Balancing Social, Environmental and Economic Impact

8/8/2019 Balancing Social, Environmental and Economic Impact

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Balancing Environmental, Social, and Economic Impact


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Introduction

Climate change has brought forth the environmental aspect in investments and business

functions worldwide. The threats posed by climate change and global warming are

enormous and therefore CEOs of worlds leading organizations are now focusing on

sustainability like never before. E&Y surveyed top companies in the world and found that in

36% of the companies the role of climate change manager is handled by the CEOs. The

term Sustainability has shed its fancy image and now being used to demonstrate actual

commitment towards environmental, social, and economic harmony. Organizations are now

turning their CSR activities from merely being tree plantation drive into a more integrated

social, environmental, and economic activities. Major organizations in India are now

turning towards Sustainable Development Reporting based on Global Reporting Initiative

(GRI).

CSR Trends in India

There is a clear trend showing the increase in number of Sustainable Development

Reporting based on GRI in India. Organizations irrespective of their sizes are adopting to

GRI framework to design their sustainability strategy and reporting. Such change is because

of increasing pressure from governments, investors, and society at large, which has forced

organizations to think about single bottom line approach. Also risk posed by climate change

and depleting resources has pushed sustainability agenda into the board rooms. Now triple

bottom line approach that talks about social, environmental, and economic gains has

become driving force behind the CSR and sustainability initiatives.

A study conducted by NGO Karmayog shows that there is clear trend in CSR reporting and

quality of the activities. Organizations are now investing in building social capital, goodwill,

and environmental stewardship. Karmayog rated the CSR initiatives of Indias top 500

companies on various parameters. The rating 1 represents that the organization has

initiated the CSR activities at the organization. As the rating increases, the quality of the

CSR activities and reporting improves. Rating 0 represents the lack of any CSR activity in

the organization.


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Source: http://www.karmayog.org/

The graph shows the CSR trend over last 3 years. There is significant drop in the number of

companies which do not have any CSR activities at the organizational level. The numberhas come down from 229 to 129. This is also reflected in rating 1 has seen increasing trend,

indicating that more companies have started CSR activities which were absent before.

Though there is significant rise in the quality of CSR and number of companies

doing it, Indian companies still have long way to go before they have long term sustainable

and beneficial CSR activity. As long as CSR doesnt not bring in benefits to society and

business equally, organizations will never focus on it as its core activities. CSR is seen as

philanthropy in India and hence its not sustainable activity having performance targets anddedicated work resources. It suffers from lack of funding, involvement of senior

management, and effective execution. On the other side if CSR is run purely for business

benefits, it looses the very purpose and becomes just another marketing activity.

Following schematic shows that the way CSR run - as pet project of senior management,

philanthropy activity, or business activity through propaganda. None of these is sustainable

in long runs. Partnering is the only way to makes CSR successful and sustainable. Some of

the Indian companies have demonstrated that.

Rating 1 Rating 2 Rating 3 Rating 4 Rating 5 Rating 0

0

75

150

225

300

2007 2008 2009


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http://www.karmayog.org/http://www.karmayog.org/http://www.karmayog.org/


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Source: McKinsey Quarterly Report - Making the most of CSR

ESG issues in the Investment Analysis and Decision Making Process

Environmental and Social Governance issues are critical for the successful outcome of the

projects. Especially in India where ESG issues have stalled some of the big ticket projects

recently. Social issue halted or failed projects like Reliance mega city project in Ratnagiri

district of Maharashtra. The reason given for the failure was the way land acquisition was

carried out. Other examples include Posco Steel plant in Orrisa, Vedanta Resources

Aluminum plant facing troubles due to social and environmental issues. Tata Motors had to

shift their ambitious nano plant out of West Bengal due to social unrest. Therefore

integrating ESG in investment analysis and decision making process can increase the

viability of the project.

ESG integration should not be a stand-alone activity but rather one element of a holistic

approach to responsible investment that encompasses actively promoting high standards of

corporate governance and corporate responsibility, explaining to companies how ESG issues

are built into investment processes and decisions, and playing a supportive role in public

policy and wider debates on corporate governance and corporate responsibility.

SDR replaces CSR


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Industrialization and globalization have changed the context of business, accelerating

economic growth and intensifying social and environmental risks and impacts. A

sustainability program is the sum total of corporate strategies, policies, goals and initiatives

based on drivers of economic, social and environmental risk, return, resources and

reputation. Sustainability program ensures that amid environmental, social and even

economic uncertainty, an organization is able to adapt and remain viable in the long-term

interest of the owners. Sustainability reporting as a practice, over the last ten years has

evolved from being a fringe one to a mainstream practice. Some of the drivers of the same

are

There is an increasing volume of queries on sustainability performance of product/

services providing organizations from customers and socially responsible investors. In

some cases, the RFPs by prospective clients can ask information about sustainability

activities of the company, thus making it a part of market access requirement.

Reporting ones performance on sustainability front has a definite marketing value, either

intended or intended. It can help in garnering recognition from third parties in form of

green/sustainability rankings.

As a continuation of a fierce competition in the marketplace on all parameters,

competition in public relations is ensuring that information requests such as Carbon

Disclosure Project are becoming mainstream means of communicating with conscious

investors and public.

Activities that are voluntary today can become mandatory by law in future. Proposed

ideas such as CSR credits can make sustainability and corporate social responsibility a

key governance measure for action and reporting

Companies that have good performance in sustainability and reporting it have better

ability to attract and retain talent.

Sooner or later organizations have to develop their own sustainability strategies which look

at Environmental, Social, and Economic aspects of the business. GRI framework allows

organizations to start in that direction.


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Agneya Carbon Ventures is a focused Carbon, Renewable

Energy, and Sustainability Management consulting firm. We

provide services in the wide spectrum of carbon

management, Renewable Energy projects, and Sustainability

domain helping our clients identify the risks and opportunities,

mitigate the risks, exploit the opportunities, and thus tackle

the environmental, social, and economic challenge.

For further details contact us at

[email protected] / +91-9028788430

[email protected] / +91-9665407848
mailto:[email protected]:[email protected]:[email protected]:[email protected]

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Balancing Social, Environmental and Economic Impact