Global Organisations And Sme In India A Comparative Study Of Sustainability Initiatives

Global Organisations and SME in India : A Comparative Study of Sustainability Initiatives

Abstract

Sustainability has become a mandatory strategy for survival on the planet. Sustainable development is an imperative for survival and growth for nations, peoples and the organisations. The study embraces the sustainability initiatives of Global and Small/Medium enterprises (SME) working in India. Data was collected for the study using a questionnaire. Mid-senior level executives were contacted for their take on sustainability initiatives by their organisations in India. The responses were collected both from globally operating organisations and SME in India. The summarised data was analysed to arrive at the conclusions. The study indicates that global organisations are operating at global scale in corporate sustainability programs for competitive advantage, to mitigate risk, for building a brand, and to regulate the complexity of global supply chains for business growth to ensure an enhanced market share/customer growth. The SMEs in India s are found at a nascent stage with respect to sustainability and are only involved in activities necessary for their survival. Incorporating sustainability initiatives in the business practices of SME will need awareness and policy frame. On the other hand, the global organisations have a long way to go to create appreciable impact on the planet via their sustainability efforts. However, changes of responsible product, processes and global supply chain designs are being incorporated in their culture. These initiatives will need further push through governance and policy announcements at a regional and country level for far reaching impact. And for emerging countries like India they can be leaders in sustainability efforts for other Indian organisations, particularly SME to follow sustainability.

Key Words: Sustainability, Global Organisations, SME, Business practices,

Introduction

Climate changes have raised a need for Sustainable development. Most countries, organisations, peoples are working to achieve a solution. Gibson B.R (2001) also reported as was talked about two decades back in Brundtland Commission Report (WCED 1987) that “Continuing environmental degradation was leading not only to local and regional resource depletion and damage to essential ecological functions, but also it is leading to cumulative global effects”. The sentiment is clearly understood as recently countries worldwide made efforts on curbing emissions. A plethora of other steps were suggested to reverse the climate change a COP-21 meet in Paris (COP- 21 2015). There were pledges and concrete action plans both by the developing and the developed countries.

A decade back, sustainability efforts had the focus only on curbing environmental emissions/standards along with specific degradation concepts. In recent time the business complexity is increasing which is making it extremely important for organisations to implement and adopt business practices which are environmentally and socially responsible and will enhance profitability, revenue along with effective risk management (Agnihotri & Tripathi 2015). Authors claim that inclusion of sustainability initiatives has been gradual and is fuelled by fiscal disorder and turmoil in the economies. Researchers also argue that corporate organisations especially global organisations with big brand values are working to implement policies, processes and procedures in their organisations as a way to stabilise and improve their supply chain and product quality. This is helping the organisations ultimately to minimise financial risks and capture more business value. It is culminating in achieving their ultimate financial and economic goals (Dauvergne & Liste 2012).

The SME or small/medium enterprises which are significant to India’s economy due to massive contribution to local income growth, job generation, market innovation .They are ostensibly oriented with the imperatives of globalisation, market strategies, innovation etc. The Indian policies do not match to help the organisations since the reforms that happened in early 1990s (Das 2008).Rupa (2013) argues that this is particularly due to the inherent problems present in small/medium enterprises in India. The sector is unorganised with little bargaining power and access to different markets. Tough financial conditions and lack of economic and market prowess make their survival difficult. Hence the sector needs bolstering from government policies. Sustainability could be a way forward for society and organisations/enterprises wholesome development.

MIT Sloan Management Review (Kiron et al., 2013) argues the same facet that “economic downturn accelerated greater shift towards corporate focus on sustainability issues particularly those which have impact on bottom-line profits of an organization”. Sustainability is helping the organisations with improved bottom lines, cost saving, and branding as a responsible business organisation. Today’s Global brand business organisations understand that their sustained success depends upon the economic, social and ecological contexts in which they operate. They have to find ways to be more meaningful and these contexts can no longer be taken for granted. People want to see the efficient use of available resources as an economic imperative and there has been tremendous work to understand what that means for individual business (Reinhardt 2015) The physical environment is becoming more unpredictable. More interconnected global economy is altering social conditions, and technological innovation is transforming the nature of consumption and production (Kiron et al. 2015)

Hence, the greatest drivers of corporate sustainability programs had been the stakeholders involved. And businesses too are taking a note with enhanced government regulation, consumer and employee interest. (Kiron et al. 2013).Global organisations need to prune their bottom lines for risk management and hence the policies for sustainable or holistic development. In line with this, small/medium enterprises need sustainability to match the quality and competitiveness of global giants.

While industry represents single biggest threat to society and the natural world, it can also represent one of our greatest allies in our mission to safeguard it and provide for its sustainable development. Marsden (2000) insisted in conclusion at the world wide fund for nature’s international conference. Today, a company’s profits are tied to the prosperity of its consumers, customers, employees, communities and society. More than ever before, profitability and sustainability are synonymous. (Indira Nooyi, Sustainability reporting 2014).

Literature review

Sustainable development may not be at the forefront but the issues are lingering with respect to it. According to Ernst and Young (2013) report, there are six growing trends in corporate sustainability. Organisations may not talk about climate change directly or employ the business practices with respect to climate change. All are being buffeted by its effects and issues including deforestation and shrinking bio-diversity that are affecting the availability of agricultural products. Risk management for global supply chains is making Sustainability an important part of corporate agenda.

Global organisations with presence in multiple locations and policy implementations at regional level are involved in Sustainability based practices. MIT Sloan Management review (Kiron et al. 2013) elaborate in their report that nearly two-thirds of respondents rate social and environmental issues, such as pollution or employees health, as “significant” or “very significant” among their sustainability concerns. Yet only about 40% report that their organizations are largely addressing them. Even worse, only 10% say their companies fully tackle these issues. Interestingly, MIT Sloan Management Review (Kiron et al., 2013) further state that companies that perceive sustainability issues as significant, thoroughly address them and share distinct characteristics. For example, Kiron et al. (2013) claim that,

More than 90% have developed a sustainability strategy, compared to 62% among all respondents.

70% have placed sustainability permanently on their top management agenda, compared to an average of 39%.

69% have developed a sustainability business case, compared to only 37% of all respondents

The Ceres roadmap (Ceres 2014) for Sustainability report also stresses that Global organisations or organisations with presence across multiple locations are leading with their efforts. The report particularly highlights that organisations have substantially accelerated and broadened their sustainability efforts. Global organisations are embracing sustainability efforts to create long term shareholder value. According to the report:

More Global organisations are showing evidence that top management is having an oversight of sustainability issues, with 54 per cent performing or conforming to the expectations.

Globally, the Food and Beverage sector showed marked improvement in their efforts to engage with stakeholders than other sectors.

The report also stresses on the fact that “The Food and Beverage sector is the leader across the Ceres Roadmap’s disclosure expectations, showing particularly strong use of a variety of communication vehicles to convey sustainability progress, including those aimed at investors”.

The important finding of the report being that the leading beverage organisations are engaging their employees to connect sustainability goals to broader business goals. The Food and Beverage sector is beginning to seize this opportunity and the report clearly illustrate that nearly 60 per cent of companies are actively engaging their employees on sustainability issues. (Ceres 2014)

Authors (Lopez et al 2007) argue in their work that for creation of long term value sustainability has an effect. This is established by various sustainability based indexes to cater to financial performance of an organisation. Authors concluded that for firms initially the sustainability initiatives may be economically very viable but in long term it creates and delivers value and is not seen to have any repercussions on performance indicators.(Lopez et al 2007).

In India SME sector is involved with sustainability only in the capacity of business partners or as a part of supply chain. Mohanty & Prakash (2013) stress through their research that small/medium enterprises have been involved in green supply chain practices only to the extent of their participation as suppliers, distributors and in other capacities as business partners. Small/medium enterprises face external pressure when they are part of global supply chain and resort to practices only as a part business partner/supplier.

As the Ceres roadmap (Ceres 2014) stresses though the awareness and intent for sustainable way of development has increased among organisations yet the efforts need more pace and number of companies have to start the journey towards sustainable development.

Leading global organisations with presence across multiple locations are working on the goal of delivering superb financial performance with greater sustainable growth and shareholder value. Organisations are working through business practices for sustainable communities to reduce environmental and carbon footprint, along with an inclusive work environment for associatesand partners. There are efforts on minimizing the impacts on environment through energy; water conversation as well reduced use of packaging material (PepsiCo 2014, Ceres 2014). Some of the global organisations are becoming more responsible and are adopting newer approaches for resource conservation and are adopting business practices to reduce their human, environmental and social impacts.

Global organisations are also making public their initiatives, actions and plans for sustainability using GRI guidelines to ensure transparency .This action by Indian SME sector or small/medium enterprises is dismissal. Reports highlight that in India disclosures on sustainability or Sustainability reporting is very less (Majuamdar et al 2015). And the organisations which are disclosing information are having lesser externally certified (less than 25%) reports and 41% reports in India do not have carbon disclosures. (Majuamdar et al 2015).

Sustainable business practices and Indian Organisations

Indian Organisations have started making efforts on sustainability and is visible through their plethora of initiatives as envisaged in the annual report “India’s top companies for CSR and Sustainability-2015”. Majuamdar et al 2015 have listed that mainly organisations which are globally interconnected and has presence across diverse portfolios is working through and with initiatives to reduce their emissions, have innovative strategies for resource utilisation, product and Consumer responsibility and transparency. Authors of the report reveal that Indian Manufacturing organisations are spending more through mandatory CSR proceeds on the local communities. Large manufacturing sectors are spending more than service sectors and with a greater thrust to “Make in India” concept, business responsibility is increasing. Still the report mandates that Indian Organisations are more involved with activities in their CSR spend though Sustainability efforts are increasing each year. Also the authors highlight the disclosure practices of Indian organisations. Indian Organisations are having lesser externally certified (less than 25%) reports and 41% reports in India do not have carbon disclosures. (Majuamdar et al 2015).

Researchers (Kaur et al 2015) also highlight that organizations in India are resorting to sustainability based initiatives due to greater government regulation for CSR spends and environmental regulation. India is committed to reduce its carbon emission by 33% to 35% by 2030 (Plucinska, 2015). And Indian Manufacturing organisations primarily are focusing on sustainability based reporting using GRI guidelines. In Indian private organizations the focus is more on environment and social factors than economic factors to become sustainable or to follow sustainable development. Indian organisation have long way to become sustainable. Now with COP-21 agreement and our commitment to reduce the emissions, there has to be more work on this front . Authors (Kaur et al 2015) also point out that organizations need sustainability measures economic, environment and social factors to transform organizational culture which will in turn lead to increased innovation, enhanced brand values, more internal efficiencies and more customer, stakeholder loyalty. Hence, being sustainable is not just a climate perspective but a business prerogative as well.

Nevertheless, Majuamdar et al 2015 conclude in their report that the sustainability efforts of organisations are enhancing. In India, mostly organisations are resorting to sustainable business practices in product/services and internal operations. Majuamdar et al 2015 point out that as compared to sustainability efforts organisations are more prudent on their CSR spends to develop communities and employees. And this is particularly due to Companies Act 2013 which mandates the CSR spends to be 2% of organisations profit.

The Companies Act 2013 demands that the organisations to put 2% of their profits in Corporate Social responsibility acts. Majuamdar et al 2015 claim that with this the organisations have a certain point upto which they have to spend and thus it helps in CSR spend decision making. But Sustainability lacks such policy and government framework and thus cannot be curtailed through spends and can be only integrated through business practices which are adopted by organisations.

Make in India will put focus on Sustainable supply chain and hence make a perfect sense for organisations to enhance their efforts for sustainability.

Indian organisations are becoming global and sustainability is the only solution to manage risks and create a reputation via a brand

This is further elaborated by Dauvergne & Lister (2012) that lists that branded/global organisations are resorting to sustainability for more control over their global supply chain and it’s an essential need to manage risks and for acceptance through local community innovation for the likes of global organisations, such as Coke, IBM, Dell, General Motors etc .

In India the global branded MNCs are leading the path for adoption of sustainability business practices. Authors assert that the Global organisations are adopting more of Sustainability programs as cost considerations which make it imperative for production to happen in emerging economies like India and with sustainability initiatives they can remain relevant to the supply chain in the country along with manage and mitigate their business costs ( Dauvergne & Lister 2012 )

So the question arises that have the global organisations or big branded organisations have become sustainable. Not necessarily, Dauvergne & Lister (2012) point out that what they are achieving is mere a measurable incremental advances in corporate sustainability. These gains however are concrete efforts to reduce carbon footprint, better resource utilisation and at the same time to become responsible with respect to human factors.

And thus this is a road map for Indian SME enterprises and other organisations to spruce up their efforts to reverse and mitigate risk, build brand and enhance the profitability by being more conscious and responsible whilst adapting sustainable business practices in their organisations.

Dauvergne & Lister (2012) point out those Global organisations sustainability efforts alone will not resolve the eco-pressures from a growth-dependent world economy. For greater adaptability and effective environmental policy implementation there is a need for an approach with strong policy advocacy and regulations to go beyond small incremental steps and for effective improvement of sustainability programs of organisations (Dauvergne & Lister 2012).And with draft of COP-21 ready and India having a huge case to curb emission and develop at a faster rate, Sustainability is the way for private, public and government Indian Organisations and particularly SME. And if like CSR law of 2% profits spend, the sustainable efforts are also gauged with policy and law framework, it will surely help organisations to become sustainable.

Research Methodology & Data Collection

The research study aimed to understand the Sustainability efforts of organisations operating at global level and for SME in India.

To achieve the objective data was collected using a questionnaire with a 5 point linker scale (Saraswat, A. & Tewari, R., 2015). The Questionnaire was pilot tested for reliability using total item correlation and Cronbach alpha(0.83). A quantitative survey approach for data collection was used. Survey is an attractive method of data collection, because of its potential to afford the researcher a large amount of information that can be analyzed to test relationships between two or more variables (Prentice & Miller, 1992). And survey is an important method for data collection which can gather large amount of data from diverse perspectives which can be suitable for the study Kerlinger, 1986(cited in Ma Ga yang 2013). The data was collected from top and middle level executives of private organizations in India.

The questionnaire was administered to Executives at various levels to ascertain their views with respect to Sustainability in their organisations. Around 80 responses were collected which were segregated into global and SME in India.

A hypothesis was framed and the data was tested using Non-Parametric test. As the data was to test difference between two groups so Mann Whitney test was used if there was significant difference in the sustainability efforts of organisations with different scales in working. (Chauhan, 2015)

Ho: There is no difference in the Sustainability efforts of Global and SME in India.

Ha: There is a significant difference in in the Sustainability efforts of Global and SME in India

Results and Conclusion

As the P value is less than 5 per cent level of significance, it was concluded by the data that there is significant difference in the sustainability efforts of Global organisations and SME in India (Chauhan, 2015)

Conclusion

COP-21 agreement has become an important yardstick for curbing environmental emissions, to spruce up innovation and for acts which are more responsible but not at the rate of growth for countries. Indian organisations are more engaged in CSR perspective in community and employee enhancement due to government regulation to limit the CSR spends at 2% of their profits which large manufacturing organisations are resorting to. The sustainability efforts of Indian organisations need more work. The Global organisations that have tremendous presence across the globe have made great gains and have sustainability embedded in their business practices. To reduce their risks, and for greater stakeholder value the organisations are resorting to Sustainability practices which is in contrast to SME in India. It makes a strong case for SME to work on to become sustainable which also makes a great business case. It will also need some regulation and policy framework as achieving or reducing emissions up-to 33-35% that will call for tremendous efforts and cooperation at all levels. The global organisations need to spruce up their efforts and SME which are far lagging behind due to lack of policy framework and knowledge that must step forward and adopt sustainable business practices to develop new solutions, uncover new opportunities and, ultimately, build the viable, trusted companies of tomorrow for a better and sustainable planet. Hence, intervention through shared governance approach which includes stronger state regulations, sustained social pressure, a more responsible individual consumerism, and tougher national/international legal constraints will help to achieve sustainability. And thus this will be beyond the ultimate goal of business gains and India will achieve more transformational progress.

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