Industrial systems function primarily in a linear fashion

Take Make Waste

Take “natural capital,” Only 6% of

valuable material, and material flow
process it into unusable ends up in
waste products

Source: Hawken, Lovins, Natural Capitalism

The economic system, operating on an ever larger scale, is
embedded in and affecting nature’s cycle.

Source of Sink for the waste

raw materials
Is there a future?

I = PAT

Dr. Tata L. Raghu Ram, XLRI Jamshedpur

 Elephant in the room?
An obvious truth that is either being ignored or going unaddressed. The
idiomatic expression also applies to an obvious problem or risk no one
wants to discuss.

Dr. Tata L. Raghu Ram, XLRI Jamshedpur

 Sustainable Development
“Development that meets the needs of
the present without compromising the
ability of future generations to meet their
own needs” – “Our Common Future” -Brundtland Commission 1987
• A macro economic concept
• Inter & intra generational
equity
• Anthropocentric?

Dr. Tata L. Raghu Ram, XLRI Jamshedpur

Dr. Tata L. Raghu Ram, XLRI Jamshedpur
3 overlapping circles model

Sustainability

Dr. Tata L. Raghu Ram, XLRI Jamshedpur

 NESTED INTERDEPENDENCIES MODEL

Society and Business are wholly-owned subsidiaries

of the Environment
Dr. Tata L. Raghu Ram, XLRI Jamshedpur
 TBL MODEL

J. Elkington, 1994
Dr. Tata L. Raghu Ram, XLRI Jamshedpur
 SUSTAINABILITY ACCOUNTABILITY SCOPE

Value Chain / Life Cycle

Supply Chain Distribution Chain

Tier Tier

Customers
Channels
X 2 Company’s End-of-Life
Own Disposition
Tier Tier Operations
3 1

Dr. Tata L. Raghu Ram, XLRI Jamshedpur

 Corporate Sustainability defined
“Corporate sustainability is a business approach that
creates long-term shareholder value by embracing
opportunities and managing risks deriving from
economic, environmental and social developments”.
• Dow Jones Sustainability Index
“A sustainable business is one that delivers value for
investors, customers, and employees; improves the
living standards of its employees and the communities it
touches; makes wise use of natural resources; and treats
people fairly.”
• Sustainable Excellence: The Future of Business in a Fast-
Changing World, Book by Aron Cramer and Zachary
Karabel, 2010.
Sustainability: Who’s responsibility is it?

Individuals: as consumers?
Governments: as regulators & policy makers?
Business enterprises: as consumers / providers of goods & services?
Collective responsibility?
Dr. Tata L. Raghu Ram, XLRI Jamshedpur
 Why do we degrade the Environment?

Environmental resources are “CPR”

No well defined property rights
– Belongs to all while using, to no-one while paying
– Leads to “The tragedy of Commons”
– Garrett Hardin, 1968

• Results in “Externalities”
– Impact on environment is “external” to the profit &
loss calculations of the economic agent - eg. Car users
(-ve), plantations (+ve)

Dr. Tata L. Raghu Ram, XLRI Jamshedpur

• “Stakeholders”
– polluters, affected, controllers etc..
• Stakeholder: ‘One who gets affected or can
affect the outcomes of a decision”

• “Sustainable Development”
– Environmental resources are to be shared
across generations (Inter & intragenerational
equity)
– Possible that future generations may prefer
natural capital over man made capital (Strong
sustainability)

Dr. Tata L. Raghu Ram, XLRI Jamshedpur

Why do we degrade the environment?

• Policy failure
• Institutional failure
• Market failure
• Over emphasis on GDP?

Dr. Tata L. Raghu Ram, XLRI Jamshedpur

 Policy options to achieve SD

Precautionary principle

Command & Control

Regulations:-
• Environmental Protection Act, 1986
• The Right to Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act, 2013
• India has > 200 environment related regulations in place

Economic/market based approaches

• Polluter Pays; Carbon cess
• Net Present Value of forest
• Tax breaks, accelerated depreciation on technology, Subsidies
• Carbon trading (CDM under Kyoto protocol);
• Renewable energy certificates trading (India); Feed-in-tariffs
Dr. Tata L. Raghu Ram, XLRI Jamshedpur
 What is the science behind environmental regulations?
How are regulations set?
Do ecological/environmental footprints drive business decisions &
government policy?

The Cynefin Framework Simple and complicated contexts:

• assume an ordered universe
• Cause-and-effect relationships are
perceptible,
• Right answers can be determined based on
the facts
The ordered world is the world of fact-based
management
Complex and chaotic contexts:
• Unordered— no immediately apparent
relationship between cause and effect
• The way forward is determined based on
emerging patterns.
Unordered world represents pattern based
management
A Leader’s Framework for Decision Making by David J. Snowden and Mary E. Boone, HBR, 2007.
Dr. Tata L. Raghu Ram, XLRI Jamshedpur
 The Corporate Response…

• Present business
models are
paradoxical &
untenable
• SD – fashionable to
talk about
• CSR is a smoke screen
• Walking the talk
requires a Paradigm
shift & building a
compelling business
case for Sustainability

With GREAT power comes GREAT responsibility

Dr. Tata L. Raghu Ram, XLRI Jamshedpur

What makes firms respond and change?
 Tata Steel Slide

Risks & Opportunities

Doing Nothing is costly – Capturing Opportunities –
• Increasing business cost • Market for sustainable technologies, products,
• Less viable business environment, • Strong licence to operate,
• Regulatory risks, • Differentiate from competitors
• Market disruption, • Informed decision making
• Reduced licence to operate • Partnerships – Industry, sector, public private

Risk – Cost to Business Opportunities -$12 tr /year; 380 mn jobs

Estimated annual global direct economic impact Value of incremental market opportunities
associated with selected global burdens in 2030
Share of global GDP, 2014 [$79 trillion] 9.1% US $ billions: 2015 values
Food Health & Well-being

2,020
Environment

1,650
Cities

1,345
Governance

1,200
1,080
Energy & Materials

1,015
Social 3.1%

835
735

685
665
2.7% 2.8%

365
345
1.9% 2.0%

355
1.3% 1.3% 1.4% 1.6% 1.6% 1.8%

Forest Ecosystem…

Circular Economy…

New Healthcare…
Other

Healthy Lifestyles

Energy Efficiency
Urban Infrastructure

Clean Energy

Mobility Systems
Affordable Housing
Building Solutions

Food Loss & Waste

Agricultural Solutions
Alcoholism
Food Waste

Illiteracy

Obesity
Corruption

Smoking
Illicit Financial Flows

Violence & Armed Conflict

Climate Change

Congestion Costs

Antimicrobial Resistance

Biodiversity & Ecosystem

Impact

Source: WBCSD CEO Guide to Sustainable Development Goals