Corporate Sustainability

Lecture 1
Global Risk landscape
Source: World Economic Forum
Top most strongly connected global
risks
Infectious disease

Extreme weather events + failure of climate change mitigation and adaptation

Large-scale cyberattacks + breakdown of critical information infrastructure and networks

High structural unemployment or underemployment + adverse consequences of

technological advances

Major biodiversity loss and ecosystem collapse + failure of climate change mitigation and
adaptation

Food crises + extreme weather events

Indian Scenario: Risks
India's richest 1 per cent hold more than four- Indian Scenario
times the wealth held by 953 million people
who make up for the bottom 70 per cent of the
country's population

Total wealth of 63 Indian billionaires is

higher than the total Union Budget of
India for the fiscal year 2018-19 which
was at Rs 24,42,200 crore.

Important Indices

102/117 Hunger Index

HDI- 129/180
countries
Energy Transition Index- 76/115

80/ 180 Corruption

perception index

Peace Index- 141/163

 Sustainability issues: climate
change, water scarcity,
droughts, floods, earthquakes
depletion of natural resources,
and Human Rights violation Why do we have
sustainability issues?
Demographic challenge:
Strong population growth Can the society be
Resource challenge: sustained in the long run?
An increasing usage of resources,
renewable and non renewable alike.
Raw materials. Can Businesses be
Energy.
Food.
Sustainable if there is
Environmental challenge: Social & Environmental
Higher levels of environmental Risk?
impacts of human activities.
The capacity of this world to sustain its
population is compromised.
 Development & Sustainable
Development
• “Development”
• Development is about people,
not necessarily the economy.
• Development is a process.
• Improvement of the welfare
of the population:
• Create an enabling
environment for people.
• Often forgotten in the
immediate concern with
the accumulation of
commodities and wealth.
• Finding ways to satisfy and
improve human needs.
“Sustainable
Development”
• Development that meets
the needs of the present
without compromising
the ability of future
generations to meet their
own needs”
• ( 1987- Bruntland Report)
Three “E”s
Economics.
Ecology / Environment.
Equity (social).
Sustainable Society
• Population
• Lessen population growth and
stabilize it (preferably).
• Access to contraception and
family planning (freedom of
choice).
• Political and gender equity.
• Access to information and
education.
• Ecology
• Restore the biological base
(soils, forests, atmosphere
and hydrosphere).
• Agriculture supporting
ecosystems (diversity and
organic recycling).
• Energy
• Minimize and abolish fossil fuels.
• Shift to natural gas as an interim
measure.
• Move to renewable energy sources
(hydrogen, solar, wind, geothermal,
biomass and hydroelectric).
• Alternative transportation modes:
• Leaning on mass transit, cycling and
walking.
• Economy
• Promotion of efficiency and recycling.
• Source materials mainly recycled
materials.
• Reduce wastes in production,
packaging and distribution.
• Economy like an ecosystem.
• Dematerialization of the economy.
 What the Business Do?
Energy and air New sources of energy. Less energy intensity. Lower
quality emission levels.

Water, materials and Less water intensity. Lower material intensity (packaging)
waste Recycling system. Efficient waste disposal.

Land, green spaces Increased agricultural productivity.

and biodiversity

Livability Improved health. Higher education. Global access to

information and entertainment (Internet).

Transportation Provide collective (transit) and private mobility.

John Elkington: mid-1990s- Triple Bottom
Line
Corporate Sustainability at a Crossroads
Sustainability
Strategy
Seventy-four percent of the world’s largest companies now use the Global Reporting
Initiative’s process for tracking and reporting their sustainability performance

Majority of executives today agree that having a sustainability strategy is necessary

to be competitive.

More and more companies are reporting on their sustainability performance.

The roster of businesses with multibillion-dollar sustainable business practices is

expanding year by year.

Corporate sustainability is no longer a marginal or money-losing set of activities.

A vast network of tool makers, including

investors, consumer groups, organizations, Civil Regulation on
coalitions, certifiers, and platforms, now exists Unsustainable Practices is
to spur and aid sustainable business practices. increasing: Social Media
Barriers to Global Trade &
UN’s Response
 Significant
Significant achievementshave
achievements havebeen
been
made,but
made, butmany
manypeople
peopleare
arebeing
being
left behind:
left behind:
Gender inequality persists

Big gaps exist between:

• The poorest and richest households

• Rural and urban areas

Climate change and environmental degradation undermine any progress

achieved; poor people suffer the most

Conflict remains the biggest threat to human development

Millions of people still live in poverty and hunger, without access to basic services
The international proposal: ‘Transforming
our world’
Post 2015 Framework for Development
• 17 goals
• 169 targets
https://sustainabledevelopment.un.org/sdgs
The 2030 Sustainable Development Goals

The main goals focus on the 5 Ps

• People: the wellbeing of all people

• Planet: protection of the earth’s ecosystems
• Prosperity: continued economic & technological growth
• Peace: securing peace
• Partnership: improving international cooperation

These five aspects are interdependent

Therefore the SDGs demand integrated thinking

as well as integrated approaches to achieving the goals
CEMEX
( Mexican
Cement
Company)
Thank You
Stakeholder Management &
Sustainability
Lecture 2
Definition of Stakeholders

Groups and individuals

who benefit from or
are harmed by , and
whose rights are
violated or respected
by, corporate action.
Freeman,2001
 Who Are Business
Stakeholders?
Government Employees

Political Task & Social

Business
Environment Environment

Community Owners

Consumers

Economic Environment
Relations between a business firm and its primary
stakeholders

Employees
(Unions) Stockholders
Wholesalers Distribute Sell
(Retailers) products labor
Invest
Business capital

Buy firm Creditors

products Lend
(Managers) money

Customers Sell
materials
Suppliers
Relations between a business firm and some
of its other (secondary) stakeholders

The Local
General Communities
Public Positive,
negative Jobs, Governments
opinion environment Central/State
Regulation, and Local
Advice, Taxes
Business research
Business
Support Firm Friendly,
Groups hostile
Image, (Managers)
publicity
Social
Social Activist
Media Groups
demands
Attributes of a Stakeholder
 Stakeholder groups & attributes for mining and environment

Source: Peck, Philip. (2005). Mining for Closure: Policies and Guidelines for Sustainable Mining Practice and Closure of Mines.
Stakeholder Matrix
 Stakeholder Management- Key
Questions
1. Who are our stakeholders and what are their
stakes?
2. What opportunities and challenges do they
present?
3. What economic, legal, ethical, and philanthropic
responsibilities does our firm have?
4. What strategies or actions should our firm
take to best manage stakeholder challenges
and opportunities?
Stakeholder management: process by which you organise, monitor and improve your
relationships with your stakeholders.
The process of stakeholder mapping is important. The
results of the mapping depend upon the approaches and
attitudes of the people participating.

Analysis of
stakeholder will
help you map how
to engage them
Source: Taylor & Bancilhon.( 2019). Report- Five step approach to stakeholder engagement, BSR
What strategies do companies adopt
to address stakeholder issues?
 Four basic strategies of response
to stakeholder issues
Inactive Stakeholder expectations Organization does
Strategy changes not change

Reactive Stakeholder expectations Organization resists, then

Strategy change first responds to stakeholders

Proactive Organization Stakeholder expectations

Strategy initiates change and relations are changing

Organization and environment are changing and there

Interactive is an effort to adjust to one another’s needs
Strategy
Organization Stakeholders
What is the relationship between
Stakeholder management &
Sustainability
 Relationship between Stakeholders and Corporate
Sustainability

Sustainability is an intergenerational dilemma. Intergenerational dilemmas are defined as

“decisions that entail a tradeoff between one’s own self-interest in the present and the
interests of other people in the future”

Corporate sustainability depends on the sustainability of its stakeholder relationships.

Companies need appropriate systems to measure and control their own behaviour in
order to assess whether they are responding to stakeholder concerns in an effective way
and to communicate the results achieved.

Decisions to ignore climate change, for example, affect other people in the future. An
intergenerational perspective broadens the definition of economic interests to include
multiple stakeholder across time
 Why are leadership companies
integrating sustainability in their
business strategies?
 Drivers : Sustainability
Regulations
Access to Capital-
Investors seeking
information on social
and environmental
Operational Efficiency
performance,
Availability of ESG
Standards,
Sustainability Indices

Consumer
Brand & Reputation Awareness-Carbon
aware world

Social License to
Innovation of new operate- Availability of
products and services Social Accounting
Standards
Source:
McKinsey.com
Enablers: Integrating
Sustainability
Key Enablers: Sustainability
Building blocks of a sustainability strategy and
performance system

Vision and
Strategy

Monitoring
and Governance
reporting structure
Lec 3: Corporate Sustainability
Sustainability lessons from the frontline
1.What do companies need to know to
implement a sustainable business model?
Sustainability is more than just a change initiative
Its more than change management-involves creating value for
all stakeholders in the ecosystem
Executives need to engage with the entire organization
It is iterative and evolves over time
Usually starts from the CEO and leadership team
CEO has to lead the change
Unilever-example of Leadership leading from the top-”Unilever
Sustainable Living Plan”
2.Look at the entire value chain

Identify leverage points for Plant and People along the entire
value chain
In a global supply chain there is a need to include even
suppliers
Opportunity to reduce footprint is often bigger outside
organizational boundaries
Tools such as carbon- and energy-footprint analysis and life-
cycle assessment help companies identify the sources of waste
in supply chains.
Unilever-performed an internal measurement across the value
chain of the environmental impact of the company’s products
3. Make sustainability priority to the Board

Sustainability management plan suffers because Company

Boards are not on board
Only 2% of companies had an executive or non-executive
director responsible for sustainability
To overcome these barriers and engage the board, the first
task is to understand and explain the board’s oversight role
Companies may need to appoint new board members with
sustainability expertise or use an external sustainability
advisory group
4. Gain buy-in from undecideds
Senior leadership and young recruits “get it” — both are
typically much more purpose-driven than the rest of the
organization.
Big middle layer of “undecideds” that needs to be brought on
board
The undecided segment of the workforce is fear of the
unknown
Unilever has a host of young Unilever Sustainable Living Plan
ambassadors who proactively talk about the plan to colleagues
5. Make sustainability part of every
employees job
A Balance of rigidity and flexibility helps integrate sustainability into everyone’s
job.
At Unilever-top management sets the overall company targets, but specific
implementation is left to individual departments and business units
Procurement
Sourcing, supply chain security, CO2 emission, cutting waste in supply chain
Innovation and R&D
Eco-efficiency, life-cycle analysis
Financing and Investor relationships
Economic value additions
Integrated reporting
Marketing
Promoting environmental and social benefits of the project
Brand purpose statements
Business/Geographic units
Sustainability initiates according to local requirements
India-water conservation initiatives
6. Redefine the competitive space by
collaborating
Tragedy of Commons-No company can solve the problems
alone
Industry collaborations are required
World Economic Forum and Consumer Goods Forum
Partnership with like minded organizations
Competing through Sustainability-Unilever’s
new global strategy
Question 1: What is Unilevers’ Sustainable
Living Plan?

Benefits
Risks
Agents involved and their roles
Shareholders
Suppliers
Employees
NGOs
Question 2: Has the strategy been
implemented effectively?

What has Unilever done effectively

Identify the problems in implementing the sustainable living
plan-Barriers and Impediments
Why the resistance to the strategy?
Is Unilever picking low hanging fruits?
Are achievement short term?
How do we institutionalize sustainability approaches?
Question 3: What actions should Unilever
take now?
3 possible actions
“Double down” by pushing ahead on USLP objectives
“Hunker down” by scaling back
“Pivot and refocus” the strategy on the new partnership based
transformational change agenda
Question 4: How would you go about
implementing your recommendations?
Students perspective/recommendations
Thank You
Lec 4: Building Sustainability in
Supply Chain
Study
Executives from 70 companies committed to developing, expanding and
making their supply chains sustainable

Respondents across industries and geographies

Half of the interviewed companies are signatories to the UN Global

Compact

Signatories of UN Global Compact has aligned their operations and

strategies with ten principles-human rights, labour, environment and anti-
corruption
Finding 1: Supply chain sustainability can
no longer be ignored
How companies approach sustainability in their supply chain?
Align with company culture, code of conduct, sustainability strategy and
materiality
Comply with regulations and voluntary commitments
Apply guidelines from international frameworks
Collaborate with industry
Disclose their efforts
Resilient and Responsible supply chain
Resilient: Understands and adapts to external factors-which may impact
ability to produce a product/deliver a service
Responsible: Understands and mitigates the social, environmental and
economic risks and impacts connected with life cycle of a product
Finding 2: Companies are predominantly risk-driven with
aspirations to unlock strategic opportunities and benefits

Drivers for a sustainable supply chain

Efficiency and opportunities for innovation
Business continuity
License to operate and responding to stakeholder interests
Consumers
Customers
Investors
Local communities-They are vocal about pollution, natural resource depletion
Employees-Eg: Employees have shown interest in ethical sourcing

Compliance and Regulatory Risk

Finding 3: Companies tailor their approaches and
governance to create sustainable supply chains

Accountability for supply chain sustainability resides within a range of different functions

Organizational Models
Siloed: Supply chain suitability responsibility segregated from core supply chain
management. Sustainability managed separately
Hybrid: Sustainability function collaborates with supply chain team. Cross functional
working group
Integrated: Sustainability embedded in procurement and sourcing process. Sustainability
is weighed along with price and quality factors
Finding 4: Leading companies are establishing a
shared commitment with suppliers
Basic Improving Established Mature Leading

• Minimum • Focus on risk • Prioritize • Sustainability • Sustainability part of

standards and compliance suppliers based requirements globally company’s DNA
• Poor • Assess against on risk aligned • Suppliers considered an
understandin supplier code • Optional or • Apply leading extension of business
g of supplier of conduct mandatory standards/certificatio • Sustainability part of upstream
risks • Audit approach processes in ns design
for high risk place • Monitoring and • Work with suppliers to build
areas • Focus on short visibility beyond Tier- capacity and embed a culture
term risks 1 of sustainability
• Site visits and • Suppliers segregated • Selecting suppliers based on
supplier based on sustainability criteria
monitoring performance • Focus on long term risk
• Reporting KPIs • KPIs on sustainable • Prominent lead in industry
on Sustainable supply chain initiatives
supply chains sustainability • Ahead of emerging regulation
• Engaged with Govt to • Transparency about
develop regulations performance-reporting
Finding 5: Technology enables visibility and
influence beyond Tier I
Level of Visibility
Finding 5: Technology enables visibility and
influence beyond Tier I
Technology to create sustainable supply culture
Finding 6: Collaboration is critical for
companies to achieve greater impacts
Company actions to endorse sustainability
in supply chains
Assess materiality to focus on the most pressing value chain issues, taking into
consideration the UN Global Compact
Prioritizing focus areas helps guide investment, initiatives across the supply chain
and engagement with key stakeholders
Align resources, structures and processes focused on supply chain sustainability
across the whole organization
Integrating sustainability criteria into the procurement process
Dedicated resources to supply chain sustainability (at least in early stages)
Train management and suppliers on market practices
Capacity building and knowledge sharing across the organization and with
suppliers
Invest in diverse and inclusive supply chain
Work with small and diverse businesses
Embracing different cultures leads to competitive advantages and innovation and
economic benefits to local communities
Company actions to endorse sustainability
in supply chains
Stretch sustainability goals beyond direct operations across the tiers of the supply
chain
Work with suppliers to extend company’s sustainability goals across the supply chain
Convey company’s values and sustainability commitment
Deploy technology to increase accountability, transparency and traceability
Technological solutions for comprehensive supplier performance assessments
Internal organizational alignment around supply chain performance metrics, procurement
decisions and economies of scale
Create a shift toward supply chain sustainability by leveraging buying power and
influence
Industry collaboration and initatives-access to common tools, databases and knowledge
Influence suppliers by leveraging the combined (human, buying, technical, public relations)
power of all partners
Disclose supply chain information beyond the sustainability reporting mechanisms
Integrated reporting
Thank You
Corporate
Sustainability
MBA-Year II
Lecture 5
Need for
Voluntary
Codes for
Sustainability
An effective Voluntary Code or Standard
or Guidelines can

Raise Raise awareness about corporate responsibility within the company

Help Help companies to set strategies and objectives

Assist Assist companies with implementation and control of values

Help Help companies to avoid risk

Foster Foster dialogue and partnership between companies and key stakeholders

Enhance Enhance unity and identity among divergent companies.

Codes/ Principles/Standards to Measure
Sustainability parameters
Areas of Responsibility
Responsible Behaviour, Transparency &
Good Governance
Ethics & Corporate Values
Stakeholder Engagement
Human Rights- Supply Chain,
community
Safety
Environment
Client & Customer Satisfaction
Industry Specific
Principles/Codes/Standards
UN Global Compact Framework; EITI; Coalition for
Environmentally Responsible Economies (CERES); ISO
26000; NVG, SEBI BRR
Extractive Industries Transparency Initiative ( EITI);
AA1000; IFC Performance Standards
SA 8000; Voluntary Principles on Security & Human
Rights (VPS), UNDHR
OHSAS 18001
140001
OECD Guidelines
Kimberly Process; Equator Principles; Forest
Stewardship Council
 Limitations of nations and international
laws

Role of Third- Certifications-a new tool to engage with

market forces
Party
Certification Certifications increase transparency,
accountability, public participation in
decision making

Voluntary and market mechanisms to

improve performance has resulted in the
rise of product and process certifications
Government Regulation: Strengths and
Weaknesses
Strengths
• Strongest form of control of behaviour-
production and processes
• Standards are mandatory and non-
compliance is subject to a variety of legal
sanctions
Weaknesses
• Legal traditions and efficiency –Limit the
scope of regulations.
• Environmental regulations focus on
control of the externalities
• No mandate specific methods of
production with regard to natural
resource extraction or harvesting
• The process of developing or amending a
regulation is cumbersome and very time
consuming
• International treaties are very difficult to
negotiate – nation states must consent to
their prescriptions
 Relevance of Certification
strategies
• Help companies take care of supply chain relationships in
broad markets
This Photo by Unknown Author is licensed under CC BY-SA
• Applicable across geographies
• Not subject to national standards
• Believed to have increased revenues (e.g. Chiquita and
bananas)
• Used by businesses where government regulations are
more prescriptive
• Certification are an increased improvement over
required practices
• Certifications also offer “salience, legitimacy and
This Photo by Unknown Author is licensed under CC BY-SA-NC credibility” through the choice of environmental and
social goals that the company wants to achieve
 Poppy Barley:
Weighing the Costs
and Benefits of
Sustainability
Certifications

https://www.retail-insider.com/retail-insider/2019/4/canadian-footwear-brand-poppy-barley-kicks-
Source : https://poppybarley.com/pages/about-us off-store-expansion-with-2nd-storefront
Questions for Discussion

1. What key factors does Poppy Barley need to consider in choosing whether
Poppy Barley to pursue certification?
2. Should Poppy Barley pursue sustainability certification? If so, which one
should the company choose?
3. To what extent will the company’s decision to pursue certification affect its
triple line?
Key factors that Poppy
Barley need to consider

There primary factors to consider:

• Rana Plaza Building Collapse and
Consumer Demand
• Time and Resources needed to
complete application and upkeep
once certified
• Venture into new territory
(Certification) versus Current
Initiatives (Company Growth)
Source : https://us.fashionnetwork.com/news/Poppy-barley-opens-first-store-in-
calgary,1096163.html
 Benefits and drawbacks of certifications
- B Corp, Fairtrade and LWG Certification

Should Poppy
Barley pursue Strategic focus of the company- brand,
factory and product
sustainability
certification- Importance that owners place on
Which One? certification

Value of certification from customer

perspective
 Triple bottom line – ethical
sourcing, recycled packing,
Pursue proper compensation
certification -
affect its
triple line? Focus of the certification in
relation to people, planet and
profit.
Lec 6: International Voluntary Codes
for Sustainability
ISO 26000
ISO 26000
ISO 26000 seeks to promote a common understanding of social responsibility
ISO 26000 cannot be used for certification
ISO 26000 addresses seven core subjects of social responsibility
How does ISO 26000 define Social
Responsibility?

Social Responsibility (SR) is the responsibility of an organization for the impacts of its
decisions and activities on society and the environment through transparent and
ethical behaviour that:
Contributes to sustainable development, including the health and welfare of society
Takes into account the expectations of stakeholders
Is in compliance with applicable law and consistent with international norms of
behavior, and
Is integrated throughout the organization and practised in its relationships.
Benefits by implementing ISO 26000
Competitive advantage

Reputation

Ability to attract and retain workers, customers, clients and users

Maintenance of employee morale, commitment and productivity

Perception of investors, owners, donors, sponsors and financial community

Relationships with companies, governments, media, suppliers, peers,

customers and community in which the organization operates
Source : https://www.iso.org/obp/ui/#iso:std:iso:26000:ed-1:v1:en
ISO 26000
UN Global Compact
UN Global Compact
WHY COMPANIES PARTICIPATE
Adopting an established and globally recognized policy framework-
environmental, social and governance

Advancing sustainability solutions in partnership-UN, governments, civil

society, labour and non-business interests

Linking business units across the value chain with UN Global Compacts
local networks around the world

Accessing UNs extensive knowledge and experience with sustainability

UN Global Compact
CORPORATE COMMITMENT

Make UN Global Compact and its principles an integral part of business

strategy, day-to-day operations and organizational culture

Incorporate UN Global Compact principles in highest level governance

body (Board)

Engage in partnerships to advance broader development objectives (SDGs)

Integrate in annual report (public document) sustainability initiatives

Advance sustainability principles through advocacy and outreach to peers,

partners, clients consumers and public at large
UN Global Compact-10 principles
Ten Principles

HUMAN RIGHTS

Principle1 Support and respect the protection of internationally proclaimed

human rights
Principle 2 Make sure that they are not complicit in human rights abuses

LABOUR

Principle 3 Uphold the freedom of association and the effective recognition of the
right to collective bargaining
Principle 4 Elimination of all forms of forced and compulsory labour

Principle 5 Effective abolition of child labour

Principle 6 Elimination of discrimination in respect of employment and occupation

UN Global Compact-10 principles
Ten Principles

Environment

Principle 7 Support a precautionary approach to environmental challenges

Principle 8 Promote greater environmental responsibility

Principle 9 Encourage the development and diffusion of environmentally friendly

technologies
Anti-corruption

Principle 10 Work against corruption in all its forms including extortion and bribery
Thank You
 Lec 7: International Voluntary Codes for
Sustainability-SA 8000 and Equator Principle
Social Accountability International SA 8000
Social Accountability International SA 8000
SA8000 certification is a management systems standard, modeled on ISO standards.
SA8000 is based on the principles of international human rights norms as described
in International Labour Organisation conventions, the United Nations Convention
on the Rights of the Child and the Universal Declaration of Human Rights
It measures the performance of companies in eight areas important to social
accountability in the workplace:
Child labour,
Forced labour,
Health and safety,
Free association and collective bargaining,
discrimination,
Disciplinary practices,
Working hours
Remuneration
Social Accountability International SA 8000
Child Labour: No use or support of child labor
Forced and Compulsory Labor: No use or support for forced or compulsory labor; no
required 'deposits' - financial or otherwise; no withholding salary, benefits, property or
documents to force personnel to continue work
Health and Safety: Provide a safe and healthy workplace;
Freedom of Association and Right to Collective Bargaining: Respect the right to form
and join trade unions and bargain collectively.
Discrimination: No discrimination based on race, national or social origin, caste, birth,
religion, disability, gender, sexual orientation, union membership, political opinions and age.
Disciplinary Practices: Treat all personnel with dignity and respect; zero tolerance of
corporal punishment, mental or physical abuse of personnel; no harsh or inhumane treatment.
Working Hours: Compliance with laws & industry standards; normal workweek, not
including overtime, shall not exceed 48 hours; 1 day off following every 6 consecutive work
days, with some exceptions; overtime is voluntary, not regular, not more than 12 hours per
week
Remuneration: Respect right of personnel to living wage; all workers paid at least legal
minimum wage; wages sufficient to meet basic needs & provide discretionary income
SA8000: Management Systems
Policies, Procedures and Records
Social Performance Team
Implementation and Assessment of Risks
Monitoring
Internal Involvement and Communication
Complaint Management and Resolution
External Verification and Stakeholder Engagement
Corrective and Preventive Actions
Training and Capacity Building
Management of Suppliers and Contractors
Equator Principles
 Equator Principles
• The Equator Principles is a risk management framework, adopted by financial institutions,
for determining, assessing and managing environmental and social risk in project finance
• It is primarily intended to provide a minimum standard for due diligence to support
responsible risk decision-making
• Applies to below five financial products
• Project Finance Advisory Services-project cost USD 10 million or more
• Project Finance –project cost USD 10 million or more
• Project-Related Corporate Loans-aggregate loan amount of at least USD 50 million with
a tenor above 2 years
• Bridge Loans-meeting above criteria 2 and 3
• Project related refinance and project related acquisition finance
• Underlying project was financed according to Equator Principles
• There has been no material change in the scope and size of the project
• Project completion has not yet occurred
Equator Principles
Equator Principles
Principle 1: Review and Categorisation (Category A, B and C- High to low risk)
Principle 2: Environmental and Social Assessment
Principle 3: Applicable Environmental and Social Standards
Principle 4: Environmental and Social Management System and Equator Principles Action
Plan
Principle 5: Stakeholder Engagement
Principle 6: Grievance Mechanism
Principle 7: Independent Review
Principle 8: Covenants
Principle 9: Independent Monitoring and Reporting
Principle 10: Reporting and Transparency
 Equator Principle as a Good Risk Management Tool
CATEGORIZATION OF PROJECTS HELPS IN UNDERSTANDING PROJECT RISKS
• Under the EPs, borrowers must conduct a Social and Environmental Assessment of a proposed
project.
• EPFIs use common terminology to categorise (based on the International Finance Corporation's
categorisation process) projects into high, medium and low, in terms of environmental and social risk,
and apply this to all new projects globally and across all industry sectors.
• Category A – Projects with potential significant adverse social or environmental impacts which are
diverse, irreversible or unprecedented;
• Category B – Projects with potential limited adverse social or environmental impacts that are few in
number, generally site-specific, largely reversible and readily addressed through mitigation measures;
and Category
• C – Projects with minimal or no social or environmental impacts.
INDEPENDENT REVIEW- THIRD PARTY OPINION BEFORE FUNDING THE PROJECT

WATER TIGHT CONTRACTS CLEARLY ELUCIDATING THE RISK AND THE PARTY WHICH SHARES
THE RISK

INDEPENDENT MONITORING AND REPORTING

• Brings in transparency in implementation
Potential Environment and Social Issues to
be addressed
Assessment of baseline environmental and social conditions
Consideration of feasible environmentally and socially preferable
alternatives
Requirements under host country laws and regulations including 2015 Paris
Climate Change Agreement
Protection and conservation of biodiversity
Sustainable management and use of renewable resources
Use and management of dangerous substances
Major hazards assessment and management
Efficient projections-energy consumed per output
Pollution prevention and waste minimization
Greenhouse gas emissions level and emissions intensity
Water usage, water intensity and water source
Potential Environment and Social Issues to
be addressed
Land cover, land use practices
Physical climate risk and adaptation opportunities
Cumulative impacts of existing projects
Consideration of actual and potential adverse human rights
Labour issues- occupational health and safety
Consultation and participation of affected parties in the project
Socio-economic impacts
Impacts on affected communities-vulnerable groups
Gender
Land acquisition and involuntary settlement
Impact on indigenous people and their unique cultural systems
Protection of cultural heritage and property
Protection of community health, safety and security
Fire prevention and life safety
Equator Principles
E&S at IDFC

• Adopted equator principles in 2013

• First financial institution in India
• Have a rigorous Environment and Social Policy
E&S at IDFC
E&S at IDFC-Exclusion List

Sensitive List
• Defense
• Nuclear Power
E&S at IDFC-Exclusion List
Thank You
Planning & Execution:
Sustainability
Lec 8
Source: National Voluntary
Guidelines
 Orientation table for the identification of
CSR activities

Market Environment Workplace Community

What have we done

With regard to Responsible
Business

Why did we do this?

What more can we do,

how will it benefit?

What resources we need?

Timeline for action

Prof. Dr. Björn Hekman, Prof. Dr.

Joachim von Kiedrowski, Prof. Dr. 3
Uwe Schaumann
Sustainability: Value Creation
Stage 1: Do old
things in new
ways

Stage 2: Do new
things in new
ways

Stage 3:
Transform core
business

Stage 4: New
business model
creation and
differentiation
 Sustainability Execution

Leadership

Reporting & Methods: Value

Communication Assessment

Five Critical Areas

Operational
Management
Strategy
Integration
Development

In each of the above area, companies must transit from

Adhoc & siloed Strategic, systematic,

Tactical
approaches and integrated ones
 Sustainability performance system
Vision of sustainability value
creation (the “what we must
do”) with evolving execution
capabilities (the “how we
must do it”), firms develop
sustainability performance
system

Depending on their
sophistication in both realms,
and their desire to use
sustainability as a competitive
weapon, they will fall into one
of four categories
Case: Unilever’s Lifebouy in India
Lec 9: Measuring Sustainability
Three approaches to sustainability
measurement & reporting
Approach 1: Accounts that use quantitative data and convert
them to common unit

Approach 2: Narrative assessments –text, maps, graphics and

tabular data

Approach 3: Indicator-based system

Common Sustainability Metrics-Economic
Method Description Use
Contingent valuation Preferences of public regarding a good Good or Service
method (CVM) or service by measuring willingness to
pay
Ecosystem services Valuation of services provided by nature- Goods or service
valuation cleaning of water by microorganisms
Cost Benefit Analysis Calculation of NPV by aggregating and Project or Policy
(CBA) comparing cost and benefits over the
whole life of project
Index of Sustainable Weighs personal expenditure with an Regional Welfare
Economic Welfare index of income inequality
(ISEW)
Net National Product Total income of the people in an Regional Welfare
(NNP) economy less capital consumption or
depreciation
Green NNP Net NNP accounting for loss of Regional Welfare
resource capital
Common Sustainability Metrics-Physical
Method Description Use

Emergy Amount of solar energy that has been Good or services

used directly or indirectly to make a
good or service
Common Sustainability Metrics-Ecological
Method Description Use

Resilience Intensity of disturbance required to Ecosystem

move system to a new regime

Carrying capacity: Maximum amount of resource Ecosystem

Maximum sustainable extraction while not depleting the
yield (MSY) resource from one harvest to the next

Ecological Footprint Total area of productive land and water Individual,

(EF) ecosystem needed to produce Institutional,
resources and assimilate waste of a Regional
given population
Sustainability Indicators and Composite
Indices
No single indicator to capture all aspects of sustainability
Group of indicators can be selected
Group of indicators can then be evaluated using a complex
indicator/index (CI)
Can use a multi-criteria assessment (MCA) when there are
many units which we do not want to aggregate into one
Example: Composite Sustainable Index
(Krajnc and Glavic 2005)
Economic Environmental Social
Sales Total energy consumption No of occupational
accidents
Operating Profit Water consumption No of non-profit projects
Investment Capital and Production mass No of odor complaints
Expenditure
Net earnings Carbon dioxide, nitrous oxides, sulfur No of noise complaints
dioxide and dust emissions
Research & Wastewater No of dust complaints
development costs
Number of employees Waste for disposal No of neighbor complaints
Recycling
Hazardous waste
• Normalized indicators: indicators for each sector (different units) divided by value in
time (year) with its average value of all the time in the years measured.
• Alternatively can be normalized by using max and min values or target values
• Weights are given to different indicators
Multi-Criteria Assessment
For each category score can be created and represented as a
hexagon
Thank You
Common Sustainability Metrics-Physical
Method Description Use

Emergy Amount of solar energy that has been Good or services

used directly or indirectly to make a
good or service
Exergy Maximum work that can be extracted Policy, evaluation of
from a system when it moves towards energy systems
thermodynamic equilibrium with a
reference state
Lec 10: Sustainability Reporting
Sustainability Reporting for decision making
Sustainability Reporting for decision making
Sustainability Reporting for decision making
Sustainability Reporting for decision making
GRI-Global Reporting Initiative
Evolution of Corporate Reporting
Importance of Integrated Reporting
Financial reports fail to reflect an organization’s ability to create value in the short,
medium and long term through efficient management of its strategic resources
An organization’s value is decreasingly derived from the tangible assets on its
balance sheet and increasingly from its intangibles
Integrated Reporting
Shared value is fundamental to
integrated reporting
An organization’s value creation potential
depends on its ability to identify all of the
resources available to it, whether tangible or
intangible, owned by the organization or third
parties, and to align them with its corporate
strategy
Any value created, including that which
benefits society as a whole, has the potential
to impact on the organization’s value and
profitability
An organization that communicates its
strategy to the market and quantifies this
broader contribution may well be stimulating
value creation in itself
Business Model in an integrated report
The New Capitals
Natural capital
Social and relationship capital
Intellectual capital
Human capital
Financial Capital
Manufactured Capital

HOW DO VARIOUS CAPITALS CONTRIBUTE TO THE VALUE CREATION

STRATEGY?
Connecting the dots…….
Thank You