Sustainability Dilemmas in

Emerging Economies

Prof. L.K.Vaswani
Adjunct Faculty, MICA & IRMA

Course: Sustainable Marketing

Term IV, PRMX 01
[PGDMX(R)]

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 Global Sustainability Best Practices
• Increasing evidence of climate change is forcing
businesses to play an active role in reducing
sustainability burdens and preserving resources for
future generations.
• In general, emerging markets lag behind developed
economies(with stringent environmental regulations
and activist scrutiny) in environmental stewardship.
• However, resource depletion pressures, coupled with
grass root movements to preserve environmental
sanctity, opened up opportunities to innovate and
leapfrog sustainability challenges in developing
economies.
 Sustainability Dilemmas in Emerging
Economies
• Although the three pillars of sustainability are
presumed to work in harmony, in the real world
there are often conflicts among the three.
• Managers wonder whether it pays to be green.
• In spite of numerous studies spanning three
decades, this question is yet to be answered.
• Since managers often pitch environmental and
social issues against financial returns from such
practices, we plot strategies based on dilemmas
among the two
Sustainability Practices within the Indian
Business Context - A Framework

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 Sustainability Practices within the Indian
Business Context - A Framework

The framework illustrates four sustainability

related strategies that are grounded in the
organisational practices pertaining to
sustainability and financial returns on
sustainability investments.

• Visionaries integrate sustainability into their

core organisational strategy and enjoy superior
return on sustainability investments.
 Sustainability Practices within the Indian
Business Context - A Framework
• The license to operate strategists view
sustainability as a burden on their financial
returns and often subordinate sustainability to
economic viability.
• The social contract strategists consider
sustainability as an obligation that needs to be
paid forward.
• Finally, the suboptimal strategists do not excel
at either sustainable performance or financial
performance.
 Ingenious Visionary Strategy
• The ingenious visionary strategy attempts to reinforce
financial returns through sustainability and finds no tension
between the two goals.
• This strategy is exemplified by research that ties
sustainability to
– innovation and operational efficiency
– competitive advantages
– reputational endowment
– environmental impact assessment
– differentiation
– Eco-design and
– better human resource practices
• In order for the visionary strategy to work, companies need
to focus on issues that are most relevant to their
stakeholders and produce major innovations in both products
and processes
 The License to Operate Merchant

• The license to operate strategy professes a

tension between sustainability and financial
performance.
• Managerial strategies prioritise financial
performance over sustainability and prefer to
deliver performance that meets the threshold of
societal acceptance in order to gain legitimacy.
• Managers strive to fulfil societal expectations
mainly through compliance. Top management
involvement is generally negligible and employee
training and buy-in are considered superfluous
 The Social Contract Altruist
• The social contracts strategy recognises that organisational
activities impact the communities in the organisations’
external environment and moves the sustainability debate
from social responsibility to social obligation.
• As such, social contract focuses on a forward looking
idealism where investments in sustainability are perceived as
social contracts for global human welfare.
• Managers recognise that organisational priorities need to
align with larger systems through sustainable practices that
create social capital which can be a source of future rents.
• By immersing their business models within a set of coherent
values, these companies seek out new growth opportunities
through a process of strategic re-alignment.
 The Suboptimal Merchant / Altruist

• The suboptimal strategy exhibits no discernable

strength in either sustainability performance or in
financial performance.
• Managerial practices reflect the stuck-in-the middle
generic strategy and lag behind the other three
quadrants due to negligible top management
involvement in sustainability efforts.
• As such, explicit goals and policies with regard to
sustainability as well as employee awareness of
sustainability obligations are absent.
 Going Forward
• The framework does not lock in managers in iron cages but
recognises that the dynamic nature of markets forces
constant churn among strategies exemplified at any one point
in time.
• In general, managers who exhibit exemplary sustainability
performance adhere to strong forms of sustainability with the
recognition that natural capital cannot be substituted by
human capital and should be preserved in order to reap future
rents.
• These are the visionaries and altruists in the framework.
• Weak forms of sustainability is the operating philosophy of
license to operate merchants and suboptimal managers who
believe that natural resources are inexhaustible and will always
exist to be exploited for human benefit.
• Providing critical insights into the success of sustainability
strategies is still evolving , especially in emerging economies.
 Responsibility Matrix
• Responsibility matrix — deriving the relationship between
spending and performance (Governance, Disclosure,
Stakeholders and Sustainability).
• Pace setters scored high but also spent more.
• Smart utilisers got the maximum bang for their buck.
• Low efficiency spent a lot but scored relatively poorly.
• Starting out were just finding their feet. They spent less
and also scored less.
• Over the four years, we find that across quadrant,
companies are both spending more as well as scoring more.
• This is really heartening that corporate India is focussing
more on responsible business. India needs more pace-
setters and smart utilisers to take it to the next frontier.
 Responsible Business Activities:
Measured by Spread

Combined score of the four criteria

The Responsibility Matrix
 Responsibility Matrix
• Pace setters: These are companies that spend
relatively large amounts and have relatively high
responsible business scores. These companies
have responsible business at the core of their
long term vision with good execution.
• Smart utilisers: These companies spend
relatively less but have higher scores. They get
the best bang for their buck. They spend
judiciously and are often able to extract
economies of scale and also utilise their
experience to the hilt.
 Responsibility Matrix
• Low efficiency: These companies spend a relatively
larger amount but have relatively low responsible
business scores.
– These companies focus on complying with regulatory
norms.
– However, they lack vision and execution. Their approach
is more short term.
• Starting out: These companies spend relatively less
and also have lower responsible business scores.
– As the name suggests, these companies are still finding
their feet.
– They are still putting their frameworks in place and are
struggling to comply with norms. They may take a while
to ramp up.
The Top 10 List.
 The Tata Group
• In terms of implementation if a group looks at SDGs as a
guiding light, then it becomes easier for member-companies
to adopt SDGs.
• We observe this at the Tata Group. Of the top 10 companies
on our list, three belong to the Tata group.
• Dr Mukund Chairman of the Tata Global Sustainability
Council says, “The SDG roadmap will help guide, shape,
implement, monitor and report company-wide initiatives,
providing the business case for staying invested in
sustainable development for the long term.”
• For the Tatas, sustainability is built into the Tata group's
business processes through a
– well defined policy,
– a value system committed to social expenditure and
– environmental preservation, and
– through a governance structure that engages employees and
other key stakeholders.
 A Comparison of Frameworks

Sustainability Strategies Responsibility Matrix

• The ingenious visionary • Pace setters

• The license to operate • Smart utilisers

merchant

• The social contract altruist • Low efficiency

• The suboptimal • Starting out

merchant/altruist
 Link CSR and SDGs

• Reporting of SDGs is a three-step process:

(i) develop priority SDG targets;
(ii) measure and analyse; and,
(iii) report, integrate and implement change.
 The U.N. SDGs
forecast to generate market
opportunities of over $12 trillion a year
by 2030. Some believe
it’s a conservative estimate.