Understanding the Relevance

of Sustainability in Businesses

Souvik Bhattacharjya
Sr. Fellow and Associate Director
TERI
1
Understanding Shared Value
American businessman and professor at Harvard Business School

Harvard's Kennedy School of Government and a former senior lecturer at Harvard Business School

Shared value as "the policies and practices that enhance the competitiveness of a company
while simultaneously advancing social and economic conditions in the communities in
which it operates"

2
Understanding Shared Value

3
 Dimensions of Shared Value

-Redefining productivity in the value chain – Companies can improve the quality, quantity,
cost, and reliability of inputs and distribution while they simultaneously act as a steward for
essential natural resources and drive economic and social development

- Reconceiving products and markets – Companies can meet social needs while better serving
existing markets, accessing new ones, or lowering costs through innovation

4
 Dimensions of Shared Value

-Enabling local cluster development – Companies do not operate in isolation from their
surroundings. To compete and thrive, for example, they need reliable local suppliers, a
functioning infrastructure of roads and telecommunications, access to talent, and an effective
and predictable legal system

- Advocacy and Collaboration - Engage with various stakeholders, including customers,

suppliers, local communities, and NGOs, to develop effective shared value initiatives

5
 Creating Shared Value
Vs
Corporate Social Responsibility

SAME OR DIFFERENT ?

6
Corporate Social Responsibility vs Creating
Shared Value

7
Brands are redefining strategic position
around a shared value mindset

8
Nine Principles of Sustainability

• Ethics
• Governance
• Transparency
• Business Relationships
• Financial Return
• Community Involvement and economic development
• Value of Products
• Employment Practices
• Environment Protection

9
Nine Principles of Sustainability

• Ethics – The company establishes, promotes, monitors, and maintains

ethical standards and practices in dealings with all of the company
stakeholders.
• Governance – The company manages all its resources conscientiously
and effectively, recognizing the fiduciary duty of corporate boards and
managers to focus on the interests of all company stakeholder.
• Transparency – The company provides timely disclosure of
information about its products, services, and activities
• Business Relationships – The company engages in fair-trading
practices with suppliers, distributors, and partners.

10
Nine Principles of Sustainability
• Financial Return – The company compensates providers of capital with a
competitive return on investment and the protection of company assets.
• Community Involvement / Economic Development – The company fosters a
mutually beneficial relationship between the corporation and community in which it is
sensitive to the culture, context, and the needs of the community.
• Values of Products and Services - The company respects the needs, desires, and
rights of its customers and strives to provide the highest levels of product and service
values.
• Employment Practices – The company engages in human resource management
practices that promote personal and professional employee development, diversity,
and empowerment.
• Protection of the Environment – The company strives to protect and restore the
environment and promote sustainable development with products, processes, services
and other activities.
11
Innovation for Sustainability
Sustainability is often presented as a challenge demanding a 2-pronged strategy
• Economics
• Encouraging (Incentives)
• Discouraging (Sanctions)
• Financial markets to put an accurate value in different dimensions of sustainability
• Technology
• Discovering and deploying technological innovations that enhance sustainability
and resilience

12
Economic Innovation
Emission Trading Scheme

13
Economic Innovation
ESCert trading

14
Technological Innovation

• Efficiency – technologies using existing resources more efficiently (home insulation,

anaerobic digestion of wastes)
• Substitution – technologies to allow alternative resources to be used as substitutes
for depleted or harmful ones (hydrogen fuel cells, solar energy)
• Effectiveness – technologies that add value in sustainability terms (portable solar
powered lighting, green roofs)
• Mitigation – technologies that negate sustainability risk (geo-engineering like carbon
dioxide removal and solar radiation management, or nuclear fusion)

15
What is Materiality Assessment?

Materiality is the process of defining the sustainability topics that

matter most to your business and shareholders. Given most
organizations have limited resources and time, companies should focus on
what is high priority, and what will have the greatest impact to their
business and stakeholders. Ideally, organisations could have up to five
material pillars, under which more specific material topics can be nested.

16
Materiality Assessment

17
ABOUT
ITC

18
ABOUT
ITC

19
20
ITC’s Process of Stakeholder
Engagement

21
Key Stakeholders
The engagement approach
takes into cognisance the fact
that each stakeholder group is
unique and has a distinctive set
of priorities. Insights gathered
from stakeholder
engagements, help validate the
Company’s performance and
shape new perspectives.

22
Materiality
Matrix

23
Materiality Analysis

24
Strategic Risk Management
Risk Description
Climate related physical and transitional disruptions may impact business operations,
sourcing, supply chain and increase compliance costs.

Significant disruption of business operations and loss of data integrity due to increase in
sophisticated cyber-attacks resulting in non-availability of Information Technology systems.
Inability to attract and retain high quality talent in a highly competitive market.
Inequitable and high taxation coupled with stringent regulations adversely impacts the legal
cigarette industry.
Failure to adequately anticipate evolving consumer preferences and inability to proactively
innovate and remain competitive.
Risks arising due to inadequate protection against malicious attacks, misinformation,
trademark infringement, misrepresentation or fraudulent activity, including those on digital
and social media.
Potential Impact

Risk Mitigation Strategy

25
Reporting

CDP, formerly the Carbon Disclosure Project, runs the global disclosure
system that enables companies, cities, states and regions to measure
and manage their environmental impacts. Companies self-report data
related to carbon emissions and water, among other environmental
issues. CDP does not emphasis materiality as much because it is
primarily focused on getting companies to disclose key environmental
data; it is not focused on a holistic set of sustainability issues. Primary
Audience: Investors, ESG data providers.

26
Reporting

GRI is a “international independent standards organization that helps

businesses, governments and other organizations understand and
communicate their impacts on issues such as climate change, human
rights and corruption.” Materiality refers to an organization’s
significant economic, environmental and social impacts, or to issues
that substantively influence the assessments and decisions of
stakeholders. Primary Audience: Sustainability practitioner
community, stakeholders, investors, ESG data providers.

27
Reporting

The Sustainability Accounting Standards Board sets industry-specific

standards for corporate sustainability disclosure, with a view towards
ensuring that disclosure is material, comparable, and decision-useful for
investors. SASB standards address sustainability topics that are likely to be
material and to have material impacts on the financial condition or
operating performance of companies in an industry. In identifying
sustainability topics, SASB applies the definition of “materiality” under U.S.
securities laws. Primary Audience: Investors

28
End of Session 4

29