CORPORATE ENVIRONMENTAL RESPONSIBILITY: A LEGAL ANALYSIS

LEADERSHIP & CORPORATE ACCOUNTABILITY (LCA) PROJECT REPORT

FACULTY – PROF. DR. SHANNU NARAYAN

Submitted by: GROUP NO 1

SNO. TEAM MEMBERS NAME ROLL NUMBER
1 AKSHAY KUMAR SINGH EPGP-13B-008
2 BHASKAR CHOWDHURY EPGP-13B-022
3 CHINMAYANANDA J NAYAK EPGP-13B-027
4 GIRISH VYAS EPGP-13B-035
5 NEEHARIKA SHARMA EPGP-13B-061
6 PARTHA GHOSH EPGP-13B-068
7 PIYUSH SHARMA EPGP-13B-070
8 SHAMEEK DEB EPGP-13B-103
9 TITAS LAHIRI EPGP-13B-116
10 VARUN MISHRA EPGP-13B-120
Table of Contents

Title.............................................................................................................................................................3
Brief Introduction........................................................................................................................................3
Relationship between Indian legal systems and CER..................................................................................4
Maximization of stakeholder wealth and the importance of CER..............................................................10
Factors that affect CER activities of an Organisation................................................................................11
Programs that educate employees, about CER...........................................................................................13
Organization Structure & shareholders voting right’s impact on CER.......................................................17
How can Organization reduce the risks and costs of capital through long-run environmental management20
CAPM Model Approach to Determine the Cost of Capital.....................................................................21
Ex-ante Approach to Determine the Cost of Capital..............................................................................23
Is the Investment in CER Worth it?........................................................................................................24
Reputation Building with CER..................................................................................................................25
CER cost vs total Asset..............................................................................................................................27
Use the input/output model developed by Leontief in relation..................................................................29
CER requirement as per Indian Law and its future implication to the country..........................................31
Conclusion.................................................................................................................................................34
References.................................................................................................................................................34

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Title

CORPORATE ENVIRONMENTAL RESPONSIBILITY: A LEGAL ANALYSIS

Brief Introduction
Authored by BHASKAR CHOWDHURY (EPGP-13B-022)

[The phenomenal clip from the 1940

Academy Awards winner acclaimed
Hollywood movie 'Gone with the
Wind']
Scarlett O'Hara (played by Vivien
Leigh) : "But you are a blockade
runner."
Rhett Butler (played by Clark
Gable) : "For profit, and profit only."
Scarlett O'Hara : " Are you tryin' to
tell me you don't believe in the cause?"
Rhett Butler : "I believe in Rhett Butler, he's the only cause I know."’’
In the year of 1940, at the 12th Academy Awards, the Hollywood blockbuster movie ‘Gone with
the Wind’ set a World record for Academy awards (popularly known as Oscars), winning in 8 of
the competitive categories the movie was nominated in, from a total of mindblowing 13
nominations !!! The movie won the ‘Best Picture’ award and Vivien Leigh became a global icon
winning the ‘Best Actress’ award.
Within 4 years of its release in 1939, ‘Gone with the Wind’ had sold an estimated 60 million tickets
across the USA – sales equivalent to almost half of the American population that time.
But why? Why the movie ‘Gone with the Wind’ hogged the maximum limelight possible and
became the-then global topic of discussion almost everywhere?
Because, the movie struck hard on the most discussed keyword of business – PROFIT, being the
driving force and the most important criterion in making a decision. Social, environmental, moral
and ethical responsibilities always took back seat against the magic word – ‘Profit’ !!!
80+ years ago !!!

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 Recent years have seen a lot of attention paid to
the environmental responsibilities of businesses.
This has been a big deal for both managers and
academics. Environmental issues have gained so
much attention that now almost every stakeholder
wants to see environmental efficiency in modern
businesses.
It was the goal of this report to look into the
environmental practices in India from the legal
analysis point of view.
We have tried to capture what companies in India are doing to reduce the environmental effects of
their business. Globally when people want businesses to be more environmentally friendly, are the
Indian companies following the same road.

Relationship between Indian legal systems and CER

Authored by BHASKAR CHOWDHURY (EPGP-13B-022)

We read about an Akbar-Birbal story in our childhood. The story goes like this :
One day Emperor Akbar asked Birbal what he
would choose if he were given a
choice between justice and a gold coin.
“The gold coin,” said Birbal.
Akbar was taken aback.
“You would prefer a gold coin to justice?” he
asked, incredulously.
“Yes,” said Birbal.
The other courtiers were amazed by Birbal's
display of idiocy.
For years they had been trying to discredit
Birbal in the emperor's eyes but without success
and now the man had gone and done it himself!
They could not believe their good fortune.

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“I would have been dismayed if even the lowliest of my servants had said this,” continued the
emperor. “But coming from you it's . . . it's shocking - and sad. I did not know you were so
debased!”
“One asks for what one does not have, Your Majesty!” said Birbal, quietly. “You have seen to it
that in our country justice is available to everybody. So as justice is already available to me and as
I'm always short of money I said I would choose the gold coin.”
The emperor was so pleased with Birbal's reply that he gave him not one but a thousand gold
coins.
India, as a country, has a recorded legal history beginning from the Vedic ages.Law and Legal
System in India have primarily evolved from customs and religious prescription to the current
constitutional and legal system we Indians have today, thereby traversing through secular legal
systems and the common law, in specific.

The Kandahar bilingual (Greek and Aramaic) Edict (a decree or announcement of a law) of King
Ashoka, a bilingual edict by King Ashoka from Kandahar. Kabul Museum
Secular law in India diversified widely
from region to region and from one ruler to
another ruler. Traditional court systems for
civil and criminal matters were essential
features of many ruling dynasties of ancient
India. Extraordinary secular court systems
existed under the Mauryas (321-185 BCE)
and the Mughals (16 – 19 centuries) that
brilliantly preceded the current scheme of
common law in India.
Here let us gauge the important
determinants of corporate environmental
responsibility (CER), alongwith the
relationship between Indian legal systems
and CER as measured by a unique set of
global environmental cost data from India
perspective. The results of our analysis
clearly show that pattern that firms' legal
origins indeed affect CER, which requires a long-term management perspective. To be specific,
our results justifiably indicate that civil law firms exhibit significantly higher levels of CER than
common law firms. Additionally, results of an auxiliary test suggest that a manager shareholding
has a clear,significant, nonlinear relationship with CER. In fact,the close association between a
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firm's legal origin and its CER performance remains robustly strong after controlling for the effects
of managerial ownership and issues related to endogeneity. Now our findings imply that although
the majority of corporate law studies in the past few decades provide adequate support for the
common law system emphasizing the maximization of shareholder value as well as investor
protection, the civil law system stressing the maximization of stakeholder wealth alongwith the
importance of CER should become more influential in the coming decades as CER becomes
central to each and every firm’s smooth operations.

Well,the sustainable development goals

mandated by the United Nations (UN)
try to take into account the 3 powerful
Ps – Profit, Planet and People, all
together in a balanced manner. Now
the Indian Governments,so far, through
their administrative policies, various
regulators through monitoring, a
number of corporations through
innovation, and customers,in general,
through modified lifestyles have been
endeavouring to meet these sustainable
development goals and work for a better
future for the global Indians and the
generations to come.

Corporate spending on Corporate Environmental Responsibility (CER) activities in India, has

been streamlined,so far, since the introduction of the Companies Act 2013. CER spending on
enhancement of the natural environment is an
important aspect of meeting the legal
requirements relating to CER in India. Let's see
the spending patterns of the Indian corporates
comprising the NIFTY index on environment as
part of their CER.

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The data related to
total CSR spending and
environment
spending as a part of
CSR spending was
collected from the
annual reports of the
sample companies from
2014-15 to 2016-17.
The data was collected
for 44
companies out of the
sample of 50 companies
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for which data was
available. This
data was then converted
into two classification
metrics:
• Average proportion of
CER spending as a part
of total CSR spending.
• Compounded growth
in CER spending.
Some of the salient
features of the above
metrics in general were:
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• The total CSR
spending of the sample
firms during the study
period was INR
20420 million.
• The average
proportion of CER spend
as a part of CSR spend
was 6.15%.
• The average
compounded growth in
CER spending was
16.21%.
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The data related to
total CSR spending and
environment
spending as a part of
CSR spending was
collected from the
annual reports of the
sample companies from
2014-15 to 2016-17.
The data was collected
for 44
companies out of the
sample of 50 companies
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for which data was
available. This
data was then converted
into two classification
metrics:
• Average proportion of
CER spending as a part
of total CSR spending.
• Compounded growth
in CER spending.
Some of the salient
features of the above
metrics in general were:
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• The total CSR
spending of the sample
firms during the study
period was INR
20420 million.
• The average
proportion of CER spend
as a part of CSR spend
was 6.15%.
• The average
compounded growth in
CER spending was
16.21%.
Well, the field data related to total CSR spending,in general and environment spending,in
particular as a part of CSR spending was collected from the annual reports of some selected Indian

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companies during the time 2014-15 to 2016-17. This data was collected for around 50
companies for which data was readily available in the internet. This data was then briadly
converted into two primary classification metrics:

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(1) Average proportion of CER spending as a part of total CSR spending for those companies
&
(2) Compounded growth in CER spending for those companies
Now, some of the crucial features of the above metrics,in general were:
- CER spending,in total,by those companies during the study period mentioned was INR 20420 Mn.
- Companies’ average proportion of CER spend as a part of CSR spend was 6.15%.
- Companies’ average compounded growth in CER spending was an impressive 16.21%.

These companies were then plotted on the 4 quadrants of the CER Matrix.

Green Skeptics (Quadrant 1): The quadrant 1 companies lag behind other companies both in terms of
allocation of expenditure towards CER and the growth in CER spend. They have limited focus on
CSR and normally prefer to integrate their CSR with their core activities.

Some of the CER vision and mission statements of the quadrant 1 companies read :

“As a primary resources conglomerate, we plan to ramp up our resources businesses.

With a strong balance sheet and a clear capital allocation strategy, we are confident about
our prospects for the coming years and are opti-mistic about the long-term outlook for the
global resources sector.”

“As a responsible pharmaceutical corporate, we are a responsible corporate citizen, focused

on reaching more people with affordable healthcare”.

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Green Laggards (Quadrant 2): Green Laggards are those companies, which have above average
growth in their CER spend but have not yet allocated sufficient proportion of their overall CSR
spend to CER. For Green Laggards, CER is not a focal part of their CSR.

This is beautifully demonstrated in the following annual statements:

“Our CSR spend has grown by 330%. Our interventions are in the areas of women
empowerment, computer assisted learning, medical care, rainwater harvesting and
education sponsorship.”

“We focus on education which supports the education of underprivileged girls, and
provide livelihood training to youth from socially and economically disadvantaged
communities.”

Green Leaders (Quadrant 3): Now green leaders,in quadrant 3, represent companies which have
clearly demonstrated their dedicated and consistent efforts towards CER through their CSR.
Efforts of these green leaders towards environmental sustainability as described in their reports
include:

‘’“We have reduced our per capita electricity consumption by 51% as of fiscal 2017 against
the baseline figure of fiscal 2008 at our India locations – achieving the goal one year
ahead of the target year! As of FY17, we have installed total 15.2 MW solar plants on
the rooftop of our campus and as 282 ground mount installations. We have met 44.6%
of our electricity requirements from renewable energy sources.””

‘’ “We are a socially responsible Corporate Citizen caring for the environment and
striving to reduce our carbon footprint by incorporating the 'green' perspective in all its
key organizational processes, while pursuing its own growth aspirations towards
Customer delight". ‘’

‘’“As a bank we have partnered with Centre for environmental research & education
(CERE) to promote ecological development through afforestation programmes. In FY
2017-18, we supported the plantation of about 10,000 trees at 21 urban and peri-urban
locations including agro-forested areas partnering with farmers in Bhiwandi, the Indian
navy in Uran, and schools in the Mumbai metropolitan region. Native trees of
about 48 species, were planted to conserve and promote regional biodiversity”.’’
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Green Strivers (Quadrant 4): Green Strivers,in quadrant 4, are those companies which have
demonstrated low growth in their CER spending though they are above average in the proportion
allocated to CER as a part of CSR spending. Green Strivers’ philosophy as disclosed in their
reports includes:

““We have contributed INR 36 million in promoting usage of solar power plants, solar
lamps, solar water heaters and solar street lamps”.”

““Our company has a aim of giving efficiency to the planet. We have adopted two strategies
for efficient energy management – changing the energy mix and reducing specific
energy consumption. We have been successful in reducing energy by changing the energy
mix by 8%. Promoting efficient technologies in our operations to reduce specific energy
consumption, we have reduced specific energy consumption by 9% in the past year”.”

“"We want to emerge as a global player in the primary energy sector committed to provide
energy security to the country by attaining environmentally & socially sustainable
growth through best practices from mine to market”.”

Now as CER becomes increasingly important, it would be necessary for Indian companies to
choose a path to move towards green leaders. Two paths are suggested as below:

1. Path of Conviction: This path says that to become green leaders in future, the green sceptics
should first be thorougholy convinced to become green strivers and then move towards being
green leaders. The path suggested is Quadrant 1 -> Quadrant 3 -> Quadrant 4.
2. Path of Action: Here green laggards have already exhibited growth in their CER spend.
Now they need to increase their proportion of CER spend as a part of CSR. The path
suggested is Quadrant 2 -> Quadrant 4.

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Maximization of stakeholder wealth and the importance of CER
Authored by Akshay Singh (EPGP-13B-008)

Businesses' attitudes regarding the environment have shifted dramatically in the past few years.
For most managers, "business as usual" is taking on a tint in the face of changing customer
attitudes, increasingly stringent environmental rules, risks of large-scale climate change, and a
projected scarcity of natural resources. A society in which enterprises succeed by satisfying the
demands of a stable population while limiting their impact on the natural environment is one of the
ideals of a sustainable future.

"Pollution avoidance," "environmental design," "industrial ecology," and "total quality

environmental management" are just a few of the tactics currently being promoted to help attain
this goal. While there has been much chatter on Corporate's Environment Responsibility, limited
research has happened on establishing a link with shareholder return or wealth maximization and
corporate strategy to go green. Corporations are accountable to their shareholders, who expect a
return on their investment. Investors are unwilling to devote the resources required to support the
transition to a sustainable economy unless company strategies provide financial and environmental
rewards.
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Some justifications for Corporate Environmental Performance and Shareholder Value
1) Reduced environmental litigation and future liability,
2) Opportunities in the sale of environmental services and "earth-friendly" products,
3) Reduced waste treatment and/or disposal costs,
4) Improved public credibility,
5) More productive employees and/or improved employee working conditions, and
6) Benefits accruing from a less antagonistic regulatory relationship.

The historical data on the relationship between environmental and financial success has been
contradictory. The results of a dozen studies (Cochran and Wood, 1984) on corporate social
responsibility and firm performance are equivocal, owing to disparities in datasets, methodology,
time-periods, and measurements. Recent research, however, have discovered a link between
environmental success as evaluated by the Council on Economic Priorities' reputation indexes and
financial performance as measured by financial metrics.

The effects of CER on shareholder wealth maximization can be summaries under three empirical
data sets:

1. Stock Return and CER :

CER efforts, according to some research, have a positive influence on shareholder wealth since
focusing on stakeholders' interests enhances their desire to support a firm's operations, which raises
shareholder value. According to the latter, a focus on CER issues has a detrimental impact on
shareholder value due to overinvestment of productive resources in unprofitable social and
environmental responsibility projects.The long term return on top 350 russel index showed that
companies following CER have an average return of 7.2% against the wider russel index return of
5.6%. (Justyna Przychodzen,2016)

2. Stock Return Volatility and CER :

Standard deviation, a measure of stock price risk is lower for companies having CER than the
broader set of russel index companies. Other measures of risk like Kurtosis and Skewness,
suggest better risk-adjusted returns for CER companies than other corporation.

3. Stock Market Crash Resistance and CER :

Both investors and management are interested in determining the characteristics of stock
market cycles for sustainable firms. If the integration of financial objectives with restrictions
on environmental issues into investment practises is characterised by greater than average
resistance to general swings in stock market prices, then the integration of financial objectives
18 | P a g e
 with restrictions on environmental and social issues can have a positive impact on shareholders'
risk-adjusted financial returns. It has been shown that the return on CER firms during financial
crisis is less pronounced than on other companies.

Adjusting for market factor risk, market capitalization, book-to-market value, immediate past
returns, and sector affiliation, research have demostrated environmentally sincere enterprises earn
higher long-term returns on long term basis. It also implies that companies that include
sustainability into their business strategy and decision-making processes invest in activities that
improve their long-term efficiency, resulting in increased shareholder wealth and corporate value.
Research has also suggested that corporate environmental performance investment screens could
boost total returns and yield clear utility gains for investors.

Factors that affect CER activities of an Organisation

Authored by Chinmayananda Nayak (EPGP-13B-027)

There has only been limited research into what motivates some major corporations to become
aware of their environmental responsibilities, what inspires some to develop policies, and what
motivates an even smaller number of corporations to act on these policies and actually change their
practices to become more environmentally responsible. It is suggested that strategic motivations
and institutional pressures are the primary drivers of adopting ecologically friendly management
techniques. However, the most critical finding is that government law or the threat of regulation is
the most crucial factor, came as no surprise and is consistent with the results of prior studies on the
subject.

CER has emerged as a prominent topic of discussion as businesses' survival, strategy development,
and long-term viability are all dependent on effective environmental management practices. Ample
evidence of the need for CER is observed in the International Organization for Standardization's
introduction of a specific set of environment-related standards - the ISO 14000 series - as part of
their environmental management system.

The industrialisation has given development, but it has also brought about environmental
deterioration. Which has resulted in the sounding of alarm bells at many levels, including:

 First and foremost, the government has enacted legislation such as the Environmental
Protection Act and conducted large-scale initiatives like Swach Bharath.

 On the other hand, citizens have become environmental activists and want to see the
environment protected.

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 International organisations: The United Nations has a convention on climate change that was
signed in 1992. International agreements such as the Paris Agreement (2016) and the Kyoto
Protocol (2012) have compelled countries to take greater responsibility for the environment.

 NGOs (non-governmental organisations) (NGOs): Organisations such as Greenpeace and the

Narmada Bachao Andolan have pressed corporations to concentrate on their acts that impact
the natural environment.

Companies are now required to include CER as a component of their corporate social
responsibility (CSR) initiatives. In this sense, corporate social responsibility (CSR) can be
described as a commitment towards the society that must be proven as part of a company's actions.
The Companies Act, 2013, which is widely regarded as a watershed moment in India's corporate
social responsibility (CSR) history, mandated that 2% of a company's profits be set aside for CSR
efforts. As a result of this mandate, there has been a 47% increase in corporate social responsibility
spending in India in 2017. (PTI, 2017). Many companies, such as TATA's, AMUL, WIPRO, and
others, have displayed CER to benefit society as a whole, which is a good thing.

The spirituality and ethos of India might serve as an additional source of motivation for businesses
in the country. The "Rally for Rivers" initiative, which took place in September and October 2017
and was organised by the ISHA Foundation, demonstrates this. When it comes to environmental
health restoration, this programme has garnered the federal government's attention, individuals,
celebrities, religious leaders, and even corporations.

We want to draw a framework to understand the motivation towards CER of the Corporates in
today's time.

Operational Motive: This framework includes activities that firms intend to gain some economic
benefits in exchange for their CSR expenditure. The operational dimension of CER is concerned
with short-term environmental management objectives such as pollution control, resource
efficiency improvement, and other similar goals to obtain economic benefit and strategic
advantage (Porter and Karmer, 2002). This type of motivation could also imply that companies in
this category have placed a lower priority on corporate social responsibility than on other parts of
their operations. Companies that incur CSR spending only to operationalise CSR are classified as
having an operational rationale for their expenditure. As a result, this motivation receives the
lowest possible rating in this framework.

Legal Motive: Companies are required to comply with the laws and mandates of the country if
they want to operate legally. CSR spending is mandated by Section 135 of the Companies Act,
2013, passed in India in 2013. In order to be eligible for CSR spending, companies must spend 2%
of their average net profit over the prior three years on CSR activities. Obtaining obligatory
certification such as ISO 14001, adhering to product standards mandated by the Food Safety and
Standards Authority of India, and implementing reporting techniques such as the Global Reporting
Index are all examples of CER practises (GRI). This sort of motivation is regarded as more
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important than operational incentive because corporations must spend on CSR regardless of the
economic gain they may derive from their efforts. Although this motivation is lower, it is also less
effective because it is imposed from without rather than being generated internally.

Moral Motive: Moral impulses are inherent in the natural world. Carroll (1991) described the
'ethical dimension' of corporate social responsibility as a company's commitment to appropriate
actions. Companies that wish to be perceived as virtuous do so by engaging in corporate social
responsibility as a moral obligation. As a result, Dolan (2017) asserted that individuals and
corporations are fundamentally motivated to retain a reputation as being morally upright. However,
this reason is not seen as the most important because CSR actions are carried out to earn the
company a positive reputation as an excellent corporate citizen. The dilemma of corporations in
determining whether environmental stewardship was a perfect or imperfect duty was examined by
Brookshire (2015) concerning corporate social responsibility. A clear set of sustainability
objectives is required to prevent corporate hypocrisy and retain a company's good reputation.

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Now that we have defined the motives that can drive the CER initiatives, let's take a corporate
example and compare these motives. We have selected WIPRO to make an assessment.

WIPRO is an example of a corporation that constantly spends

more on CSR than the government mandates. It has
maintained a high level of consistency in its CER, allocating
more than 30% of its CSR spending to CER. This is how the
company's commitment to the environment is captured in the
company's motto, WIPRO: "We shall be global in both our
thinking and our actions." We are global citizens who bear
responsibilities. Energised by the profound
interconnectedness between people, ideas, communities, and
the environment. We believe in providing a long-term
contribution to the development of a just, egalitarian,
humane, and sustainable society."

According to Mr. Azim Premji, the CEO of the company, in a letter to staff, "We must
acknowledge that society, economies, and the environment are all intricately intertwined."
Individual human beings and groups find purpose in this interconnectedness rather than in
separation and seclusion. It is essential to recognise that our issues and solutions are intertwined.
As a result, every attempt we make to discover solutions and purpose must serve to increase this
sense of togetherness."

The global demand for sustainable processes is being driven by new energy sources paired with
more critical regulatory requirements caused by one of WIPRO's subsidiaries. WIPRO has begun a
Health, Safety, Security, and Environment (HSSE) initiative through its subsidiaries. As a result,
health, safety, and security have been elevated to the top of the priority list in exploration,
production, and operations.

Corporations such as WIPRO demonstrate that companies in India are deeply committed to
promoting environmental sustainability through their corporate social responsibility initiatives.

We may also state that different organisations have different underlying reasons for CER
compliance; yet legal motivation is the most crucial driver of CER compliance among corporate
entities.

Programs that educate employees, about CER

Authored by GIRISH VYAS (EPGP-13B-035)

WeWork, a shared workspace firm, has made a bold decision by announcing that it will no longer
serve or reimburse meat products at its events. In an effort to reduce plastic waste, companies like
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Starbucks, Hyatt, and Alaska Airlines have published statements committing to eliminate plastic
straws.

These are just a few instances of firms that are leading the way in implementing eco-friendly
policies to create more environmentally conscious workplaces and company cultures.

Consumers are more likely to buy items from, invest in services from, and support businesses that
have a proven track record of social responsibility in terms of lowering their environmental impact.
According to research, 80 percent of consumers prefer to support firms and brands that have a long
history of sustainability.

Creating an ecologically conscious organization starts with your employees, as it is critical for
them to believe in your vision and follow environmentally friendly behaviors in the workplace in
order for your sustainability objective to be realized.

There are a number of simple and cost-effective steps your business can take to minimize its
carbon footprint and impact on the environment. Here are seven sustainable projects you can put in
place to encourage your staff to be environmentally mindful not just on Earth Day, but every day.

CER strives to reduce any negative environmental effects caused by your company processes.
Activities may focus on:

 use of energy
 the use of water
 trash disposal
 recycling
 emissions
 rules for eco-friendly office and business travel

Some of these are crucial in terms of both the environment and the economy.

Below are the programs that actually educate your employees about their environmental
responsibilities and its implementation:

1- Start a recycling program:

Establishing a recycling program in your company is a common way to increase consciousness

around sustainability. Educate your employees on proper waste disposal from the kitchen to the
workplace by posting clear signage on designated waste stations to assist them identify between
what belongs in the recycling, compost, and trash bins. You can also check into having outdated
computer parts and other items that are taking up space in your office safely removed and donated
to a local organization that supports ethical electronics recycling.

2- Conserve energy in the workplace

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Turning off the lights and electronic devices around the office during off-hours helps to conserve
energy resources while also saving your firm money on your electric bill. Ensure that your
company's policy on minimizing energy usage at their desks and around the office has been
conveyed to employees, and offer advice like as turning off computers at the end of the day and
turning off lights when a meeting room is not in use.

3- Promote a paperless office:

Companies have grown more collaborative, streamlined, efficient, and yes, greener as a result of
digital and cloud computing technologies. Paper and ink are being replaced with an eco-friendly
alternative, from employing desktop apps like Microsoft Office and Google Drive to investing in
digital HR and payroll tools to manage workforce management.

4- Support green vendors:

To establish a more environmentally conscious workplace, choose to conduct business with green-
friendly brands and companies. Investigate potential vendors to learn more about their
sustainability efforts and determine if they correspond with your company's mission and objectives
in terms of environmental effect. Thirst First, a locally based organic and fair-trade coffee
company, is a proud partner of Rise.

5- Reduce by reusing:
Encourage your employees to utilize reusable coffee mugs and water bottles to avoid this wasteful
habit. You may promote this project in the office by providing corporate swag like travel mugs and
stainless steel water bottles, as well as encouraging the program by holding a monthly gift card
drawing for team members who use their reusable cups for a whole week.

6- Invest in office plants:

Plants in the workplace can assist to enhance your workplaces, improve the overall ambiance, and
reduce tension and anxiety among your employees. Indoor vegetation can help to increase oxygen
levels while also removing contaminants like carbon dioxide and formaldehyde. According to
NASA studies, indoor plants can eliminate 87 percent of indoor air pollutants in just 24 hours. If
you believe in the health advantages of office greenery, this infographic might assist you in
choosing the right plant for your workspace.

7- Conserve human energy:

Although it may not be the first thing that comes to mind when thinking about environmental
practices, the well-being of your employees is critical to your company's healthy habits. The
importance of mindfulness cannot be overstated. Consider how keeping your personnel healthy
and energized will benefit your company's overall production. Establish a safe, non-toxic
environment for your employees at all times to keep them happy and energized. It can begin by
giving options that are both sustainable and healthful, such as organic fruits and vegetables.
8- Encourage sustainable transportation:
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During the work week, encourage your team members to use alternative forms of transportation to
and from the workplace, such as walking or carpooling with co-workers. As a benefit, your
company may provide transit subsidies to employees who commute to work. Additionally, if your
employees are not required to be in the office Monday through Friday, consider reducing their
commute time during the week by enabling them to work from home on occasion.

9- Get outside and volunteer:

Cause-driven volunteer programs are a great way to become involved in something worthwhile
while also making a major difference in your community like support some NGOs which are in
social cause and educate poor kids and help them financially. Organize some training sessions to
educate members of NGOs about environmental responsibilities, health and safety and help them
to implement. There are numerous green causes and conservation efforts in which your
organization might become involved. Find a philanthropic cause that is important to your company
and get your employees involved.

10- Make green thinking a key part of your company culture:

Get your staff interested in your environmental goal by engaging and involving them. Gather
suggestions from your team members on how your company can go green and be more
environmentally conscious in the workplace by talking to them and collaborating with them.
Obtaining feedback from your staff will allow them to embody and embrace your new mission and
goals.

Encourage environmentally conscious practices in the workplace to help your people feel healthier,
more satisfied with your company, and more motivated to thrive at work. From promoting
workplace wellness through a mindful and healthy office environment to allowing your team
members to think of the bigger picture, encouraging environmentally conscious practices in the
workplace will help your people feel healthier, more satisfied with your company, and more driven
to thrive at work. Above all, the value of creating a lasting impression of your organization's
environmental effect will last for decades.

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Organization Structure & shareholders voting right’s impact on CER
Authored by NEEHARIKA SHARMA (EPGP-13B-061)

Difference between CSR and CER:

CSR (Corporate Social Responsibility) is a process by which businesses incorporate social,

environmental, ethical, and human rights concerns into their fundamental business operations."

It is, nevertheless, equally crucial to understand the distinction between the two. A company's CSR
spending is proportional to its profitability. The amount of CER spent is proportional to the
project's cost. As a result, the promise under the latter is made regardless of the company's profit
or loss.

CSR is focused with giving back to society through a variety of activities in the areas of education,
development, and the development of skilled labour. CER, on the other hand, is exclusively
interested in green solutions for the area in which the corporation has left its mark.

Structural elements of CER

 Using sustainability models to ensure that resources are available for future generations
 Optimal utilisation of natural resources to boost productivity
 Waste elimination or zero waste, as well as pollution reduction

Infrastructure generation for drinking water supply, sanitization, health, education, skill
development, roads development, cross drains, solar power management, solid waste management
facilities, scientific support and awareness to local farmers to increase crop and fodder yields,
rainwater harvesting, soil moisture, avenue plantation, community area plantation, and so on are
some of the activities that can be carried out in CER.

CER was implemented as an additional cost to cope with pollution management, environmental
protection, and conservation, according to recommendations issued by the Ministry of
Environment, Forest and Climate Change (MoEFCC) in May 2018. A greenfield project with an
investment of Rs 100 crore will be required to pay 2% in CER, whereas a brownfield project will
be required to pay 1%.

The CER fluctuates based on the amount of money invested. The CER for a project worth Rs
10,000 crore would be between 0.125 percent and 0.25 percent.

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The company must have a well-defined environmental policy that the Board of Directors has
approved. Standard operating procedures should be prescribed in the environmental policy to
ensure effective checks and balances and to bring any infringements/deviation/violation of
environmental/forest/wildlife norms/conditions to light. Infringements / deviations / violations of
environmental / forest / wildlife standards / conditions and / or shareholders / stake holders must be
reported to the corporation through an established method. As part of the six-monthly report, a
copy of the board resolution in this regard will be provided to the MoEF&CC.

 A separate Environmental Cell at the project and company head level, with qualified personnel
would be set up under the control of senior Executives, who are directly responsible to lead an
organization.
 Self-environmental audit shall be conducted annually. Every three years third party
environmental audit shall be carried out.
 A top-down chain of control is embodied by a pyramidal ownership structure, with business
owners at the top of the pyramid. Investors are divided into groups based on their voting habits
in a multiple-share class structure. These arrangements enable managers to strengthen their
control by owning shares with higher voting rights.
 Outside investors and minority shareholders are usually more concerned with short-term
earnings than with the long-term success or viability of the companies in which they invest.
Because of this short-term concentration, management is prone to making short-sighted
judgments that inhibit long-term investments.

Example:

KPMG has implemented corporate

environmental responsibility (CER). To ensure
long-term viability, their environmental
programs are interwoven into day-to-day
operations. KPMG has an impact on the
environment in five areas: water, trash, paper,
energy, and transportation. Currently, the
environmental management program is saving
£250,000 each year. Furthermore, moving to
greener energy sources saves an additional
£600,000.

Another company that has been active in environmental program is Levi's. Its strategy is to lessen
their carbon footprint through contributing to environmental causes. By utilising less water in the
manufacturing of their products, Levi's has trademarked their "Water Less" marketing. This
programs has already saved one billion litres of water, and they intend to improve their production
process by 2020. The goal of the Environmental Social and Governance Committee (the "ESG
Committee") is to support the Company's continued commitment to environmental stewardship,
health and safety, corporate social responsibility, corporate governance, and sustainability, as
applicable. The ESG Committee is made up of executives from several departments.

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The Committee aims to:

 Define ESG goals, targets, and strategy with the purpose of further integrating sustainability
into the Company's strategy and operations.
 Oversee and coordinate the Company's ESG initiatives.
 Assist the Board of Directors' Governance and Nominating Committee ("GNC") in executing
its oversight obligations with relation to the Company's ESG efforts; and
 Keep track on and analyze advancements in ESG issues, with the goal of enhancing the
company's understanding.
 To assist in the development of the Company's general ESG strategy and to consider and
recommend policies, practices, and disclosures that conform to such strategy.
 To assist in the oversight of internal and external communications with employees, investors,
customers, and other stakeholders.
 To assist in the development of the Company's general ESG strategy and to consider and
recommend policies, practices, and disclosures that conform to such strategy.
 To consider the current and emerging ESG matters that may affect the business, operations,
performance or public image of the Company.
 To maintain metrics, systems, and procedures to monitor and track ESG matters, as judged
necessary and appropriate.
 To undertake such other duties, tasks, and obligations relating to the ESG Committee's purpose
as may be needed from time to time by the GNC or the Board of Directors.

The CSR and CER activities overlap in sense. Total Members of CSR Committee the CSR
Committee shall consist of 3 (Three) or more Director, out of which at least one director would be
an Independent Director. Relaxation from having Independent Director in CSR Committee: All
unlisted public limited companies on which the appointment of Independent Director is not
mandatory, are exempted from having Independent Director in their CSR Committee. Committee
will convene on a regular basis and submit an update to the Steering Committee every three
months. The ESG Action Committee may convene at any moment it deems necessary or suitable to
carry out its tasks. Other Company personnel may be invited to attend ESG Action Committee
meetings to give appropriate information as needed. Members of the ESG Committee may
participate in meetings using a telephone conference or comparable communications equipment
that allows everyone in the room to hear each other. The ESG Steering and Action Committee
Chairpersons, or their designees, are in charge of organising and setting the agenda for each
meeting. Until the ESG Steering Committee picks a successor, the Company's Chief Financial
Officer will act as Chairperson of the ESG Action Committee.

The Action Committee Chairperson, in collaboration with TriMas' President and CEO, will provide
monthly reports to the GNC and Board of Directors on the ESG Committee. The ESG Steering
Committee may delegate all or part of its tasks and responsibilities to one or more of the ESG
Committee's ESG Action Committee subcommittees at its discretion.

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How can Organization reduce the risks and costs of capital through long-run environmental
management
Authored by PARTHA GHOSH (EPGP-13B-068)

The conventional view had been that environmental (“green”) performance represented a cost to
the firm and should be minimized whenever possible. Specifically, investors view pollution control
expenditures as a waste of resources that could have been invested profitably and hence do not
reward the companies for their socially responsible behavior.

In this section, we will understand the capital market’s response to improved environmental risk
management by a firm. We will use a firm’s cost of capital to measure this impact. We believe that
such improved environmental risk management helps in improving the market’s risk perception of
the firm. Research proves that investors and analysts take account of improvement in
environmental risk factors when making investment decisions and recommendations. This
improved perception, in turn, cause the financial market either of the two –
1. Accept lower risk premiums on equity
2. Allow the firm to maintain higher levels of leverage

Both of these result in a low cost of capital overall. The reduction in the firm’s cost of capital due
to a reduction in the perceived riskiness of its future cash flows can be differentiated from an
increase in its cash flows from higher revenues and/or lower costs due to improved resource
efficiency through better corporate environmental performance.

Our focus here is solely on whether or not investors’ risk perception of the firm changes due to
environmental performance. This question is of significance because the cost of capital and return
on capital are fundamental variables from the firm’s standpoint and capital markets, respectively. If
the market perceives improvements in resource utilization only and does not perceive changes in
firm’s riskiness, the cost of capital would remain unchanged. However, if the changes in perceived
riskiness help in the reduction of costs of capital, the firm’s overall cost base would decrease while
its ability to make a profit from a given level of revenue correspondingly improves. Research
proves that firms that invested in cleaner technologies experienced higher levels of abnormal profit
growth while the earliest adopters had the highest levels of that growth.

A firm’s cost of capital is a key determinant of its valuation for two reasons.
1. First, the cost of capital is the expected rate of return demanded by a firm’s investors for
investing in the firm. The higher the rate of return demanded by a firm’s investors for the
capital they provide to the firm, the more costly it is for a firm to finance itself. As capital is
a basic input the firm receives, the more costly that this input is, the less chance the firm
has to make a profit regardless of its level of revenues.
2. Second, the cost of capital is the rate that investors use to discount a firm’s future cash
flows. More the cost of capital, the lower the present value of the firm’s future cash flows.

Therefore, all else equal, firms with a lower cost of capital will be more highly valued than firms
with a higher cost of capital and hence more attractive to investors. We will try to understand this
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impact on the cost of capital through a couple of approaches, namely the CAPM model approach
and the alternate ex-ante conventional approach.

CAPM Model Approach to Determine the Cost of Capital

Investors determine a firm’s cost of capital by evaluating the riskiness of its cash flows relative to
other investment opportunities that are available to them. Broadly speaking, firms are financed
through either debt or equity capital. Debt capital can come from private sources (e.g. banks) or
from public sources (the debt markets). In either case, the cost of debt is the applicable interest
rate. (In public debt markets, investors trade debt securities just like they trade equities in a stock
market.) The cost of equity is the return investors in the firm’s shares except as reflected in the
stock price they are willing to pay relative to future expected cash flows. Since most publicly held
firms typically finance themselves with both debt and equity, the firm’s overall cost of capital is
given by the weighted average of its cost of debt and equity capital, which has come to be known
as the weighted average cost of capital (WACC). In the general case of a firm with both equity and
debt financing, the firm’s after-tax weighted average cost of capital (WACC ) can be expressed as

D E
WACC = r d (1−T )+ r
D+ E D+ E e
where –
1. E = market value of the firm’s equity
2. D = market value of the firm’s debt
3. re = the firm’s cost of equity capital
4. rd = the firm’s cost of debt capital
5. T = the firm’s rate of corporate taxation.
The firm’s cost of equity capital ( r e ) is equal to the expected investor return from holding the
firm’s equity, estimated with the Capital Asset Pricing Model (CAPM)

re = rf + βE(rm – rf)
where –
1. rf = the risk-free rate
2. rm = the return on the market portfolio
σ em
3. βE = 2
σm
a. σ em = covariance between the stock returns and the market returns
b. σ 2m = variance of the returns on the market

By reducing current or potential hazards, the firm reduces the number of potential claimants on its
rents through fines, settlements, or other compliance/litigation costs. By reducing the number of
potential claimants on its rents, more of the firm’s overall economic resources can be directed
strategically to dividends to stockholders, debt payments, internal investments, or acquisitions.
Each of these activities is likely to be rewarded by the market in terms of improved risk perception
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of the company from an investment standpoint. In general, improving a firm’s environmental risk
exposure (environmental risk management) can reduce its cost of capital in several ways through
both direct and indirect relationships;
1. By reducing the firm’s cost of debt capital rd
2. By increasing the firm’s debt capacity and thereby increasing the amount of income the
firm can protect from corporate taxation
3. By reducing the firm’s cost of equity capital

The cost of debt financing sustained by a firm is based on the assessment by the capital market
(including banks, bond markets, and rating agencies) of the firm's default risk. The level of default
risk that a firm presents is a function of the uncertainty inherent in its future activities. The greater
the uncertainty inherent in a firm’s future activities, the lower the assessed credit quality of its debt
and the higher the cost of debt financing (i.e. it will have to pay higher interest rates). Undertaking
environmental risk management activities by improving environmental performance will reduce
the likelihood that firms will encounter extreme environmental events that may require heavy cash
outflows arising from compensation and clean-up costs, and thereby make firms more endangered
to bankruptcy. Environmental risk management can also reduce the vulnerability of firms to other
adverse business developments that would reduce profitability, impair the firm’s reputation or
reduce the value of its asset base.

Thus, we can conclude that the higher the level of environmental risk management the lower the
firm’s cost of debt capital for a given level of debt.

Risk management can be viewed as an alternative strategic choice to employing equity capital.
When the firm shifts its financing strategy from equity to debt, it shifts to the debt market the
burden to bear the firm’s residual risk. As a firm increases its level of risk management, it can
correspondingly shift its financing from equity to debt capital (i.e., increase its leverage) because
the firm is perceived as being less risky.

Another benefit of raising the firm’s level of debt is that higher leverage, in turn, increases the
amount of income that a firm can shield from taxation. Therefore, the higher tax advantage
associated with a higher level of debt reduces the after-tax cost of capital of a firm, giving
managers further incentive to add leverage by reducing the cost of borrowing even further.

Thus, we can understand that –

1. More the level of environmental risk management the higher the firm’s leverage.
2. More the level of environmental risk management the higher the firm’s tax advantage
(shield) from debt financing.
3. More the level of environmental risk management the lower the cost of equity capital.

Another explanation for the relationship between environmental risk management and the cost of
equity capital stems from the types of investors “green” firms attract. Two investor classes, “green”
and “non-green”, the authors showed how green investors will only invest in firms with good
environmental risk management (i.e., more legitimate firms) while non-green investors are
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indifferent about environmental risk management and will not necessarily invest in “green” firms.
Therefore, firms with poor environmental risk management will have a higher cost of equity
capital because fewer people will buy their shares.

Finally, another explanation for why the cost of equity financing might be reduced can be found in
the benefits of the firm being monitored by institutional investors who own its shares. Under this
line of reasoning, if firms strategically manage their environmental risks, it is possible that this
activity will gain them legitimacy even with “non-green” institutional investors and increase the
investment by institutional investors in the firm’s shares.

Thus, we can safely conclude that the higher the level of environmental risk management, the
lower the firm’s weighted average cost of capital (WACC).

Ex-ante Approach to Determine the Cost of Capital

We have seen through the CAPM model how environmental management helps bring down the
cost of capital of a firm. Let’s understand the exact impact through an alternate approach. This
approach is called the implied (ex-ante) cost of capital approach and has been widely used in
recent CER research-related literature.

Several approaches have been defined to estimate firms’ ex-ante cost of equity; however, it is
found consistently that firms with better CER scores exhibit cheaper equity financing. In
particular, the results suggest that investments in environmental policies, product strategies, and
improving responsible employee relations contribute substantially to reducing firms’ cost of equity.
The results also show that participation in two industries, namely, tobacco and nuclear power,
increases firms’ cost of equity.

To understand the link between CER performance and the cost of capital, let’s understand the
following considerations -
1. The cost of capital is the internal rate of return (IRR or discount rate) that the market uses
to calculate a firm’s future cash flows to understand its current market value. It is hence,
the required rate of return given the market’s perception of a firm’s riskiness. If CER
affects the perceived riskiness of a firm, then socially responsible firms do benefit from a
lower cost of finance.
2. Related research suggests that effective corporate environmental governance, especially
stricter disclosure standards, lowers firms' equity capital costs by reducing agency and
information asymmetry problems. Information asymmetry is one of the reasons through
which CER impacts the cost of capital.
3. The cost of equity symbolizes the investors’ expected rate of return on corporate
investments and hence is a crucial consideration for a firms’ long-term investment
decisions. Understanding the relation between CER and the cost of equity helps managers
estimate the impact of CER investment on firms’ cost of finance, and hence has significant

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 implications for strategic planning. Capital cost is a channel through which capital markets
encourage firms to become more socially responsible.

It is clear that concerning investor preferences, socially conscious investors prefer not to include
low CER firms in their investment portfolios. For instance, based on their equilibrium model,
researchers argue theoretically that exclusionary investing by green investors leads polluting firms
to be held only by neutral, and thus fewer, investors. As a result, polluting firms have to offer
neutral investors higher expected returns to compensate them for the lack of risk-sharing

Also, with respect to information asymmetry, it is found that information asymmetry is likely to be
more severe for low CER firms. Research results have shown that high CSR firms tend to disclose
more information. These firms want to project their positive image as a responsible corporate
citizen to investors and other stakeholders.

Hence it is evident from the financing research literature that companies do benefit by investing in
corporate environmental management.

Is the Investment in CER Worth it?

Now that we have discussed the impact of environmental management on a firm’s future risks and
cost of capital, let’s understand what it takes for the firm to be environment-friendly – “green”.
Does reducing pollution and emissions really help firm’s improve the bottom-line or just add
investment burden and cost?

There are arguments in favor of both the views, i.e., going green is a cost burden of firms and
could be detrimental to it’s competitiveness. Also, becoming green increases efficiency and saves
money, hence giving the firm a cost advantage. However, it is evident from the numerous research
that the cost incurred to prevent environmental pollution and reduce emissions does get reflected to
the ‘bottom line’ within one to two years of initiation, meaning that those firms with the highest
emission control levels stand the most to gain. Strict environmental regulation to lower emissions
might actually improve competitiveness by encouraging efficiency and innovation.

Emission reduction can be achieved through either of the two following means:
(i) Control - emissions and effluents are trapped, stored, treated, and disposed of using
pollution control equipment; or
(ii) Prevention - emissions and effluents are reduced, changed, or prevented altogether
through better housekeeping, material substitution, recycling, or process innovation.

The second approach prevents pollution during the manufacturing process itself, i.e., at the same
time that it produces its goods, whereas the former approach requires expensive and non-
productive pollution control mechanisms to achieve compliance with environmental regulations.
Reducing emissions or complying with norms through pollution prevention is thus much cheaper
than cleaning it up at the end of the process.
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By integrating pollution prevention into existing total quality management (TQM)programs
through the use of employee involvement and ‘green’ teams, significant reductions in emissions
appear possible using continuous improvement methods focused on environmental objectives.
Thus, not only does pollution prevention save the cost of installing and operating an end-of-
process pollution control equipment, but it actually also increase productivity and efficiency.
Reduced waste means better utilization of inputs, hence resulting in lower raw material and waste
disposal costs. Moreover, pollution prevention strategies offer the potential to cut emissions well
below the levels required by law, reducing the firm’s compliance and liability costs.

Evidence also suggests that in the early stages of pollution prevention, there is a great deal of ‘low
hanging fruit’ - easy and inexpensive behavioral and material changes that result in large emission
reductions relative to costs. As the firm’s environmental performance improves. However, further
reductions in emissions become progressively more difficult, often requiring more significant
changes in processes or even entirely new production technology

The results of numerous studies do conclude that it does indeed pay to be green. Efforts to reduce
emissions through pollution prevention appear to drop to the bottom line within one to two years
after initiation. As expected, the biggest bottom-line benefits accrue to the ‘high polluters’ where
there are plenty of low-cost improvements to be made. It appears that the closer a firm gets to ‘zero
pollution’, the more expensive it gets, as further reductions mean rising capital and technology
investments. Rising costs thus appear to offset cost reductions realized from the elimination of the
remaining emissions. However, the results also suggest that the marginal costs of reducing
emissions seldom exceed marginal benefits. Indeed, although up-front investment may increase,
the data suggest that a strategy to reduce emissions does not negatively affect the bottom line, even
among those firms that have already drastically reduced emission levels.

Reputation Building with CER

Authored by PIYUSH SHARMA (EPGP-13B-070)

Corporate environmental responsibility (CER) is a new way for businesses and the environment to
work together. Companies that promote environmental goals have economic, political, and societal
ramifications. Responsible organizations are perceived as friendly by both consumers and
competitors, and consumers choose their products and services because they believe they are the
outcome of responsible and sustainable business. Furthermore, corporate environmental
stewardship can aid in the development of long-term enterprises, while social responsibility
initiatives can be beneficial business strategies.

According to studies, companies who use systems and methods to maintain and improve the
environment's quality over time might "win competitive advantage," according to studies.
Businesses may save money by recycling and reusing, and their reputation among their consumers,
the company's most essential stakeholders, increases.

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IKEA, a Swiss company, has a broad CER initiative called People & Planet that includes specific
goals and action plans to achieve three lofty objectives: • enabling a healthy and sustainable
lifestyle for a billion people, • creating a circular business that recycles all of the resources they
use, and ensuring an equal workplace for all in their supply chain.

So far, the Climate and Energy steps they've taken have yielded incredible outcomes, including the
usage of 100 percent sustainable wood suppliers, which they handpick based on their use of
forestry methods that ensure renewable resources. They've also switched entirely to LED light
bulbs, which use 85 percent less energy than their incandescent counterparts. By making
production brighter, their "More for Less" concept reduced waste. Cotton, water, and food are part
of their comprehensive sustainability approach. IKEA has done an outstanding job! UPS is another
excellent example of a green strategy. Carbon emissions are the primary concern about
environmental effects because their business involves transporting things. They've been hiring an
independent auditing agency to keep track of their energy use and carbon emissions reductions for
a few years now.

Are all enterprises harmful to the environment? No. However, this does not absolve those who are
"innocent" of culpability. Businesses with significant CO2 emissions aren't the only ones who need
to start modifying their ways. Organizations worldwide are becoming more aware of their role,
with stakeholder pressure for sustainable practices playing an essential part.

Businesses place a high value on environmental responsibility. They deplete natural resources,
release toxic waste, and emit CO2, contributing to global warming. Forests have been exhausted,
rivers have been contaminated, and ocean ecosystems have been degraded. To summarise, there is
a pressing need to find ways to decrease, if not eliminate, corporations' environmental impact.

Numerous studies show a positive link between corporate reputation and financial performance.
Conforming to global corporate social responsibility guidelines can help businesses strengthen
their brand.

Opinion, image, and identity are the three components that make up a company's reputation. It
assesses the organization's standing with its internal employees and external stakeholders. The
interchangeability of identity, image, and corporate reputation has been exposed through various
attempts to define them across time. Internal tactics to convey the organization's accomplishments
and failures to others are based on a collective mentality.

According to some studies, there are three different corporate reputation definitions: reputation as a
condition of awareness, assessment, and asset. This method provides for the definition of corporate
reputation as "collective observers' evaluations of the organization's economic, social, and
environmental effect across time." Corporate reputation is recognized as an intangible asset with
two dimensions in management research: the economic outlook, or how to expand stakeholders'
perceptions of an organization's ability to produce quality goods, and the institutional perspective,
which entails increasing what is important to stakeholders.

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CER cost vs total Asset
Authored by SHAMEEK DEB (EPGP-13B-103)

A company is a type of organisation that gathers operations and other aspects that support
operational activity. The company's goal of making profit must be backed up by sufficient finances
to run its operations. One of the various ways for go-public companies to obtain capital is to
exchange their shares on the Stock Exchange. Increased market competition and rivalry pushes
organisations, particularly go-public companies, to further demonstrate their competitive
advantages in order to entice investors to invest in them. Financial statements are used to evaluate
a company's financial performance. The financial statement analysis that will be employed in this
study is a financial ratio analysis namely Return on Assets (ROA) and Return on Equity (ROE).
The decisions, strategies & implementation in the form of CER activities and its impact on
revenues, cost, net profit, retained earnings, ROA & ROE is also furnished below
Given the importance of financial performance to a business, we looked at the elements that
influence financial performance, with a focus on non-monetary aspects including environmental
performance and corporate environment responsibility (CER). Environmental performance refers
to a company's efforts to manufacture energy efficient & eco friendly products that provide a
healthy environment for the community. Companies that have a better environmental performance
and invest more in clean and green technologies will be more well-liked by the public. An increase
in public admiration and loyalty leads to an increase in sales of the company's product and service.
On the other hand, the company with the best environmental performance has implemented the
concept of ecoefficiency. Ecoefficiency is the concept of creating more goods and services by
using fewer resources whilst generating lesser waste and pollution as possible. The increase in
sales followed by cost efficiency (eco friendly & energy efficient products) will increase the
company's net profit. Subsequent impact of the increase in the net profit of the company shall
increase the Return on Assets (ROA)
Investors, in addition to consumers, evaluate a firm based on its environmental performance.
People will value companies that have a gold or green rating for their environmental performance.
Greater public admiration and loyalty leads to increased sales of the company's products and
services. The company's net profit would have improved as a result of higher sales and the
adoption of the concept of energy & ecoefficiency that leads to cost optimisation. Retained
earnings surged with the company's expanding profitability. Increased retained earnings will allow
the company to enhance its ownership (shareholders' equity) in the future. Most corporations used
to reinvest their retained earnings in the business segments that could potentially increase market
share, revenues and generate higher profits. The revenue, which is always increasing, is the next
effect. As a result, increasing the company's net profit will result in an increase in Return on Equity
(ROE)

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Companies who perform CER activities and publish it in their financial statements will receive a
higher public response. The safety and health of consumers & customers whilst using the product
is one indicator of CER assessment. The company's CER disclosure confirms the public that it
produces a high-quality product and does business in an ethical and responsible manner. The
company's sales will expand as the public's faith in the company grows. In terms of cost, the
company can conduct CER activity by hiring local labour as a means of increasing community job
opportunities. As the local workforce is less expensive than foreign labour, this type of CER
activity decreases the company's labour expenditures indirectly. The increased level of sales along
with an optimised costs shall increase the company's net profit and create a positive effect on ROA
Investors can also assess performance based on the company's social performance. With CER's
public disclosure, shareholders can discover that the company's personnel are trained and educated
through a company-designed training programme. In addition, shareholders are informed that the
company is continuing to evaluate staff performance and development. This form of CER
disclosure would therefore provide the various stakeholders confidence that the company
generating the goods and services is employing high-quality people. The amount of sales will rise
vis-à-vis the increase in stakeholder confidence. Companies that do CER activity with their energy
savings through conservation and better efficiency might be an indicator of a reduction in expenses
to be incurred by the company in terms of costs. Increased sales combined with lower operational
costs will boost the company's net profit. Increased corporate profits will increase retained
earnings, which will have an impact on the company's equity. With more retained earnings, the
company will be able to enhance its ownership (shareholders' equity) in the future.
Conclusion:
The impact of CER activity leads to the creation of eco-friendly environment, energy efficient
products & local workforce management helps to optimise utilisation of resource, thereby reducing
the cost of operations. Such activities boosts customers & investors confidence level and leads to
increased revenues. The higher revenues with an optimised cost increases the net profit, retained
earnings and equity ownership of the company. This creates a positive impact on the ROA and
ROE of the company
Return on assets = Net profit / Total assets
Return on equity = Net profit / Total equity amount

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Use the input/output model developed by Leontief in relation
Authored by TITAS LAHIRI (EPGP-13B-116)

Abstract:
This model is intended to take into account macro-economic assessments of environmental
damage, health deterioration due to pollution, as well as the costs of using environmentally
friendly technology, the implementation of environmental and energy advances, and climate
change. The proposed modified model of environmentally oriented input-output balance can be
employed in the development of an economic compensation system for the use of natural capital
and the consumption of ecosystem services in countries and regions. The paper's modified
Leontief-Ford model can be used to calculate green economy development, such as in Russia
during the creation of environmental and economic development initiatives. This paper also opens
up discussion about the possibility of further integrating theoretical models for environmental
decision-making.

Introduction:
By combining two useful ecological-economic methods: input-output analysis and multi-criteria
decision, one can assess the sustainability of investment in various economic sectors to minimize
resource usage and generation of emissions.

The GDP and other economic indicators are just the ‘distorting lens’ & these are insufficient to
show the negative effects on environmental pollution due to economic development.

So, below is the proposed modified Leontief-Ford model showing all parameters of determine the
damages caused by environmental pollution.
The following system of equations can be used to illustrate the modified model:

∑j=1maijxj+∑q=m+1naiqyq+yi=xi, i=1,m¯¯¯¯¯¯(1)

where i―the type of a product. All these products can be from 1 (unit) to m;

m―the number of all products.

∑j=1majqjxj−yq=bq, q=m+1,n¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯(2)

where: aij ―costs of product i per unit of the production j;

aiq ―costs of product i to render harmless a unit of hazardous waste q;

aiq ―waste generation q in production a unit of product j;

yi ―the value of the final good i;

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xi and xj ―the value of gross domestic product of i-type or j-type;

yq ―the volume of waste disposal q prevention of the potential air pollution by hazardous waste);

bq ―waste q emissions into the air.

Equations (1), in contrast to the usual static balance model, the production cost and the air
pollution prevention costs are separately considered. Equation (2) describes the ecological and
technological balance of education, disposal and specific waste emissions.

After entering the vectors & matrices, the final equation stands like-
Final good –
y¯i is -

y¯=∑i=1my¯i

Results & conclusion:

As a result, the decrease in resource use for environmental damage prevention and
environmentally-oriented activities in the traditional final good can only result in a visible increase
in resource growth for consumption and accumulation, as more and more resources will be spent to
compensate for pollution losses, reducing real consumption and accumulation in the national
economy. As a result, the "purified" end good, i.e. its conventional worth without cost
compensation, better reflects the country's socio-economic growth.

Conclusion:

Currently, the needs of economic growth in most countries' resources do not match the available
opportunities, putting a greater strain on the environment, resulting in deterioration of natural
capital, social conflicts, poverty, and hunger. A green economy, which aims to establish economic
and environmental balance, is the path out of this problem. Thus, in the transition to a green
economy, cleansed macroeconomic measures like as GDP and final good will better represent the
dynamics of socio-economic growth. As they get closer to mass adoption of environmentally
friendly technologies, conventional and macro purified values will merge.

The presented methods can be applied to assess green growth in other nations, particularly those in
the Asia-Pacific area.

The problems raised in this article provide new viewpoints, unresolved issues, and suggestions:

1) In order to apply this modified input-output model in the transition to a green economy, it is
important to develop uniform methodological methods to the assessment and measurement
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 of environmental costs and pollution damage. This is important so that when equivalent
computations are carried out in different nations around the world, unified concepts and
techniques are utilised to assess the detrimental impact of economic activity on the
environment.

2) In the context of specific types of economic activity, it is also required to create uniform
methodological ways for assessing damage and potential losses as a result of climate change
(industry, construction, agriculture and forestry, housing and communal services, etc.).
Within the scope of the Paris Climate Agreements [15], the development and use of climate
funds, it is required to adopt common approaches and mechanisms to manage the low-
carbon sector.

3) Statistics of indicators characterising the environmental intensity of production, i.e.

consumption of natural resources, energy, emissions and discharges of harmful substances,
waste generation, greenhouse gas emissions per unit of output, as well as statistical
indicators characterising "net savings," i.e. processes of "wear and tear" of natural capital,
exhaustion of natural resources for environmental purposes, are used to implement this
model and conduct practical calculations on its basis.

4) Calculations for one or more nations and regions of the world based on a comparable system
of environmental, economic, and climatic indicators require international cooperation of
universities and research institutions.

CER requirement as per Indian Law and its future implication to the country
Authored by VARUN MISHRA (EPGP-13B-120)

Corporate Environmental Responsibility is an

offshoot of Corporate Social Responsibility. CER
refers to a company's responsibility to avoid
harming the environment. The environmental side
of CSR has been debated for decades as
stakeholders demand that businesses become more
environmentally conscious and socially
responsible. Environmental protection is
considered the "public interest" in the old business
paradigm. Governments have previously assumed
primary responsibility for environmental
management and conservation.

As a means of promoting environmental protection, the public sector has focused on formulating
legislation and applying punishments. The business sector has recently adopted a corporate
responsibility approach to environmental harm prevention and mitigation. The sectors and their
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functions have evolved, with the private sector becoming more involved in environmental
protection. Many governments, enterprises, and large businesses are increasingly developing
ecological and economic growth strategies. A growing number of companies have promised to
conserve natural environments in recent years.

CER is defined as a method for businesses to incorporate environmental concerns into their
operations to reduce waste and emissions while increasing resource efficiency and production. Its
goal is to minimize actions that hurt the country's natural resources. It derives its entire meaning
from the current context of global warming, biodiversity destruction, and so on. It serves as a pillar
for creating some organizations that voluntarily contribute to CER. Corporate environmental
responsibility is concerned with the most effective and efficient use of natural resources to reduce
ecological consequences and financial costs. Environmental risk management is now a must for all
businesses' growth, since it enables them to carry out their operations in a sustainable manner
while also safeguarding the environment.

Corporate Environmental Responsibility in India

The environment ministry has finalised guidelines requiring any company seeking green clearance
to set aside 2% of its capital investment for corporate environmental responsibility (CER). The
standards compel every corporation to set aside funds for Corporate Environmental Responsibility
in addition to the cash needed to carry out the environment management plan in a project-affected
area. Brownfield (expansion) projects would be required to set aside 0.125 percent to 1% of extra
capital investment for CER purposes. In contrast, greenfield projects would be required to set aside
0.25 percent to 2% of capital investment for CER purposes.

The Environmental Impact Assessment (EIA) process is not in place in India. As a result, the
ministry must enhance its implementation and EIA process. Instead, the ministry is now dictating
how much money each company should spend on CSR (or Corporate Environment Responsibility,
as the ministry prefers to call it). The ministry, on the other hand, is unconcerned about CSR.
Companies are required by the Companies Act to undertake Corporate Social Responsibility.
Reference to the Sec 135 of the Companies Act 2013 and schedule VII of the Companies Rule
2014 currently lay the groundwork for Corporate Social Responsibility (CSR) for any company
having a net worth of Rs 500 Cr or more, a turnover of Rs 1,000 Cr or more, or a profit of Rs 5 Cr
or higher in any financial year.

According to the environment ministry's criteria, CSR does not always cover all initiatives. When
a project receives environmental approval, it may be in a scenario where the company has yet to
produce a profit or is not covered by the Companies Act. Pollution control, wildlife and forest
conservation, compensatory afforestation, and rehabilitation and resettlement of displaced persons
are all examples of corporate environmental responsibility efforts. Money can be used for a various
purposes, including supplying drinking water, infrastructure, sanitation, health, education, and skill
development, among others.

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Union Budget and Environment Protection
The Central Government boosted the budget for the environment by roughly 5% for 2020-21 in the
budget for 2020, while leaving the cash given to pollution control and climate change action plan
unchanged. The Union Finance Minister has set aside Rs 3100 crore for the environment ministry,
with Rs 460 crore set aside for pollution control, which is the same amount as in the previous
budget. Pollution Control was conceived to provide financial aid to pollution control
boards/committees as well as money for the National Clean Air Program (NCAP).

The minister also stated that states with cities with populations above one million should be
encouraged to develop and implement measures to ensure cleaner air.

The Ministry of Environment, Forests, and Climate Change will announce the incentive
parameters. For 2020-21, Rs 4,400 crore has been allotted for this purpose.

Compared to the previous year, the budgeted allocation for the National Mission for Green India
programme has increased from Rs 240 crore to Rs 311 crore with the national afforestation
programme.

The sum allocated to alone is Rs 246 crore, which is significantly greater than the amount allotted
the previous year, which was Rs 179 crore.

Project Tiger and Project Elephant, both established by the government, have seen some
modifications, with the former being cut by Rs 50 crore and the latter being raised by Rs 5 crore.
The fiscal year's funding of Rs 350 crore for Project Tiger, a conservation project for the wildcat,
has been cut to Rs 300 crore. Rs 30 crore for Project Elephant, a conservation initiative for
elephants across the country, has been increased to Rs 35 crore.

The environment ministry is responsible for ensuring the security of livelihood of coastal
populations, particularly fishermen, under the National Coastal Mission. The fund is planned to
maintain and conserve coastal sections and encourage sustainable development based on scientific
principles.

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Conclusion

Corporate Environmental Responsibility is

a new and rising facet of Corporate Social
Responsibility that prioritises the
company's environment. Concern for the
environment is gaining traction since, in
the fast-paced globalised digital age, our
natural environment and ecosystem are
rapidly deteriorating, potentially making
life on Earth impossible.

The government has enacted a slew of

rules and regulations aimed at protecting
the environment, but the truth is that
environmental protection is only
achievable thanks to the individual efforts
of every one of us. Some view CSR
activities as merely charitable actions that
are not carried out with the objective of
achieving the goals. Businesses use CSR
as a method to improve their reputation,
which leads to a larger client base and
increased revenues. They saw CSR as a
way to increase profits in terms of both
money and wealth. With the advent of
CER, it took a detour from its previous
path and became more focused on the
well-being of our natural surroundings.

References

- Strategic Management Journal - Environmental Risk Management and the Cost of

Capital by Mark P. Sharfman & Chitru S. Fernando
- Journal of Banking & Finance – Does corporate social responsibility affect the cost of
capital? by El Ghoul
- Business Strategy and Environment - Does it pay to be green? By Hart, S. L., & Ahuja,
G
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S1877042815053859/main.pdf?X-Amz-Security-

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- Section 135 of Companies Act, 2013 – Corporate Social ....
http://corporatelawreporter.com/companies_act/section-135-of-companies-act-2013-
corporate-social-responsibility/
- Corporate Sustainability and shareholder wealth, Justya Przychodzen 2016
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Categorizing_Motivations_of_Corporate_Environmental_Responsibility_as_part_of_
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