How Green is your Personal EBIDTA ?

World Environment Day was celebrated recently on 5^th June amidst much fanfare with the usual pledges by governments and corporate firms. Usual buzz words in the business and economic space, like climate change, global warming, greenhouse emissions, net-zero carbon, etc. were extensively discussed.

However, at the ground level, the magnitude of the climate change problem has reached huge proportions as exemplified by the heatwave across many countries, including in my own country India. Heatwaves have led to various destructive patterns like destruction of crops, scarcity of water, etc. The intense heatwave across India has led to such a huge surge in power demand, that the government has been forced to import additional coal to meet the demand!

Food scarcity already exacerbated by the Ukraine war has been further intensified with the heatwaves severely affecting food crop yields across the world. India, one of the world’s largest wheat producers, has been forced to ban wheat exports as crop yields have been affected due to the recent heat wave.

Green activists are having a field day now with their targets being mainly governments and corporates. Business firms globally, are under scrutiny and pressure from critical stakeholders like government agencies, financiers, and the public to focus on reducing their “Carbon Footprint” or in other words focus on their “GREEN EBIDTA”. Undoubtedly, corporates and governments have a large role to play in this endeavor. Top global firms like BP, Shell, etc. have taken a pledge to move to zero carbon emissions by 2040.

However, in this fight against climate change, it's time to target the segment which is most affected and whose consumption and behavioral patterns play a key role in the actions of corporates and governments – people like you and me – consumers, mass public- who pay the taxes finally !! After all, if we all demand carbon-free goods, corporates will take heed. If we vote for public leaders who are serious about climate change, then we can get the right policies being implemented. If we buy shares, despite paying a premium, of firms that are serious about sustainability then publicly traded firms will be forced to pay attention. Fossil fuel companies like BP, Shell, Exxon, etc. were forced to modify their business strategies as they feared a backlash from the investors’ community as well as damage to their brand image.

Consumers, however, can also play a major role, in this fight by paying heed to their personal lifestyles also and the carbon footprint left by their consumption patterns. It’s time that the public also starts measuring their “Carbon Footprint” and make their lifestyles “Greener”!!!

An interesting article was published, in Economic Times, on the same topic by Arijit Burman titled “Is your Is your EBITDA black, grey, blue or green?”. In this article, the author emphasizes the need for the public to pay heed to their consumption patterns and throws perspectives at the carbon footprints left behind by our day-to-day consumption patterns.

The recent World Economic Forum at Davos had climate change as one of the major topics of discussion. An article on the World Economic Forum platform published by Maciej Kolaczkowski titled “What can consumers do to help solve the climate change crisis”  states some interesting facts-

• Consumers are responsible for 60-70% of global emissions. After all,  consumption by consumers will lead to corporates making products leaving a  carbon footprint!
• Majority of the household carbon footprint comes from transportation, housing, and food choices.
• High-income households naturally consume more and hence higher carbon footprint. More money you have, more is your luxury consumption as compared to your basic needs consumption.
• Luxury consumption, as reflected by increased demand for goods and services, leads to a higher carbon footprint.
• Education plays a vital role in optimizing the carbon footprint of households. Probably many people are still unaware of the trails of their consumption patterns and need to be shown a mirror of their actions.

What can consumers and mass public do to control the increased carbon footprint?

Like corporates, consumers too will have to take carbon footprint reduction targets and modify their lifestyles. Some major areas can be:

Use public transport systems: Globally most of the major cities have very efficient public transport systems like London, Singapore, New Delhi, etc. Local authorities want people to travel more by public transport systems and lesser by private vehicles as it achieves the double purpose of a lesser carbon footprint as well as reducing pressure on the roads. In Singapore, due to high local taxes, it is very expensive to own a private vehicle, and hence people prefer to use the public transport system. In fact, I ‘am personally looking forward to the full-fledged rollout of the metro system in my city of Mumbai!

Reduce luxury spending and consumption: This recommendation may sound odd given that it looks to be against the capitalist theories especially as the world is facing recessionary trends. Today if people spend as per their needs its sustainable, however an excess of spending above basic needs leads to additional consumption which in turn leads to additional usage of natural resources. 

Clothing usage patterns are an interesting example. Fashion trends keep on changing and consumers are inclined to buy more in keeping up with the trends. The additional spending however lies unutilized after some time but has left behind a carbon footprint that is irreversible. 

An interesting graphic I saw recently in the Times of India, indicates that having a well-defined wardrobe means reducing new clothes purchases by 75%! Having a sustainable wardrobe means ditching fast fashion, embracing slow fashion, and importantly being a part of a clothes exchange ecosystem.

Embrace recycled products: Footprint of products already produced and lying in a heap across the world, like plastic waste, needs to be addressed. Products made from plastic waste are great examples. Segregation of household waste and proper disposal for efficient recycling is the order of the day. An India-based start-up - Recharkha (https://www.recharkha.org/), dealing with plastic waste products, has shown the way in this endeavor by upgrading plastic waste to various consumer products like bags, purses, etc.

The global problem of climate change that we are facing needs to be addressed on a war footing, as the world did with the Covid pandemic. Today corporates have started reporting the share of their earnings that is from sustainable resources- “Green EBIDTA”.

Consumers like you and I also need to shoulder responsibility and play our part and not leave the fight only to governments and corporates. Hence it's time that everyone like you and me measure our “Personal Green EBIDTA”!

Invite critical views !!

References:

1) “Is your Is your EBITDA black, grey, blue or green?”

(https://economictimes.indiatimes.com/opinion/et-commentary/view-is-your-ebitda-black-grey-blue-or-green/articleshow/90785853.cms?frm=mailtofriend&intenttarget=no).

2) What can consumers do to help solve the climate change crisis”  (https://www.weforum.org/agenda/2021/02/consumers-help-solve-climate-change/)

Sustainability can start affecting new age businesses - like fossil fuel businesses

Preamble

New age businesses like renewable energy, electric vehicles, social media technology giants, etc. are the talk of the world with their businesses attracting very high valuations.

These new businesses are expected to usher in a new business models attarcting high valuations. However, these business might start facing different type of sustainability issues in the days to come very similar to the issues faced by traditional fossil fuel firms

In this article, I explore some issues and trends relating to sustainability for these new age business.

Invite critical views

Main Article

A few weeks back I was attending an online webinar on Electric Vehicles and got connected with a retired gentleman who had worked in the automobile industry in his entire career. When I quizzed him about his views on the advent of electric vehicles and especially on its effect on climate change, he said he wasn’t sure! I was perplexed. After all, EV`s were supposed to be the panacea for the pollution that we all face from normal combustion vehicle engine car!!!

He told me a story. When cars were first introduced more than a century back, they were actually solving a pollution problem!! Before cars, horse carts were used by people to travel, in which the biggest issue was the cleaning and disposal of horse dung! Hence when combustion vehicles cars were introduced, people were happy that the dung problem will be a thing of the past. Now when the world is talking about solving climate change issues by replacing fuel powered cars with electric vehicles, he said he wasn’t sure of the downside effects of the EV`s !!

Recent sustainability concerns with new age businesses

The above story made to think about some of the sticky events across the world involving the new age businesses – especially the global digital technology giants.

• Recently, the famous Chinese company, Alibaba was fined $2.8bn by the Chinese government as the Chinese government wasn’t happy with the monopolistic tendencies wielded by Alibaba`s digital reach!

 

• China recently introduced a Personal Information Protection Law (PIPL) that lays down a comprehensive set of rules around data collection and protection. Along with a new antitrust law, the data protection law is seen as part of a broader effort by Beijing to rein in the power of its technology giants such as Alibaba and Tencent and creating a regulatory model for the next-generation internet.

• European Union (EU) introduced the General Data Protection Regulation (GDPR) in 2018 to regulate citizen`s data collection and privacy concerns. Many of the EU countries have also implemented a digital tax levy on digital services at point of consumption which has added to the controls on the global digital firms.

• Closer home in India, the Indian government recently had a faceoff with Twitter over blocking some accounts associated with the farmers protest. Twitter had to take some quick action to avoid facing a total blockage by the Indian government.

 

• Google and the Australian government have had a tiff on whether news on Google feed needs to be paid for by Google or not. It was resolved only after Google acceding to the Aussie governments concerns.

 

• USA law makers are so highly concerned about the power wielded by the technology giants like Google and Facebook, that they are talking about breaking up the companies like the telecom major AT&T many years back. Regular Congress sessions, in which the digital technology majors CEO`s are grilled, give an insight into the seriousness with which the USA government is looking warily at the influence of these companies over the general public.

 

• Cobalt and Lithium, which are the essentials to make batteries for Electric Vehicles’ face mining labor issues especially in Africa which can constrict the supply of these products in the days to come.

All the events described above, might be seen as discrete events in a common man`s eyes but the common thread is that all the new age businesses will very soon face a sustainability wall block very similar that the fossil fuels businesses have faced. The movie “The Social Dilemma” portrayed how the digital companies use algorithms to manipulate the general public`s thoughts and purchasing decisions.

Oil and Gas companies were global economic stars till sustainability backlash...

Oil and gas propelled the growth of global economy in the second half of 1900`s with geopolitics too affected by oil business dynamics. Downstream products of oil like fuels and plastics gave a boost to industries like automobiles, heavy machinery, and consumer products. However, soon these businesses were accused of being primarily responsible for the various society ills like global warming, climate change, oceans pollution, emissions, etc. Importantly capital markets too have been highly influenced by these trends with markets according higher valuations to firms with better compliance to environmental norms.

Backlash has been higher in Europe as compared to the USA, till last year which has forced European oil and gas firms like BP, Eni, Total, etc. to announce aggressive zero carbon target dates and move to renewables. In fact a leading company like BP sold of its prized chemical business assets in 2020 in order to be seen as a “green” and “environmentally compliant” company.

New age companies have phenomenal valuations Vs traditional firms…

Comparison of valuations of new age firms like Tesla, Google and Exxon over the last 10 years shows that new age firms have far greater valuations with the key reasons being - wider geographical reach and highly scalable, asset light models.

 What lies ahead?

With the recent sustainability backlashes facing the new age firms, will this run of higher valuations continue? Will there be roadblocks like what the oil and gas firms faced? Will capital markets start reducing the future cash flows as business model scalability becomes a question mark?

Interesting times ahead.

My tryst with Himalayas and Climate Change

#sustainability, #climatechange, #environment, #annapurnabasecamp, #himalayas, #pollution, #reuse, #recycle, #reduce,#circulareconomy #Nepal, #Nepaltourism, #gretathurnberg

Last month myself, my wife Vani Narayanan and other friends from my running group in Mumbai, experienced the beauty and freshness of the Himalayas by trekking up to the Annapurna Base Camp (ABC). Over a period of 8 days- 5 days to climb up till ABC and 3 days to climb down, our enthusiastic team scaled an elevation of 4,100m and trekked close to 100kms with steep climbs up along narrow, rocky and muddy but pristine paths laced with breath-taking views of the Himalayas with stunning views of the various peaks like the Annapurna, Macchapuchare and Himchuli. The journey started from Pokhara (Elevation: 1,400m)- Ghandruk (1,940m) – Chumrong (2,040m)- Bamboo (2,190m) -Deurali (3,280m) and finally Annapurna Base Camp (4,100m).

 A breathtaking experience in the mountains....

The trudge in the mountains were inundated with various walks through clouds and splashes along mountain streams with spring fresh water and being treated to the various fresh local cuisines along the way.

For most of us used to staying in 5-star hotels across the world we had overnight stays in various tea houses with minimalistic facilities like cramped rooms for 3 people, common bathrooms, Rs. 200 paid hot shower, no TV, no free WIFI, limited mobile connectivity etc.

As we could carry only limited items due to weight restrictions all of us learnt the values of minimalistic living like reusing clothes for several days, washing and drying clothes overnight under mattresses and sleeping bags, reuse plastic covers, one shower per day, sharing our battery packs for charging our cameras as charging mobiles, etc. was a paid affair, etc. Importantly, instead of buying all our trekking material many of us borrowed from our ever-helping trekking friends’ networks - like bags, jackets, etc. or leased it from a mountaineering shop.

..Laced with some eye opening and humbling experiences

We all huffed and puffed carrying our 5-6 kg day packs along the route but our bags weighing about 10-12kgs were carried by the local porters who could carry about 2 bags each and walk at such a pace that they would reach the destinations well before we all did! Another eye-opening experience that we saw was that all material like some food material, fuel, construction material to the people, houses at the top of the mountains were carried by the local porters with many sights during our trek of these porters carrying LPG cylinders, steel rods, house doors weighing up to 20 kgs on their backs.

A humbling experience indeed for all of us who are used to all facilities and luxuries in life but, yet we complain about many things!! 

Global events in the background

As we were lost in the natural beauty of the Himalayas, at the he same time many events with sustainability and environment issues as the core occurred in the world. The UN climate conference debated the effects of climate change, marked By Greta Thurnberg` s emotional outburst, in which the usual issues of developed vs developing nations clashed with no clear solutions. The Indian government announced a roadmap to weed out single use plastic by 2022 to address the plastics pollutions issue and closer home we Mumbaikars saw the horrible spectacle of trees being cut down in Aarey forest – one of the lungs of Mumbai- overnight to make way for a metro rail shed.

Can mountain people preach climate change?

Obviously, the debate will go on to balance the needs of development to meet the ever-growing needs of people as against the menace due to the unbridled development leading to environmental issues, pollution, etc. which can affect the long-term sustainable development. I reflected to our learnings from the Himalayas trek to check whether these learnings can be applied to our “luxurious” day to day life styles.

Can the sustainability concepts, on which the life style of the people living in the mountains like Himalayas are based, and which our team embraced during the ABC trek – Reduce, Reuse and Recycle be embedded in the mind sets of the people across the world address the climate change and environmental issues?

My gut feel says yes!

What can we people do?

The recent backlash in support of environmental and sustainability issues indicates that this process might have started. Instead of having clothes for many single usage occasions can we all live with clothes just for our utility use and limited other usages and borrow clothes for special occasions? Many of us who spend all our working days in air-conditioned offices, cars, etc. – can we use our clothes more than once before washing and hence saving water usage, soap, power, etc.? Sharing platforms like Uber, Lyft and Ola have shown that we don’t need to own cars to commute. Recycled clothing, even for active sportswear, have been proved to be very similar to clothing made from virgin material from a utility and design perspective. Usage of recycled plastics in roads have proved to be very effective to lay durable roads.

Economic theories driving this change in consumer behavior?

Milton Friedman, the guru of consumption economics, propounded his Nobel Award winning theory of consumption economics in the 1970`s which drove the booming economies of the western world. However, the latest theories of “Sustainability” and “Circular Economy” propagate the perils of unabashed consumerism on the economies and hence highlight prudent consumerism. In short, these concepts highlight that the goods made are resent back to their roots for sustainable solutions and hence leave lesser footprints. If we use the same items more times, reuse and recycle like the people living in mountains do it would lead to a prudent usage of virgin material and hence prudent usage of water, power, fuels, etc. and hence lesser environmental issues and pollution issues and hence lesser climate change issues!

Thus, every policy maker dealing with climate change and environmental issues need to look up to people living in inclement conditions like the people in mountains and look up to them to address the environment issues. Hence at the next UN climate change summit, instead of listening to emotional and content less speeches like the one made by Greta Thurnberg, the organizers would be better off by inviting mountaineers and people living in mountains to speak!!!

Hail Mountains!! Hail Himalayas!!