Government should support sustainable initiatives in small enterprises in India, says Frost analyst

Nitin-K

Government should support sustainable initiatives in small enterprises in India, says Frost analyst

Greentech Lead India: Sustainable development has fast become
a universal term applicable to all industries and all types of businesses- – whether
big or small. The developed world has almost succeeded in implementing strict
guidelines to ensure sustainable development (SD) across different verticals.
In developing countries like India, SD initiatives are faced with numerous
challenges, however.

While all industry verticals need attention on SD, the
manufacturing sector in India demands special attention as it contributes to majority
of carbon emission in the country. Primary reasons for slow adoption of SD in manufacturing in India are
lack of awareness and scarcity of funds among micro, small and emerging enterprises
(MSMEs).

Nitin Kalothia, associate director, Manufacturing and
Process Consulting Practice, Frost & Sullivan, South Asia & Middle East,
recently spoke to Greentech Lead about his views on various SD initiatives in
Indian manufacturing industry with a special focus the issues faced by MSMEs in this
regard.

Our exchange follows:

What are the major issues related to adopting
environmental sustainability initiatives in manufacturing industry in India?

‘Lack of Awareness’ will be the number one reason
resulting in non-adoption of sustainable development (SD) initiatives by
organizations. Educating corporates as to how these initiatives can bring
business benefits to their organizations through cost cutting, eliminating
potential future risks, reducing environmental and social impact, developing
eco-friendly and energy efficient products and services, will influence them to
adopt these concepts. Many organizations are already reaping the benefits of
having created a competitive advantage by implementing sustainable development
initiatives. In emerging and medium enterprises today, high initial investments
and long ROI duration does constraint implementation of these initiatives.
Also, there are no requirements from stakeholders (Shareholders, regulatory
bodies, Investor community, etc) for reporting performance on sustainability
and hence there isn’t adequate focus from organizations in this field. The good
news is that things are changing very fast and there is an increasing trend in
number of Indian organizations that are adopting SD initiatives or at least
seriously looking in this direction.

Has corporate sustainability initiatives become a new
strategy to garner public support? Is the
manufacturing industry really concerned about environmental issues?

It’s true that companies who have adopted SD initiatives
and worked towards reducing adverse impact on environment and society are
appreciated and supported more compared to their counterparts by the society
and other stakeholders. But neither this is the objective or ultimate
destination in itself for most of the organizations. A handful of forward
looking companies in our country are structurally working on SD and reporting
their performance. The main vision of these organizations is to identify and
mitigate sustainability challenges, support and appreciation from the society
comes in as additional benefits.

On the other hand, some companies stay away from
sustainability initiatives citing cost concerns. They would rather pay
penalties (which is far less than the investment and efforts required for major
sustainability projects like water treatments). How long this will continue? Do
you think Indian government should rethink these strategies to make the
industry more responsible?

To my knowledge, these situations are reducing everyday
as the enforcement of regulatory norms is increasing and companies themselves
are becoming more responsible. I agree, even today we have organizations with
such mind set mainly among the macro and small enterprises due to financial
constraints to fund these projects. With increasing awareness among society and
organizations, enforcement of regulatory laws and green procurement policies
being adopted by large companies, such instances will substantially reduce over
the coming years.

Government is already working on making corporates more
responsible for their actions towards environment, society and governance (ESG).
The ministry of corporate affairs is working on sustainability reporting
framework for companies to ensure that they follow the environmental guidelines
and report their performance. SEBI has also notified top 100 listed companies
to report their performance on ESG parameters. So things are moving in the
right direction but at their own pace.

What policies should government of India adopt to ensure
the manufacturing industry adheres to sustainability initiatives?

The Indian Government is already planning many new
initiatives to ensure adherence to environmental laws by Indian companies and
also facilitate adoption of sustainable development initiatives. For example,
the PAT (Perform, Achieve and Trade) scheme that been implemented to improve
energy efficiency in energy intensive organizations and reward companies who
surpass the improvement target by crediting tradable energy permits to them.
There are already programs being formulated to ensure a minimum of 5 percent of
energy being consumed is procured from renewable sources.

While such policies are being formulated by the
government and are applicable to large industries in our country, government
should focus on ensuring adherence of environmental norms and policies among
the Micro, Small and Emerging (MSMEs). A fund could be created by government to
support initial investment in Green Technologies and processes for MSMEs
companies. The MSMEs have the biggest challenge on investing in such
infrastructure. Secondly, common infrastructure could be developed on “Pay and
use” basis at subsidized rates so that MSMEs can dispose their waste and
effluents in a more environmental friendly way. This model is seen operational
in few industrial towns of the country.

Lastly, to make companies accountable for their actions
towards environment, society and governance, government should in a phased
manner make reporting on SD parameter mandatory by all Mega Large and Large
industries and also for sectors that have maximum impact on environment.

What are the major industry segments in India that you
think should immediately respond to environmental concerns? Why? Have you seen
any initiatives from these sectors in this regard?

According to me, textiles, metal and mining, power,
cement and chemical industries have a significant impact on the environment,
either from a perspective of waste (emission, effluent and other solid waste)
generation, use of natural resources or both. The major players in most of
these sectors already have a team in place to work on sustainability and are
working towards mitigating the environmental impacts. The biggest focus area
for companies today is to reduce its specific energy consumption. While it
brings cost benefits, it also helps to reduce the overall emissions. The
challenge is with the smaller players in these sectors who have significant
impact but are yet to start their journey in this direction.

Many multinational companies including leading food &
beverage companies and car makers are busy launching sustainability
initiatives. Have you seen any such initiatives from Indian companies recently?
Please name them, if yes.

The concept of sustainable development has been present
in developed nations much earlier than in India. Many of the countries in
Europe and USA have mandatory requirements of reporting unlike in our country.
But still, we do have a few Indian companies like Larsen & Toubro, Tata
group, Mahindra & Mahindra, Reliance, and many others who have been early
adopters of this concept. Tata Group companies were among the first Indian
companies to publish their sustainability report almost a decade back.
 

What is the role of Frost & Sullivan in building
sustainable practices in the industry? How far have you succeeded in your
efforts?

Frost & Sullivan through its Green Manufacturing
Excellence Awards platform is trying to educate and facilitate implementation
of Sustainable Development initiatives in the organizations. Companies are
assessed and benchmarked on their current progress towards SD and input on
roadmap ahead is shared. We also started the sustainability services to
handhold companies in its implementation. The process started in 2009 and over
the past 3 years we have succeeded to the extent of educating few of the
corporates about its importance and helped a handful of manufacturing companies
embark on the journey. The progress so far has been satisfying but it’s a long
journey ahead.

Rajani Baburajan

editor@greentechlead.com