<p>The reasons for any business to become more ‘ESG compliant’ go beyond regulatory compliance or the need to ‘look nice’. Doing so can improve a company’s reputation, access to funding and support for growth, and CEOs have an essential role in making their organisations more sustainable. At a recent India CEO Forum session in Hyderabad, Anirban Ghosh, Chief Sustainability Officer of the Mahindra Group, drew upon his experience to examine how CEOs can help drive successful ESG initiatives.</p><h2>Why ESG Matters…</h2><p>Just about 100 companies account for 71% of all global emissions. While experts claim that the solutions required to achieve the climate goals of 2030 already exist, it is the wide-scale adoption of these solutions that proves to be a stumbling block. At another level, companies must consider the unintended consequences of using newer technologies and concerted efforts must be undertaken to repurpose, reuse and recycle current technological advancements. For instance, an alternate use for solar panels must be considered when more energy-efficient technology, which might lead to the large-scale <em>decommissioning </em>of existing solar panels, becomes available. </p><p>Depending on the nature of the business, any one of six functions might lead a firm’s ESG initiatives. These include Operations, Marketing, Project Design, Finance, Risk and HR. While individuals from these functions need not be designated as ‘Sustainability Heads’, they must actively incorporate sustainability-related aspects in their strategies.</p><h2>ESG And Profit: No Longer In Conflict</h2><p>Historically, adopting ESG practices was seen as a cost-adding process but today, profit and sustainability are no longer conflicting goals or at least not necessarily so. To illustrate:</p><p><em><strong>Financial gains from energy efficiency</strong></em></p><p>Technological advancements can help drive energy efficiency while reducing the associated costs. Mahindra invested ~Rs 245 crores over five years to improve its energy efficiency but this has already generated a savings annuity of over Rs 145 crores in the last two years. The company also employs ‘Zero Waste to Landfills’ to save waste disposal costs, with 25 locations, including the Mahindra World City, having been certified as zero-waste-to-landfill and 44 resorts on their way to being so certified.</p><p><em><strong>Attracting global clients</strong></em></p><p>Sustainability’s cost-positive impact can no longer be refuted but it plays an <em>additional </em>role in helping to attract global clients. With ESG concerns growing among potential investors, particularly in the West, well-established ESG practices can help ‘seal the deal’. For example, Mahindra’s ESG practices helped it foster relationships with BMW’s sustainability team, which subsequently helped it become part of BMW’s value chain.</p><p><em><strong>Staying ahead of regulation</strong></em></p><p>Becoming more ESG-conscious also helps businesses stay ahead of emerging compliance norms. With the Indian government focusing more on the circular economy space, extended producer responsibility regulations are a distinct possibility. For India to achieve its net-zero targets by 2070, it will likely impose new regulations in terms of energy, waste management and carbon-pricing. Adopting sustainable practices <em>today</em> can help businesses stay ahead of the stricter compliance norms that will almost certainly be mandated soon.</p><h2>ESG’s Social Components</h2><p>Tech Mahindra has a strong focus on diversity, including training programmes for differently-abled staff, gender-neutral infrastructure and inclusive policies for LGBTQIA+ employees. Similarly, LemonTree Hotels now consciously hires 18-20% of all new employees from among the differently-abled, and it has taken important steps to create a socially inclusive ecosystem. For instance, <em>all</em> its managers are trained in sign language so that <em>no employee</em> faces difficulties communicating at work.</p><p>Building diversity in a meaningful sense also requires a focused effort to hire, retain and promote women in mid- and senior-management roles. ‘Back-from-a-break’ programmes targeting women that are looking to re-join the workforce work best when combined with strong training and mentoring efforts. More and more companies are also adopting progressive policies such as menstrual/menopausal leave. Some are providing increased support for maternity leave and prioritising re-employment even after 1-2-year gaps.</p><h2>Measuring ESG Outcomes</h2><p>Energy savings are one of the key metrics used in the ESG space. Mahindra’s ‘<em>make sustainability personal’ </em>programme aims to foster sustainable practices across its factories and among its employees. To that end, it bought and installed government-issued LED lamps in every factory but it also encouraged employees to use them at home. The Group is also introducing Brushless Direct Current fans (BLDC), which reduce energy consumption by about two-thirds. Other key measures include installing aerator taps (which dramatically reduce water consumption) and replacing over 2,500 motors with more energy-efficient ones, reducing energy consumption by ~20%.</p><p>Waste segregation is another means of conserving energy efficiently. 60% of all landfills are food/wet waste but many factories now have the means to convert such ‘wet waste’ into pure energy. For example, a factory in Indore converts 550 tonnes of organic solid municipal waste daily to produce 17,000 kg of bio-CNG. The implication is that ~60% of all landfills can be freed by segregating waste. Efforts are also on to install solar pumps <em>en masse</em> in farms. This would help move farmers towards more sustainable water-use practices. Finally, employing micro-irrigation, rainwater harvesting and a more judicious use of agro-chemicals could help cut water consumption by 30-40%.</p>
<p>The reasons for any business to become more ‘ESG compliant’ go beyond regulatory compliance or the need to ‘look nice’. Doing so can improve a company’s reputation, access to funding and support for growth, and CEOs have an essential role in making their organisations more sustainable. At a recent India CEO Forum session in Hyderabad, Anirban Ghosh, Chief Sustainability Officer of the Mahindra Group, drew upon his experience to examine how CEOs can help drive successful ESG initiatives.</p><h2>Why ESG Matters…</h2><p>Just about 100 companies account for 71% of all global emissions. While experts claim that the solutions required to achieve the climate goals of 2030 already exist, it is the wide-scale adoption of these solutions that proves to be a stumbling block. At another level, companies must consider the unintended consequences of using newer technologies and concerted efforts must be undertaken to repurpose, reuse and recycle current technological advancements. For instance, an alternate use for solar panels must be considered when more energy-efficient technology, which might lead to the large-scale <em>decommissioning </em>of existing solar panels, becomes available. </p><p>Depending on the nature of the business, any one of six functions might lead a firm’s ESG initiatives. These include Operations, Marketing, Project Design, Finance, Risk and HR. While individuals from these functions need not be designated as ‘Sustainability Heads’, they must actively incorporate sustainability-related aspects in their strategies.</p><h2>ESG And Profit: No Longer In Conflict</h2><p>Historically, adopting ESG practices was seen as a cost-adding process but today, profit and sustainability are no longer conflicting goals or at least not necessarily so. To illustrate:</p><p><em><strong>Financial gains from energy efficiency</strong></em></p><p>Technological advancements can help drive energy efficiency while reducing the associated costs. Mahindra invested ~Rs 245 crores over five years to improve its energy efficiency but this has already generated a savings annuity of over Rs 145 crores in the last two years. The company also employs ‘Zero Waste to Landfills’ to save waste disposal costs, with 25 locations, including the Mahindra World City, having been certified as zero-waste-to-landfill and 44 resorts on their way to being so certified.</p><p><em><strong>Attracting global clients</strong></em></p><p>Sustainability’s cost-positive impact can no longer be refuted but it plays an <em>additional </em>role in helping to attract global clients. With ESG concerns growing among potential investors, particularly in the West, well-established ESG practices can help ‘seal the deal’. For example, Mahindra’s ESG practices helped it foster relationships with BMW’s sustainability team, which subsequently helped it become part of BMW’s value chain.</p><p><em><strong>Staying ahead of regulation</strong></em></p><p>Becoming more ESG-conscious also helps businesses stay ahead of emerging compliance norms. With the Indian government focusing more on the circular economy space, extended producer responsibility regulations are a distinct possibility. For India to achieve its net-zero targets by 2070, it will likely impose new regulations in terms of energy, waste management and carbon-pricing. Adopting sustainable practices <em>today</em> can help businesses stay ahead of the stricter compliance norms that will almost certainly be mandated soon.</p><h2>ESG’s Social Components</h2><p>Tech Mahindra has a strong focus on diversity, including training programmes for differently-abled staff, gender-neutral infrastructure and inclusive policies for LGBTQIA+ employees. Similarly, LemonTree Hotels now consciously hires 18-20% of all new employees from among the differently-abled, and it has taken important steps to create a socially inclusive ecosystem. For instance, <em>all</em> its managers are trained in sign language so that <em>no employee</em> faces difficulties communicating at work.</p><p>Building diversity in a meaningful sense also requires a focused effort to hire, retain and promote women in mid- and senior-management roles. ‘Back-from-a-break’ programmes targeting women that are looking to re-join the workforce work best when combined with strong training and mentoring efforts. More and more companies are also adopting progressive policies such as menstrual/menopausal leave. Some are providing increased support for maternity leave and prioritising re-employment even after 1-2-year gaps.</p><h2>Measuring ESG Outcomes</h2><p>Energy savings are one of the key metrics used in the ESG space. Mahindra’s ‘<em>make sustainability personal’ </em>programme aims to foster sustainable practices across its factories and among its employees. To that end, it bought and installed government-issued LED lamps in every factory but it also encouraged employees to use them at home. The Group is also introducing Brushless Direct Current fans (BLDC), which reduce energy consumption by about two-thirds. Other key measures include installing aerator taps (which dramatically reduce water consumption) and replacing over 2,500 motors with more energy-efficient ones, reducing energy consumption by ~20%.</p><p>Waste segregation is another means of conserving energy efficiently. 60% of all landfills are food/wet waste but many factories now have the means to convert such ‘wet waste’ into pure energy. For example, a factory in Indore converts 550 tonnes of organic solid municipal waste daily to produce 17,000 kg of bio-CNG. The implication is that ~60% of all landfills can be freed by segregating waste. Efforts are also on to install solar pumps <em>en masse</em> in farms. This would help move farmers towards more sustainable water-use practices. Finally, employing micro-irrigation, rainwater harvesting and a more judicious use of agro-chemicals could help cut water consumption by 30-40%.</p>
