Money seems to be the only variable in this world. Beautifully summed up by this Dilbert Comic.
Topper: I reject your idea because the costs are high.
Dilbert: In a one-variable world, you would be a genius.
Topper: Thank you.
Dilbert: I meant every word of it.
Have you ever seen a Chartered Accountant offer a return on investment on an environmental project instead of a tax return, audit financial statements instead of sustainability reports, and offer advisory services to clients based on what is good for the people and the planet?
What about environmental and social costs and related variables? These are mostly hidden unless deliberately shown in the form of CSR (Corporate Social Responsibility) or ESG (Environmental Social and Governance) disclosures.
I attended a webinar once where I raised this question – “When do you see CSR getting integrated into financial reporting?” Their answer – “Regional characteristics and resource limitations play into this greatly. As you may be well aware, Integrated Reporting (IR) is heavily deployed in South Africa and in neighboring/partner countries. Similarly, countries where stock exchanges require ESG disclosure, are more likely to produce integrated reports. Here in the U.S., many of our pioneering IR companies came into this space for the need to share resources with the financial/accounting teams when producing reports. Finally, we’re starting to see a great deal of interest for these types of reports blooming in the U.S.”
In 2013, research by the India Responsible Investment Working Group, encompassing large corporates as well as Small and Medium Enterprises (SMEs), more than 50% businesses are now prepared to provide ESG information to investors / other stakeholders.
The big players are considering these costs. Is your business following suit?
The world is phasing out fossil-fuels, old polluting vehicles, plastic products, toxic substances, nuclear power, biofuel, incandescent light bulbs, ozone depleting substances, waste imports, second hand clothes, food waste, and ivory trade. These are either gradual phase outs or immediate bans. So, who exactly is phasing out what? Read ahead to find out.
As a young independent adult, one of the things I’m learning about is investing. I want to be able to invest and at the same time bring about a social change. This blog post contains basic terminologies, who this is for, how to start with sustainable investing and some resources if you are still interested. This kind of investing goes by several names and approaches such as:
Socially responsible investing (SRI)
Socially conscious investing
Development impact bonds
Corporate Social Responsibility (CSR) Investment
Who is this for?
Sustainable investing is for everyone and according to experts it doesn’t mean low returns. It is not just for those who care about bringing about social change.
How do I start?
Whenever starting something new, research is inevitable. I’m not an expert but this might help:
The horrendously low prices that farmers get for their produce is a symptom of a society with warped priorities; we do not want to pay adequately to someone who keeps us alive, but we are willing to pay through our noses for branded shoes and gadgets. And in relation to the latter, we don’t even care what the actual factory worker gets. – Scroll.in
The same goes for some of the clothes we buy. We don’t pay through our noses for all the clothes we buy. We buy them because they are the cheapest we could find. #whomademyclothes marks the 3rd anniversary of the Rana Plaza disaster when 1,134 people were killed in a garment factory collapse in Bangladesh. We dress to impress, but we forget the suppressed. Until this incident happened, not many knew where those cheap clothes come from, who makes them and how they are made.
The clothing industry is wrapped with social, environmental and economic problems. India is world’s second largest textile exporter and the third largest exporter to the US but at what cost? Challenges currently faced by the textile industry with respect to its environmental footprint include water issues, pollution caused due to dyes, and microplastics. India is battling water crisis. Water mining is rampant in the country and hence we are losing precious water resources that are not renewable in nature. Textile industry is water intensive and needs to adapt to these changing conditions.
People who manufacture clothes are victimized by human trafficking. India Textile Industry being the second largest employer after the Agriculture Industry, unfair labor practices and human trafficking are pervasive in the country. For example, Sumangali is one such form of child labor forbidden but practiced in Tamil Nadu.
The Gujarat Pollution Control Board (GPCB) had once issued closure notices to 18 industrial units in Surat for water pollution and there are over 500 units polluting Pali, Rajasthan. The Indian Textile Industry was off the sustainability wagon here. Waterless dyeing process, using solar power to run textile companies, green textile based on organic and natural colours and hand embroider, are some of the things India can do to tackle this mess. Labeling products also can help raise consumer awareness and help consumers choose greener and fairtrade products.
In a recent report by UNEP, Global Waste Management Outlook, that I was involved in, it was found that textile forms 1 to 3% of municipal solid waste. The second-hand clothing industry has doubled from 1.26 billion USD in 2001 to 2.5 billion USD in 2009. Canada, Germany, Republic of Korea, UK and U.S. account for more than half of all exports of this. Fifteen countries account for half of all imports: Angola, Benin, Cambodia, Cameroon, Canada, Germany, Ghana, India, Kenya, Malaysia, Pakistan, Poland, Russia, Tunisia and Ukraine . The importing countries again export the sorted fractions depending on the quality.
On a global scale, the Sustainable Apparel Coalition’s vision is an apparel, footwear, and home textiles industry that produces no unnecessary environmental harm and has a positive impact on the people and communities associated with its activities. The Fashion Transparency Index looks at five key areas when ranking brands:
1. Policy & Commitment
What are the standards and goals the company sets itself for the protection of workers’ rights and the environment? And do they make these public?
2. Tracking & Traceability
How well does the company know its supply chain and what does it make public?
3. Audits & Remediation
How does the company go about checking its supply chain for compliance with its policies and standards? And what is its approach to dealing with suppliers who fall below these standards? Do they make these public?
4. Engagement & Collaboration
Which organisations and stakeholders does the company work with to ensure its suppliers and their employees are treated well? And do they make these public?
What checks and balances does the company have in place within its own organisation, to ensure its initiatives take place as planned? And do they make this public?
Fashion Revolution is based in the UK and is a not for profit Community Interest Company. On 24th April each year, Fashion Revolution will bring everyone in the fashion value chain together and help to raise awareness of the true cost of fashion, show the world that change is possible, and celebrate all those involved in creating a more sustainable future.
Disruptive innovation changes the world. It seeps into the unguarded supply chain like a virus if economy is considered as one large collective organism. Supply-demand goes off balance. This is because it is in the nature of disruptive technologies to rapidly increase demand.
Increasing demand is the reflection of how the new technology was able to reach to larger masses by being more affordable and accessible. It’s chaotic. Every small or large business is clinging on to whatever it can to win this battle. The new technology now dominates the market. It changes the course of day-to-day business activities. All eyes are on this innovation and everyone in the business is breathing it. A new infrastructure replaces the old one. It’s a new market! It’s a shamble! In an effort towards a sustainable world, the companies also have to struggle to keep up and sustain themselves. Those who adapt and turn issues into opportunities will survive. Resources really are going to run out someday. Sustaining innovation on the other hand does not shock the market behavior by a sudden entry but rather evolves in digestible steps. Sustaining technologies are improved products.
Clayton M. Christensen‘s book The Innovator’s Dilemma describes his theory of disruptive innovation. It talks about how companies fail to adapt to such changes. He lays down principles of disruptive innovations that companies fail to follow.
Here are some examples of disruptive and sustaining innovation that also offer a contrast between these two.
Plastic is an example of disruptive innovation. It disturbed the market back then by changing the whole scenario. An example of sustaining innovation on the other hand is bioplastic, an evolutionary innovation that cannot be integrated into existing infrastructures so easily but is capable of replacing petroplastic. It could have been a revolutionary innovation had it not brought along with it land and food issues.
Green revolution is a classic example of how new technologies such as high yielding seeds changed the world or rather saved the world. Norman Borlaug’s techniques were disruptive in behavior. They went beyond industrialized nations. Genetically Modified Organisms (GMOs) on other hand is an advancement to these revolutionary techniques. This so called ‘Gene Revolution’ is a sustaining innovation. But is it? It’s in some people’s black books.
Renewables like solar and wind are the new green invaders of the market. It’s an all grown industry that is trying get into the veins of policies but existing policies offer some resistance. To make sure that it doesn’t disrupt current market behavior, taxes are levied. Taxes buffer the impact the technology can have on the market, it acts as a cushion to the market. Can we say that a disruptive innovation is advertently or inadvertently converted to a sustaining one? For example,
The state House in Oklahoma this week passed a bill that would levy a new fee on those who generate their own energy through solar equipment or wind turbines on their property. – The Week
In terms of subsidies, petroleum still gets a large share. Old companies have started to invest in renewables – a sign of adaptation.
Oil & Gas:
Shale gas is a natural gas that is trapped in shale formations underneath the Earth’s surface. It is cleaner and greener than coal. A disruptive combination of technologies like horizontal drilling, hydraulic fracturing (aka fracking), computer imaging and modelling gave rise to the natural gas extraction boom. This makes shale gas a rapidly available energy resource and that changes things around. US is currently the largest producer of natural gas.
To watch the LinkedIn Speaker Series with Clayton Christensen, click here.
Green economy is the economy that takes into measure the environmental consequences current technologies have created. The three pillars of sustainability as they are called are: economy, society and environment. While companies do embrace this, they fail to make their mark. So, how does a green business, that believes in sustainable development, limits its growth and how can it overcome it?
Here are some parameters that can measure a company’s extent and limitations:
#1 Going ‘green’: Green is called nature’s color. But it is not wise to color your websites and offices in all possible shades of green: green wall, green chair, green pens. It can come across as a green wash. It affects your brand and credibility. Jeremy Heimans, co-founder of GetUp and of Avaaz.org, calls it the ‘green vomit‘. Instead let your greenness reflect in your inner and outer workings of the company. Embrace energy efficiency and less polluting strategies. Save water. Become an eco-friendly business at all levels possible. Help others do the same. It does make business sense to do that. Lead your way.
#2 Keeping intentions clear: Environmental responsibility is possible with profitability but not at the expense of it.The third pillar of sustainability is economy which cannot be forgotten. A business is capable of solving environmental and social problems, although it is not what it is primarily based on. Take, IKEA for instance. IKEA is a Swedish company that designs and sells ready-to-assemble furniture, appliances and home accessories and does green business with solar-panels. IKEA doesn’t accept child-labour and supports sustainable forestry. Companies like this are doing well since green business is now popular among consumers.
#3 Incentives: Just because one cares about having a healthy and clean environment doesn’t mean he/she has to work for a green company at low wages. It is a deterrent because everyone works for a living. Pump up some creativity in everything you do and it is bound to grab some attention. Honesty is the best policy. Millennials will dig it. Instead of making people guilty of not recycling, how about creating incentives for the process? What do you think about Coca-cola’s new idea about making recycling fun? Have a look at this video:
#4 Transparency: A business is affected by how transparent it is in its actions. Sustainability reporting is one way to convey transparency. Whoever expresses it the best is at an advantage.
What else do you think that businesses can do to go green without limiting themselves?