It is always with humility that international assessments can or should be made from outside of a country.
However, my association with the Centre for Responsible Business in Delhi and in my years leading global moves towards integrated reporting (now merged in to the new global body setting corporate sustainability reporting standards), I had the privilege of working with a number of major Indian conglomerates including the Tata Group, Reliance Industries, Mahindra & Mahindra, ITC, Wipro and YES Bank, as well as with Indian accountancy institutes, the Confederation of Indian Industry and the Asian Centre for Corporate Governance & Sustainability.
This prompts me to take current and likely future international developments in Responsible Business Conduct and – with humility – to suggest five potential future trends for business responsibility in the great country which is India:
- Net zero pledges
The Net Zero commitment from the Government of India has already led to around fifty top Indian companies adopting their own carbon reduction pledges, according to the United Nations Environment Programme. However, I have witnessed the clarity of ‘net zero’, despite all the challenges of achieving it, to have been a huge factor towards adoption by companies, not previously leading in sustainability efforts. It may well be this is a ‘breakthrough’ moment, which will also see a big acceleration in Indian business joining the ‘race to zero’. The commitment to Net Zero requires a strategy for achieving it and reporting on progress. If it is a race, it is only the starter’s pistol. However, expect to hear that noise.
- A switch in focus from CSR spending to developing sustainable business models.
The requirement to commit expenditure to Corporate Social Responsibility (CSR) took place in India, before any other country in the world. It was a bold move which continues to bring much good in education and health across the country, and to foster productive relationships between Indian companies and local communities. However, its one risk is in diverting attention in the company away from managing the social, environmental and human rights impact of its business activities, seeing business responsibility as an ‘after-thought’, when the profits have already been made. Yet it is how the profits are made which is crucial to the concept of ‘sustainability transition’, which understands that no company can be immune from the way markets will rapidly adapt to sustainability challenges and whether the company itself will be able to survive and prosper. The World Economic Forum suggests that decarbonisation alone represents a USD 15 trillion economic opportunity in India and could create as many as 50 million net new jobs. Philanthropy will always play a good and noble role in corporate citizenship, but expect the emphasis to switch from what companies spend to how they operate. It is a sustainable business model which is likely to become the objective.
- Addressing global sustainability standards.
One of the core activities of the CRB has been to engage in international dialogue on sustainability standards, one in which I have been honoured to contribute. The accelerated progress towards the establishment of global sustainability reporting standards under the International Financial Reporting Standards (IFRS) Foundation, means that key moments for decision are approaching for Indian business and government. India has always followed its own path in financial accounting, nevertheless choosing to converge with IFRS. The India National Platform on Private Sustainability Standards was developed from a United Nations initiative, whilst the country’s leading Trustea certification for social and environmental standards in tea production, was developed in collaboration with international brands and with Dutch government support. In truth, social, environmental principles are worldwide in character, human rights universal by definition. Our collective ability to uphold them will, again, always need to be collaborative if we are to succeed. India will want to engage with what is now called the International Sustainability Standards Board (ISSB) and to shape the manner and timetable in implementing its recommendations. However, this is likely to increasingly to dominate thinking – including at this year’s CRB ‘India and Sustainability Standards’ conference.
- Exponential growth in India’s domestic market for Sustainable Finance.
As global capital markets develop an ever-increasing number and share of environmental, social and governance (ESG) funds, expect the rapidly expanding Indian investment market to follow suit. Already the Indian sustainable debt market (known in the country as green, social, and sustainability (GSS)) has seen a six-fold rate of increase in the last year. Representatives of large companies in India including Tata Power and JSW Steel are calling for a massive expansion of green finance, whilst consumer surveys show young Indians – driving the next generation of investment – sharing attitudes of younger people worldwide, with 50 per cent committed to using their money to support business sustainability. The establishment of a Sustainable Finance Task Force by the Indian Ministry of Finance and similar moves by the Reserve Bank of India, are likely to see the country producing its own taxonomy defining what is and is not sustainable business activity, leading to new disclosure rules for Indian investors and business. This mirrors what is happening in Europe, China and elsewhere. The ESG investment market estimated at US$22.8 trillion globally in 2016 is predicted to more than double to US$53 trillion by 2025, representing one-third of all Assets Under Management. This year just 0.7% of bonds issued in India are ESG-linked. I have no doubt that this will rise exponentially in the years ahead
- Can Aatmanirbhar Bharat lead to a new development model shared by other countries?
The emphasis on self-reliance (Aatmanirbhar Bharat) and ‘Make in India’ in public policy in recent years, has sometimes led to anxiety in international circles about India’s commitment to multilateral agreements. However, India’s announcements on climate goals and its global response to the Covid pandemic signal the opportunity for the country to develop a model of sustainable development with international application. India is seeking to meet the needs of its burgeoning 400million middle class, improve livelihoods in its rural areas and further develop the international competitiveness of its manufacturing and technology base, whilst seeking to maintain what are still some of the lowest per capita carbon emissions in the world. The scale of expansion of renewable energy is an important element, although eco-design across all infrastructure and providing alternatives to the traditional urbanisation seen in western countries will also be key. These challenges of sustainable development are shared across many middle income countries and emerging markets. India’s political importance may provide it with the opportunity not simply to develop a new sustainable economic model, but to champion it amongst other countries, whose collective impact will be decisive in meeting Sustainable Development Goals. Whether this happens can be a matter not just for India’s politicians, but also for its business leaders. However, the world needs it.
For Indian businesses who will be many of the readers of this article, you will be involved in some or all of these trends and be part of making them happen. They build on all the achievements of Corporate Social and Business Responsibility over many years, not replace them. They also build on the ten years of excellent work by the Centre for Responsible Business itself, for which many congratulations are due. However, I hope this attempt to match extraordinary international developments in sustainability with the insights from my many friends and colleagues in India, provide a helpful guide to what will be significant in sustainability in the next ten years – actually much sooner than that.
Think about your company’s business model through a sustainability perspective, with a Net Zero pledge and a strategy to achieve it, upholding globally accepted sustainability standards and delivered through access to cheaper and longer-term sustainable finance. Think about your company and of India as a country being a role model to others and mobilising international action to meet global goals.
Then consider your own personal role in achieving this by heeding the advice of the old Indian proverb: “We can’t change the direction of the wind, but we can adjust the sails.”
Richard Howitt is Strategic Advisor on Corporate Sustainability and Responsibility, Business and Human Rights, Non-Executive Director on Boards, former European Parliament Rapporteur on Corporate Social Responsibility and Chief Executive of the International Integrated Reporting Council.