Sustainability is the mantra for growth in the ever competitive world

Another area for growth will be becoming part of global supply chains of multi-national corporations, manufacturing and supplying products with unblemished quality at competitive prices. This will not only galvanise the manufacturing but also the logistics industry, creating additional avenue for meaningful employment. However there is one more thing which is needed to be part of this exciting journey. As recent developments have shown, traceability and accountability on environmental and societal impact of business activities across the value chain have become increasingly important. 

Changing times

The neo-industrial societies had the early mover advantage in terms of abundant resources and a balance with environment, which absorbed any negative effects of the industries. However, today is a different story. We are living in times where the excessive consumption has fast depleted resources, the threshold of environment to absorb the effluents, emissions and waste has been severely breached and workforce is considered as mere production tools that can be replaced quickly and cheaply. In this scenario, if we follow the old school development model, we may not last very long. 

New rules of the game

Today there is tremendous awareness about this situation and actions required from businesses. Recently introduced regulatory requirements around the world, like French Duty of Care Law, UK Modern Slavery Act, Dutch Law on Due Diligence for Child Labor, EU and American laws on conflict minerals among many others, now focus on how companies source and manufacture their product and what kind of environmental and human rights impact it has. 

Public disclosure has been an effective tool in this. In April this year, a new ISO standard on Sustainable Procurement- ISO20400 was released, which brought the topic of sustainability, conventionally on the fringe of procurement into the main stream. In addition to this, 14 nations have released action plans on business and human rights, which calls for policy instruments to make businesses more accountable of their own and suppliers’ performance. 

Several stock exchanges now require companies to furnish data about the non-financial performance, that throws light on the impact of company’s operations and supply chain on environment and society in general. In India, SEBI, in 2012 made the publication of ‘Business Responsibility Report’ on similar lines mandatory for top 100 listed entities, based on market capitalisation in NSE and BSE. 

Going a step further, in February this year, it came out with another notification, encouraging companies to quantify not just financial capital but also six other types of capitals: natural, human, social and relationship, intellectual and manufactured to get a holistic understanding of true value generated by a company by looking at not only the financial performance but integrated performance, factoring in all the good, bad and ugly. 

Although this is only voluntary right now, but the writing on the wall is very clear. Going forward, businesses have to take end to end ownership of their impacts and those who can do this will only survive the next wave. 

Are we ready?

While we have seen some strong performance on the quality and cost side, areas of business impact like environment, labour rights and safety of workmen has largely been out of focus. Barring few companies, these issues have been paid more of a lip service. It is very common to find manufacturing units operating without appropriate licenses, especially environment ones or working hours exceeding regulatory limits, under payment of wages, unsafe working etc. One can attribute various reasons for these malpractices ranging from complex regulatory regime, to conventional mindset focusing only on product and not how it is manufactured to malpractices like corruption or even using them as excuse for low cost of manufacturing.  

However, none of these malpractices can be an acceptable excuse in the evolving global scenario. With companies increasingly coming under scrutiny for their own and their supplier performance, the demand for greater transparency and accountability will only increase in the times to come. It could also be a new differentiator for products in the new global landscape. 

What can we do?

We cannot carry the baggage of our past and become leader of future. To attract global business we have to address these challenges and find innovative solutions. This new reality presents an opportunity to overhaul our manufacturing capabilities and sensitivities. 

Experience shows inefficient planning and execution is the root cause of majority of malpractices. Stringent adherence to the sustainability and regulatory parameters require revisiting the processes and review of policies and practices. Such a review, when forced upon as an external requirement can bring the desired seriousness and help identify the inefficiencies and improve the organisation. 

Some approaches that can help above situations include careful review of capacity utilisation, workforce deployment, synergies of value chain within the organisation, health and safety indicators, waste management etc. Ad-hoc planning, casual management of shop floor and high safety incidents not only hurt delivery schedules and employees but also erode productive man-hours, increasing stress on lead time and potential quality issues. When addressed, these can result in more efficient processes leading to improved productivity and better cost management, thus changing the archaic perception that compliant operations are costlier. 

The integrated approach to organisation review focuses on often ignored areas, leading to discovery of newer areas of efficiency. With increasing focus on sustainability issues, only businesses that sustain these will be relevant and gain differential advantage. It is extremely important that global businesses can have trust and faith in Indian manufacturing capabilities to produce not only quality products at competitive prices but also in a manner that the impact is not harming the society and the environment. This will be the mantra for growth and thriving in the ever competitive world.

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Kanishk Negi is the global SCM sustainability manager of ABB