lecture 1

Om,MayGodProtectusBoth(theTeacherandtheStudent),MayGodNourishusBoth,

MayweWorkTogetherwithEnergyandVigour,MayourStudybeEnlightening,notgivingrisetoHostility,

Om,Peace,Peace,Peace.

IntroductiontoSustainableDevelopment&CorporateSustainability

TataL.RaghuRam,XLRI

1. Individualresearchonsustainability: 15% Chooseasustainabilitytopic/issueofyourchoice.Criticallyanalyzetheissuethroughresearchandsubmitastateoftheartarticlewhichwillbenolongerthan4pages+references.Youshouldhavereadatleast10journalarticlesandreferencesshouldbecited.Submissionwillbeduewithin30daysofcommencementofthecourse(July15,2015).2.Attendance: 10% In addition to 10%, absence from class beyond 2 sessions(with permission or otherwise), will attract 3 negative marks persession. Missing 5 sessions or more will attract F grade. Leaveof absence should be notified to the course instructor. Requestsfor attending a class with another section will not beentertained.

3.Groupprojectandpresentation: 25%(15%forwriteup+10%forpresentation)

From session 2 onwards, students in groups (5students/group/roll number wise) will research and presenton a preassigned topic. Submit a 4 page writeup on the state of the art. At least 10research articles/reports should be read and citations need tobe provided along with the writeup. This requires that thegroups shall interact with me at least 7 days before theirpresentation to finalize the contents. Final presentation and writeup should be shared with meand other students at least 24 hours before the class.

4.Quizzes: 10%5.Endterm: 40%Grading:Gradingnormasperstudentmanual. No repeat quizzes will be conducted. Zero tolerance towards plagiarism. All writtensubmissions and group projects/ppts shall passthrough antiplagiarism software. Plagiarism willattract F grade.

Zero tolerance towards use of laptops, mobilephones, sleeping in the class, reading some othercourses material, proxy attendance etc.

No student will be allowed into the class afterattendance is taken.

SustainableDevelopment AContext&Direction

AResourceintensiveeconomy

The20thcenturywasatimeofremarkableprogressforhumancivilization Unparalleledwealthcreationandhumanwellbeing

Theextractionofconstructionmaterialsgrewbyafactorof34

Oresandmineralsbyafactorof27 Fossilfuelsbyafactorof12 Biomassbyafactorof3.6

Dr.RaghuRamTata,XLRIJamshedpur

Exponentialgrowthofresourceextraction

CommodityPriceIndices

Consequences?

Expansion&benefitsofconsumptionarenotequitablydistributed


Millionsofpeopleworldwidearestrugglingtomeettheirbasicneeds.

Richest Fifth

Poorest Fifth

Distribution of Total World Income

Global wealth distribution

Consequences?

Profoundenvironmental&socialimpacts Overexploitationofresources climatechange Pollution landusechanges lossofbiodiversity


EXTERNALITIES

SustainableDevelopment

Developmentthatmeetstheneedsofthepresentwithoutcompromisingthe

abilityoffuturegenerationstomeettheirownneeds Brundtland Committee1987

Amacroeconomicconcept Anthropocentric Inter&intragenerationalequity

18

Ambiguity

Abusinessapproachthatcreateslongtermshareholdervaluebyembracingopportunitiesandmanagingrisksderivingfrom

economic,environmentalandsocialdevelopments.Corporatesustainabilityleadersachievelongtermshareholdervaluebygearingtheirstrategiesandmanagementtoharness

themarketspotentialforsustainabilityproductsandserviceswhileatthesametimesuccessfullyreducingand

avoidingsustainabilitycostsandrisks DowJonesCompany,1999

AmicroeconomicdefinitionthatcomplementstheBrundtlandsmacroeconomicconcept

HermanDalyillustratesthefundamentaldifferencebetweengrowthanddevelopmentbythesedefinitions:

Growth the quantitative increase in size or throughput ofbiophysical matter. Daly has argued economic growth isbased on the limitless transformation of natural capital intomanmade capital.

Development the qualitative improvement in economicwelfare from increased quality of goods and services asdefined by their ability to increase human wellbeing. Thisinfers promoting increased economic activity only insofar asit does not exceed the capacity of the ecosystem to sustainit.

Growth&Development

Anorganismssurvivaldependsontwocriticalfunctionsfromitsenvironment:provisionofresourcesandabsorptionof

wastes.

Organism

Source Sink

Provideresources: Water Cleanair Nutrients

Absorbwastesandbyproducts

Thesameprincipleappliesatlargerscales,e.g.,toacompany,industry,oreconomy.

Environment

Hownatureworks?

NoWaste

Natureworksincycles

Thereisnowaste whatisunusedbyonespeciesbecomesnutrientsforthenext

Thesunsenergydrivestheprocess:

Greencelledplantsusingphotosynthesiscreatenetconcentrationandstructure

Industrial systems function primarily in a linear fashion

Take Make Waste

Only 6% of material flow ends up in products

Source: Hawken, Lovins, Natural Capitalism

Take natural capital, valuable material, and process it into unusable waste

Thisindustrialsystem,operatingonaneverlargerscale,isembeddedinandaffectingnaturescycle.

Sustainability driven business risk & opportunities

Oftheworlds100largesteconomicentities,44arecorporations.Inthetop150,theproportionrisesto59%.

The44companiesgeneratedrevenuesofUS$6.4trillion@11%ofglobalGDP.

Largerthanthecombinedeconomiesof155countries

Together,theyemployedover13.5millionpeople,@0.4%oftheworldseconomicallyactivepopulation.

(2009)Dr.RaghuRamTata,XLRIJamshedpur

CorporateResponsibility?

The Corporate Response

WithpowercomesRESPONSIBILITY

Presentbusinessmodelsareparadoxical&untenable

SD fashionabletotalkabout

CSRisasmokescreen LookingtotheEast&walkingtotheWest

WalkingthetalkrequiresaParadigmshift&buildingcompellingbusinesscaseforSD

Compellingbusinesscaseforsustainability?Orgoingbeyond,transcendingintoSustainabilityasthepurposeofbusiness?

Our vision is to be the global steel industry benchmark for value creation and corporate

citizenship -TATA STEEL

We work to create a better future every day

We will inspire people to take small everyday actions that can add up to a big difference for the world.

We will develop new ways of doing business with the aim of doubling the size of our company while

reducing our environmental impact - HUL

To enhance the wealth generating capability of the enterprise in a

globalizing environment, delivering superior and sustainable stakeholder

value - ITC

To emerge from the position of domestic leader to leading global player in the energy sector by

adopting best practices from mine to market with due care to environmental and social

sustenance CIL

XLRIsVision Apassionforacademicexcellence Uncompromisinghumanvalues Asensitivesocialconscience Anabidingcommitmenttoimprovingthequalityofthelifein

organizationsandsociety Integrity XLRIJamshedpurwasthefirstIndianBSchool toendorseUNGCsPRiME FatherAruppe CentreforEcology&Sustainability(FACES) CentreforRuralDevelopment Socialentrepreneurshipfund XLRIiscommittedtoachievecarbonneutralstatusinfiveyearswitha

capitalcommitmentofRs.75lakhs.

MiltonFriedmansargument

TheNobelPrizewinningeconomistMiltonFriedmanargues:Fewtrendscouldsothoroughlyunderminetheveryfoundationsofourfreesocietyastheacceptancebycorporateofficialsofasocialresponsibilityotherthantomakeasmuchmoneyfortheirstockholdersaspossible

1962

Stakeholdertheory

Thebottomlineorprofitisnottheonlyconcernforthecompany.Stakeholdertheoryintegratesresourcebasedviews,marketbasedviews,politicalviews,andsocietalviews(Freeman,1986).

R.EdwardFreemanisanAmericanphilosopher

CreatingSharedvalueMichaelE.PorterandMarkR.Kramer

Societalneeds,notjustconventionaleconomicneeds,definemarkets,andsocialharmscancreateinternalcostsforfirms.

Companiescancreateeconomicvaluebycreatingsocietalvalue. byreconceivingproductsandmarkets redefiningproductivityinthevaluechain buildingsupportiveindustryclustersatthecompanyslocations

Mutualismisthewaytwoorganismsofdifferentspeciesexistinarelationshipinwhicheachindividualbenefitsfromtheactivityoftheother.

Stakeholders:WinWinoutcomes

Pleasemeetthemeanestshrewdeststrategistontheplanet

SHAREDVALUECREATION Porter&Kramer,2011

Costreduction,Riskavoidance,Revenuegeneration,Innovation,ethicalbusiness

+SocialConsent+

TheartandscienceofManagementhastocatchupwithsustainability

Companies evolved in how they manage SD issues

Environmental Compliance

Risk Management

Sustainable Development

End-of-pipe

Limit impact of current activities

Pollution prevention;Management systems

Redesign to eliminate impacts of activities

Strategic integration

Change activities and design of industrial system

Friedman

Freeman

Porter&Kramer

Kondratiev cycles

Economicgrowthcomesinwavesofprosperitydrivenbynewtechnology&structuraleconomicchanges

lecture 1

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