Sustainability and Business

INDIAN INSTITUTE OF MANAGEMENT, KOZHIKODE

POST GRADUATE PROGRAMME
PGP 25 – SECTION D
Group - 02

ABB’S HYDROPOWER SUSTAINABILITY DILEMMA

Roll Number Team Member Name

PGP/25/193 Arnav Narain
PGP/25/208 Lopa Mudra
PGP/25/213 Milan Gupta
PGP/25/217 Ojas Sewak
PGP/25/233 Sidharth Jain
PGP/25/243 Swati Porwal
1. What are the sustainability-related trade-offs in large dam/hydro projects in general, and NT2 in
particular ?

The positive trade-offs associated :

• Combustion of Fossil Fuels: Constructions of dams will lead to an eventual reduction in the amount
of fossil fuels combustion as seen in NT2 as well were 40-50 mn tonnes of coal was going to be
replaced for generation of energy.
• Global Climatic Change: Hazardous gases like CO2 and SO2 which contribute to global climate
change will be released in lesser quantities due to human activities as lesser fossil fuels are
consumed. In NT2, 1.5mn tonnes of SO2 and 100mn tonnes of CO2 would not be produced annually
due to the dam. Thus the renewable energy source is a positive tradeoff.

Negative trade-offs associated :

• Relocation: In such projects, the ethical concern is the relocation issue. People are forcibly or with
consent relocated from areas that have a risk of flooding. Usually, indigenous groups that are closely
related to the lands on which they live, stand to lose out on their distinct culture, language, customs,
and traditions. In NT2 dam also we see that 6,200 indigenous people have been moved from Nakai
Plateau to make way for the dam.
• Ecosystem: Dams have been known to lead to the extinction of fish and other aquatic species, birds
disappearing in floodplains, loss of forest canopies, wetlands which ultimately disturb the entire
ecosystem already in place. Frequent flooding, contamination of water bodies, and riverbed
deepening is also common as seen in NT2 as well where International Rivers is raising similar issues.

2. Why might the NT2 dam and the International Rivers letter pose a reputation risk for ABB?

ABB, as an organization, was a visionary in the environmental policy domain and has worked closely with
ISO to develop a standard for environmental management (ISO 14001). The International Rivers letter
criticizing the NT2 dam’s functioning can follow these impacts:

• ABB has played a very proactive role in setting and implementing environmental standards. A letter
from a large reputed NGO can bring a negative reputation to the company and cause a loss in the
credibility of the organization.
• It can lead to a loss of business if the existing and prospective customers who value sustainability
and quality standards lose faith in ABB as an organization.
• ABB has been involved in developing major dam projects like the Three Gorges Dam in China. Such
negative criticism can bring its other projects under scrutiny, causing a threat to its existing and
prospective tie-ups.
• World Bank has always been on a clear stance concerning its policies, being associated with a project
which violates these guidelines will bring the firm under the negative spotlight and impact its
association with international organizations as well as cause a loss of business.
• The company has set up high reporting standards with its “triple bottom line” sustainability reports.
Negative publicity can impact the credibility of these reports.
• ABB has always demonstrated itself as a leader in implementing sustainable environmental policies
and having high standards of functioning when it comes to its association with other firms and
projects undertaken. Negative criticism will tarnish this image of ABB.

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3. To what extent and how should ABB integrate stakeholder concerns in its business decisions?

ABB works towards establishing a Stakeholder Theory towards its operations and focuses not only on
increasing its profits but also recognizes the responsibility it holds towards external stakeholders including
and not limited to the society, environment, and people. ABB fulfills Social responsibility wherein it tries
to focus on maximizing profit in the purview of social welfare. ABB has already developed sustainability
objectives as of 2009 and as per its website, has incorporated social, environmental, and human rights criteria
to judge its upcoming opportunities before acceptance.

By this, it can be established that ABB should have a proactive interest in maintaining stakeholder
relationships. The organization has committed itself to work towards mitigating or limiting risks that affect
the society or environmental ecosystem and has always weighed pros and cons in terms of sustainable
development and not monetization alone. With this in mind, the company should regularly give an impactful
weightage to stakeholder concerns, otherwise, it can risk its growing reputation as a sustainable social
organization and the credibility of the company can be at risk. Being one of the first companies to be ISO
14001 certified with 98% complacent ABB sites, they need to stick towards setting a standard for
environmental and social responsibility in the business. This makes it important for the company to keep
its vision for the future intact and focus on a sustainable vision it wishes to establish in the future.

4. Would you change ABB’s sustainability criteria and objectives, and if so, how?

With respect to the situation at hand, ABB should change its sustainability criteria and objectives to
incorporate adherence to social and environmental responsibilities.

• ABB relied on the assessments done by third parties can conduct its own analysis and help ensure
that long-term impacts of the collaboration are taken into consideration and ABB as well as
collaborative parties can be held responsible in case of any negligence. With the case in hand, ABB
should be able to restrict its operations until compliance with regards to quality of ground water and
rights of people relocated due to the project. (Human Rights Criteria)
• ABB should have substantial contractual and legal power to incorporate the governmental as well as
International authorities like World Bank so that NTPL can be held accountable for their actions or
lack thereof. ABB can establish sustainability indices which are dynamic that change with the project
progression. This will make sure that the project sticks to its promises and the collaborative parties
are held responsible to adhere to their contractual social responsibilities.
• ABB should hold the right to refuse, terminate or suspend its operations for lack thereof actions that
risk sustainable operations, this will help ABB to enforce and align its operations with the vision it
keeps in mind and not suffer from reputational damage if the its partners are unable to support
sustainable measures taken.

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