Based in India, Aditya Birla Group (ABG) was founded in 1857. With more than 120,000 employees worldwide and spanning 34 countries and 14 sectors, the Group is built on a strong foundation of stakeholder value creation.
GlobeScan’s India Director Anup Guruvugari spoke with Tony Henshaw, Chief Sustainability Officer of ABG, about their strategy to build sustainable businesses.
What does sustainability mean to ABG, a group with a legacy of more than 150 years in 35 countries and one of India’s first big multinational corporations?
Our definition of a sustainable business is one that is able to thrive and be profitable within the shrinking constraints and legal requirements of a sustainable world. Best practice today won’t be good enough and we expect governments to have to legislate a sustainable world. Increased legislation is a risk and an opportunity to business, and we need to understand today what risks and opportunities may come along so that we can plan to adapt. We expect the world to go through a downturn first, as lack of legislation means business as usual and the world continues to deteriorate. Once change is inevitable, those who can adapt will be the survivors in a stable and sustainable world. Adaptation is not without its price and many may not have the technical ability, the geographical location, or the funds to make the transitions needed. Our objective is to get through that dip and come out the other side, and so continue to add to our 150 years of legacy and be around for another 150 years.
Not many companies are currently fully aware of the size of the change needed, the complete transformation of the energy matrix for instance, with 30 percent less fossil fuel use by 2030 and 60 percent by 2050, some even say 100 percent by that date. Today, everyone “does sustainability” and many assume they will be able to adapt because they have big enough balance sheets and they already have good technology, or they just feel invincible and they will be in the right place at the right time. This may be true for some, but many will have to change their product portfolio, the way they make things, and build new supply chains. Consider what happened to Volkswagen and the emissions scandal which led them to a new vision to become the biggest electric car maker in the world. That means retooling every factory, retraining every employee, learning new technologies and redesigning every car, and completely changing the way they operate. If you’re big enough and start early enough, then you can do it.
How does ABG actively build sustainable businesses?
We start by proactively building management systems to ensure that we know and can prove that we’re obeying the law. We then use the same systems to help each business ask themselves if they have management systems in place that meet our Sustainable Business Framework that has been certified as conforming to 16 international standards – including the UN Principles for Responsible Investments, the leading banks Equator Principles, and many international standards Organizations, among others. We also make sure that our people are trained and motivated, our assets are fit for purpose and maintained, and that our systems and procedures are capable of helping us operate to deliver best practice. We are moving away from command and control management to professional systems.
After working to make our current operations as good as possible and reduce our impacts on the world, our strategic teams are asking a number of key questions. What happens if best practice today isn’t good enough for the needs of a sustainable world by 2025 and 2030? What are the external factors that will impact our business and force us to redesign it in order to adapt? For example, we might need a much higher carbon price to motivate the energy transformation or shrinking water tables due to lack of management and over-exploitation, or plastics and waste legislation to clean the oceans and land. What do we need to do to adapt to these changes? For example, do we need to invest in new materials technology? How do we transform our captive power supplies? Where can we find sufficient water and how far do we have to bring it? These are questions that no longer have easy answers.
We are also looking at our supply chains. One of the biggest issues we see is that most big businesses don’t know where their supply chain resides and they take it for granted, particularly tiers 4, 5, and 6 who will be facing the same needs to adapt to the sustainable world we need to build. We not only want to build sustainable businesses; we want to build sustainable value chains where every connection in the value chain is a business that we understand to be sustainable. We need to find which companies are physically resilient to water shortage, have the right technology and energy matrix, and then work with them because we can’t afford to have key components disappear in the future.
What have been some of the macro trends that have affected ABG’s stance and strategy on sustainability?
The biggest macro trend is the realization that the planet is still deteriorating – carbon in the atmosphere has gone from 354 parts per million when former Norwegian Prime Minister Gro Brundtland wrote her famous 1987 “Our Common Future” report, to 415 parts per million today. 450 parts per million means we have locked in a 2-degree temperature rise which means that India will have much less water available for its growing population. The world’s population has doubled in the past 60 years. Socially the world is getting better as we lift people from poverty and improve life expectancy, but if we don’t prioritize what we call the mission-critical issues then all our hard-gotten gains on the social front could be lost.
These trends have helped us to think about how we manage our operations better now, and how we prepare to adapt to the future. We need to see the return before we make the investment and one of the current challenges is to help leaders see the total cost of future adaptation as we are past the simple cost of mitigation. Some businesses may not even produce CO2, but could be massively impacted by climate change. To make the huge investments needed and to meet the laws and regulations driving them, we will need to innovate across the business including how we finance these changes. If we wait too long and are not ambitious enough, then business will find it cannot operate on a planet that fails.
Studying these macro trends at ABG has led us to develop our sustainable business model. We are reducing our impacts today and as we understand them more, we are creating sustainable business strategies to adapt to them.
With such varied businesses such as textiles, cement, telecommunications, financial services, and many others, how do you ensure that best practices are shared within the group?
At the Group level, we do more on systems best practice than we do on engineering best practice because the businesses are so different, however, the management systems needed are relatively the same. It is very important that every site has a risk assessment, an exposure assessment, a human rights risk assessment, and a biodiversity risk assessment. Each business analyzes these assessments and then takes decisions over targets and performance improvement that fits within their own business context.
Each business also looks at its long-term risk matrix and makes sure that the trends that we’ve identified are included and their consequences have been thought through. The results of the analysis and subsequent plan may well be different in retail, telecom, and metals. For example, metals may focus more on recycling while cement might go look at alternative materials and fuels. The answers may be different, but the methodology of building a sustainable business is the same.
What are you most proud of at the Aditya Birla Group?
I’m proud of our unique model and the creation of the sustainable business framework where we’ve boiled down international standards into an ABG framework of policies, standards, guidance notes, training courses, and self-assessment questionnaires for the business to assess where they are and prioritize improvements and plan transformations.
We’ve also innovated in how we oversee our global assets including 180+ factories, 5,000+ offices, and more than 50 guesthouses by using an IT system and self-assessment that puts the responsibility squarely on the business leadership and local management to drive the changes we need. By using IT, our reach and bandwidth plus our ability to manage large amounts of information is increased.
Finally, we have also developed many strong partnerships. We work with the International Union for Conservation of Nature on biodiversity, an NGO called Canopy on forest management and protection of ancient and endangered forests, and with Forum for the Future on Cotton 2030. We are members of the World Business Council for Sustainable Development and the Sustainable Apparel Coalition. These partnerships have helped our business leaders identify what the major external factors are that face them and to consider longer-term risks and opportunities that have traditionally been underestimated or unseen. We have created a debate as to how we can build sustainable businesses that is happening more every day.