Sustainability and how quick companies can start implementation

A Generational Reflection and Urgent Call to Action

Through this piece, we want to elicit a response from our decision makers and a call for immediate action from our generation of movers and shakers. We have been presented an unprecedented opportunity to change the course of humanity.

Setting this as our prologue, let’s take a deep dive into the world of sustainability and ESG:

Net Zero • ESG • Climate-technology • 1.5 degrees target of the Paris Agreement • Carbon credits • GHG emissions • Green finance • GRI • SASB • BRSR • Integrated Report

The aforementioned are a few terms, most people are hearing these days. Before we get into specific actions to be taken by companies to set themselves on the path of sustainability, it is imperative to understand, how the world economy evolved, what happened to our climate and how we got here.

Evolution of the World Economy and the Social Contract

International trade continued to evolve in the 19th century. Colonialisation was at its peak. Powerful countries from the west exerted their force on weaker ones, exploiting their resources, leaving them with pittance. This started unravelling in the 20th century. This century was marked by two world wars, liberation of several erstwhile colonies, massive post-world war industrialisation, rise of corporations and an unending race to establish supremacy between the Americans and Soviets.

As we complete, over 70 years since the end of World War II and the formation of United Nations, the 21st century is seeing unprecedented nuclear stockpiles, global warming, mass pandemics and a failing economic agenda. As per the Global Risks Report 2022 by the World Economic Forum, the top 5 risks are either environmental or social.

The answers to most of our questions lie in the evolution of the social contract. The social contract is an implicit agreement on which all societies rest. It is an accord that balances the roles and responsibilities of corporations and states with that of individuals. While the exact terms keep evolving based on the law of a society, the larger idea is to keep humanity harmonised. This contract, in one way or the other is breaking globally.

While every country faces its individual problems, the premise has remained the same. In the “so-called” liberalised economies, corporations started to write rules, making way for monopolies. On one hand, China seemed to have combined top-down authoritarianism with the efficiency of capitalism. The world has never been so polarised before.

As corporations grew bigger, governments in liberalised economies ceded control. Focused on shareholder value, corporations failed to deliver on environmental and social agendas. What we are left with is global warming, unbridled consumer price inflation, fear of constant surveillance, human rights’ violations and mass wealth disparity.

ESG stands for:
• E – Environmental Stewardship
• S – Social Responsibility
• G – Purposeful Governance
ESG, sustainability, climate action, impact investing, PRI (Principles of Responsible Investing), called by several names, have multiple overlaps.

ESG is a mindset, a tool or framework to deliver on the promise of “Conscious Capitalism”. An attempt to refocus on stakeholder primacy over shareholder value, to think long-term value over short-term profits, to drive equitable distribution of opportunities and to restore the ecological balance.

What Must Companies Do, How Must They Implement, How Must They Report?

We believe, that the most important for companies is to STOP seeing ESG as an additional burden or cost. It is an opportunity to rethink supply chains, business models and processes, to make them more eco-friendly and future proof. What you see below is our Standard Model of ESG. While we have tried to incorporate everything relevant on one image, the model is continuously evolving.

Our research across multiple sectors has shown that globally companies that have adopted sustainability with a defined net zero target have managed to attract green finance and better ratings. They implement sustainable solutions that drive enterprise value accretion and report transparently.

We call our model “A Journey Beyond Net Zero”. We are moving towards more natural disasters if we do not change course immediately. Critically important is for all organisations to make their net zero commitments taking into account Scopes 1, 2 and 3. Companies must believe that a change in their business model will lead to better unit economics. Therefore, ESG will take route only by lowering cost of operation. Once you have the definition of your journey it becomes important as a validation to seek green finance and to have objective assessments of your activity through an external rating of credibility.

Risk, Reporting, and Disclosures: The Six Capitals & Global Frameworks

Following the growing support for ESG and Stakeholder capitalism, a whole new era of corporate reporting is emerging with a focus on 6 capitals: Financial, Environmental, Human, Physical, Relationship, and Innovation.

Companies must adopt risk management tools that can help:

• Evaluate gaps between companies’ risk management initiatives and global best practices and implement enhancing actions;
• Assess materiality and review of priorities;
• Effectively capture and measure data sets;
• Commit to science-based commitments and targets;
• Produce accurate and reliable outcomes and end reports.

Corporations Must Act: The Case of Unilever

While regulators are doing their bit, laws and guidelines mean nothing without honest and committed enforcement. Corporates must implement ESG through the virtuous cycle of measuring, mitigating, monitoring and transparent reporting. This will be enabled by engaging experts, exponential technology solutions and collaborative partnerships.

Future CEOs and Board Members must understand that companies driven by societal purpose have delivered long-term value across key drivers such as sales, brand and reputation, capital access and market value, operational efficiency, talent retention and risk mitigation.

Focused Implementation: 10 Critical Targets to Eradicate for India at 100 in 2047

While our Standard Model, reporting frameworks and regulations push for adoption of sustainable practices, actual change has to come from within the organisation. Focused efforts on implementing sustainable technologies and solutions that will help decarbonise are the need of the hour. With the commitments at the COP26, the Prime Minister has set the tone at the top; corporates must now absorb, implement, and decarbonise.

To see India becoming great at 100 in 2047, our efforts must be realigned to eradicate the following 10 challenges:

Extinction is Closer Than It Seems, Our Time to Act Is Now or Never

A garbage patch thrice the size of France is floating in the Pacific, Australia is reeling under one its worst floods in history and constant drilling in Siberia is causing temperatures to soar.

All governments must immediately push for mass clean-ups of water bodies, zero waste to landfill, waste segregation at source and incentives for full-scale circularity initiatives. At companies and NPOs, from the board to the last employee in the organisation, all must speak only one language of sustainability and climate action.

Only policy formulation will not make the cut anymore. Implementation is the need of the hour. Progress on implementation must be measured, monitored and reported adequately, accurately and communicated transparently. Data and analytics must be available for the world to see in real-time.

We have no time, we can’t take pride and relief in committing to net zero by 2050. While we should have taken action yesterday, all we have now is today and every day.

Official References & Citations

1. Forbes India / IPCC Report Analysis on Global Warming Economic Impacts: India can face 92% GDP loss by 2100 due to global warming (IPCC Report)