Published in Mar-Apr 2022
"There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” – Milton Friedman
Milton Friedman was a renowned American economist and the recipient of the 1976 Nobel Prize in Economic Sciences. A committed capitalist, his theories heavily influenced policy for a long time, not only in the US but in other western countries as well.
By today’s standards, the ‘rules of the game’ were fairly indulgent in Friedman’s era. Although terms like global warming and climate change had already been coined, their understanding was largely limited to academia and the scientific community. As a result, global society continued to use fossil fuels with gay abandon, indulge in agricultural deforestation, and mining went on unchecked. In other words, industries flourished with scant attention to the discharge of gaseous or liquid effluents. This may sound like a sweeping statement given that in many developed countries laws were enacted, or are being enacted, to make businesses more responsible. However, this statement holds true if we consider how much more stringent these laws have become today, especially with regard to environmental pollution.
The shift by companies that largely began in the early nineties, in terms of greater environmental responsibility and reducing their carbon footprint, was less out of altruism and more as a response to increasing public pressure. Environmental activists (organisations and individuals) became more vocal (and dramatic) in drawing public attention to environmental issues. Then came the giant leap in communication and the rise of social media in the early 2000s with Facebook and Twitter leading the way. For environmental activism, social media provided the means to spread the message globally and catalyse public opinion in pressuring both governments and companies. Now, we are witnessing young people taking the lead in demanding action.
Compared to individuals, big business has a huge carbon footprint. The use of fossil fuels is regarded as the leading contributor to global warming, although several studies place agriculture as the biggest culprit due to the high number of greenhouse gas emissions. Transportation (land, sea and air), oil and gas exploration, mining and petrochemicals-based industries are also major generators of greenhouse gases – and, perhaps unrealised by most of us, the energy needed to power large computer networks and data processing systems leaves a substantial carbon footprint.
Admittedly, for a lot of businesses, it may be financially unfeasible or practically not possible to source their energy from renewable sources. For example, for an industrial production unit (such as steel manufacturing) requiring hundreds of megawatts of energy, the cost of setting up solar generation for this output would be astronomical. Or, can airlines fly their aircraft on solar power? Nevertheless, this is not to say that nothing can be done. All companies could have at least run some of their operations on renewable energy while reducing the fossil fuels they use in other areas.
A good example is the introduction of e-bikes by Foodpanda. With about 50,000 registered delivery riders, Foodpanda recently launched a programme to encourage their riders to move away from motorcycles and use e-bikes. There is a long way to go of course, but this is a good example of a company acting to bring about a reduction in the carbon footprint within a critical part of their operations.
Tetra Pak, too, is working towards delivering solutions that combine the lowest carbon footprint with the highest efficiency. Their goal is to make all their packaging from 100% renewable materials. Already, their cartons are made mostly from plant-based materials with a significantly lower climate impact than other packaging. The lifetime carbon impact of a Tetra Pak carton is five times less than its steel or glass equivalent.
A few years ago, a large manufacturing company in the food sector carried out a study to see how they could reduce energy (and costs) at their plant as well as head office. Some of the recommendations of the study were eye-opening, demonstrating how some easily put into practice measures can result in huge savings. These included increasing the operating temperature of chillers by a couple of degrees (thus reducing the energy required for greater cooling) without any real impact on the chillers’ performance, reducing air leakages, optimising lighting levels and installing solar power systems. The study concluded that by adopting these recommendations, energy use would be reduced by 1.7 million kWh/year, resulting in cost savings of over Rs 22.5 million per year and carbon dioxide reduction by over 860 tons per year.
The above examples are illustrative of what can be called ‘the business case for environmental action’ – and, furthermore, in these circumstances, Friedman’s idea, that the goal of companies must be the maximisation of profits, would still be met.
However, to start reducing their carbon footprint, companies need to be committed. There has to be a categorical buy-in from top to bottom – especially from the top – and a change of mindset will be required. The fact is that although corporate leaders have become much more supportive of adopting sustainable practices, a lot of old-fashioned or traditional thinking that remains at the boardroom level is resistant to the introduction of new values and policies. The need is to reskill the board room across financial, transitional and operational matters within an Environmental, Social and Governance (ESG) framework.
Once the board is firmly on board (no pun intended!), a comprehensive audit of energy use will have to be carried out by experts to account for seasonal and other variances, and cover all operational aspects of the company. During this exercise, the experts would work closely with the in-house technical people to identify where and how energy savings can be implemented, and where fossil fuels can be replaced by renewable energy systems. An extension of this step would be to evaluate the potential of reducing the carbon footprint in terms of the company’s entire supply and value chain and supporting the players in the value chain to adopt measures to reduce their own carbon footprint. Finally, business associations need to explore what collective action can be taken to achieve economies of scale whereby the cost of a joint carbon reduction programme for each participating company is reduced, while at the same time scaling up the effort.
Zohare Ali Shariff is a communications and public relations professional.