An Aditya Birla Group Commitment 13 SUCCEEDING WITH SUSTAINABILITY Insider View The 2007 Nobel Peace Prize was jointly awarded to the Intergovernmental Panel on Climate Change and to former U.S. Vice President Al Gore. It was for their effort to disseminate knowledge about man-made climate change, and their advocacy for measures to counter that change. Gore’s personal campaign became an Academy Award winning commercial hit, in the form of Davis Guggenheim’s film “An Inconvenient Truth”. Eight years later we saw the historic signing of the Paris Treaty by 191 countries. Four of the largest emitters of greenhouse gases have already ratified the Treaty, and are committed to reducing emissions substantially. This was quickly followed by the signing by 197 countries, of the Kigali Agreement, to phase out the use of hydrofluorcarbons. New trade agreements are increasingly incorporating environmental clauses. The consensus and momentum on global climate action is remarkable. Notwithstanding the climate skeptics, the reality is that governments are moving rapidly, making new laws, and enforcing new rules for doing business and economic activity. Examples range from emission standards for automobiles, taxes on the use of fossil fuel, renewable energy purchase obligations or local governments banning use of plastic bags. In addition to governments’ action, consumer preferences are also changing, reflecting their environmental and health concerns. No surprise those “greener” products are winning, ranging from refrigerators, detergents, automobiles, and footwear to even clothing. Policy makers are convinced that for progress on climate action, mere voluntary action can no longer be relied upon. That explains the proliferation of new regulation and standards, and also the growing activism of consumer groups. Ultimate success, however, will depend on the role of the private sector and businesses. These constitute more than three fourths of the world economy. For far too long, businesses have regarded environmental friendliness as opposite of competitiveness. When regulation is uneven across countries and jurisdictions, companies complain of disadvantage of the burden of regulatory costs. All that may change quickly as standards get harmonised, trade blurs national boundaries, and global treaties are signed in quick succession. Companies can remain skeptical, shortsighted and confrontational with regulations, by mounting legal challenges or they can embrace the future, race ahead of compliance, invest in new products, technologies and business processes. This may catapult them ahead with an unbridgeable competitive advantage. Examples already abound. HP anticipated the ban on lead and chromium and developed alternate soldering substances. It led in formation of a recycling platform by involving vendors and customers. Cisco pioneered recycling and refurbishing in its industry. Unilever is committed to halving its carbon and water footprint, and has forged ahead in the development of waterless detergents. Xerox redesigned its machines to be able to recycle up to 90 percent of the components. Novelis, world leader in aluminium rolled products, uses more than 50 percent recycled metal. It is clear that leaders of tomorrow are those that will reduce their environmental impact today, engage in innovations in products, services, technologies and processes today, and persuade and educate other stakeholders (vendors, supply chain), to collaborate on their sustainability journey. Sustainable business models create a sustainable competitive advantage, which manifests not just in the top and bottom line (new products, market share gains and potentially, premium pricing), but also in consumer loyalty, societal acceptance, in making lawmakers as allies and ultimately in enhancing their own reputational capital. Dr Ajit Ranade Chief Economist, Aditya Birla Group Insider View