Profits, so that planet and people benefit

D. Raghuram | Updated on January 15, 2018 Published on March 17, 2017

Wealth from waste It’s an imperative   -  Mohamed AbdulRaheem/shutterstock.com

It is possible to recycle materials without impacting product quality, as an auto major has shown. That’s the only way to go

Natural resources are finite and mankind’s needs are boundless; this combination is creating an irreversible situation as far as our planet’s ecology is concerned. The idea here is to see what some leading companies worldwide, are “doing” about the environmental impact arising out of the “linear economy” route to capitalism which takes, makes, and wastes.

There is an emerging ecosystem created by government policies, industry support and academia that is driving innovation to recycle, refurbish, reuse and replenish in an eco-friendly, sustainable manner.

This new model lends a refreshingly optimistic view on attaining “long-term sustainable profitable growth. There is growing worry in the West on the consequences of carrying on with a business as usual approach — of neglecting sustainability and ecological imbalance.

Building capabilities

What does it take to “innovate” for sustainability? Industry innovates whenever there is an incentive to do so. Industry can spur into action if there are conducive policies to encourage investments into “innovation” .

For example, the EU parliament is rolling out policies that tax natural resources (more than human resources) and also formulating VAT structures that incentivise customers to buy products made through “greener” routes. Such innovative policies will encourage industries to find newer ways to reuse, refurbish and recycle their products through R&D ,leading to efficient use of finite natural resources without diluting value to customers. Developing such capabilities should be a mandate for our engineering and management schools. It will be useful to know the number of elite educational institutions that offer degrees or subjects to equip our youth with the required techno-commercial skills to find “innovative” solutions to our ecological problems.

Over the last couple of years, there has been an unprecedented volatility in London Metal Exchange prices and many a company’s fortune has been adversely affected. Reduced exposure to commodity price movements (or lower use of commodities) will help improve their profitability in a “sustainable” manner.

Some industry examples

A large European auto maker is honing the capability to design and deliver vehicles that will be using materials that have already been used. In 2016, their new vehicles would have had a recycled proportion of 40 per cent if they had met their targets.

Such capabilities for an organisation makes its business model robust. They can use the 40 per cent proportion to insulate themselves from input cost vagaries and at the same time consider providing vehicles at competitive prices without compromising quality and also retain more to shore up their profits. Innovation capabilities make such solutions happen. This auto maker has taken stakes in companies that recycle vehicle and vehicle parts through a network of 400 dismantlers in France.

A leading US-based food packaging company that has been using paper made from the wood harvested from “sustainable” forests, has recently invested in manufacturing plastic from sugarcane. They are on their way to finding sustainable solutions leveraging renewable materials from sustainably managed resources.

In India, industry leaders should take the lead without waiting for the other person to find the winning formula to save the environment while delivering greater value to customers and to their shareholders. It’s true that perhaps India recycles like none other, but the effort is dissipated and the overall impact inadequate if not insignificant. While conducive government policies and academic infrastructure will enable acceleration of such initiatives, it makes hard-nosed business sense for some industry leaders to take the lead. By increasing the proportion of the “circular economy”, the environment, customers and the bottomline will benefit. Industry leaders can consolidate their positions.

It is a race against time: be it protecting the environment, retaining and growing the customer base, or bolstering the profits. Now is a good time to get started.

The writer is managing partner at CorEssentials

Published on March 17, 2017

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