This month saw the 27th UNFCC Conference of Parties in Egypt (COP27). The event was dominated by global government delegations and climate activists addressing the key thematic priorities of mobilising climate finance to emerging economies, food and water security, climate adaptation, and industry decarbonisation.
It was rather sobering as it comes at a time of multiple unprecedented climate extremes across every continent.
To put things in perspective, an estimate by the Centre for Science and Environment noted that India has seen a localised climate disaster nearly every day in the first nine months of 2022. It argued that if our country doesn’t put prompt mitigation measures in place, India is likely to face irreversible economic and socio-cultural damage in the next decade.
The good news is that in recent years India has taken some strong policy initiatives to promote the use of renewable energy and electric mobility and step up its fight against climate change. Similarly, Indian businesses have begun to commit to sustainability action by setting targets to achieve net zero emissions, accelerate decarbonisation, and deploy innovative green technologies. In fact, a recent survey by Oxford Economics revealed that most Indian organisations today acknowledge the business case for sustainability, with 62% of companies having a clear sustainability plan in place.
Businesses need to move beyond a sustainability compliance mindset to create value
While these are encouraging signs, a lot more needs to be done to ensure sustainability ambitions translate into long-term, tangible action. For instance, the Oxford Economics study also revealed that more than half the organisations say regulatory compliance is their primary driver of sustainability, ahead of factors such as carbon reduction, perceived reputational risks, or business innovation.
Unsurprisingly, only 7% of those who have acted on their strategies are seeing any significant business value out of it. This singular focus on compliance can cause companies to miss out on opportunities like creating new revenue streams and bringing in higher efficiencies, social innovation, and impact. To build inclusive, sustainable and resilient enterprises companies must manage their ‘green line’ with the same priority and emphasis as they do their top and bottom-line.
Data can bridge the green gap
Data drives sustainability success: if you can’t measure your environmental impact, how will you manage it?
Access to accurate and insightful data across the business value chain is critical to maximising sustainability outcomes. By translating raw data into meaningful metrics, businesses can strengthen their organisation’s sustainability DNA through a three-stage cycle of change: enabling reporting and compliance through transparency; optimising, and using sustainability data in business processes and decisions and driving sustainability across wider business networks.
When value chains become value networks, business becomes sustainable
The health of our planet affects every single person and business. That’s why sustainability is a challenge we must solve together. It truly is a team sport.
For businesses that doesn’t only mean looking after your own emissions – what we call Scope 1 and Scope 2 emissions. But it means considering your impact up and down your value chains. These are Scope 3 emissions.
But to understand and manage that impact, it’s critical to move beyond siloed, one-to-one connections among distinct trading partners. Sustainability efforts need to be extended across the value chain to the data-enabled network level, bringing together suppliers, customers, business partners and your own employees.
By transparently measuring and sharing sustainability data across networks, organisations can create actionable insights and best practices in real-time to infuse agility and resiliency in their supply chains and contribute toward achieving zero emissions and zero waste.
Leaders must lead from the front
Today, business stakeholders place much higher expectations on businesses to address global challenges like sustainability.
For example, investors are likely to take ESG risks into account when making investment decisions and job applicants are more likely to choose a company that supports sustainable business practices. And the demand for environmentally or socially conscious products is growing among customers and partners. For sustainability thinking to permeate across the entire organisation, leaders must define and incentivise sustainability success – and then lead by example.
Sustainability matters. But action is needed, right now
Sustainability is a long-term iterative process and it is an encouraging sign that Indian businesses are ready to embrace it.
But, as we look to the future, one thing is abundantly clear: businesses that choose to reset and recommit to sustainable business models will move quickly in the direction of their goals, providing them the chance not only to get more out of their investments, but also to create a clear competitive edge.
Now is the time for climate action.
The article was originally published in the print edition of Mint on 25th November 2022. The author is President & Managing Director, SAP Indian Subcontinent