The pandemic has pushed us to better understand social and other risks. While corporates focus on environmental and societal governance, these are seen as costs rather than bottom-hugging values. Yet sustainability strategies have a financial muscle as they boost innovation, operational efficiency, sales, customer loyalty and risk management. Companies can use a Return on Sustainability Investment methodology to gauge the value-added.
Here are five macro areas on sustainability.
Look at what you are now doing
When a logistic company decides that trucks should be fully loaded before leaving, it is not just about efficiency but also about the fleet's greenhouse gas discharges. Auto companies could look at practising waste management, building electric vehicles and promoting water conservation. Elsewhere, A power station is looking at utilising coal-ash, a significant air and water pollution source.
Get a cross-functional team
If top management has ‘emissions decrease goals,’ the team should look into which methods have management modified to meet the targets.
Is the management fixing energy preservation technologies or altering manufacturing procedures? Should a magazine continue with its print version, or should it completely move online? If it continues with print for visibility, should it cut down on pages and move the more salacious parts to the internet?
Measure non-financial gains
A pharma company that jigged a production process employing green chemistry ideologies may reduce energy, chemicals, water usage and greenhouse emissions.
These increase operational competence. When companies use sodium lights, they do so because it requires less power.
Compare new methods with old ones
In the auto industry, gather data on turpentine salvaged, the unit cost of recycling solvents and the cost of water-based surrogate solvents to do a cost-benefit analysis of reprocessing solvents. Coca-Cola now pumps syrup directly from the tank instead of plastic, saving 68 million pounds a year.
Find the money earned or lost
An automotive company may multiply the year-over-year decrease in the number of solvents used by the average cost of virgin solvent to calculate its annual savings.
Mark it: These benefits add millions to the bottom line. Look at companies that consciously move to work from home. This could save immense transportation costs and affect climate change positively.
Here are five specific ideas on being a responsible corporate citizen.
Recycle
Instead of getting into use and throw society, reuse. Domino’s uses 100 per cent recyclable boxes and is experimenting with robotic pizza delivery. Samsung is replacing plastic packaging with bio plastics and modifying product designs to cut waste.
Reduce wastage
Try alternative models. Using new methods, Pratt & Whitney cut back 90 per cent of the ingots it uses to make jet engine blades, leading to lower wastage. Fuji Heavy has a perfect score in water use during manufacturing.
Energy
Reduce carbon footprints. Apple runs entirely on renewable energy and has lowered the energy output of its products by 70 per cent. Panasonic has moved its headquarters to a LEED-certified building to cut down on employee commuting pollution. Grocery delivery outlets can try sourcing locally.
Paperless
Bank of America has cut its paper usage by 32 per cent and recycles 30,000 tonnes of paper every year.
Government
Iceland’s capital Reykjavik encourages residents to walk or use its hydrogen-powered buses. Berlin has a network of electric bike charging stations, rental kiosks and bike paths to enthuse residents to leave their cars behind.
India's corporate honchos must embrace corporate sustainability as prudent risk management and cost reduction strategy, lest they face social dangers. A case in point is the protest against Vedanta's Sterlite Copper plant and Hindustan Unilever's mercury plant. Many Indian companies implemented major internal campaigns to reduce and recycle, adopted eco-friendly technology to reduce environmental risks and generally acted as good citizens.
The NITI Aayog released the SDG India Index Baseline Report 2018 to track the performance of states and union territories. The ICAI has developed "Sustainability Reporting Maturity Model (SRMM) Version 1.0," which is a self-scoring tool that seeks answers to a set of myriad questions. Here corporates self-evaluate, identify areas to focus on, and then develop a road map for moving to the next level. Soon a time would come when this is audited.
Today, the world faces volatility, uncertainty, complexity and ambiguity like never before. In this context, companies must earmark sums for sustainability investments that will bring money over the long run and joy and comfort in the near term.
(Pattabhi Ram is a CA, an author, teacher, and public speaker; Shivanand Pandit is a Goa-based finance professional)