the society and reducing compensation and other forms of discrimination.What can India Inc do? SEBI has directed that the top 1000 companies disclose ESG related data using the Business Responsibility and Sustainability Reporting Framework. However, companies are not limited to disclosing only what is demanded but can go beyond and set benchmarks for others to follow.Once the leaders start disclosing on other parameters, especially voluntarily, they will be rewarded by investors and others and become a source of competitive advantage.A classical example is the way Infosys influenced and drove reforms on corporate governance in India.Here are some employee related information that corporates can consider disclosing voluntarily.(a) A key disclosure that is now required is that of the ratio of compensation between the highest and lowest paid employees. Corporates can provide commentary on how they will reduce this gap over a period. In addition, they can disclose similar ratios with respect to contract employees and others in their supply chain. Where we have owner managers the owners also compute a ratio where they include the dividend with the salary for the numerator.This reduces the distortions in such computations where dividend is preferred to salary for tax reasons.(b) Companies are required to disclose the number of permanent employees and non-permanent employees classified into men, women and differently abled employees broken up between officers and workers. Corporates can start disclosing their employee composition on other dimensions — example, state of origin, mother tongue, rural versus urban background, religion, social status (SC/ST), etc — and work towards improving the composition in line with their region or country.(c) Similarly, changes in employee composition — example, additions and exits for current and past years — can be disclosed not just on the three dimensions and two categories but on all the other dimensions mentioned in (b).(d) Companies are required to disclose gender differences in compensation. Corporates can go one step further and think of compensation differences across the dimensions in (b).(e) Corporates are required to train people on human rights. They could train everyone on ethics, integrity and core principles of the Constitution, etc., and provide disclosure on how they are being model corporate citizens.More such items can be thought through and disclosed.Social harmony is a key requirement for long term prosperity of corporates and it is in their interest to promote this.

Don‘t ignore the ‘S’ in ESG

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Don‘t ignore the ‘S’ in ESG

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Over the 250 years since the first industrial revolution, the timelines of every new innovation cycle appear to be shrinking. After the last cycle dominated by digital innovation, we are entering a new one where sustainability considerations are taking centre stage. Big drivers for this include the shared trauma of communities across the world as a result of the adverse impact of COVID 19, growing anxieties about unchecked global warming, and major new investments being made to solve these kinds of challenges.Substantial new capital is being made available to address sustainability challenges through the actions of governments (for example, the European Union’s Green Deal, and the Biden administration’s Inflation Reduction Act in the US), recast mandates of financial institutions seeking to reduce risk and tap into emerging opportunities, as well as the endeavours of many private sector players including a host of start-ups determined to meet changing customer demands. &nbsp;With each innovation cycle, flag bearers of disruptions that become mainstream emerge, such as Tesla, which by virtue of its pioneering innovations in electric vehicle manufacture has been rewarded with a market cap greater than that of its four closest rivals put together. Alongside, we see other enterprises that fail to evolve and perish, famously like Kodak, a company that once controlled over 50% of the global market share for the photographic film industry but did not seize the digital innovations impacting its industry to architect a new future for itself. As one study, Stall Points by Matthew S. Olson and Derek van Bever argues, the greatest threat to an enterprise’s growth is posed by obsolete strategic assumptions that undermine market position, and by breakdowns in innovation and talent management.With shortening innovation cycles, the pressure increases on enterprises to constantly innovate. A great example is Netflix, which started in 1997 as a disrupter to Blockbuster by delivering movie DVDs by mail. Recognizing the innovation cycle of digitisation, the company entered the digital streaming market in 2007 and is today one of the largest OTT content providers in the world.In India as well, we are seeing business leaders taking note of the dramatic changes the new trend of sustainability will likely introduce in their businesses. From the announcement by Reliance Industries’ Mukesh Ambani at the company’s Annual General Meeting in 2020 that “The catastrophic impact of climate change calls for the legacy energy industry to reinvent itself on a war footing”, to last week’s observation at a CII Business Summit by Tata Group Chairman Chandrasekaran that “At the Tata Group, we are undergoing a massive transformation to become future-ready, a transition where we are tightly integrating or embedding digital data, AI and sustainability at the core of the business, building strategy, and most importantly, in the business model itself”, the country’s largest enterprises are gearing up for the new sustainability challenges they face. &nbsp; &nbsp;Sustainability is the new DigitalClimate change is clearly driving the latest innovation cycle of sustainability. Over the last decade, major fossil fuel companies such as BP, Statoil, and DONG have transformed. They are moving away from fossil fuels to become “energy” companies. Statoil has rebranded itself as Equinor, while DONG underwent a massive transformation from an oil and natural gas company to become a wind energy company, now known as Orsted.Back home, we are seeing these themes play out as well. Reliance and Adani have announced pioneering forays into Green Hydrogen. In June last year, ANIL and TotalEnergies outlined a capex plan of $50 Billion to set up 2.5 million metric tonnes per annum of green H2 manufacturing capacity over the next 10 years. Reliance is investing $74 Billion in Green Energy and other projects in Gujarat over 10 -15 years. Tata Power has substantially pivoted away from coal-fired thermal power to become one of the country’s largest renewable energy providers. From the public sector, NTPC, traditionally a thermal power player, has entered the solar energy space. They have tripled their operational clean-energy capacity to 3.2 GW since 2020 with a target to reach 60 GW by 2032. &nbsp;These changes in business models and pivots are coming in good time. Three years earlier, we saw one of the first major corporate casualties of climate change, when Pacific Gas &amp; Electric Company (PG&amp;E), one of the largest electric utilities in the US, filed for bankruptcy. Due to the tragic wildfires in California in 2017 and 2018 for which it was assigned primary blame, it was hit with liabilities to the tune of $30 billion which led to its bankruptcy.In India, over the past year, we have seen an increasing thrust towards a green transition. The BRSR became mandatory this year, and a recent update has introduced BRSR Core that will introduce assured reporting &amp; disclosures. Companies are responding by creating ESG and Sustainability committees on their board to accelerate their transition. RBI recently raised funds at a greenium through sovereign green bonds and they have recently announced a framework for green deposits.Yet, there are enterprises that continue to live in denial. Their extreme short-term thinking has led to disasters in the past, such as the Great Financial Crisis, and will continue to lead to disasters in the future. Such businesses that fail, like Kodak in the past, to read the writing on the wall and choose not to innovate, will be left behind and risk eventually perishing.

Green Innovation,&nbsp; a major driving force

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Green Innovation, a major driving force

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The Covid pandemic and growing anxiety about the adverse impact of global warming have increased public interest in Environment, Social and Governance (ESG) investing.ESG investing strategies have been broadly summarised by the Global Sustainable Investment Alliance (GSIA) under seven broad themes: impact investing; best-in-class screening; sustainability-themed investing; norms-based screening; corporate engagement; negative screening; and ESG integration.As of 2020, per GSIA, these strategies were used to manage assets of over $35 trillion, and according to a Bloomberg study, global ESG assets are on track to exceed $53 trillion by FY 2025.However, the growing popularity of ESG investing has recently faced increasing criticism.Questions have also been raised about the underwhelming performance of many ESG funds in the past year, especially when benchmarked with funds that were happy to invest in ESG-unfriendly fossil fuel companies that saw record profits in the wake of the Russia-Ukraine war. ⁠We discuss three major critiques of ESG investing and why they should not impede its sustained growth.Critique 1: ESG is subjective and difficult to measure, the criteria for investing are confusing, and this distracts from a pure returns focus.There is considerable merit to the argument that ESG is hard to measure. ESG rating providers typically track several hundred parameters under each of E, S and G, and these are neither identical nor do they lend themselves to comparable scoring.Yet, ESG investing strategies — all the seven identified above by GSIA — play a valuable role in offering investors options around how their assets might be managed. From funds that target impact in areas like healthcare, to funds that focus on backing companies that are successfully reducing their greenhouse gas footprint, to activist funds that force the pace of change in reluctant company managements, a plethora of choices are getting created for investors.The onus of explaining and defending the benefits of each such strategy would obviously fall on the respective fund manager. Just as there is a spectrum of public market investment choices, ranging across bullish and bearish strategies, likewise, there is a spectrum of ESG outcomes promised by different fund managers, and it is up to investors to select the fund strategy that offers the most meaningful outcome to them. The outcome sought may or may not be predicated on financial returns, and this is clearly a choice entirely in the hands of the investors.Critique 2: Business success and ESG performance are not always correlated.Critics question whether better ESG performance necessarily leads to better financial returns. They point to the underperformance of many ESG funds when benchmarked with market returns. This is a fair critique, and the fund managers of such ESG funds need to explain what may have gone wrong with their strategies. It is simultaneously worth noting that in markets like India, even though the ESG focus is relatively nascent, the MSCI India ESG Leaders Index has outperformed the benchmark index over various periods, including from inception, and over the past 10 and five years. (See chart)<img class="image_resized" style="aspect-ratio:730/384;width:83.42%;" src="https://ecube.tinglabs.in/uploads/Cumulativ_index_050981eb90.png" alt="Cumulativ index.png" srcset="https://ecube.tinglabs.in/uploads/thumbnail_Cumulativ_index_050981eb90.png 245w,https://ecube.tinglabs.in/uploads/small_Cumulativ_index_050981eb90.png 500w," sizes="100vw" width="730" height="384">For many fund managers, the ESG performance of companies actually offers a proxy measure for prudent risk management. A company that does a better job of managing risks relating to various ESG parameters including environmental impact, employee engagement, community support and good governance, is likely to be better able to navigate through black swan events like Covid and other looming challenges like climate change.Plenty of research papers point to the outperformance on hard-core business and financial parameters of ESG leaders as compared to ESG laggards, across geographies.Promised outcomes from ESG investing may or may not have much to do with a singular dimension of business success linked to financial returns. Outcomes will also depend on a variety of factors such as the tenure of investments, business cycles, geopolitical developments, and so on. And as with any investment fund, outcomes will be shaped significantly by the capability of the fund manager, and to expect that every ESG fund will be successful is unrealistic.Critique 3: ESG investing is a gimmick.For many critics, ESG investing represents a form of virtue signalling and is essentially a gimmick.They point to frequent instances of greenwashing by companies to make the point that the search for strong ESG performance incentivises superficial actions without a genuine commitment to change.However, a few bad apples cannot be the basis for rejecting an effort in the direction of improving ESG performance.We have seen the perils of short-term thinking which led to the Great Financial Crisis. ESG investing, by focusing on certain defined ESG metrics, usually with a preference for long-term sustainable growth, can be a force for good.As climate change worsens and more sustainability-linked challenges emerge, stakeholders will increasingly look towards reporting and disclosure frameworks for information on the issues that matter to them. ESG investing strategies will consequently resonate with many stakeholders.In India too, we are seeing regulatory pressure moving the needle on this front. SEBI is tasking ESG funds to improve their corporate engagement and stewardship protocols.Likewise, the RBI is also beginning to press banks and lending institutions to incorporate an assessment of both physical and transition risks across a range of climate-related scenarios, and to determine their resilience to financial losses; for risk mitigation, it wants them to encourage their customers to be more responsible and provide relevant climate-related disclosures, and where required, adopt steps like reducing the tenor of loans to customers who may face higher climate risks, or persuading them to take on insurance against extreme weather and embrace a clean energy transition strategy.The message is clear. ESG investing is here to stay, and rumours of its imminent demise are completely unfounded.

ESG Investing is here to stay

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ESG Investing is here to stay

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"Don’t find customers for your product. Find products for your customers.” - Seth GodinMission LiFE (Lifestyle For Environment) launched by the government during COP26 rightly brings individual behaviours to the forefront of the global climate action narrative.With a vision to replace the “use-and-dispose” economy with a circular economy, the initiative focuses on individual behaviours and leveraging local cultures.Mission LiFE leverages the deep emphasis Indian culture has historically placed on nature and living in balance. The first phase focuses on changing demand, by nudging individuals across the world to practice environment-friendly actions in their daily lives. But driving behavioural change is a complex and multi-dimensional problem. Multiple interventions will be needed, including:Awareness Creation Only when consumers are aware of sustainable alternatives will they exercise their choice in selecting greener products. We have enough sustainable alternatives in the market for most consumers to get started on their journey. The role of advertisers, the media, social media influencers and non-profits tracking new product development will be key in allowing consumers to make informed choices.It is also important that consumer education begins at a young age, with the values we inculcate in school children, the citizens of the future. Mahindra’s latest campaign, #TogetherWeRise, perfectly summarizes this when it says “Citizens of the future will show the way to Businesses of the Future”.Legislation Behavioural change can be nudged by legislation that creates a conducive environment that empowers consumers. The recent ban on Single-Use Plastic and the EPR Guidelines of 2022 are examples of how legislation can get the conversation started for consumers and industries.With the introduction of regulatory mandates to recycle plastic, brands are now much more conscious about their use of packaging material. This has started the transition away from plastic packaging and spurred innovation in alternate packaging materials.Incentivization Incentives can help to accelerate the adoption of sustainable products by consumers. The subsidies introduced by various State governments for the purchase of Electric Vehicles (EVs) is a great example.Over the years, we have seen an accelerated EV adoption curve, especially in the two-wheeler EV segment. By reducing the cost of entry, the State governments have incentivised consumers to make the greener choice.Labelling Labels and certifications have emerged as useful ways for consumers to understand the actual impact of the products that they are patronising. Food labelling, for instance, has been successful in reducing dietary intake of sodium and artificial trans-fat. Carbon labels can similarly nudge businesses to disclose their performance and meet consumer expectations.Consumer goods major Unilever has launched an initiative to introduce carbon footprint labels for all its 70,000 plus products. Empowering consumers with information can be the tipping point for the adoption of low carbon products.Looking Ahead As consumers increasingly demand green products, “greenwashing” by companies has increased.Big brands from H&amp;M to Coca-Cola have faced questions and had to deal with criticism over sustainability claims that they have made.The UK Advertising Standards Authority has called out advertisements by RyanAir and Shell in the recent past for misleading sustainability claims.In the US, the United Airlines’ customer carbon offset program drew flak from consumers, leading the airline to discontinue the use of carbon offsets in its emission reduction strategy.Similar vigilance on the part of the Advertising Standards Council of India (ASCI) and informed consumers would be required in India.The media, with due support from non-profits and activists, can also play a role in naming and shaming errant companies.While there is no one size fits all solution for the complex challenges we face, evolving consumer behaviour has the potential to accelerate our Net Zero transformation.Taking the first step is always the hardest due to inertia, but once enough consumers get on board, it will pave the path for the rest of the market.

Net Zero: The consumer angle

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Net Zero: The consumer angle

Corporations are increasingly becoming more dominant and powerful across the world. The scale of large corporations as a proportion of world GDP is increasing rapidly. The business sector overall contributes 72 per cent of GDP in the OECD, and corporations with more than $1 billion in revenue account for an increasingly large share of that. In 2020, the top 50 firms by value increased their stock market capitalization by $4.5 trillion, bringing their total value to nearly 28% of the global GDP. Three decades ago, the equivalent figure was less than 5 per cent.India is no different. Corporates control significant wealth in India and we see the wealth of the top corporates and their leaders growing by leaps and bounds. &nbsp;One number to illustrate this is market capitalisation of listed companies in India is 104 per cent of its Nominal GDP in December 2022, compared to a percentage of 76 per cent in 2016 (CEIC Data).The largest corporations control a large portion of the global assets, employ a huge number of people directly and indirectly impact several more through their supply chains. They also supply goods and products and, therefore, directly or indirectly are engaged with the most of the world population. &nbsp;The concentration of economic power also leads to a disproportionate ability to influence policy and society.Typical discussions on societal and environmental issues focus primarily on what the government and civil society can do. Given their wealth, impact and influence, it is important that corporations pay attention to these issues. &nbsp;The question is how to engage them on issues other than wealth or profit. This is where ESG (Environmental, Social and Governance) comes in. ESG calls on corporations to look beyond only wealth maximisation and consider ESG issues whilst managing their businesses. This is being driven by large global institutional investors, who are pushing them to consider ESG as a key factor in designing their companies’ strategies and goals. This is not being done with any altruistic motive but a realisation that corporates have to address these issues and are a significant cause of these issues. In addition, if these issues are not addressed, they can destroy markets and hence impact long-term sustainability, growth and profits.More and more funds and investors are demanding ESG actions from corporates and the number is increasing daily. &nbsp;According to a Bloomberg study, sustainable investing has now gone mainstream, with an estimated $37.8 trillion in assets under management in FY2022 and is expected to top $53 trillion by 2025India ESG DriversIndian society has wide social inequities, and wealth distribution is quite skewed and the skewing is increasing. Separately, whilst India has not contributed materially to global warming, it will be impacted severely in the form of events like floods, heat waves, water shortages due to it. &nbsp;Therefore, it is an imperative that the Indian corporate sector pay attention to E and S along with G. There are three other key reasons for India Inc. to adopt ESG standardsInvestors: &nbsp;As more and more investors embrace ESG, they are demanding that Indian companies adopt ESG standards. &nbsp;Over a period, we anticipate that there will be an ESG premium and companies, which adopt ESG and are seen to adhere to its principles, will garner the ESG premium compared to their peers just like we see a Governance Premium day. &nbsp;Companies, which do not meet ESG standards or are in the exclusion lists of ESG – for examples, coal, pornography and tobacco – will see fewer investors investing in their stocks and are likely to lose value.Regulation: While regulations are getting tighter, there are also incentives for companies to adopt ESG standards. &nbsp;There are incentives for green power, EVs, etc There are already regulations for extended producer responsibilities, avoidance of plastic, mandatory CSR and having adequate diversity in Boards, and tighter regulations are likely in all sectors.Customers: &nbsp;Global corporates are demanding ESG integration in their supply chains and Indian companies supplying to them will be forced to adopt these standards. In addition retail customers and employees are beginning to demand responsible conduct by corporates and prefer to buy products from companies with better ESG score. &nbsp;New products are being designed with these in mind by many companies.ESG Scenario in IndiaThe ESG scenario in India is buzzing actively and if one sees the actions below holistically, it is clear that ESG is here to stay.The Government of India has, as noted earlier, mandated several new regulations, and provided incentives. &nbsp;The Securities and Exchange Board of India (SEBI) has introduced Business Responsibility and Sustainability Reporting guideline, which is mandatory for large listed companies and will slowly be rolled out to all other listed companies, with the following preamble: “The BRSR is a notable departure from the existing Business Responsibility Report (“BRR”) and a significant step towards bringing sustainability reporting at par with financial reporting. The BRSR is an initiative towards ensuring that investors have access to standardised disclosures on ESG parameters.”The disclosures under BRSR are mandatory from this financial year for the top 1,000 listed companies. SEBI plans to bring out more guidelines in this area to make certain parts of the report requiring certification/ audit and has floated a discussion paper on this.Global investors and private equity are increasingly requiring ESG integration as a precondition to investments. Bain &amp; Co.’s Jenny Davis-Peccoud, founder and co-leader, Global Sustainability &amp; Responsibility Practice, has recently said that over the next five years, ESG considerations are expected to influence 90 per cent of India-bound investments. That is a huge jump from five years ago when only 40 per cent of investments were taking ESG considerations into account before making investments.Indian Mutual Funds have also started launching ESG funds. As of date there are about seven ESG funds with a total AUM of about Rs 10,000 crore. &nbsp;Given the AUM of Rs 40,00,000 crore by all AUMs, this is clearly a drop in the ocean. SEBI has recently brought out a discussion paper on regulating ESG Funds and clearly expects more action in this space. &nbsp;SEBI and IRDA are also mandating stewardship regulations for Mutual Funds and insurance companies. We can expect more and differentiated ESG funds, which will invest only in companies which are ESG compliant.Rating agencies are developing indices to measure ESG and companies are advertising their ESG credentials. Last year, rating agency CRISIL launched an ESG score for Indian firms based on the knowledge available in the public domain. The scores vary from 1-100 with 100 being the best ESG performance. &nbsp;SEBI is also planning regulations around ESG Ratings.In recent years, quite a few indices have come up to track, motor and measure the ESG performance of various companies. Some of those are as follows: S&amp;P BSE Greenex, S&amp;P BSE Carbonex, S&amp;P BSE 100 ESG Index, NIFTY 100 ESG Index, NIFTY 100 Enhanced ESG Index.Several large companies have declared their intentions to become net zero by specific dates and also launching green products, floating green bonds etc.RBI has launched regulatory initiatives on climate risk and sustainable finance while announcing key policy decisions by Monetary Policy Committee (MPC). These guidelines include; Broad Framework for Acceptance of Green Deposits; Disclosure Framework on Climate-related Financial Risks and Guidance on Climate Scenario Analysis and Stress Testing. &nbsp;RBI said these guidelines will be issued in a phased manner.We are also seeing consumers demanding ESG in companies by boycotting products sold by companies with poor track record of governance or societal issues and not addressing climate change. At the same time we are seeing companies launching products with a green label or promising to do good for the society, etc.Challenges for ESG in IndiaCapital: India needs a lot of capital to address climate change and societal inequities and it needs to find sources for capital. &nbsp; Indian companies must leverage green bonds, social bonds and sale of voluntary carbon to augment resources to meet the additional costs to meet E and S commitments and incentives that are provided by the government.Data: Obtaining credible data is a huge challenge. There are also concerns of greenwashing and multiple standards. Some of these will be partially addressed by the BRSR disclosures from this year, but we need consistent standards which consider the local conditions. There are several standard setting bodies and India Inc. must participate actively in the process of setting standards.Talent: &nbsp;ESG analysis by investors and others and ESG integration within companies require a huge talent pool and it is a big challenge as it is a relatively newer field. Most companies lack qualified internal resources to implement ESG initiatives effectively. Instead, they must rely on external consultants. While this comes at a cost, it may be an effective way to outsource and comply with the need. &nbsp;Several efforts to train talent are under way and they need the support of India Inc. Way ForwardESG is clearly something whose time has come, and it makes sense for companies to integrate ESG into their decision making not only due to pressure from investors but also in their own self-interest. &nbsp;As is always the case, there will be early adopters, followers and those who use a tickbox approach. &nbsp;India Inc, given its climate risks and social inequities, does not seem to have much choice but to adopt ESG.

ESG Investments: Gaps,&nbsp; Challenges And Way Forward

ESG Investments: Gaps, Challenges And Way Forward

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As India sets its sights on becoming a global leader in sustainable development, the Union Budget is a crucial tool to catalyse our green transformation. This complements bold international commitments already made under the Paris Climate Treaty to reduce greenhouse gas emissions and source 50 per cent of India’s electricity from non-fossil fuel sources by 2030. Coinciding with India’s G20 presidency, the identification of green growth as one of the seven core economic priorities showcases India’s commitment to a sustainable future.Employing the largest proportion of the population, agriculture saw clear wins in the Budget’s green initiatives. Sustainable and natural farming practices are increasingly gaining traction, and the government’s intention to facilitate the transition of one crore farmers to such practices is commendable.The Agriculture Accelerator Fund announced in the Budget will provide crucial funding for entrepreneurs to drive innovation. The combination of the government’s initiatives, such as PM PRANAM, which incentivises States and UTs to promote alternative fertilisers, and the push towards sustainable farming can facilitate the transition away from chemical-intensive farming.Financing green transition The previous Budget’s announcement of sovereign green bonds marked a significant milestone for India’s green finance landscape. The successful issuance of the first tranche of these bonds by the central bank, the RBI, with a modest greenium of six basis points followed by Exim Bank’s record-breaking issuance of $1 billion in sustainability bonds, demonstrates a growing appetite for green financial products.The recent adoption of a new ESG framework by SBI for raising green debt is another step in the right direction. The public markets regulator, SEBI, also recently released a dos and don’ts framework for green bonds that should provide clarity to green debt issuers. ⁠The Budget also pointed to the potential for the growth of Municipal Bonds or Muni Bonds. These have internationally proven to be a successful tool for cities to raise funds for green infrastructure development. The success of Ghaziabad’s recent issuance of a Muni Bond for a waste plant and Indore’s Green Bond issuance shows the promise of green financing to build sustainable cities in India through this avenue.Amongst the major challenges presented by climate change induced by global warming will be the ability to manage water security in our water-stressed country; remember, close to half of Indian agriculture is still rain-fed. The increase in funding provided to the Ministry of Jal Shakti by 43 per cent is a positive step in this context.Likewise, the announcement of the ‘Mangrove Initiative for Shoreline Habitats and Tangible Incomes’, which will facilitate mangrove plantation along the Indian coastline. However, more emphasis on disaster management and risk reduction is required going forward. As the adverse effects of climate change continue to escalate, it is crucial that we increase our adaptation efforts and build climate resilience into all the new infrastructure that is being created.New service offerings Over the last two decades, the IT industry in India led a digital revolution with dramatic gains in the services sector. Sustainability is the new digital and opens up a similar opportunity for India. The Green Credit programme outlined in the Budget to incentivise behavioural change for people, organisations, and local bodies is encouraging.Likewise, a ‘green’ procurement requirement in government purchases could motivate Indian industry to transform its offerings. New job opportunities will parallelly be created in spaces such as consulting, audit and climate technology. This can unlock a new wave of growth.Multiple large-scale initiatives are being undertaken around the world as humankind transitions to net zero. The US government’s Inflation Reduction Act will invest $369 billion in climate solutions and environmental justice. In response, Ursula von der Leyen, president of the European Commission, has introduced a plan to make Europe the home of clean-tech and industrial innovation on the road to net zero. The EU has also deployed the Carbon Border Adjustment Mechanism to address concerns about carbon leakage in imports from countries with lax emission standards.Sizeable budgetary allocations are also being made in India towards the green energy transition, including an allocation of ₹19,700 crore to the National Hydrogen Mission to achieve at least 5 million tonnes production capacity by 2030, and incentives for ethanol blending in fuel, and waste to energy build-outs.Going forward, attention needs to be paid to supporting the needs of small and medium enterprises in leveraging such initiatives, including through funding common shared infrastructure in industrial clusters of the kind that exist in Surat, Dahej and Paradeep. Meanwhile, the Energy Conservation Bill envisions the creation of a domestic carbon market, and coupled with the anticipated revival of UN-sanctioned international carbon trading, the government can not only stimulate India’s emergence as the world’s leading supplier of carbon offsets, but also provide overarching guidance to industries for their long-term decarbonisation plans.Execution is key Overall, Budget 2023 shows promise in continuing the green focus of previous Budgets. Execution will be key, both in delivering on past commitments and in creating new opportunities for economic growth. The Sustainable Alternative Towards Sustainable Transportation (SATAT) scheme, announced in 2018 to achieve 5,000 compressed biogas plants by 2023, has only met 1 per cent of the target so far. And only around 60 per cent of the 2022 target of 175GW of renewable energy was delivered.Positive initiatives need to be supported by excellent execution. Meanwhile, greater focus needs to be provided towards building disaster risk resilience, and climate adaptation. From a green lens, there is much to welcome in Budget 2023, but also much more to be done.

Budget should energise&nbsp; green growth

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Understanding the sustainability disclosure landscapeThis millennium has seen a rash of sustainability disclosure frameworks like never before, much to the consternation of companies who are expected to report on! A few mandatory ones have emerged such as the EU’s Non-Financial Reporting Directive mandatory, while India’s Business Responsibility and Sustainability Report (BRSR) mandated for the top 1000 listed companies in India is an interesting example from the emerging economies.Voluntary frameworks, which dominate the landscape, these may be classified as broad-based (in that they cover several aspects of the sustainability landscape) and specialised. The broad-based ones include Global Reporting Initiative (GRI), the UN Global Compact along with its Communication of Progress (UNGC-CoP), Integrated Reporting (IR), Sustainability Accounting Standards Board (SASB), WEF’s Measuring Stakeholder Capitalism and the emerging draft of the newly-formed International Sustainability Standards Board (ISSB). Specialised frameworks include CDP (previously, Carbon Disclosure Project) and Task Force on Climate-related Financial reporting (TCFD), both of which focus on climate change, and the upcoming Task Force on Nature-Related Financial Disclosures (TNFD) outputs that focus on what may be broadly called environmental issuesRemembering the purpose of disclosures – a means and not the endIn this rush of blood, it is important to step back, take a deep breath and remind ourselves of the fundamental purpose of sustainability disclosures. They must serve 2 purposes. The first is external – to inform a company’s stakeholders (not only investors) of its plans and progress. And the second is internal – to enable a company to reflect on its strategies, performance and impacts to take corrective actions. Arguably, the second is as important, if not more, than the first since disclosures are to be a means to a sustainable world and not the end.So, how do the current ones stack up against these twin purposes? The early voluntary disclosure frameworks – GRI and UNGC-CoP – were based on the widely-accepted triple bottom-line (TBL) and the 10 principles of the UNGC respectively. Thus, there was an underlying framework that described what sustainable behaviour looked like and hence enabled companies to identify how they can get better at it. GRI uses a globally consultative process, inviting all stakeholders of business to participate while the UNGC is based on globally acceptable goals, making them relevant to all stakeholders. Thus, both these frameworks tick both the boxes in that they cater to the information needs of all stakeholders and are based on widely-accepted sustainability frameworks.The subsequent disclosures – CDP, IR, SASB, SASB, TCFD – have been largely driven by one stakeholder: Investors. While there is no doubt that investors are important but it is not clear how much the other stakeholders matter! Also, barring IR, the “S” issues are inadequately covered, arguably since many of these investors are based in the developed world, where “S” issues are reduced to Diversity &amp; Inclusion. Further, while these disclosures may have met the ever-evolving needs of investors and point to the issues that concern them, they provide very little guidance to companies on how they can perform better in a coherent and strategic way.Making disclosure frameworks purposeful The decade of the 2020s will be critical in the way sustainability and disclosure frameworks evolve. For sustainability disclosures to fulfil the twin purposes of being useful to both a company and all its stakeholders, there are some basic building blocks that must be kept in mind:<ol><li>Disclosures must rest on widely-accepted sustainability frameworks. As has been argued earlier, there must be a clear and objective understanding of what constitutes sustainable behaviour. Only then can disclosures provide a basis for both stakeholders and companies to understand where they are and what more needs to be done.</li><li>Multi-stakeholder engagements are key. If stakeholder capitalism is core, then all stakeholders must necessarily be involved, both in defining what constitutes sustainable behaviour and what should be disclosed. Easier said than done yes, but SDGs and the GRI have shown this can be done</li><li>Recognise the diversity of businesses and contexts. Businesses belong to different sectors, have different products and operate in diverse geographies. Frameworks – both sustainability and disclosure – must cater to this diversity. The search for a single, “universal” framework could produce one that either too detailed or too high level and hence not useful.</li><li>Balance depth and width of coverage. Sustainability by definition covers a wide range of issues, popularly classified as E, S and G. For instance, CDP can get in-depth data from its reporters because it sticks to a few topics and can dive deep. If the more broad-based GRI or IR were to do the same, it could result in a disclosure framework that would collapse under its own weight!&nbsp;</li></ol>ConclusionIf sustainability disclosures are to be a means to sustainable development and not the end, they must fulfil the twin purposes that they are meant to serve – they must be meaningful to all stakeholders and must provide guidance to companies on what they need to do to be on the sustainability path. Therefore, the way forward lies in building a consensus on what constitutes sustainable behaviour from the perspective of all stakeholders, depending upon their sector and geography, and designing disclosures that reflects this.

Towards a Purpose-based Sustainability&nbsp; Disclosures regime*

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Towards a Purpose-based Sustainability Disclosures regime*

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ESG stands for Environmental, Social, and Governance. Globally, investors are increasingly asking for enterprises to measure these factors; this is used as part of their investment analysis/review to flag off any material risks, as well as highlight potential developmental opportunities.Global phenomenon such as climate change, Covid-19 have pushed the policy makers and businesses to think of shaping a better future. The very survival of not just businesses, but humanity is at stake with some of these challenges.Much of the societal miseries have been brought along by our own short-term ‘game the profits’ thinking which has led to destruction of natural resources and to harm the societal value system in general.Businesses are expected to ‘build a moat’ to outlast competition and to achieve higher sustainable returns in the long-term.How do environmental effects like consumption of natural resources, waste discharge and carbon emissions impact? How does one leverage social factors such as ties with local communities, diversity and inclusion, and building a positive reputation with stakeholders? How does one look at building-up quality of governance, including board effectiveness protocols, approach to senior executive compensation and appropriate reliance on independent directors?After all, the benefits of these would not be limited to engaged investor interest, efficient use of all types of resources, lower cost of business operations, higher and proactive risk management initiatives, higher productivity and happiness index of human capital.Is there a prescribed formula to achieve these?Is there a way that Corporate India can be trained for it?The book “Outlast: How ESG Can Benefit Your Business” is a lucid commentary that gives a broad outlook of the current Environment, Social and Governance (ESG) landscape and the issues that businesses (continue to) face. After all, it speaks of how to use ESG to enable this positive outcome.The authors Dr Mukund Rajan and Dr (Col.) Rajeev Kumar have articulated well the concept of ESG, especially with the context of Indian ecosystem. Their decades of experience in working for some of India's largest organisations reflects in their wider thinking around the impact of ESG. They have also used their collective experience of working for their Tata group to analyse research for this book. Apart from this, they have studied other businesses/brands such as Marico, Unilever, Olam, Foxconn, Page Industries, Apollo Tyres, Nike, Ranbaxy, Assam tea industry, Enron, Arthur Andersen, Volkswagen, Coal India, Cognizant, and many more. The case studies and examples that this book carries makes the subtle and cannot-miss “profit with a purpose” objective that ESG-led firms adopt. The book has provided examples for almost every sub-topic it has covered, making it suitable even as a “book for ESG-dummies”.Ease of topicThe book is a simple read, with easy explanations. Unlike other books on ESG, this one does not browbeat the reader. This book is neither a technical manual nor a deep-subject-matter-book that discusses ESG framework techniques or methodologies. Whether you are a novice or student or simply blue-skying about ESG or an existing practitioner, this book brings in perspective of the Indian ESG context — of the past, and present. It lays across the benefits of adopting ESG as organisational DNA, for a resilient future in the disruptive ecosystem and the VUCA world that we live in.For this book is like a friendly conversation covering — corporates, communities, commerce, climate, carbon, concerns, corporate-governance, culture, collaborative-solutions, communication, compliance, controversies, corruption, country, codes &amp; covenants, and more — all converging into ESG.The authors wrote this book with absolute Indian context. I feel like saying “At last, Outlast”!

How to use ESG to the&nbsp; benefit of business

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How to use ESG to the benefit of business

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Gone are the days when ‘sustainability’ was seen as the preserve of the anti-capitalists. Corporates in India and elsewhere are already taking crucial steps to improve performance on Environmental, Social and Governance (ESG) metrics that influence the sustainability of businesses. To learn more about these developments, read Mukund Rajan and Col. Rajeev Kumar’s book.If this kind of jargon gets on your nerves, here’s why you should care. Improvement on ESG metrics can help businesses “gain greater efficiency in the use of resources, a lower cost of operations, reduced risk and therefore cheaper insurance premia, minimized regulatory and legal interventions, greater employee productivity, lower cost of borrowing, increased analyst coverage and investor interest, and greater prospects for valuation rerating.”Rajan is the Chairman of ECube Investment Advisors, a platform to catalyse ESG improvements. He has served the Tata Group as their Brand Custodian, Chief Ethics Officer, Chairman of the Tata Global Sustainability Council and Member of the Group Executive Council.Col Kumar currently works as a strategic communications consultant, and he used to be the Head of Learning and Development at Tata Group Corporate Communication.This book will empower corporate leaders to pull up their socks to begin addressing carbon emissions, lack of women’s participation in the workforce, under-representation of Dalits and Adivasis, exploitation of local communities, repression of union members, and other issues. The authors make it clear that compliance alone cannot be a driving force for companies to prioritize ESG metrics; ownership will come from linking these to their values and profits.The authors draw considerably on their “experience of working for the Tatas”. The subject that they have chosen has wider implications, so they bring in examples from many other companies such as Marico, Unilever, PepsiCo, Nestlé, Amazon India, Flipkart, Mahindra &amp; Mahindra, and The Gap Inc. This is, by no means, an exhaustive study of best practices. It will give you a flavour of what is possible, and inspire you to come up with solutions.One of the most unusual examples here has to do with Discovery, a life and health insurance company in South Africa “that has the stated purpose of making people healthier.” This might seem counter-intuitive because an insurance company typically benefits “when subscribers seek out products as a hedge against their possible ill-health.” Discovery has integrated economic incentives for customers to adopt behaviours reducing healthcare costs.How does an insurance company gain from increasing the life expectancy of customers? Rajan and Col. Kumar write, “Discovery is able to offer its insurance products at lower premia while sustaining superior profitability tied directly to the social impact created by delivering on its purpose…The social impact Discovery creates – improving health – is central to its strategic positioning and creates shared value for both society and its shareholders.”This book offers wise counsel to businesses starting out on their ESG journeys, urging them to learn about the India Climate Collaborative, India CEO Forum on Climate Change, and the Confederation of Indian Industry’s CII-Sohrabji Godrej Green Business Centre. It also brings forth insights from the World Health Organization, the World Bank, the Centre for Science and Environment, The Energy and Resources Institute, and the National Green Tribunal.Apart from this, the authors recommend getting familiar with the United Nations Sustainable Development Goals and the UN Guiding Principles on Business and Human Rights in addition to ESG Reporting and Assessment Frameworks and Standards that have been developed by the Global Reporting Initiative, the Sustainability Accounting Standards Board, the International Integrated Reporting Council and the International Standards Organization.The amount of research that has gone into this book is remarkable. If you have the time and inclination, read the notes compiled by the authors after the concluding chapter. They will lead you to a variety of reports, white papers, books, documents, surveys, journal articles and roundtable proceedings that will sharpen your understanding of ESG even further.This book suggests that companies will have to make this effort sooner or later because defaulting on ESG criteria can lead to massive drops in market value. Companies that want to be part of global supply chains or seek foreign investment will also have to pay more attention to their performance on ESG metrics, else they might lose out against competitors. In the years to come, they will face more pressure from activists, customers and regulators.While this book is a terrific resource, it unfortunately leaves out two major groups that ought to be part of diversity and inclusion policies in companies that want to jump onto the ESG bandwagon. These are persons with disabilities, and LGBTQIA+ people. Hopefully, the authors will address these gaps, and the next edition of the book will be even better.

Review: 'Outlast' offers counsel to businesses&nbsp; starting out on their ESG journeys

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Review: 'Outlast' offers counsel to businesses starting out on their ESG journeys

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The authors set out the emerging importance of the Environment, Society and Governance (ESG) framework in the global scenario and deep dive to relate the same to nuances in an Indian context. They argue that the yardstick for business success is already changing; a clear agenda is emerging that is shifting focus from ‘short term’ profitability and shareholders to ‘long term’ sustainability and stakeholders.A loud and clear message is given; organisations can no more focus merely on their own self-interest; their radar now needs to be wide enough to encompass the well-being of the environment in which they operate and the society they interact with. A governance mechanism that factors in the well-being of all the stakeholders will make corporates sustainable in the longer term.Corporate strategies that incorporate ESG propositions are likely to be sustainable and successful. The authors anecdotally bring together illustrations from the Tata group, Marico Industries, Olam International, Ranbaxy and many others, to strengthen their message on the growing importance of ESG.Social dimension The authors clearly explicate the ESG components; environmental sustainability is demonstrated through optimal natural resource and energy consumption, responsible waste and pollution management leaving a minimal environmental footprint. The social dimension is determined by the links and ties the company creates with the local community, the concern for its employees and the working conditions, diversity and inclusion and factoring in the ‘long term’ well-being of other stakeholders, including suppliers, customers and the community. The governance dimension brings together the role played by independent directors and board-effectiveness in ensuring transparency, stakeholder well-being through systems, processes and audit controls.The last three decades have fundamentally transformed India’s economic paradigm. The economic liberalisation of the early 1990s and the calibrated opening up of industries to competition redefined the rules of the game where Indian consumers gained significantly, enjoying products and services that were unseen before. Corporate India found it challenging to realign itself with the changing environment; from a protected environment to open competition. In the transition, corrupt practices and large-scale scams surfaced, bankruptcy cases ballooned, weak governance structures were exposed and many large successful traditional companies vanished, while a new breed of players emerged across industries.Manmade environmental crisis, including flooding and drought, industrial, vehicle and air pollution, usage of bio non-degradable waste, global warming and climate change brought to fore the debate on the need for a good quality life for the citizens. These have driven the emergence of far-reaching regulations that have redefined, and shifted a part of the responsibility to the private sector.Interconnected world The pandemic has further given us a rude shock as to how inter-connected the world has become. It has shown us the magnitude of supply chain disruptions, migrant labour issues, unemployment and demand slump, resulting in severe economic stress that can be triggered off by such ‘black swan’ events.Today, as we stand and look back, many of the myths that had been taken for granted, are now being seriously challenged. The concern for the planet and society was never on the corporate agenda in a big way; that will now seriously change. Greenhouse gas emissions, deforestation, targeting ‘net carbon zero’ trajectories will now be a centre-piece of their ‘long term’ strategies. While such initiatives for sure are bound to negatively impact profitability and shareholder value in the ‘short term’, it will enhance long-term stakeholder value creation and sustainability. Such pressures will be more on developing countries like India in comparison to developed countries, but companies need to view them as opportunities rather than threats!While on one hand the world is becoming uncertain, risky and volatile, on the other it is today far more connected than it used to be; trends that impact the corporate world are swiftly transferring across the world, exerting enormous pressures on businesses.In effect the shift from shareholder wealth creation to stakeholder ‘value creation’ is already happening. The media plays a crucial role in partnering with corporates to enhance ESG effectiveness; constructive criticism by the media that is well taken by responsible companies is a path that will lead to a sustainable future for the corporate.Constructive pressure Transparency, connectivity, the role of stakeholders and institutional investors is bound to increase, thereby, exerting constructive pressure on corporates and business eco-systems in fighting against corruption, demanding higher standards of ethics, compliance, conduct and concern towards stakeholder well-being. Corporates and boards need to be prepared for such an emerging externality.The United Nations’ sustainable development goals (SDG) and targets to be achieved by 2030 are ambitions and include eliminating poverty, health and well-being, clean energy, responsible production and consumption, climate action and gender equality. There is enormous international pressure on countries and corporates to seriously contribute to a global sustainability agenda.The authors highlight that dignity and respect for employees is becoming an important agenda that will deepen employee trust and engagement. A human capital strategy that provides for gender equality, psychological safety and inclusivity, along with ‘fair pay’ will enhance the employee’s purpose at work.The authors quote George Kell, the founding director of United Nations Global Compact: “ Technological change, environmental imperatives and long-term social norm changes will propel ESG investing and corporate sustainability forward. Intelligent ESG investing is bound to become the new normal.”Walking the talk A meaningful ESG agenda stems from a focused ‘core purpose’ of the company. It is further strengthened by the commitment from the ‘top’ and walking the talk through investment in people, establishing systems, code of conduct and metrics to measure progress. A code of conduct, encompassed around the purpose and strategy of the organisation, should ideally set out in clear terms its expectations in terms of values, rules of conduct and responsibilities towards all stakeholders, including the planet. Such a code can also extend to all associates in the supply chains. A ‘whistle blower’ policy to flag-off deviations will enhance the execution.The authors underpin the growing importance of institutional investors whose market value is now close to a third of the overall market capitalisation of Indian companies; hence, they have ‘stewardship responsibilities’ for monitoring, engaging and enhancing the ESG performance of their investee companies.Such powerful global investors have subscribed to the UN principles of responsible investment; which means corporates that are concerned and act in the best interests of the environment and society and have seamless governance are likely to attract higher quality investments.These drive companies to incorporate ESG measures that are linked to sustainable ‘long term’ growth in order to thrive.(Dr Suresh Srinivasan is Distinguished Professor, Strategy &amp; Accounting, Great Lakes Institute of Management, Chennai)Outlast: How ESG can benefit your businessMukund Rajan, Col. Rajeev KumarPublished: Harper BusinessPages: 488 Rs 637

Why ESG needs to be at the&nbsp; forefront of corporate strategy

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Why ESG needs to be at the forefront of corporate strategy

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OUTLAST – How ESG Can Benefit Your BusinessAuthors: Dr. Mukund Rajan and Dr. Rajeev KumarThe economic, health and moral crises caused by the pandemic drew our acute attention to the purpose and values espoused by businesses. More so because the COVID-19 catastrophe is a dress rehearsal for other major challenges that lie ahead, especially the climate change crisis.Far too many Indian enterprises and corporate leaders have been in the news for cutting corners, breaking rules and violating the law to achieve commercial success and personal gains. A number of businesses remain highly irresponsible with resource use, pollution control and environmental compliance. Many companies have been either reluctant to improve their competitiveness or resource-constrained to do so. And multiple examples of crony capitalism and frauds that tend to breed greater inequality in an already poor nation have made the public sceptical about the role of businesses as value creators in society and their sense of responsibility.In our book, we outline the broad landscape of corporate responsibility that Indian businesses must familiarize themselves with and the critical measures they need to take in order to become successful economic participants and responsible corporate citizens in the markets of tomorrow. In particular, we focus on Environment, Social and Governance (ESG) performance. As our book title suggests, in an uncertain, risky and volatile world, purpose-driven companies that align with ESG demands are more likely to outlast their competition. Our manuscript is replete with case studies and evidence to support our arguments.In the first chapter, we explain the concept of ESG and the importance of businesses governing themselves well, taking care of the environment and investing in human capital management for their own success and for the good of society. &nbsp;Companies that factor ESG performance improvement into their strategy and decision-making witness more sustainable growth and better financial returns. Meanwhile, the principle of shareholder primacy has been overtaken by a modern standard of corporate responsibility that advocates value creation for all stakeholders. With significant vulnerabilities on material ESG metrics and increased domestic and international scrutiny, Indian businesses are facing pressure to put in place world-class corporate governance practices.In the second chapter, we elaborate on how embracing the ESG agenda requires businesses to first define their mission or core purpose and thereafter for this to shape their corporate strategy, inspire employees, engage customers and communities and be embedded in their culture. Four important drivers of success in implementing an ESG agenda are: the tone at the top; investing in the people in the organization; walking the talk and demonstrating a commitment to ESG values; and installing systems and processes, including a code of conduct, to monitor progress. We highlight the emerging ESG reporting and assessment frameworks (including the new Business Responsibility and Sustainability Report mandated by SEBI for the top 1000 listed companies in India) and point to the significance of the concept of “materiality” in ESG reporting.The third chapter focuses on the influential role of the media in shaping attitudes towards corporate responsibility. To drive change, the media offers platforms for critique and protest, nurturing sustainable consumerism, influencing government action, strengthening communities, and shaping investor sentiment. At the same time, we suggest caution on the challenges of disinformation and propaganda that can arise from media bias and intricate webs of media ownership and competitive vested interests. We call for responsible corporate communication that aims for harmonious communication structures and processes to meet the information needs of all stakeholders and continuously scans the environment to address emerging issues and developing crises. By leveraging the media’s strengths and capacity to influence change, corporates can build a more sustainable future for themselves.In the fourth chapter on corruption and the state, we argue that India’s growth requires weaning businesses away from pro-crony policies that favour specific private interests and undermine the economy’s capacity for wealth creation. With the enormous power wielded by the state, election funding has become the fountainhead of corruption in India, and there is scope for considerable reform in this area. Meanwhile, anti-corruption campaigns by concerned stakeholders and demands for higher standards of ethics, compliance and business conduct by foreign stakeholders and institutional investors are playing a constructive role in the fight against corruption.The fifth chapter deals with the foreseeable impact of the changing climate and how businesses will be affected by it. We look at ways to address the threat of global warming and climate change, and actions of mitigation and adaptation that companies may be required to undertake. &nbsp;We suggest government-driven regulation combined with market-based incentives to achieve optimal outcomes. Pressure on businesses to change is also emerging from institutional investors, millennials, environmental activists, advocacy groups and retail customers.In the sixth chapter, we focus on dignity and respect at the workplace as an important element of a human capital strategy that must be included within the ESG initiatives of an organization. Businesses are seen as valuing human resources when they compensate them fairly linking reward with performance and value creation, investing in their development, fostering diversity and inclusion, and assuring dignity and respect. Much more needs to be done by the private sector towards increasing the female labour force participation in India, reducing the gender wage gap, encouraging women business leaders and entrepreneurs, and safeguarding the rights and legal entitlements of women. Businesses must actively adopt affirmative action programmes to remove inequalities and discriminatory practices faced by underprivileged sections of Indian society, including the Scheduled Castes and Scheduled Tribes.The seventh chapter deals with the importance of codifying conduct so that stakeholders know what an organization stands for, and for what it can be held accountable for. We offer advice on how to design a code of conduct and ensure that it does not fail. Responsible companies would do well to meticulously design codes of conduct that are aligned to their vision, mission and values, besides being in conformity with international principles, guidelines and covenants, and national legal and regulatory frameworks.In the eighth chapter, the growing phenomenon of shareholder activism in India is discussed. Activist funds are beginning to play an important role in catalysing changes they consider necessary in investee companies. Mandatory Stewardship Codes are propelling hitherto passive institutional investors like mutual funds, insurance companies and pension funds to fulfil their responsibilities by protecting and enhancing value for their clients and increasing the accountability of companies. Proxy advisory firms are also pressing for stronger and more purposive action by Indian businesses. Company boards will have to ensure greater transparency and market disclosures and be prepared to engage with demanding shareholders and proactively address their ESG-linked concerns.In the conclusion, we caution companies to be prepared for more frequent black swan events and to seriously consider how they can build resilience and de-risk their operations. They will be tested for their long-term orientation, determination to deliver sustainable and profitable growth and performance on material ESG indicators. Enterprises that fail to innovate and transform their business models to be fully aligned with ESG concerns will be replaced by companies that care for the environment, build social capital and are properly governed. Unless India Inc. is able to demonstrate more responsible behaviour, it is likely to attract stakeholder censure and far greater regulatory controls. Business leaders will have to make decisions ‘with the long horizon in mind’.The Age of Responsibility is well upon us, and the companies that will outlast their competition are the ones that will build resilience and prepare their businesses for long-term success through a holistic adoption of the mantra of ESG.Available on Amazon – <a target="_blank" rel="noopener noreferrer" href="https://amzn.to/31sxDo7">https://amzn.to/31sxDo7</a>

ESG I Can benefit your business&nbsp; I Increase Revenue

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ESG I Can benefit your business I Increase Revenue

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Usually, blame for business failures is apportioned to external factors such as adverse business cycles, badly framed government regulations and lack of infrastructure. Often the causes lie within: from short term thinking to destruction of natural resources, and exploitation of labour. To outlast competition, build resilience, gain competitive advantage andachieve greater returns in the long run, businesses must improve their performance on material ESG metrics. Outlast:How ESG Can Benefit Your Business, co-authored by Dr Mukund Rajan is a clarion call to corporate leaders to follow the pathway of ESG.<figure class="image image_resized image-style-block-align-left" style="width:50%;"><img class="image_resized" style="aspect-ratio:400/150;" src="https://ecube.tinglabs.in/uploads/Mint_7bafd2e363.jpg" alt="Mint.jpg" srcset="https://ecube.tinglabs.in/uploads/thumbnail_Mint_7bafd2e363.jpg 245w," sizes="100vw" width="400" height="150"></figure>&nbsp;<a target="_blank" rel="noopener noreferrer" href="https://media.graphassets.com/nynzZndeRUq8M2py64R1?_gl=1*1fwyae*_ga*NTcwODUwNDMuMTY2MDgxMTkyNA..*_ga_G6FYGSYGZ4*MTY2MzA3OTg5My4yOS4xLjE2NjMwODA4OTMuNTQuMC4w"><img class="image_resized image-style-align-left" style="aspect-ratio:400/150;width:50%;" src="https://ecube.tinglabs.in/uploads/The_Economic_Times_d84c6aa73e.jpg" alt="The Economic Times.jpg" srcset="https://ecube.tinglabs.in/uploads/thumbnail_The_Economic_Times_d84c6aa73e.jpg 245w," sizes="100vw" width="400" height="150"></a>

Outlast- How ESG can&nbsp; Benefit Your Business

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Outlast- How ESG can Benefit Your Business

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Could Paying Farmers to Store Carbon&nbsp; Help the Climate and Save Farms?

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Could Paying Farmers to Store Carbon Help the Climate and Save Farms?

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By building SDG-compliant enclaves, the country can boost manufacturing and get investments, tooIndia has the potential, but has not been able to scale up the share of manufacturing to its target of 25 per cent. It is blessed with natural resources, human resource and a history of manufacturing everything, from pins to planes. Growth in manufacturing can be achieved through a number of measures, for instance, ease of doing business, improved logistics and transportation, reduced on-going interference and harassment, and availability of land. Most of these are well documented and the government is achieving steady progress, but that is taking time. However, policymakers are forever worried about the ones that get away with easing of rules than the many that would prosper, and this mindset needs to change. But that is a subject for another discussion.One of the key inputs required for investors to set up manufacturing facilities in India, whether local or international, is land and infrastructure. Challenges of obtaining land and building infrastructure, and the delays this creates, are well known.A solution is to create industrial parks/special economic zones through private public partnerships, as the investment required to set up infrastructure is capital intensive. There are a number of global and local developers who are now capable of investing capital to create such infrastructure, if the government can ensure land availability.We are also today faced with significant issues of inequality in society, gender disparities and the need to address climate change. Many times, manufacturing investment could lead to adverse results due to dispossession of land and sources of income for the land-owners, pollution, reduction of water availability, etc.<img class="image_resized" style="aspect-ratio:900/674;width:75%;" src="https://ecube.tinglabs.in/uploads/land_900x674_2e0c4e371f.jpg" alt="land-900x674.jpg" srcset="https://ecube.tinglabs.in/uploads/thumbnail_land_900x674_2e0c4e371f.jpg 208w,https://ecube.tinglabs.in/uploads/small_land_900x674_2e0c4e371f.jpg 500w,https://ecube.tinglabs.in/uploads/medium_land_900x674_2e0c4e371f.jpg 750w," sizes="100vw" width="900" height="674">SDG goals India can be a pioneer and create ‘SDG industrial zones’, whi,ch address the land, and social issues . SDG refers to the Sustainable Development Goals that were adopted by the United Nations in 2015.SDG zones are an entirely new type of industrial parks/zones to address SDG goals. These zones target SDG-compliant activities, aim to have an impact on all the SDG goals with high ESG (environmental, social and governance) standards, compliance and promote inclusive growth. According to the UNCTAD, SDG model zones could act as catalysts to transform the ‘race to the bottom’ for the attraction of investment (through lower taxes, fewer rules and lower standards) into a ‘race to the top’ — making sustainable development impact a locational advantage.While the core of the SDG zone will focus on creating infrastructure for manufacturing, like other industrial estates/SEZs, they have to be designed keeping in mind parameters such as zero carbon discharge, zero discharge into groundwater and rivers, minimum or zero waste, use of closed circle loops, gender neutrality, contribution to public revenues, minimising income gaps within the zone, being responsible citizens and having high standards of transparency.All construction within the zone should meet green standards and ensure low energy consumption. The zone should provide services to support and certify the ESG and other parameters for units operating within it. It could create excess capacity in areas like energy generation, waste management, and water treatment and provide services to the community around it and achieve scale efficiencies. The zone should provide all education and healthcare services required for the residents, including child-care infrastructure.Investment potential All this needs to be done not by regulation by the government but by self-compliance and certification, which will then attract investments. This can be achieved by involving all stakeholders. The zones should also be transparent and high on disclosure on all aspects of ESG, including climate impact.The number of investors who are now focussed on SDG is increasing, and this class of investment is growing fastest among all categories. The total assets under management of investors who are signatories to the UNPRI (Principles of Responsible Investing) exceeds $90 trillion. It should not be presumed that this activity will not be commercially viable — SDG model zones can be economically rewarding too.While this was proposed by the UNCTAD some time back, there are not many such zones in the world. India can be a pioneer and a leader in this by developing all its new industrial estates and SEZs using this model. In addition, it can encourage existing SEZs/estates to adhere to these principles, which would enable them to prosper, create wealth and benefit society and provide a new model for the world to follow whilst increasing manufacturing output.This post was originally published in The Hindu Business Line dated June 24, 2020.

In green industrial zones&nbsp; lies India’s future

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In green industrial zones lies India’s future

Building Back Better after COVID-19 – Reimagining the Construction Sector - banner.jpeg

One of the many faultiness that COVID-19 has exposed is the plight of migrant workers. Estimates vary on how much there are – all guesstimates because there is no hard data – but it can be safely assumed to be around 100 million. We also know that they are employed in a wide range of sectors but we do know that a significant number – one estimate suggests 40% – are employed in the construction sector, which is India’s second largest employer after agriculture.Construction includes a range of buildings, factories, roads, flyovers, bridges, metros and so on being built. It also evokes images of huge cranes, cement mixers, pneumatic tools, scaffolding, road rollers and what have you. All this is of course true but these images often dwarf the large number of people, not all wearing safety equipment, engaged in hard manual labour in the heat and dust of a construction site. What is even less visible is how all the material that go into construction is produced and, more importantly, the people who produce them.This piece speaks to the seamier human side of the construction industry which, like so many things in India, is known but ignored. It is about those whose horrific lives subsidise our fancy apartments and the infrastructure that we love complaining about. And, more importantly, it is about how COVID 19 potentially provides us the possibility to build back better.Construction material – looking beyond cement and steelIn terms of material, cement and steel are very significant inputs of the built environment. But if you follow the debates, you may be forgiven if you are given the impression that there is little else to worry about. Cement and steel are capital and technology intensive and hence produced by large companies and once worker safety issues are taken care of, which one would expect in large companies, so are the human elements. The focus therefore is on the environment – reducing emissions, effluents and waste, eliminating fossil fuel use in the process, using renewable electricity etc.But there is much more than steel and cement that goes into the construction – clay bricks, aggregates, grit, sand to name a few. Most of these are produced in the unorganised sector where, by definition, there is no security of wages, conditions of work are dangerous and where human rights is followed in breach.<img class="image_resized" style="aspect-ratio:543/362;width:75%;" src="https://ecube.tinglabs.in/uploads/image1_7375867c88.jpg" alt="image1.jpg" srcset="https://ecube.tinglabs.in/uploads/thumbnail_image1_7375867c88.jpg 234w,https://ecube.tinglabs.in/uploads/small_image1_7375867c88.jpg 500w," sizes="100vw" width="543" height="362">Let’s start with bricks. Modern building techniques are slowly reducing the use of clay bricks but there is still a significant amount of it produced and used. Just drive around the villages surrounding any Indian town or city and you will the see stacks or chimneys which is the sure give-away that it is a brick kiln. One estimate says there are over 1.5 lakh brick kilns in India employing over 10 million workers. Clay brick manufacturing has to be one of the most primitive processes in use and, tragically, is where child labour and bonded labour is still prevalent. Typically, these bricks are produced by migrant labour in units of 3: a man, a woman and a child. The roles for each are clearly defined with the child’s role being to move between rows of wet bricks laid out to dry in the sun and turn them over – you need small feet for that and so children are irreplaceable! The workers just earn enough to eat – the rest being taken away by the middlemen to be set off against monies advanced to the families before they migrated. One estimate is that the wages paid to the workers is less than 5% of the retail price of the brick. Less said of the working conditions the better – the workers are undocumented (which eliminates all liabilities in case of accidents or death), safety is not on anyone’s mind and forget about working hours, adequate water, shade etc. And if the social conditions are not bad enough, bricks are made using precious top soil which is then lost forever!<img class="image_resized" style="aspect-ratio:834/506;width:75%;" src="https://ecube.tinglabs.in/uploads/image4_05b571c5ba.jpg" alt="image4.jpg" srcset="https://ecube.tinglabs.in/uploads/thumbnail_image4_05b571c5ba.jpg 245w,https://ecube.tinglabs.in/uploads/small_image4_05b571c5ba.jpg 500w,https://ecube.tinglabs.in/uploads/medium_image4_05b571c5ba.jpg 750w," sizes="100vw" width="834" height="506">The next in line is stones. Here, there are two varieties – coarse aggregates that, along with cement and sand, constitutes concrete and hence used in practically all construction. And the other is the decorative ones – marble, granite etc. – used for floors, wall tiling etc. Both these are mostly sourced from stone quarries, most of which is in the unorganised sector and, like bricks, made by the blood, sweat and tears of migrant workers. And apart from horrific work conditions that are like in brick kilns, stone quarries add another dimension to this grisly story – silicosis – a disease that people working in stone quarries get by inhaling fine particles of silica from stone that is known to cause lung infections, heart failure, cancer, disability and premature death! &nbsp;The people<img src="https://ecube.tinglabs.in/uploads/image2_3f4cbc7088.png" alt="image2.png" srcset="https://ecube.tinglabs.in/uploads/thumbnail_image2_3f4cbc7088.png 108w," sizes="100vw" width="163" height="235">The built environment then has to be built. You are right if you think that a lot of these are built by large, hi-tech construction companies who must be taking care of the human element. And though increasingly a lot of these structures come semi-finished from a factory, someone must tie the steel rods for the columns, someone has to carry bricks and material to structure and so on. The large companies, whose shares you and I own, outsource these tasks and it is back to the old familiar middle-man – of the same ilk as those who “supply” labour to brick kilns and quarries – who sources manual labour from villages and brings them to the worksite. And here again, they live in unhygienic shanties near the worksite, their children running around supervised by the elder sibling – usually the girl – who drop out from school. Next time you drive by an apartment building or a highway under construction, just park your car somewhere and take a look at who is working there and how they live. Or speak to folks at Mobile Creches, an NGO working for child rights at construction sites, and they will show you a thing or two. Warning – some scenes may be graphic and unsuitable for the weak-hearted!&nbsp;<img class="image_resized" style="aspect-ratio:522/348;width:75%;" src="https://ecube.tinglabs.in/uploads/image3_e45e6d86e1.jpg" alt="image3.jpg" srcset="https://ecube.tinglabs.in/uploads/thumbnail_image3_e45e6d86e1.jpg 234w,https://ecube.tinglabs.in/uploads/small_image3_e45e6d86e1.jpg 500w," sizes="100vw" width="522" height="348">It has to be said that conditions at worksites have improved significantly with workers being provided safety gear like helmets, masks and harnesses etc. However, the safety equipment is often ill-suited to the Indian summer and it at times causes so much heat that the already under-nourished worker runs the risk of heat strokes. Also, so little is invested in training workers on safety that accidents are no surprise, sometimes even undocumented because the workers themselves may not be recorded on a muster roll.So, how do we build back better?As we start reopening the Indian economy, especially the construction sector, the choice simply is do we revert to business-as-usual – which is the simpler option – or do we use this opportunity to build back better? Let’s also be real – even if we want to build back better, it is not going to happen overnight. Also, we must remember that those who can change things may not want to and those who want to – mainly the workers themselves – cannot! So, what needs to happen?As with every problem, the first thing is for everyone – policy makers, policy enforcers, infrastructure builders, buyers, house owners – to acknowledge that we have a problem because if we don’t do that, all our so-called Smart Cities and highways will be built the same way as the Taj Mahal! Apart from a handful of NGOs and the odd mention by mainstream media (ironically, it was the BBC that ran a campaign on the state of brick-making called Blood Bricks), there is little coverage of this issue.The construction industry is of course best placed to ensure that we build back better. The low-hanging fruit is of course what happens at the worksite and this is where they need to look beyond their tier 1 contractor to every sub-contractor down the line. They must ensure that every labour contractor is thoroughly audited so that they do not employ any form of forced or involuntary labour, that there are adequate budgets for safety training and refreshers on site and that the staying arrangements meet basic standards. If the company does not have its own standard, the International Finance Corporation (IFC) has a set of performance standards and of particular relevance is Performance Standard 2 for labour. I have seen the worksites of Tata Housing and while there is room for improvement, I have not seen a better run construction site and so, it is possible! An excellent role model that Indian construction companies can adopt is the Considerate Constructors Scheme of the UK, set up as a non-profit by the industry to promote practices that go beyond compliance.Apart from construction sites that meet proper human rights standards, construction companies must also focus on the supply chain, right down to where the bricks, aggregates and flooring stones are procured. Since they are such large buyers of these material, they can significantly influence their suppliers; it will not enough to tell them to pay proper wages and provide clean and safe working and living conditions but to also ensure it. This, admittedly, will take time to change but post-COVID is the best opportunity to begin this process.Companies that have plans to construct a new plant or office building post COVID too can play a significant part in building back better. They can do this by simply ensuring that they contract this out to construction companies who conduct themselves responsibly and ensure that this is followed in practice. Again, the IFC Performance Standards mentioned above provide guidance on how this can be done.Government of course has a huge role to play. The obvious one is as a part of its regulatory role – developing building codes, standards and regulations with a strong grievance redressal system that enables swift action when these are breached. Beyond this, as arguably the entity with the largest construction budget in the country, it could contract only those that commit to responsible construction practices and put strict conditionalities on its contractorsFinally, what should we as individuals do? As consumers buying a house or an office, the first question we need to ask ourselves is how responsible is the builder in terms of his building and procurement practices. In some cases, it might mean paying a bit extra but change sometimes costs. If we are building our own house, then we need to set down some ground rules with our contractor – in terms of wages, work and living conditions on the site, safety, child labour and – this is admittedly difficult at an individual level – the sourcing of the material apart from cement and steel. Even while procuring cement and steel, we can well indicate which brands to buy based on our own assessment of which companies we might consider responsible. As employees of companies that are in construction or those that are procuring construction services, we can ask the right questions of our colleagues: Do we have policies that deal with workplace conditions? Do we have policies on sustainable and ethical sourcing? And, very importantly, do we have systems and processes that ensure that these policies are practised? And finally, as advocates and activists, we can join movements and campaigns that demand better behavior from companies, especially in regard to labour practices.Written by Shankar Venkateswaran, Operating Partner &amp; Head ESG, ECube Investment Advisors. The views expressed here are personal.

Building Back Better after COVID-19 – Reimagining the Construction Sector

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Building Back Better after COVID-19 – Reimagining the Construction Sector

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For the last over 2 months, almost all of human thought and concern has been about COVID 19. And rightly so because this is the first time several generations of humanity have seen and been directly impacted by such an upheaval in their lifetimes as they stand by helplessly. But as the curves have begun to flatten out in many of the most affected parts of the world (India is still a distance from that point), the other big agenda of our time – Climate Change – has begun to re-emerge from the shadows.The big question of course is, will COVID 19 accelerate our quest for a zero-carbon-emission world or has it set us back big time? There are a number of folks out there who believe that COVID is good for the climate change agenda and point to the evidence that they believe proves their point.My position is simple. I believe that the lessons of COVID will not automatically or axiomatically rub-off of on the Climate Change agenda and the first part of this piece argues why I believe this to be the case. A set of deliberate, strategic actions must be taken by institutions and individuals who believe in climate change to ensure that it is taken very seriously and that constitutes the latter part of this piece.Positive impacts of COVID on the Climate Change agendaMuch has been written about the positive rub-offs of COVID on the climate change agenda. On the clean environment front, there is little argument. Delhi – the city where I live and where AQI levels sometimes go beyond the 999 that the meters record – has seen these drop to two figures and early 100s is almost the norm. Perhaps the most evocative was the photograph of the Dhauladhar range of the Himalayas seen from Jalandhar over 200 km away. Citizens have begun to realise that bad air quality is not a fait accompli and clean air is a distinct possibility.The advantages of a digitally connected world were not new – the millennials had long ago discovered this and have been living in this virtual world for a while. To many, especially in formal institutions, the lockdowns have shown that physical face-to-face meetings are no longer critical and meetings on Zoom, Teams, BlueJeans and the like are as effective. Companies such as IT major TCS has even announced that its work-from-home arrangement will cover 75% of its employees by 2025. All this, combined with the fact that most people will be wary of flying for a while will mean a lower Scope 3 carbon footprint, though the increased use of personal transport instead of public transport and the less efficient home air conditioning might nullify these impacts somewhat.There is also every reason to believe that supply chains will get shorter and off-shoring of production of physical goods will significantly reduce. Labour costs usually trumped transportation costs when companies built their supply chains but with COVID bringing business continuity well and squarely centre-stage (though climate change proponents have long been arguing this case), this is likely to become the norm, accelerated by the growing unpopularity of China as the global manufacturing hub.Finally, the matter of risk. COVID has demonstrated the extent of disruption – human and economic – that can result from a shock of this kind. To many, climate change represents a similar risk as it is also global and potentially as disruptive. Also, the responses to both these crises are similar – they have to be science-based, requires global coordination and building long-term resilience to deal with risks is key. Despite the obvious differences between the two, especially when it comes to timescales, the fact that the impacts of climate change are more predictable and hence risks are easier to assess may provide the necessary fillip and sense of urgency to the climate change agenda.Reasons for optimismAll of the above impacts provide reasons to be optimistic that the climate change agenda will hold. Additionally, there are other announcements that bring cheer.A S&amp;P Global report says that several companies have made climate related pledges during the pandemic including Microsoft (reduced land-use), Royal Dutch Shell PLC (a new net-zero emissions target), Bank of Montreal (100% of electricity usage from renewables), Morgan Stanley and Citigroup (both of whom committed to stop funding coal-based power plants).The EU is already set on delivering a green stimulus. A BBC report quoted the chief of the &nbsp;Commission’s Green Deal (which commits the EU to net-zero emissions by 2050), Frans Timmermans as saying that every euro spent on economic recovery measures after the COVID-19 crisis would be linked to the green and digital transitions. Though there has been some disquiet amongst a few EU members on the new emissions trading scheme in the light of COVID, a spokesperson was quoted as saying: “While our immediate focus is on combating Covid-19, our work on delivering the European Green Deal continues. The climate crisis is still a reality and necessitates our continued attention and efforts.” The French government’s bail out to Air France conditioned on using more energy efficient engines and a shift to sustainable fuels is another example of a government committed to building back better.A reality checkDespite these positive signals, history and economics provide a counter narrative. Carbon emission data trends seem to suggest that crises do result in a dip but these soon recover. For instance, after the 2008 financial crisis, global carbon dioxide emissions from fossil fuel combustion and cement production fell 1.4% in 2009 but with economic stimulus resources disproportionately allocated to polluting industries, emissions rebounded to 5.9% in 2010. Thus, if history repeats itself, economic recovery post COVID could remain carbon intensive and the fact that effects of climate change are staggered could tempt governments to deal with what appear immediate threats first. It is yet unclear if the indefinite postponement of COP 26, where countries were expected to announce enhancement of their Paris commitments, has derailed this process or not.Though the EU is strongly committed to the Green Deal as mentioned earlier, it is not without opposition in the light of COVID. The Prime Minister of the Czech Republic has urged ditching the Green Deal while a Deputy Prime Minister of Poland has suggested that the emission trading scheme be put on hold. According to a BBC report, Markus Pieper, an MEP from the centre-right German CDU party suggested that a post-COVID economy made investments in clean technologies unviable.Other countries too seem to be sacrificing the environment in general and climate change in particular at the altar of COVID recovery. China has indicated that it will relax environmental oversight of companies and satellite images seem to suggest that the air pollution that fell during the peak of the outbreak has started to come back as factories resume production. The US EPA announced “new less stringent” GHG standards for passenger cars and light trucks and also said it would not penalise companies for not complying with federal monitoring or reporting requirements if they could attribute their non-compliance to the pandemic. The Brazilian federal environmental agency announced it is cutting back on its enforcement duties, which include protecting the Amazon from accelerating deforestation.The position that India and several developing countries have taken in climate change negotiations has been that its mitigation actions will be subject to availability of finance and technology coming from the western world whose historical carbon emissions have occupied much of the carbon space left to ensure that temperature rise remains well below 2°C. In a post COVID world where many of the developed world is likely to see zero to negative economic growth in the coming years, and where funding social safety nets is likely to be prioritised, availability of finance for climate change will be a huge constraint. This again could prove to be a setback for GHG mitigation efforts.And finally, the matter of oil prices. These have already plummeted to historic lows on account of reduced demand. At the same time, the major oil producers have also reportedly announced plans to expand production, perhaps in a bid to monetise their assets to counter future climate change regulations. If prices continue to remain low, then this will adversely impact the growth of low carbon sectors.Maintaining the Climate Change momentum – a plan of actionSoon after the 2008 global financial crisis, Rahm Emmanuel, President Obama’s Chief of Staff was quoted as saying: “You never let a serious crisis go to waste. And what I mean by that is it’s an opportunity to do things you think you could not do before.” COVID potentially provides such an opportunity but it needs to be leveraged to be effective. What needs to be done? I believe there are 5 sets of actions.Nudge governments into a low carbon recovery pathThere is a global consensus that the economy has to restart, and quickly. What is less clear is what technological pathway this should take. As was mentioned earlier, there is a strong temptation for governments and corporations to prioritise the immediate, believing that climate change can wait. This should be discouraged.As was mentioned earlier, the EU as a bloc and France have demonstrated a clear commitment to leverage this opportunity to build back using a low carbon path. Commentators have spoken about numerous ways this could be done, ranging from economic stimulus programmes that prioritise investments in low carbon pathways, assistance to businesses conditioned on drastic cuts in emissions and financial industry bailouts that require banks to invest less in fossil fuel and more in climate change mitigation and resilience efforts. All this tied in with enhanced disclosures used widely accepted frameworks such as that recommended by TCFD and the Indian Business Responsibility Report now under revision. Resilience has to be the key message.Governments and policy-makers may have to be nudged into this course of action and this calls for a concerted and coordinated advocacy effort by a wide range of climate change champions – NGOs, think-tanks, academia, activists around the world. Media – mainstream and social – and people action would be critical allies in this transformation as would the financial services community and companies that have shown climate change leadership and commitment.Make climate change a people’s movementSo far, the climate change narrative has tended to include only policy-makers, scientists, academia, NGOs, activists and business with the public only peripherally involved. Part of the reason is the technical nature of the debate and also its relative lack of urgency, certainly compared to COVID. This has changed dramatically in the recent past with the Greta Thunbergs being able to capture the imagination, especially of the generation that will be most impacted by it.It is time that the climate change agenda got off its pedestal and waded into the messy, complex space of a people’s movement. The logic is very simple. People, especially young people, need to contribute to the solution, not just by participating in protests, but also by their own personal behaviours. And it is people as consumers and employees that can persuade companies to go down a low-carbon path and provide the “business case” for climate change and it is people as activists and voters who can get governments to take it more seriously. Easier said than done of course but its time has come.The renewed respect for science that COVID has triggered provides the building blocks of such a people’s movement. IPCC’s work has been outstanding but its messages must go out in language and ways that are simple, understandable and imaginative, leveraging the shifts in behaviour and mindsets that COVID has brought about. Correlation between consuming low carbon products such as EVs and renewable energy and clean skies and breathable air could be a powerful and positive message. The likely increase in the incidence of infectious disease outbreaks, and hence the risk of future pandemics, if climate change action is deferred is another useful link that can be drawn.Once again, climate change champions – particularly the NGOs, think-tanks and activists – have their work cut out for them. Not only should they create imaginative messages and campaigns to inform the public but also provide them with the tools to act, individually and collectively. Their natural allies in this are grass-root NGOs and the media.Strengthen the “business case” for climate changeThough businesses understand climate science, it will be useful to reiterate the risks that climate change exposes them to, based on the lessons of COVID. For instance, COVID has brought home the fact that potential disruptions to global supply chains is no longer a theoretical or isolated construct but a reality which, science tells us, that climate change will also pose. The gains that work-from-home has brought about is clearly demonstrates that not only are these effective and efficient but also reduces costs while contributing to climate change mitigation.Investors and lenders have a huge part to play in this, simply because as providers of capital and first claimants on assets, they have to be acutely aware of the risks, many of which have been magnified by COVID. Indications are that most are currently engaged in protecting their existing equity and loan portfolios but it is very likely that they recognise the risks that climate change poses and will use their influence with their investee companies to focus on resilience. Insurers too, who are looking at a once-in-a-thousand-year event like COVID might become more risk-averse which could raise the costs for those businesses who take insurance cover unmindful of their adverse impact on the climate.Again, there is a clear-cut set of actions that climate change champions can take to push this agenda, both directly with companies but perhaps more effectively though the influential financial services sector.Build a national consensus on long-term low carbon strategyThe response to COVID has demonstrated both the need and the possibility for political parties to align to an objective and the broad pathways, even if there is disagreement on the details as there should be in a healthy democracy. Climate Change actors should work to ensure this momentum is carried to the climate change agenda as well by the different countries, including India. The development of long-term low greenhouse gas emissions development strategies for India, in line with the Paris Agreement, that TERI has embarked on will be a useful instrument to build such a consensus.Given the long-term nature of climate action, building a national political consensus in a democracy is absolutely critical for success so that objectives stay steadfast even as different political parties run provincial and national governments at different points in time. The fact that the UK and the EU have been able to agree to the goal of net-zero carbon by 2050 demonstrates that this is possible while the US is a notable exception.This is an agenda that must be taken forward by think-tanks and advocacy groups in the climate change space who are skilled in political advocacy. Engaging directly with the leadership in political parties at the national and regional/provincial levels is critical. The role that individuals play as citizens, especially young people, cannot be over-emphasised.Strengthen international cooperation and institutionsThe institution designed to provide technical support and coordination to tackle a global pandemic like COVID is the WHO. However, it must be said that its reputation has been somewhat tarnished, with several countries and commentators questioning its efficacy. Further, the search for a vaccine appears to be a rather scattered and private-sector driven enterprise with little signs of any global cooperation. This, taken along with the criticism of the WTO and the UN system in general in the past, does not bode well for the role of international institutions.It is in this context that getting a global consensus in climate change must be seen. It is also obvious that to address the spatial aspects of a global challenge such as climate change, there is a need for a global institution to anchor the process. The UNFCCC has played this role for a long time and is the natural institution to continue to do so. It is, therefore, in the interests of all those who take climate change seriously to strengthen the UNEP and the UNFCCC. The postponement of COP 26 in 2020 was expected in the light of COVID but the first action all governments, cities, NGOs and businesses must take is to quickly announce a date and work on their enhanced NDC commitments.Written by Shankar Venkateswaran, Operating Partner &amp; Head ESG, ECube Investment Advisors. The views expressed here are personal.(A shorter version of this piece titled “Recovery must take into account the climate crisis” was published in Hindustan Times dated 2 June 2020)

Building Back Better after covid 19:5 actions to keep the foot on the Climate Change Pedal

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Building Back Better after covid 19:5 actions to keep the foot on the Climate Change Pedal

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The State’s role will expand. There will be more welfare projects, and a greater openness to technologySeveral changes may usher in more egalitarian growth, driving investments the government should always have made and enabling a wider base of consumption(Himanshu Vyas / Hindustan Times)No one should seek to read much into the economic predictions at the moment with the coronavirus disease (Covid-19) in full flow. However, Covid-19 is likely to profoundly impact the way governments, companies and citizens behave, changing public life as we know it.Former United States President Ronald Reagan famously said that the nine most scary words in the English language are: “I’m from the government and I’m here to help”. This approach influenced political thought for a quarter-century. But Covid-19 has put governments at the forefront of the response. There is now a greater questioning of why the role of the government has been needlessly reduced in many countries. India too has edged towards an erroneous consensus that we need to keep government small. This is likely to change.Former national security adviser and foreign secretary, Shiv Shankar Menon, wrote in Foreign Policy that governments will take on a renewed confidence in their power to shape the destinies of their nations. In responding to the crisis, governments have perhaps found powers they either did not know they had or were unwilling to use.This new-found power will influence how other matters of state are dealt with later. The climate crisis fraternity may now see greater receptiveness to demands for more stringent environmental emission standards. Demands for strengthened health care, better social security nets and the like have been denied for long, due to various fiscal reasons. The boundaries of the envelope of what government can do has clearly been expanded way beyond what people would have expect only a few weeks ago.For long, there has been an uncritical acceptance of lower wages in some jobs such as nursing and teaching. Caught in the middle of a pandemic, we now see that these groups take on an unusual level of importance. To this list of critical roles are included not just doctors and nurses but also teachers, delivery staff, store clerks and bank tellers. While granting that, in most cases, wages will be determined by market forces, other forms of benefits such as additional income support could be promised to such groups to partially offset the personal risks taken by these groups when they are expected to keep essential services afloat.Historically, governments have claimed an absence of fiscal space to fund such welfare activities. In India, there should now be a strong case to increase spending on health care and insurance. Budget 2021 will hopefully place greater importance on these. As we debate how adverse individual health outcomes impact society at large, there will also be a recognition that large-scale unemployment, partly caused by a potential economic slowdown, too damages the economy. Governments will need to implement Keynesian steps to create more jobs and would be well advised to breach their current fiscal target. Now they should have the confidence to push back on the deficit hawks. Fiscal deficits in the United States rose to 10% of GDP under Roosevelt’s “New Deal” in the mid-1930s. That was a major factor in enabling the US economy to recover. Indian must move to a 5% fiscal deficit for some years — as long as the money is used in a directed manner.Greater governmental powers do come with their own risks. Kishore Mahbubani, dean at the Lee Kuan Yew School of Public Policy in Singapore, has pointed out that at a cultural level, so far, East Asian economies have demonstrated better capability in handling the pandemic. Taiwan, Hong Kong, South Korea and Singapore, all stand as poster children of good administration. This crisis will be a shot across the bow of those in the West who claim that their models of government have little to learn from others. Citizens, in many countries, seeing governments with stronger hand work well could perhaps push democratic nations towards greater authoritarianism.Another medium-term impact of Covid-19 should be a greater openness to using technology. Telemedicine, which has been untapped, will see a surge. It has always seemed unambitious that this market is estimated by India to be just about $32 million, roughly one day’s revenues of one of the many IT majors. In the sphere of education, several lobbies have taken the position that no version of online education will be acceptable for the award of formal degrees. Now, they have scrambled to find ways to make online learning and assessment possible.In a similar vein, for long, working mothers, those with ageing parents, and the disabled have requested organisations to display greater flexibility in offering work-from-home (WFH) options. However, even enlightened companies have generally offered WFH facilities for a maximum of two or three days a month. The pandemic has shown that it is indeed possible to manage some parts of our business on a remote basis. This is a dramatic change in lifestyle for those who need it. One would expect the share of women in the workforce, which has been dropping in India in recent years, to see some revival.The 2008 financial crisis led to a distrust of experts, especially those prone to making economic prognostications. This distrust of a small part of the educated elite spilt over into scepticism of other classes of experts who indeed had something useful to say.A consequence of this trust deficit was the inclination to vote persons without meaningful expertise in public office. Governance is for serious persons who have dedicated their time to politics and administration. It is no surprise that the best administrative responses have come from thoughtful leaders in Singapore, South Korea, or Germany. One hopes that we will see a diminished enthusiasm to vote for TV stars, actors and sportsmen.Several of these changes may well usher in a period of more egalitarian growth, driving investments the government should always have made and enabling a wider base of consumption.The trente glorieuses (three decades of high growth) in France and the Golden Age in the US were driven by deep-rooted and sensible governmental interventions. India has to do the same.Govind Sankaranarayanan, former COO and CFO at Tata Capital, is currently vice chairman at ESG Fund ECube Investment AdvisorsThe views expressed are personalThis post was originally published in Hindustan Times dated 14 April 2020.

The pandemic will change public life as we know it | Analysis

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The pandemic will change public life as we know it | Analysis

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How is it different to lead a venture outside Tatas after more than 2 decades of association with the Tata group? &nbsp;What is E cube Investment Advisors? your vision and the impact it is looking for?The venture I am involved with at E Cube Investment Advisors leverages the learnings and understanding of the Indian corporate landscape of the three Founders, including myself. &nbsp;All of us have been associated closely with the Tata Group and are now seeking to deploy our skills and experience to catalyze the adoption of higher Environment, Social and Governance (ESG) standards by Indian businesses.We are very excited about the opportunity to make a difference, much needed at a time when India is not only seeing economic damage caused by the outcome of widespread corporate misconduct, but also the adverse impact of multiple social and environmental issues. As an entrepreneurial venture, we obviously have to rely on the resources the Founders and other team members have pulled together, and while we are no longer working under the umbrella of a giant corporate-like Tatas with massive resources, we do believe the several hundreds of years of senior leadership experience we have brought together allows us to create a very substantial impact. &nbsp;Ultimately, the change we wish to bring about has to be led by the companies we invest in, and our task is to mentor, guide and support the promoters and top management in these companies which we believe will become role models for Corporate India. &nbsp;Our first fund will invest in the public markets, backing small and mid-cap companies that are led by visionary promoters who have a serious intent to improve their ESG performance. &nbsp;Over time, we would launch multiple products to address different asset classes, including debt and private equity. &nbsp; &nbsp; &nbsp;&nbsp;Environment, Social and Governance issues are paradoxical considering the global capitalism philosophy. Does Conscious Capitalism really work?Absolutely. &nbsp;Globally, a series of corporate debacles since the early 2000s at companies like Enron, followed by the financial crisis of 2008-9, have served to demonstrate the importance of deep stakeholder engagement with a focus on the long-term. &nbsp;This is also the reason recently the Business Roundtable in the US, which has many of the largest US corporations as its members, advised its shift in stance in defining corporate purpose. &nbsp;From a perspective that emphasized “shareholder primacy”, the Business Roundtable has moved to the view that “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”. &nbsp;A glance at the comparative performance of public equities that are ESG leaders versus the benchmark indices across many countries also shows that the risk-adjusted returns are higher in companies that take corporate responsibility seriously. &nbsp;In India, the MSCI India ESG Leaders Index has seen a steady widening of the gap with the MSCI India Index. &nbsp; &nbsp;How critical is ethics in Corporate governance?It is absolutely vital. &nbsp;Many of the cases of corporate bankruptcies in India are the result of unethical conduct and poor corporate governance, and their impact on the banking system and the wider economy has been hugely negative. &nbsp;A number of criminal cases are consequently being pursued by the law enforcement agencies against corrupt promoters and managers. &nbsp;The tone at the top is exceedingly important, and sadly, in too many Indian companies, poor examples have been set by corporate leaders. &nbsp;How can brands be trusted today? How can they be built?It all starts with having a clear sense of who you are and what you stand for. &nbsp;The mission and values must be understood and reinforced across the entire organization. &nbsp;Employees, in particular, are the best brand ambassadors for any organization, and if they are not fully aligned, a lack of coherence gets detected that puts off many outside stakeholders. &nbsp;The tone at the top and how an organization walks the talk are also very important; on important Environment, Social and Governance (ESG) questions, business leaders will be expected to demonstrate genuine commitment. &nbsp;In a world where internet access is ubiquitous and stakeholders are extremely aware and informed, companies and business leaders that make exaggerated claims of performance will get called out very fast with an associated loss of reputation. &nbsp;If the mission and values can be established and fed into brand communication, it will enjoy a measure of authenticity. &nbsp;To the extent that these values resonate with those of the brand’s stakeholders including customers, the brand gains traction. &nbsp;Increasingly for customers, it is not just about what they buy, but what they buy into; if the brand values are believable, customers are willing to commit their loyalty. &nbsp;This is the reason that purpose-driven brands like Patagonia and The Body Shop have large fan followings.Your advice to young aspirants who want to be Corporate leaders and to senior professionals who want to sustain, grow and remain relevant in the dynamic worldTo young aspirants, one will say aim high and keep developing your skill-sets and seeking new experiences. &nbsp;Learn to work in teams and to draw the best out of your colleagues and those who may be subject matter experts in areas you do not fully comprehend. Only through continuous learning and skills up-gradation, alongside the ability to motivate your colleagues at work, will you be able to rise to the top of the corporate ladder.To senior professionals also, one would counsel the importance of continuous learning, so as to stay engaged and connected with the latest developments in your business. &nbsp;Be willing to accept advise and mentorship even from those younger or less experienced than you in your quest for improving your learning and knowledge.Do you see India becoming a 5Trillion Economy by 2025? What does she need to do to achieve that goal?On the current form, and in the context of the additional pressures we are witnessing thanks to the spread of the Corona Virus, it is likely that the date for achieving a $5 Trillion economy will move out in time. &nbsp;Enough has been written by economy experts about the reform measures that are required to give additional momentum to growth – everything ranging from land and labour reforms to significant investments in skills development. &nbsp;Two points I would like to specifically underline, though, are first, the need for Corporate India to enhance its investments in R&amp;D and innovation. &nbsp;Without far greater investments in creative new products and services, we risk being left behind the rest of the world and being condemned forever to being followers of trends in other markets. &nbsp;Second, we need to see far greater formal inclusion of women in the workplace, compared to the low percentage of around 24% we currently witness. &nbsp;More women in the workplace will not only significantly increase our GDP, but also address many negative social issues in India. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Who has been your Idol and what is your motto of life?I have seen too many leaders with feet of clay to place any living persons on a pedestal! &nbsp;However, if one looks to the past, I have been a great admirer of Mahatma Gandhi. &nbsp;His life was his message, and we may never find again a leader like him – someone who could be open about and accept his own frailties, reject the greed for power, set an example of self-sacrifice, and through all this, motivate hundreds of millions of countrymen to do better and succeed in their fight for freedom. &nbsp; &nbsp;My motto in life is “no regrets”. &nbsp;The grass always looks greener on the other side, and it is, therefore, best to not regret what has passed but instead to look to the future and keep setting new goals for yourself.About Dr. RajanDr. Rajan is the Chairman of ECube Investment Advisors, which is launching in partnership with Quantum Advisors a new Environment, Social and Governance (ESG) fund, the Q-ECube India ESG Fund, which will invest in the Indian public markets. &nbsp;Prior to this, he held a number of senior executive positions through his 23-year career with the Tata group, including Chief Ethics Officer of the Tata group, the first Brand Custodian of the Tata group, head of the foreign offices of Tata Sons, Chair of the Tata Global Sustainability Council, Member of the Group Executive Council at Tata Sons, Head of Private Equity at Tata Capital, and Managing Director of one of the group’s listed telecom businesses. He served on the boards of various Tata companies including Tata Teleservices, Tata Communications, Roots Corporation, Piem Hotels, Tata SIA Airlines, Tata AIG, and the TCS Foundation. In 2007, the World Economic Forum honoured Dr. Rajan as a Young Global Leader. He was also part of the inaugural class of the CII-Aspen Institute India Leadership Initiative.Dr. Rajan graduated from the Bachelor of Technology program at the Indian Institute of Technology, Delhi in 1989. He received a Rhodes Scholarship to study at Oxford University, where he completed a Masters and Doctorate in International Relations. His doctoral dissertation titled “Global Environmental Politics – India and the North-South Politics of Global Environmental Issues” was published by Oxford University Press in 1996, and his second book, “The Brand Custodian” was published by HarperCollins in 2019.This post was originally published in STIRFRY MBA dated April 4, 2020.

Tête-à-tête with Dr. Mukund Rajan, Chairman E Cube Investment Advisors.

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Tête-à-tête with Dr. Mukund Rajan, Chairman E Cube Investment Advisors.

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Delhi’s apocalyptic air has once again drawn attention to the widespread hardships caused by unplanned economic activity. Along with that, it also raises questions of transitional justice — namely, how to compensate farmers, if and when they move to a new cropping pattern.Farmers of Punjab and Haryana have faced flak for having caused a crisis across northern India by burning crop stubble. But the onus of reducing emissions lies on India’s corporate sector, another prime user of natural resources. Corporates, however, exist at the pleasure of their investors. Investors in companies are inexorably focused on short-term returns. But any meaningful climate response works in the longer term, and may even imply sacrifices of short-term profitability.Much speedier responses to climate change will come from the market, if the largest investors in the food chain actively drive climate-friendly behaviour.These investors are large pension funds and insurance companies who control about $80 trillion. These large investors are moving slowly in the direction of sustainable investing. But much more needs to be done, and in the interest of these organisations themselves.Pension fund investments in coal, oil and gas, and electric utilities are expected to have value drops of 4-8% a year on account of global warming.This would effectively wipe out market capitalisation of affected companies in a decade. Pension and insurance funds across the world are expected to meet liabilities to generations of retirees through the profits they make on these investments. Their assets in companies that depend on fossil fuels will lose value as countries inevitably respond to climate change.Adecline in the values of their assets has dramatic consequences for their ability to meet the needs of their pensioners and insures over the coming decades. Their trustees will be sued by those who expected pensions and couldn’t get them. Governments will fall when pensions or insurance claims are not met.In the breathing business.Over the past two years, such funds have begun to feel the sharp end of climate change impact. Some of these effects are direct, such as, when companies have invested in assets lost in floods in Kerala last year. Other challenges will be more subtle — IT companies in Chennai that shut down for days due to flooding, or governments that need to spend more on healthcare.The breathless excitement with which investors are funding companies that provide ‘cool co-working places’ or that let us share cute photos of pets is largely absent when we speak of climate change. If climate change were the new ecommerce, we would have solved the problem by now.In India, neither pension funds nor insurance companies have yet any specific responsibility to integrate climate issues into their investment decisions. These large pools of capital do not address causes of air pollution in Delhi, unseasonal rain in Mumbai, or water shortages in Chennai and Bengaluru. They don’t penalise climate-unfriendly strategies or reward innovative champions of sustainability.Indeed, many are expressly prohibited from taking exposures to corporates.Elsewhere, regulators of pension funds have begun to mandate the consideration of climate risks impacts into their portfolios. The provincial government in Ontario, Canada, requires pensions to disclose how environmental and social factors are being considered in their investments. Regulators in California, US, require insurance companies to disclose the climate-related risks to their portfolio.EU requires managers to examine the impact of climate change on the risk profile of their funds.Funds have responded to these demands by signing to the UN’s Principles of Responsible Investment, and by a steady increase in interest in funds focused on ESG (environmental, social and governance) criteria. The next stage of this movement is for asset owners increasingly asking fund managers to engage actively on their behalf, and demand that investee companies commit to measurable and challenging environmental and social targets, and disclose these, just as they disclose financials. This is not a new idea.The Sustainability Accounting Standards Board already has a well-defined and widely accepted rubric for reporting.Given that India is a major participant in global climate change mitigation, the ministry of corporate affairs, the pension fund regulator, as well as the insurance regulator, need to examine whether a detailed integration of climate-related issues into investment theses is required by entities they regulate.Doing so will be aligned to global trends, and will encourage more foreign pension investments to flow into the Indian economy.It’s time that large investors, the most influential entities in the corporate food chain, step in to nudge corporate behaviour in favour of the right climate actions to prevent a recurrence of the travails so visible in Delhi’s skies.The writer is former COO-CFO, Tata Capital.DISCLAIMER : Views expressed above are the author’s own.This post was originally published in The Economic Times dated November 22, 2019.

Hello there blue sky investors

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Hello there blue sky investors

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In an email dated September 20 to the Infosys Board and the United States Securities and Exchange Commission, Ethical Employees, a whistleblower group, alleged that Infosys CEO Salil Parekh was indulging in “unethical practices” to boost short-term revenues and profits. (REUTERS)In an email dated September 20 to the Infosys Board and the United States Securities and Exchange Commission, Ethical Employees, a whistleblower group, alleged that Infosys CEO Salil Parekh was indulging in “unethical practices” to boost short-term revenues and profits.This case once again raises important questions about the mechanics of whistleblowing and its implications for the Indian corporate sector. After the letter, ordinary shareholders of the company, which is into business consulting, information technology and outsourcing services, appear to have lost 16% (~44,000 crore) of market capitalisation in one day. This out-of-proportion reaction of the market to one letter is indeed a matter for concern. It also reflects an unjustified lack of faith in culture of Infosys, which has been a well-run company. One would strongly urge the regulator to look long and hard at the short sellers in the stock market, and enquire into the motivations of those people.Prospective whistleblowers must learn from this episode and introspect. It is indeed well accepted that if a CEO, or his senior team indulge in questionable behaviour, the only way to get evidence of corporate malfeasance are employees of a company. So, whistleblowers are important.In this case though, the major concerns raised in the letter written by Ethical Employees to the regulator may not stand up to the classical tests of what justifies as whistleblowing. It is worth assessing, with the limited evidence at hand, how likely it is that any merit will be found, in these accusations.The first of the allegations made in the letter is that some deals were done at zero or low margins. I would argue that it is within the purview of senior management of a company to decide on the profitability of the deals they choose to do. They do not need to highlight low-margin deals. It would, over time, be captured in lower profits. The chief executive officer (CEO) of a company may choose to mention this to the board — or he may not — if they are otherwise getting the numbers.The second accusation that has been directed at the management is that the CEO and chief financial officer (CFO) differed with the auditors on various issues, including the charging of visa fees. The letter also states that the auditors (Deloitte) pushed back and their view prevailed. The mere articulation of a different opinion cannot be a reason to accuse a company of improper accounting. Visa costs, for example, could be subject to multiple conditionalities (for instance, will employees stay/leave) that need to be fulfilled before they are likely to be incurred. Managements may have different views on these issues.The third allegation has been made that substantial profits were made through treasury operations by taking greater risk. A decision on the extent of risk to be taken by a company is best left to the CFO and the audit committee. It is not really open for others to question these, unless these acts were in violation of audit committee or board policies. Companies must have degrees of freedom to use these tools to keep profits intact so long as this is declared in investor calls.Fourth, there is also an accusation that the Infosys management sidelined people who had differences with the senior management. The presence of malafide intent is difficult to prove. Organisations are complex animals and the powers of judgment delegated to the topmost persons in a company are substantial. This should never have been a complaint.Whistleblowers need to distinguish between what they may feel is poor management practices and evidence of illegality. The tone at the top is important, but you cannot whistleblow if you don’t like it. Not nice to hear, but there you have it!The listing regulations provide for anonymity for whistleblowers. However, during an enquiry, whistleblowers should expect that their fingerprints will be visible on the complaint, and that their bosses will have a strong suspicion of who they are. The Securities and Exchange Board of India (Sebi), along with auditors, can perhaps seek to come out with a largish checklist of situations (perhaps by industry) where they would support whistleblowing, and others where they would be forced to go with the judgment of managements. While this can neither be complete nor perfect, it will let whistleblowers know the type of situations in which they are liable to be believed.There is still an unimplemented proposal, for rewards for whistleblowing, but these rewards are too small to offset the career limiting damage that whistleblowers face. The likelihood of a suspected whistleblower getting a reference for a new role is low.If a whistleblower complaint were felt by Sebi to be bonafide (even if they ultimately had to bow before the judgment of management), the company could be required to make a substantial payment for him for the remainder of his career. Given that whistleblowers are important, but whistleblowing must be done in the rarest of cases, we need to find unconventional approaches to finesse this.As for Infosys, the problem appears to lie elsewhere entirely. This is the third whistleblower complaint in Infosys over the last four years. All companies will have situations where managers feel unhappy, but these do not need to boil over into the type of angst we have seen in Infosys. There may be a strong need to treat insiders with greater respect, and to acculturate new recruits into the value systems of the founders. Organisation culture, as always, has the last word. Nandan Nilekani has to reinforce the culture Infosys was well known for. That is his task now.Govind Sankaranarayanan, former COO and CFO at Tata Capital , is currently vice chairman at ESG Fund ECube Investment Advisors. The views expressed are personalThis post was originally published in The Hindustan Times dated Oct 31, 2019.

The possibilities and perils of whistleblowing

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The possibilities and perils of whistleblowing

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ECube founder Mukund Rajan believes mutual funds in India will soon have to have a strong environment, social, and governance (ESG) element.When Mukund Rajan came back from Oxford in the mid-1990s, he was interviewed by Ratan Tata and cleared to join his office once he completed a mandatory assignment in a Tata subsidiary. Rajan completed the drill and when he returned to join Tata’s office in 1996, the first thing he asked Tata was about leave. “I said, ‘I Tata had an eye for detail. He said: Congratulations. But the binding is a little weak,” Rajan laughs as he recalls the episode. Perhaps Rajan’s next book will be published only on the environmental-friendly Kindle even as he starts work on tying the ESG knots together. ( Research support by Rochelle Britto) ( Graphics by Sadhana Saxena)Read the full article in Economic Time Prime published on 23 September 2019

Ex-Tata sons executive Rajan's fund looks to improve governance and green thinking in small and mid cap firms

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Ex-Tata sons executive Rajan's fund looks to improve governance thimb.jpg

Ex-Tata sons executive Rajan's fund looks to improve governance and green thinking in small and mid cap firms

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People walk through a flooded street following heavy monsoon rains at LBS road Kurla, Mumbai, September 4, 2019(Kunal Patil/HT Photo)This is the season of trade threats. There was much consternation about President Trump’s tweet two months earlier that “India has long had a field day putting tariffs on American products. No longer acceptable!”. This came in the wake of retaliatory tariffs slapped by India in response to the US’s termination of India’s participation in the Generalized System of Preferences (GSP).On the horizon, though, are more ominous threats from developed countries with the intent of prodding India to substantially enhance its commitments under the Paris Climate Agreement to address climate change and global warming. These may take the shape of tariffs and non-tariff barriers on Indian exports. International aid flows and concessional finance will be impacted, as will foreign portfolio investments influenced by new regulatory requirements in markets like the European Union (EU). The damage to India’s economic interests could be large, even as Corporate India struggles to adapt to climate change and find new opportunities for growth.The international community is beginning to ask searching questions about the role that developing countries play in the fight against climate change. India is the third largest producer in the world of climate change inducing greenhouse gas emissions, after China and the US. At various international fora, including the forthcoming Climate Action Summit called by the United Nations Secretary General next week, India’s actions to curb the growth of greenhouse gases will be under scrutiny.India’s commitments under the Paris Climate Treaty, including the reduction of the carbon intensity of its GDP by 33-35% by 2030, and the generation of 40% of its energy from renewable sources, will in fact not yield a decline in greenhouse gas production; with the targeted economic expansion outlined in the recent Economic Survey, greenhouse gas production is slated to increase in India. Meanwhile, compensating short-term goals set by the government, including the promise to create 100 GW of solar power capacity by 2022, appear very difficult to achieve given the current run-rate.Unfortunately, India’s growing emissions come at a time when the Intergovernmental Panel on Climate Change (IPCC) has concluded that global emissions need to fall by 45% from 1990 levels by 2030 to constrain the worst impacts of global warming. These impacts – including unbearable heat waves, extreme climatic events like torrential rainfall as well as drought, changes in cropping patterns, and sea level rise – are already being felt across the globe. Cities like Paris and New York, as well as the UK Parliament, have declared “climate emergencies”, and a green surge was visible in the recent European Parliamentary elections.The responses that are taking shape include the European Commission’s Draft Rules for an EU framework which puts Environment, Social and Governance (ESG) considerations at the heart of the financial system; these will soon require all asset managers to disclose the ESG performance of their investment portfolios. Consequently, corporates that are non-compliant on issues like reducing their carbon footprint will be progressively excluded from the investment portfolios of the largest fund managers in the world. The recent action by Norway’s sovereign wealth fund to dump fossil fuel stocks is a sign of things to come. Guided by regulation, corporates in the developed countries will also start excluding from their supply chains companies in the developing world that are non-compliant with climate change mitigation standards.Likewise, on international aid, statements from Britain’s Department for International Development indicate a relook at aid spending to incorporate measures like resilience to climate change and reducing environmental harm.It is only a matter of time before international trade flows, and the levers they offer to influence the climate agenda, start receiving the attention of Western governments.The Indian government and the corporate sector are key stakeholders who will have to work hard to defend India’s position. The government will rightly argue climate ethics – the unfairness of asking developing countries that have major developmental challenges to embrace structural changes to solve the problem of climate change that has, at least in terms of legacy greenhouse gas emissions, been predominantly caused by the developed world. Indeed, on per capita emissions, India falls well over 100 places in the world rankings of biggest greenhouse gas producers. Hence the government’s emphasis on the “common but differentiated responsibility” of developing countries. It will also highlight the gross inadequacy of financial flows and technology assistance from the developed countries to the developing countries. Grants, loans and project finance of $100 Bn a year to tackle climate change have been long promised by developed countries, but only around 20% of this amount currently flows to developing countries.The Indian corporate sector, meanwhile, must demonstrate greater resource use efficiency, and invest in both greenhouse gas mitigation and climate adaptation. Awareness is certainly increasing, with events like the Chennai floods of 2015, which disrupted business continuity at some of India’s largest IT campuses, vividly bringing home the damage climate change can cause. The risks of business model disruption and stranded assets in major sectors of the economy like automobiles, power and construction are high. Witness the agitated reactions of two-wheeler companies to the Niti Ayog’s proposed 2025 deadline for full migration to electric two-wheelers.Corporate India needs to step up its investments on R&amp;D and innovation, in order to adapt to the disruptive changes ahead, and to tap the opportunities presenting themselves in emerging spaces like electric mobility, renewable energy, waste management, and green buildings.We are in the midst of a climate emergency which can stimulate irrational actions on the part of developed countries. India will have to substantially enhance its focus on climate risks, and seek international support. If the transition is not managed well, India could emerge as the villain of the piece, rather than one of the biggest victims of climate change.This post was originally published in The Hindustan Times dated Sep 19, 2019

The global discourse on climate change is shifting&nbsp;

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The global discourse on climate change is shifting thumb.jpg

The global discourse on climate change is shifting

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On July 12, crowds celebrated the arrival of a train carrying 2.5 million litres of water at Chennai, India’s third largest city with a population of 7 million. &nbsp;The city has been experiencing an acute water shortage in recent months after its four main reservoirs ran dry. &nbsp;The new train service might help ease the crisis for a few days but is no solution to a deepening water challenge, caused by a shortfall in rainfall as well as irresponsible development.A week earlier, Mumbai, India’s second most populous city, suffered floods after 16 inches of rain fell in a single night. &nbsp;At least 32 people were reported dead across the state of Maharashtra as aconsequence of the unusually intense monsoon.Even more concerning, in June it was reported that, as a result of rising temperatures, the pace of glacier melt in the Himalayas has doubled to 22 cm per year on average in recent years.Around a billion people depend on the rivers that flow into South Asia from these glaciers, some of which might disappear within a generation.While fluctuations in the annual monsoons or individual storms cannot be ascribed to climate change, the overall pattern is clear and deeply concerning.Much of India and its regional neighbours are facing deepening water challenges as one manifestation of this phenomenon.Indeed, India is the country facing the greatest risks from a dramatically changing climate. &nbsp;In June, Delhi recorded its highest ever temperature at 48 degrees. &nbsp;The country has also suffered unusually strong and frequent storms, including Cyclone Fani that struck Odisha, West Bengal,in May – the fiercest storm in 20 years. The implications of the climate becoming more extreme and monsoon patterns altering are enormous in this densely populated and largely poor nation.Yet India has not so far been a major contributor to the increase in greenhouse gases that has triggered this upward trend in temperatures. &nbsp;On average, Indians are responsible for emitting 1.8 tonnes of CO2 per head each year, compared to more than 16 tonnes for each American. &nbsp;However, going forward, as India’s economy grows and its middle class expands, India is likely to become one of the largest carbon emitters. &nbsp;Were Indians to emit per capita as much carbon as the Chinese currently do, global emissions would rise by 20 per cent; if it were to reach the US’s current average per capita emissions, global emissions would rise by 56 per cent.On average, Indians are responsible for emitting 1.8 tonnes of CO2 &nbsp;per head each yearIndia’s role in responding to the issue of climate change is thus critical if there is to be any prospect of achieving outcomes close to the targets agreed at COP 21 in Paris in 2015.The government’s policy response has been impressive and wide-reaching. &nbsp;While not agreeing to target a reduction in carbon emissions, with potentially serious implications for economic growth, the government has set out ambitious plans to reduce significantly the carbon intensity of the economy. &nbsp;When he was Chief Minister of Gujarat, Prime Minister Narendra Modi published a book on climate change entitled A Convenient Action, and over the past decade India has implemented well-conceived policies to encourage renewable energy. Renewables now account for 21 per cent of electricity generation capacity. &nbsp;Solar capacity has reached 30 GWs, exceeding the initial target of 20 GW three years ahead of schedule; the revised target is 100 GW by 2022.The re-elected Modi administration has quickly signalled further focus on sustainability. &nbsp;The programme for the new government’s first 1,000 days included targets for solar power and the budget set out a number of measures to encourage renewable energy and electric vehicles.But government action, however ‘convenient’, cannot alone mitigate the growing impact that India’s economic growth could have on the climate challenge we face. &nbsp;What is now needed is genuine leadership on climate responsibility from India’s private sector.More focused on the growth agenda, corporate India has, with a few exceptions, so far lagged behind in global best practice on sustainability. &nbsp;India’s regulators have followed international best practice by introducing higher governance and reporting requirements. &nbsp;Given the social realities of the country and a long history of philanthropy, a number of Indian companies have well-developed programmes of corporate responsibility. &nbsp;But, without the consumer and investor pressure that is now common in developed markets, fewIndian companies have made environmental responsibility fundamental to their business strategy.It would be in the interests of companies to get ahead of regulatory requirements by driving change to reduce their environmental impact. There is a growing body of research that demonstrates a clear correlation between corporate and stock price performance and higher standards of Environmental, Social and Governance (ESG) standards. &nbsp;Such action reduces cost, mitigates risk and can provide a valuable differentiator in the marketplace.Where boards and business leaders are slow to adopt best practice, in addition to regulatory and consumer pressure, investor focus on ESG standards has proven a critical factor in lifting ESG performance. &nbsp;Globally, about a quarter of institutional money is now branded as ESG investment. &nbsp;Many of the most sophisticated global investors are now advocating ESG performance, not just as the right way to run businesses but also as essential to deliver portfolio alpha.The global trend towards ESG investment is now set to become a significant factor in the Indian markets. &nbsp;International investors are increasing allocations to India, given its growth potential, and will expect high ESG standards. &nbsp;Several ESG funds have been launched, focusing on India, including our own Q-ECube India ESG Fund.My years working with the Tata Group taught me much. Most notably, all Tata employees are imbued with the conviction that running businesses well and doing the right thing are as intertwined as the double helix in DNA. &nbsp;It is critical that such business philosophy extends to environmental responsibility and that carbon mitigation is embedded in everything companies do. &nbsp;Corporate India must demonstrate leadership in blunting the environmental impact of economic growth.This post was originally published in Asian Affairs dated August, 2019

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