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Renew: environmental sustainability & corporate responsibility

Opinion | April 8, 2013

With the growing energy demands of developing countries and the continued massive energy consumption by the developed world, the need for a cohesive global approach to tackling environmental change has become urgent. The Kyoto Protocol and carbon credit system were significant steps towards keeping a check on the environment. However, the industrialized world has yet to introduce a measure that justly and effectively helps the developing world moderate its energy consumption. More than anything, the debate over usage of natural resources in developing countries must be revamped into a debate about the collaborative usage of natural resources by corporations in developing countries.

Corporate social responsibility has become a recent buzzword within the developed corporate world. It is now commonly accepted that companies stand to benefit significantly by moving toward ecological sustainability. They benefit by reducing costs by capturing emerging “green” markets, ensuring long-term profitability, establishing better community relations, and improving their corporate image. Due to the spread of environmental education, many consumers are committed to “going green.” Because of this eco-friendly businesses benefit from a favorable public opinion and greater customer loyalty. Environmental sustainability will eventually promise corporate sustainability. This will establish long-term consumer and employee value by creating a “green” strategy aimed towards the natural environment and considering every dimension of how a business operates in the social, cultural, and economic environment.

This is all well and good for companies operating in a smoothly-functioning, post-industrial business setting. Consumer and employee value are likely to merge only in an economy where individual and corporate aspiration levels have surmounted simpler, more basic needs. In developing economies, however, individuals often aspire for bare necessities without regard for the broader environmental consequences of their consumer choices. Analogously, businesses in developing countries struggle to overcome economic settings rife with bureaucracy, corruption, and an overbearing public sector . Such businesses cannot afford to be swayed by the idyllic, Western ambitions of environmental sustainability; the carbon credit scheme and Kyoto Protocol have had minimal impact on the corporate sector in the developing world.

Corporations in the Western world use environmental sustainability as a means to an end. The more “sustainable” a business’ image, the likelier it is in attracting customers to its environmentally friendly product. Every aspect of environmentalism has been used to further the cause of consumerism—to extract every last dollar of profit from the environmentally-aware consumer. For example, the carbon credit system charges environmentally unsustainable corporations in order to force them into becoming more sustainable or face the possibility of lower profits. Essentially, the concept behind conservation of natural resources has been politicized and has adapted to the competitive, consumer-oriented business culture of the developed world.

So how can the noble ideas behind environmental sustainability be translated into a language that developing countries’ business recognize and embrace? Present them in the garb of business synergy.

What is synergy? Synergy is the interaction of multiple elements in a system that produces an effect different from or greater than the sum of their individual effects. The notion of synergy in business seems to repudiate that most basic tenet of business: competition. However, in the developing world, environmental synergies between businesses across various sectors will not only further ameliorate interests but also protect the environment while driving the bottom line .

Specifically, businesses should be encouraged to collaborate with each other on workflows and supply chains. A bank with regional branches in rural villages could engage in a joint venture with a consumer-goods company seeking to sell its low-cost washing detergent in new markets. The bank’s local network and regional know-how would not only provide soft value for the consumer-goods company but also enable it to cut down on billboard and TV marketing costs, as well as reduce time and natural resources that would otherwise be used up in reaching the rural market. At the same time, the bank can benefit by introducing local communities to better lifestyles, eliminating the middle-man, and increasing their need for a financial manager.

There is a lot opportunity to drive down operating costs by exploiting similar ecological efficiencies. In India, such collaborations have already started taking place. On a local front, corporations are engaging in environment-friendly practices in order to improve their efficiency and consumer loyalty. Ambuja Cements Limited, a cement company in India, has taken the lead in the utilization of industrial wastes in cement production. Fly ash, a fine glass powder recovered from gases emitted by burning coal during the production of electricity, creates huge pressures on land and water. The cement industry traditionally uses coal for lighting kilns and for captive thermal energy. Instead of using coal, Ambuja Cements burns other waste products like plastic, shredded rubber tires, and cow dung as fuel to reduce their carbon footprint. The company has championed this new, environmentally friendly process of manufacturing cement among its would-be competitors, with the result that many other local companies are choosing to obtain and share industrial wastes to conserve energy and boost profits.

Toshiba and Hitachi have been gaining a competitive advantage in the worldwide battery industry through the design of acid-free and renewable batteries. These batteries are more expensive than conventional acid batteries; however, when the costs of renewal and disposal are factored in, they are more economical, less harmful for the environment, and in compliance with increasingly strict disposal regulations.

Environmental synergy, as a concept, needs greater backing by governments in developing countries. Politicians should introduce subsidies and tax benefits for firms choosing to engage in partnerships that can increase business efficiencies while preserving the environment. More importantly, however, developed nations must push for innovate, synergistic ideas that developing nations can easily implement. Environmental sustainability must be integrated into the logic of corporations and sustainability should become an integral aspect of any corporation’s effectiveness and its long-term mission. At this embryonic stage of corporate environmentalism, companies have the potential to create unique and inimitable environmental strategies, thus both distinguishing themselves and becoming environmental leaders within their industries. It can help companies to establish a social presence in markets and to gain social legitimacy. In order to unleash the enormous, latent potential of corporations to resolve ecological problems, researchers and managers must re-conceptualize their roles in society. Since corporations are major players in economic growth and development, they have an inherent duty to introduce enduring positive influence on all their stakeholders, including the essential, but often ignored, planet earth .