143 Socio-economic variables for strategic decisions
From The Mobile Indian
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Advocates of a greener planet have long debated over how the corporate world, in a bid to maximise its own economic interests, exploits precious resources and does not care to give back as much as it takes.
Banker-turned-environmentalist Pavan Sukhdev, in his recently released book Corporation 2020, discusses this very alarming issue at hand. The book that has been endorsed by leading corporate houses stresses on the need for a newer corporate model; one that will increase human well being and social equity, decrease environmental risks and ecological losses and yet continue to generate profit.
One-time banker with Deutsche Bank and head of global markets India, Sukhdev is the founder and chief executive officer of GIST Advisory, a specialist consulting firm, which helps governments and corporations discover, measure, value and manage their impacts on natural and human capital. Recently, he was appointed by the United Nations Environment Programme as the UNEP Goodwill Ambassador.
Talking to afaqs! on his book, Sukhdev says that the need of the hour is for companies to take up responsibility, and work towards a greener economy and a sustainable future.
"Businesses are getting bigger and bigger. Today's corporation is hardwired trying to hang on to the old model of business, which is focussed on pushing sales through means good or bad or misleading advertising, pushing production at levels that are really cheap. No one challenges a company that is creating toxic chemicals. No one challenges companies that are depleting fresh water. These are impacts of the corporation," says Sukhdev.
At the same time, he is not blind to the fact that there are positive impacts of the corporation too. Corporation 2020 discusses various examples ranging from Infosys' creation of human capital to Citibank's having to change its project finance policy due to rainforest destruction to drive home the point.
"Infosys is a good example of creator of human capital, giving opportunities for young, poor people to be educated and earn money. Groups like the Tata Group have always focussed on building communities around its employees. It is an example of what I call the community aspect of corporation. Coal India, a public sector company, has set up more than 550 higher secondary schools in and around the mining areas. ITC has been focussing on making its production carbon free," says Sukhdev.
"But for every company like ITC that exists, there are many that are depleting resources and harming the environment. There are as many negative stories as there are positive stories," he adds.
Corporation 2020, he says, is a movement that calls for new ways for corporations to operate, and in a new regulatory landscape.
According to Sukhdev, what is required is healthy followership along with good leadership, wherein policy makers and regulators are required to facilitate a change.
"The only things that companies are asked to measure and report are financial profits for shareholders. That is just a very tiny part of its performance. One big change, which is required, is measurement and disclosure of the impacts of the company. Do not just report shareholders' profits. Also disclose impact of the stakeholder. The change will not happen by letting free market taking over everything. Free markets are not there to solve social problems. They are to determine prices and to allocate capital efficiency," states Sukhdev.
"Business needs a new DNA, and that DNA is Corporation 2020. It is the DNA of stakeholder capitalism, not just shareholder capitalism. It is the DNA of business with collateral benefits, not collateral damage," he adds.
Corporation 2020 that is a product of over a year of research and analyses on the part of Sukhdev's team attempts to offer a vision for the role of business in shaping a more equitable and sustainable future.
In his testimonial for the book, noted industrialist Ratan Tata says, "The earth is in such peril that it is clear that the world's largest economic agents - the corporations - cannot carry on as they have done in the past, pursuing profit maximisation without due consideration for the environmental and social cost they visit on society. This book offers comprehensive solutions on how to re-orient corporations, through self-regulation as well as policy and legislative changes, so that their goals are aligned with society's goals and the necessary steps are taken within this decade to ensure that we are firmly on the path to a sustainable, green economy."
Yet another endorsement comes from Anand Mahindra, chairman, Mahindra & Mahindra, who says, "Pavan Sukhdev's trenchant analysis of how and why corporations can have a negative environmental and social impact, and his solutions on how this vicious circle can be converted into a virtuous one makes Corporation 2020 an eminently practical guide for enduring and holistic business growth."