Sustainability Report. Aims: To analyse and study the key strategies towards environment and sustainability and make recommendations.

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CHAPTER- 1

1.1. Executive Summary

        It has been three decades in making the environmental revolution and it has greatly changed the way how firms do the business. In the early 1960s and 1970s majority of the firms were denying their impacts on the environment. But, then a series of high ecological problems created the foundation to support for highly stringent government rules and regulations. In Japan people were dying of mercury poisoning, in Europe the Rhine was on fire and in the US Lake Eric was dying. Nowadays, most of the firms have taken the responsibility so as to do no harm to the environment. The production process and products are becoming cleaner. In most of the well industrialized countries, more and more, new and new firms are going green as they found that they can lower the levels of pollution and increase their profits at the same time. There exist a great challenge behind greening and a vast amount of opportunity as well. The major challenge is to develop a sustainable global economy: An economy that supports the planet indefinitely. According to Crews (2009) even though most of the developed nations are approaching an ecological recovery, the planet as a whole remains unsustainable. But sustainability does not involve controlling pollution only. Even if all the nations around the world achieve zero emission by 2020, the planet would remain still stressed. This is referred to as carrying capacity by biologists. In the early part of the twentieth century, depleted fisheries, farmland, forests, urban pollution, poverty, epidemics and migrations are spilling over the geographical boundaries. The simplest fact is while meeting our needs we are destroying the capability of the future generations to meet theirs.

        The root cause of the problem is the explosive growth in population and the rapid economic development in the emerging countries. The social and political issue exceeds the mandate. However, corporations are the only firms with plenty of resources, global reach, technology and motivation to achieve sustainability. On the other side, the penurious customers, failing political systems, degraded environment and the unravelling societies will make the conditions too difficult for the corporations to do the business. The business logic for greening is largely technical or operational. The bottom up pollution prevention programmes has helped firms to save billions of money. But many of the executives find that the environmental opportunities have become a major source of revenue growth. Greening is now said in terms of reduction of risks, cost cutting or reengineering. Greening is rarely linked with technological development or strategy and as a result of which most of the firms fails to find excellent opportunities.

According to Epstein (2001) the achievements of sustainability include dollars in products, technology and services that barely exists nowadays. Increasingly, many firms will be selling solutions to the world’s environmental problems. So, businesses should have a clear understanding of those problems. To move from greening to sustainability, it is required to unravel the complex interdependencies.

The market economy comprises of both emerging and developed countries. However, the developed countries leave the large ecological footprints- it can be defined as the amount of land needed to meet a particular need of a consumer. Even though there exists an intense usage of materials, energy the levels of pollution are very low in developed countries. Three factors contribute to this reason: strict environmental regulations, relocation of the polluting activities and the greening of the industry. So to certain extend, the greening of the developed nations are taking place at the expense of the developing countries. With the economic growth follows the urbanisation. Now, one of the every three people in the world lives in the city. As industrialization initially focussed more on heavy manufacturing and commodities, the cities in the developing countries suffers from extreme pollutions. Acid rain is one of the growing issues.

According to Banarjee (2000) the second economy is survival economy. Owing to the rapid growth of market economy, the survival economy is increasingly becoming precarious. Many of the rural populations are driven to poverty as they compete for scarce resources. The third economy is the nature’s economy, which comprises of the natural systems and resources that aids the survival economies and the market. Most of the non-renewable resources like metals, oils and other kind of minerals are finite in nature. Renewable resources like forests, soils etc. will replenish by themselves so long their use does not exceed. The innovations in technology have created substitutes for most of the non-renewable resources. For instance, optical fibre now substitutes the copper wire. Moreover, in developing nations the demand for virgin materials can diminish because of recycling and reuse. One of the greatest threats to sustainable development in today’s world is the depletion of renewable resources. Soils, water, fisheries and forests are all pushed beyond their limits through industrial development and human population growth. So it is very important in this twenty first century to maintain the interdependence among the three economic spheres mentioned above. These three economies have become world in collision, creating big environmental and social challenges facing the planet like, pollution, climatic change, poverty, resource depletion and inequality. The infrastructure development projects have added a reduction in raw materials and thus a long term drop in the prices of the commodity.

Based on the arguments of Bansal and Koth (2000) achieving sustainability requires reducing or stabilizing the burden on the environment. This can be done by reducing the human population, lowering the level of consumption or fundamentally changing the technology that is used to create the wealth. The first option does not appear to be a feasible one, while the second option would worsen the situation as population growth and poverty goes hand in hand. Stabilizing the human population needs the improvement of education and economic standing of the world’s poor. The third option of changing the technology is one of the better ways to solve the problem. This has led most of the firms around the world to think of incorporating sustainability into their strategic thinking.

1.2. Aims and Objectives

Aims: To analyse and study the key strategies towards environment and sustainability and make recommendations.

While the major Objectives are:

  • To explore more about the sustainable strategies those are currently used by the firms.
  • To understand the key environmental strategies followed by firms to gain a competitive edge.
  • To focus more on worldwide sustainable strategies and give suitable recommendations to the firm in adopting a good strategy.

CHAPTER-2

2.1. Introduction

        The global climatic change has emerged as an important public policy issue in the last decade. As a result many firms like Ford found that a great progress in the fuel economy performance of automobiles manufactured by them is necessary. This established the belief that a comprehensive market and business focussed strategy is crucially essential to address the climatic change. It is also critical for the long term success of the company. However, the company officials found it very difficult to draft a strategy and implement such a strategy focussing on balancing the economic and social needs of the society and company. There are wide range of approaches and methodologies to reduce the greenhouse gas emissions. The firms that are well committed to improve their social and environmental performance will find no difficulty in implementing sustainable strategies. To improve the performance, it is essential to understand the drivers of revenues and costs and the actions it can take to affect them. Some of the popular management frameworks like Value based management and Balanced Score card rely on understanding the value drivers and helps the managers in taking decisions to improve creation of value.

        However, to manage corporate social responsibility, a diligent examination of the effects of environmental and social initiatives on corporate profitability is required.

2.1.1. Corporate and Business Unit Strategy

According to Epstein (2001) business unit and corporate strategies are one of the most vital things because it is through the implementation and development of this strategy the sustainable performance happens. While formulating and revising the business unit and corporate strategies the firms should decide on what industries they will focus on and how effectively they will utilize their competencies and resources to gain a competitive edge in the industry. The business unit and corporate strategies contains both external and internal drivers that are set forth for taking actions that pertain to sustainability issues and its impact on environmental, social and financial performance of the company. So, the firms that are moving towards sustainability should always analyse various elements that are related to their strategies. They will also have to assess how the business unit and corporate strategies of the company impact on sustainability issues like employee rights, human rights and environmental protection. To develop a framework firms should find out their key stakeholders like persons or groups who can be affected by corporate actions. They should also identify environmental and social issues attributed with specific industries and geographic locations. They are powerful external drivers. According to Abreu(2011) firms that are operating in high environmental and social impact industries might show very poor performance with regards to sustainability components like emissions, consumption of natural resources and health risks associated with products or services when compared with firms operating in other industries. Companies belonging in different sectors are exposed to widely diverse pressures from customers, political institutions and community activists. These pressures become external drivers of sustainability. Some issues like labour practices and environment management exist in many sectors and have now become increasing community concern. For instance, the industry and company codes of conduct are setup widely in toy apparel and footwear industries.

2.1.2. Corporate costs and benefits

        All the costs and benefits associated with the sustainability strategy should be assessed. According to Bansal and Koth (2000) the effects of actions of sustainability and the reaction of stakeholders should be evaluated broadly as they constitute important cost and revenue drivers. Even though these benefits and costs is related to both corporate and social impacts, most of the firms focus on both long term and short term impacts on corporate financial performance. Advantages can come from improved and positive relations with stakeholders and regulators. As an example, regulators can ease the permitting process for firms who have regularly demonstrated a good sustainability record. This reduces time and investment needed to add new services and products to the market. Easy and faster access to capital is another advantage as the financial community gives great attention to social and environmental performance and gives more fondness to firms with favourable records.

        Sustainability actions can also bring in cost reductions from material substitution or very less packaging. Other cost reductions includes low energy consumption during the process of production, reduced handling and material storage costs and reduced disposal of waste. These actions helps in reducing costs through improving efficiency and also aids in creating a positive reaction from customers who may get benefited from these product improvements or savings. This can also generate a positive message to investors and financial analysts with regards to the firms manufacturing performance. Environmental and social costs and benefits are easy to find and measure. Companies should also need to incur other impacts like the costs for compliance with legislations. Many local and national governments set minimum necessities for recycled contents or may need a take back of some services or products.

2.1.3. Societal costs and benefits

        According to Abreu (2011) most commonly firms will manage only those issues that lead to short term benefits and costs. However, most of the social and environmental impacts are less unambiguous and the measurement and linking to financial performance will be too difficult. It is not always possible to regulate and control the social and environmental impacts. For example, few of the external costs will be very difficult to assign to individual polluters and are more likely to remain as external costs borne by the community. In the long run, few costs can only be considered as external. When the scientific research that supports environmental planning expands, the domain of external costs will shrink. This is because it permits accurate tracing of impacts of environments to the sources of pollution. Even though these actions need not be taken immediately, the top management should always keep in mind the environmental and social impacts attributed with their business methodologies and processes. Methods like option assessment, scenario forecasting, option screening can be used to measure the environment and social benefits and costs. Moreover, the boundary between internal and external costs suggests that avoiding external cost is a bad long term strategy.

CHAPTER -3

3.1. Literature Review, Analysis and discussion

Sustainability

According to Hart and Milstein (2003) there are specially five focus areas for sustainable development. They play a very critical and vital role in helping firms to change over to excellent and more sustainable practices of business. The first area of focus is Corporate Governance, which aims on the interplay between the management and the owners with respect to the corporate environmental issues. The next one is Cooperation, which focuses on the dimensions and possibilities offered for sustainable development by joining with forces beyond the boundaries of the corporate. Communication and Learning is another area of focus, wherein the firms can explore the importance of communicating with the stakeholders and the advantages of learning to promote the changes in a sustainable way. Innovation is the next area to focus where it explores how energy based companies improves the sustainability of their processes and products. Finally Integration involves the mechanisms and structures that improvers the sustainability within the firm.

        However, these activities can be categorized into four areas distinctively that portrays qualitatively the different fields of environmentally sustainable strategies. These areas can be viewed as incremental stages, even though it is common for firms to get involved in activities from all stages to varying degrees. According to Shrivastava (1995) reduction in emissions focuses on reducing the impact or effects on the environment directly and on increasing the efficiency. Product Stewardship scrutinizes corporate activities that are directed towards developing and improving new sustainable services and products or improving the sustainability of the existing products or services. Clean Technology focuses on all aspects related to investments in bridging or renewable technologies. In the most advanced stage Sustainable Development needs frequent and high degree of social involvement with external stakeholders. Here all the firms look out for a wide perspective on the possible methods to promote sustainability within the area of activity of energy the company applies.

3.1.1. Focus areas for Sustainable Development

Corporate Governance

Hart and Milstein (2003) suggests that a good active ownership and a very close collaboration between the board of directors and managers is a possible common denominator for firms that take active interest in environmentally sustainable development. As an example for instance a good understanding between the management of the firm and the board of directors on the firm’s environmental impacts and the possibilities to mitigate this impact. For the success of the business there also needs a clear consensus at the management and board level that environmental sustainability is very important. In addition to this, focus should not be only left on generating returns but also on producing social welfare. For instance, the owner’s directive instructs that the respect for environment is part of the company purpose. Publicly owned companies experience less pressure from their owners to provide financial returns than the private firms do. This result in a case that more funds can be used for implementing favourable projects with a long payback time.

        It was found out that firms with good strategy for environmental sustainability have good alignment of goals and interests between the board of directors, owners and the management. As a result they can take actions very effectively and swiftly. This will particularly help in investing in measures that will reduce emissions from energy productions. However, this cooperation is very useful to make more extensive investments that are inevitable for moving to energy system based on renewables. To sum up, if managers and owners have a good deal of understanding of the means and goals on how the firm can serve as a catalyst to make energy system more sustainable, changes can happen quiet swiftly.

Cooperation

        Hart and Milstein (2003) find this as one of the strong features of energy companies. One way cooperation is viewed as it is means for expanding business. The usage of heat waste from industries is a clear form of cooperation. A less common method is outsourcing of heat production. By linking the biomass furnaces of local landowners to the district heating network, renewable heat can replace some portion of in house fossil fuel production. Further, the cooperation with agricultural industry or local forest has the benefit that emissions from transportation can be lowered significantly. Some of the cooperative business models have proved a convenient way to expand the wind power. Cooperation is very helpful in exchanging ideas. For example within professional networks or business associations like Sweden energy etc. this can be used as a mechanism to spread the best practices and contribute to institutionalisation, thus generating new professional norms. Above all the cooperation with universities can lead to new innovations. The close cooperation between the energy companies and regional environmental coordinators has the great potential to generate more synergies. Finally, the cooperation offers many opportunities for improving and enhancing the sustainability of stationary energy system.

Communication and Learning

        According to Hart and Milstein (2003) communication regarding the environmental issues both within the company and among its stakeholders is a vital aspect of creating awareness for alterations that needs to be implemented on the move towards a more sustainable energy system. From the internal perspective of a firm, communication and learning is so vital to create commitment among employees towards environmental issues that facilitates implementing common visions and goals. Regular internal training on environmental aspects enables employees to take responsibility for the environment in their work operations which will sometime result in bottom –up initiatives to enhance environmental performance. However, to speed up the process of learning, it is better to hire consultants from outside, especially in the start-up phase of new sustainability related projects. A learning organization always tends to bring in changes that are vital to make energy system more sustainable.

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        They further suggests that external communication can create transparency about the firms sustainability related visions and goals and the means by which it can be achieved. This aids in creating acceptance and trust for corporate strategies and the products with the firms stakeholders. It is always desirable to maintain a friendly dialogue with the stakeholders, especially the customers. Moreover, it is very important to get inputs regarding customer preferences as it helps in developing new and value added products. The firms that needs to generate awareness campaigns among consumers regarding how they influenced the positive development of the energy system. ...

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