Sustainability Services Ready for Take-off

Nitin Kalothia

As spending on sustainability engagement is expected to touch  $1 billion in 2019, Nitin Kalothia, Director, Sustainability Initiatives Practice,  Frost & Sullivan, discusses opportunities and challenges with SustainabilityNext

What’s Frost’s view on how India is tackling Climate Change? What are your suggestions to make it better?

Climate change is one of the greatest challenges of this era. The consequences of this threat, if not we, will certainly be borne by the future generations. Combating climate change is therefore foreseen as the top priority globally. India in this regard has long been committed to United Nations (UN) towards tackling climate change and has taken certain serious steps to address its own greenhouse gas emissions – Pledge at Copenhagen, Ratifying Paris Climate Change agreement. Back home, the focus has been towards creating robust policies and action plan.

The National Action Plan on Climate Change (NAPCC) is a comprehensive action plan outlining measures on climate change related adaption and mitigation while simultaneously advancing development. Studies suggest that with the existing policies and measures, India is set to achieve its Nationally Determined Contribution (NDC) emission intensity target. With the continued expansion of renewable capacity and implementing the draft Electricity Plan, India could even overshoot the non-fossil capacity target set in the NDC and it is expected to achieve 57% against 33% target by 2027.

As India moves into the implementation phase to meet the commitments, the key areas to be looked at are one the active participation from multiple stakeholders, both business and government sectors coming together to put solutions into place. For renewable energy, affordable and available financing is the key to enable renewable energy to compete with fossil fuels. India further needs to strongly push for Climate Technology Centre and Network (CTCN) in order to have improved capacity that would help in generating good adaptation action plans to combat climate change.

What are the trends in how Indian businesses are addressing sustainability – why is the uptake so lukewarm?

In simple terms, sustainability for businesses means improving their bottom line results and at the same time not harming the society or the environment in which they operate. Businesses in India across industry sector (lead by the automotive, oil & gas, engineering, IT/ITES sector) are emphasizing sustainable operations to optimize their processes and leverage the advantage in the form of revenue growth, cost reduction and tackling regulatory risks. Over the last decade, there has been an increasing trend in sustainability performance disclosure by Indian enterprises, which is an indication of how the companies are looking at evolving as sustainable enterprises. Under the Carbon Disclosure Project (CDP), India saw a 55% increase in the reporting from Indian companies in the periods from 2007 to 2015, similarly the Global Reporting Initiative (GRI) received 88% more sustainability disclosures from Indian businesses, in the same period.

While on one hand we see growth in companies believing in sustainability, on the other hand there is still a very large mass of businesses in India that are yet to employ sustainability methodologies into their operations. The main reason for the low acceptance could be of two-fold, one the lack of understanding on how to collect, collates and report the data. Although CSR initiatives are included in their annual reports, the environmental data gathering is still at a nascent stage. The second reason is the limitation of the existing internal systems to effectively measure, track and assimilate the sustainability impacts into corporate strategy and operational objectives.

Should the government – SEBI make it mandatory for all listed companies to start filing integrated reports?

The concept of integrated reporting is being discussed at various international forums. Today, an investor seeks both financial as well as non-financial information to take a well-informed investment decision. SEBI in its recent circular in February 2017 is underpinning the top 500 listed companies to voluntarily adopt Integrated Reporting (IR). The agenda is to provide shareholders and interested stakeholders with relevant information that is useful for making informed decisions. This is foreseen as the next step to move away from companies making separate financial and non-financial disclosure statements. Experts see this as pathway for policy-makers and regulators who are seeking to induce the corporate sector to acknowledge and manage the environmental and social externalities of their business operations and to make their governance processes more robust and transparent. This would also create the need to adopt responsible business practices in the interest of the social set-up and the environment which is vital for financial and operational excellence.

What is the size of business opportunities emanating from sustainability services in the next 5 years?

A decade ago sustainability services didn’t exist as a separate category of engagement. The main reason being, top emerging economies like India and China were not big spenders on sustainability. However, today with the sustainability solutions providing unique, data driven insights, the market is transforming. The forecast show that the spending on sustainability engagement will grow from $877 million in 2015 to $1 billion in 2019 (reported
by Verdantix).

Today, the entire business value chain is interconnected, and with the focus on new technology, innovation and product stewardship, sustainability engagement is perceived as an emerging service offering. Further, the push from regulatory policies and government mandate will provide an impetus to the trend of adopting sustainability as a competitive advantage tool. As more businesses become informed, and experience the value from sustainability solutions, the market adoption of sustainability engagements will grow tremendously.

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