In the last lecture we identified a few issues that are in the interface of the organization with its stakeholders and we continued with identifying more such issues which are central to Sustainability / Corporate Social Responsibility.
Some of the issues that we identified are:
1.Resource Consumption and Eco-Efficiency/Resource Productivity
2. Wastes, emissions and discharges
3. Energy efficiency
4. EcoDesign or Design for Environment
5. Innovation in product and process design
6. Packaging design and logistics
7. Green Purchasing
8. Research & Development and Patents (intellectual rights)
9. Occupational Health & safety
10. Employee Compensation
11. Employee benefits
12. Labour Union
13. Inclusion and Diversity
14. Discrimination
15. Gender bias and harassment at the workplace
16. Insider trading
17. Bribery and corruption
18. Ethical working
19. Child and Forced Labour
20. Employee Productivity
21. Employee Morale and Loyalty
22. Fair and ethical behavior
23. Socially relevant business
24. Social Development programmes
25. Philanthropy / Strategic Philanthropy
26. Ecological footprints
27. Emergency and Emergency Response
28. Response to Complaints
29. Product Safety
30. Compliance with law
31. Brand Image
32. Exchange Rates
33. Interest Rates
34. Credit Rating
35. Stock Value
36. DJSI value
37. Profits and Dividends
38. Taxes
39. Niche Markets
40. New and Emerging Markets
41. Competition
42. Brand Image
We learnt the following in the next two hours
1. Sustainability (CSR) is three dimensional - economic, environmental and social; a sustainable organization is one that is (a) economically viable, (b) environmentally sound and (c) socially acceptable. Sustainability is also called the Triple Bottomline approach, distinguishing it from the more popular financial bottomline approach of many business organizations. It is also called the 3 P approach: Planet (natural resources, energy), People (health & safety, equity) and Profit (economic growth)
2. One of the characteristics of the Sustainability approach is to "think differently" ("The world we have created today as a result of our thinking thus far has problems that cannot be solved by thinking the way we thought when we created them" - Albert Einstein) - business as usual approach does not work.
3. Example of thinking differently: "Pollution is resources not positioned at their maximally effective location" Buckminster Fuller - i.e. pollution is nothing but a resouce at a wrong place. (Google Buckminster Fuller and know more about his work).
4. Sustanability offers us new opportunities - the result of thinking differently.
5. The economic performance pertains to not only the return on investments, but also on the taxes paid, salaries and benefits to employees, business with suppliers, philanthropic / strategic philanthropic spending, spending on Social Development etc. Most of these are captured through normal accounting practices.
We then went on to learn about the environmental issues and the characteristics of physical environment.
6. The first characteristic sof environment is "Common Property". The air, water and soil belong to all; they don't belong to one single individual. That leads to the basic environmental issue: When something belongs to everybody, then it belongs to none. Everyone thinks that someone else will take care of it. We discussed the situation of keeping our house clean while not bothering about the cleanliness of the surrounding, which belongs to all of us. We also discussed the concept of "Tragedy of Commons".
7. The second characteristics of the environment is "Multiple Use". We discussed the use of water for many purposes, like from brushing the teeth, washing, cooking, bathing, transport, sport, industries etc. We noted that if one user uses the resource at the expense of others, there is a potential for conflict. We noted the feelings of people who walk for miles to get water when they see someone watering his lawn in their neighbourhood.
8. The third characteristics of the environment is the "Uncovered Cost". I asked the students to tell me as to how they would calculate the cost of their travel to IndSearch from their house. The answer was typical: they would include the cost of petrol, cost of their time, cost of repairs and maintenance, cost of insurance, depreciation and interest etc. But the cost of someone getting ill because of the emission of pollutants from their vehicle, someone taking leave because of illness caused by vehicular pollution, loss of productivity due to systems affected by vehicular pollution etc., are not included in the cost calculation. In fact, this cost is distributed among the society. That is the cost of pollution due to travel (externality) has not been internalized. I gave you an estimate of about US $ 2,200,000,000,000,000 as the uncovered cost of the environmental damage caused by the 3000 largest corporations of the world in a year. This amount is much higher than the GDP of many countries. When such un-accounted damage is caused to the environment there is always a likelihood of conflict
9. Any society would like to avoid conflicts for development/ progress. Societies use three different methods to avoid conflicts: a. Command and Control, b. Economic instruments and c. voluntary initiatives.
10. Command and control refers to the acts, rules and regulations that are enacted or published by the Government. This can be from the National Government (in our case Governmet of India) such as the Environment (Protection) Act, Water (Prevention and Control of Pollution) Act, Air (Prevention and Control of Pollution) Act, Hazardous Waste (Management & Handling) Rules etc. Some of the rules may be published by the State Government. For example, Maharastra Motor Vehicles Rules, Maharashtra Factories Rules etc. Still more such command and control measures can come from the Municipalities, such as the Municipal Rules requiring housing societies to segregate waste into wet and dry waste and to have vermicompost pits for wet waste.
Command and Control is also applied by the international community. For example, Kyoto protocol requires countries to cut down on their greenhouse gas emissions; some countries can get carbon credits for their GHG emissions reductions (CDM). The Montreal Protocol is about the elimination of the use of chlorofluoro carbons (CFCs) which were responsible for reducing the ozone layer in the stratosphere; this ozone layer effectively blocked the ultraviolet radiation from the SUN from reaching the earth. We have many such international conventions like the Basel Convention, dealing with transboundary movement of hazardous waste.
Command and Control measures are also used by countries to restrict the entry of products having certain characateristics from other countries. For example, the EU has Restriction of Hazardous Substances Directive (RoHS), which requires that any product that is exported to Europe does not contain substances like cadmium, lead, mercury, chromium (VI), polybromobiphenlys, polybromobiphenylethers. polychlorobiphenyls etc. (there are exemptions to this general rule). Similarly the WEEE directive (Waste Electric and Electronics Equipment Directive) requires exporters to be responsible for taking back the product once the useful life of the product is over. There are such rules/directives on energy use, asbestos, pentachlorophenol , pacakging etc., throughout the world.
Such command and control measures help countries to have a control over the emissions and discharges and use of resources by business organizaions in that country without causing the businesses excessive cost. Sometimes these rules are used as "non-tariff" trade barrier in the post WTO free trade regime, even though WTO is against such a practice.
11. Economic instruments are used generally influence the way people and organizations behave. By providing tax concessions and cess reductions companies are encouraged to spend money on environmental technologies and improving environmental performance. Some of the other economic instruments are a. Deposit - Refund system (returning cocacola can fetches about 10 cents), b. Emission trading (e.g. instead of spending money in control measures and becoming economically unviable, Government may allow businesses to purchase emission points from low emissions organization and maintain the overall concentration in the ecosystem within the allowed limit), etc. Another economic instrument is Preferential Purchase, where the Government or a private company insists on purchasing products from a company whose environmental performance is good or its product is enivronmentally sound. Concessional interest rate is another economic instrument used by banks for enviornmentally sound investments.
12. While the business organization does not have control over command and control measures and the economic instruments in the domain of Government, it can have volunatry initiatives positioning them above the requiremet of the Government in terms of compliance and policy. One such initiative is the establishment of ISO-14001, Environmental Management System. We will spend about 2 x 3 hours on ISO-14001 in the next class. Other such initiatives are: a)ICC Business Charter for Sustainable Development b)EMAS – Environmental Management & Auditing Scheme, c) Responsible Care (Chemical Industry), d) Valdez Principle (Oil Industry) e) Global Reporting Initiative (GRI) etc.
10. Command and control refers to the acts, rules and regulations that are enacted or published by the Government. This can be from the National Government (in our case Governmet of India) such as the Environment (Protection) Act, Water (Prevention and Control of Pollution) Act, Air (Prevention and Control of Pollution) Act, Hazardous Waste (Management & Handling) Rules etc. Some of the rules may be published by the State Government. For example, Maharastra Motor Vehicles Rules, Maharashtra Factories Rules etc. Still more such command and control measures can come from the Municipalities, such as the Municipal Rules requiring housing societies to segregate waste into wet and dry waste and to have vermicompost pits for wet waste.
Command and Control is also applied by the international community. For example, Kyoto protocol requires countries to cut down on their greenhouse gas emissions; some countries can get carbon credits for their GHG emissions reductions (CDM). The Montreal Protocol is about the elimination of the use of chlorofluoro carbons (CFCs) which were responsible for reducing the ozone layer in the stratosphere; this ozone layer effectively blocked the ultraviolet radiation from the SUN from reaching the earth. We have many such international conventions like the Basel Convention, dealing with transboundary movement of hazardous waste.
Command and Control measures are also used by countries to restrict the entry of products having certain characateristics from other countries. For example, the EU has Restriction of Hazardous Substances Directive (RoHS), which requires that any product that is exported to Europe does not contain substances like cadmium, lead, mercury, chromium (VI), polybromobiphenlys, polybromobiphenylethers. polychlorobiphenyls etc. (there are exemptions to this general rule). Similarly the WEEE directive (Waste Electric and Electronics Equipment Directive) requires exporters to be responsible for taking back the product once the useful life of the product is over. There are such rules/directives on energy use, asbestos, pentachlorophenol , pacakging etc., throughout the world.
Such command and control measures help countries to have a control over the emissions and discharges and use of resources by business organizaions in that country without causing the businesses excessive cost. Sometimes these rules are used as "non-tariff" trade barrier in the post WTO free trade regime, even though WTO is against such a practice.
11. Economic instruments are used generally influence the way people and organizations behave. By providing tax concessions and cess reductions companies are encouraged to spend money on environmental technologies and improving environmental performance. Some of the other economic instruments are a. Deposit - Refund system (returning cocacola can fetches about 10 cents), b. Emission trading (e.g. instead of spending money in control measures and becoming economically unviable, Government may allow businesses to purchase emission points from low emissions organization and maintain the overall concentration in the ecosystem within the allowed limit), etc. Another economic instrument is Preferential Purchase, where the Government or a private company insists on purchasing products from a company whose environmental performance is good or its product is enivronmentally sound. Concessional interest rate is another economic instrument used by banks for enviornmentally sound investments.
12. While the business organization does not have control over command and control measures and the economic instruments in the domain of Government, it can have volunatry initiatives positioning them above the requiremet of the Government in terms of compliance and policy. One such initiative is the establishment of ISO-14001, Environmental Management System. We will spend about 2 x 3 hours on ISO-14001 in the next class. Other such initiatives are: a)ICC Business Charter for Sustainable Development b)EMAS – Environmental Management & Auditing Scheme, c) Responsible Care (Chemical Industry), d) Valdez Principle (Oil Industry) e) Global Reporting Initiative (GRI) etc.
13. At this point I explained to you the general response of business to stakeholder complaints. They follow the 4 D responses, namely, a) Denial b) Data c) Dialogue and d) Delivery in that order. I explained how Dow chemical company responded to Rachael Carlson (author of Silent Springs, the first book on environmental issues) and how now DDT is banned in most of the countries (DDT is also a part of the dirty dozen chemical substances covered under the POPs Convention).
14. I explained to you that Environmental Management has come a long way from being one handled by operators to the one with responsibilities at the Board Level:
Year Subject Responsibility
1960s Smoke/Effluent Operator
1970s Resources / Energy Plant Engineer
Early 1980s Substances/Product Manager
Late 1980s Technology / Risk Vice-President
Early 1990s Business Strategy Board of Directors
Late 1990s Competitiveness Board of Directors
Early 2000s Sustainable Partnerships Board of Directors
15. I also explained to you the changes in perception of environmental issues in the past and now:
Past Now
Technical Issue Business Issue
Cost & difficulties Savings & Opportunities
End of Pipe Clean and preventive
Confidential Open & Transparent
Local Issue Global Issue/trans-boundary
Short term effects Short & Long term effects
Compliance is good Compliance + and beyond
16. At this point we started discussing about the Social issues. Many of these issues fall under the following: a) Child labour, b) forced labour, c) discrimination, d) Freedom of Association and right to Collective Bargaining, e) Health and Safety at Work, f)Working hours and g) Wages. These are derived from international requirements such as a) Universal Declaration of Human Rights - 1948 (Article 23 and Article 24), b) UN Global Compact, c)ILO Declaration on Fundamental Principles and Rights at Work, d) ILO Code of Practice in Safety & Health, e) ILO International Labour Standards etc.
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