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/)

Race to de carbonization: Convergence to financial goals is the key

The iconic global company, British Petroleum (BP) made a very interesting move recently by selling off its coveted petrochemicals business and opting to play only in the energy businesses – oil and gas.

In its Q2`20 results announcement, BP`s strategy statement under its new CEO, says that it will reshape BP`s business as it pivots, from being an international oil company focused on producing resources, to an integrated energy company focused on delivering solutions for customers. 

In pursuit of its new strategy, BP aims to reduce it oil and gas output, in the next 10 years, by 40% from the present levels, with emphasis on low carbon technologies especially on renewables - bioenergy, hydrogen and on CCUS (Carbon capture, utilization and storage). Clearly BP is moving towards the global wave towards greener world and sustainability, with the better stock market valuations as the key objective.

Similarly, the other global oil major Shell has also announced similar moves to a zero carbon future as a part of its “Our response to Climate Change” report and is moving on the same lines as BP.

Stakeholders on common platform – boost for sustainability initiatives

Sustainability and climate change has become an integral strategy of all the global firms, especially in the energy and downstream area, thanks to public pressure as well as due to sustained efforts of think tanks and activist organizations like Greenpeace. 

In fact, unlike the past when the global firms were reluctant to engage with the pressure groups, there is an increasing acceptance by the global firms to engage and shape their sustainability strategies with activists like Greenpeace.

Recently, in a virtual discussion forum shared by Shell, Greenpeace and Green Alliance[1], the convergence was very visible with the statements of the senior executives of these 3 organizations. The welcome sign, that was very evident, was a rising acceptance to work together to achieve climate actions goals. 

Gone is the acerbity that used to cloud such discussions and debates in the past.

Higher financial returns for sustainability investments

Environment, Social and Governance (ESG) investing has taken a big leap in the last few years and the trend has been given a further boost especially with the recent Covid pandemic. 

Data published recently by FE analytics show that in the last 3 years, socially responsible investments have generated about 7% more returns as compared to benchmark indices and about 11% more returns than non-socially responsible investments. 

Global investments in socially responsible assets is at present estimated to be at about $45 trillion as per a JP Morgan report.

 

Green bonds – huge inflows in last few years

Green bonds, which raise money for climate and environment projects, had a very slow start when they were first launched in the year 2007. However, in the last few years, green bonds in various forms have seen a huge interest with about $258 bn of investments in the year 2019 – a 51% increase on a year on year basis.

As per Morgan Stanley Capital Index, about 70% of the green bonds issuance are in alternative energy (38%), green buildings (17%) and sustainable transport (15%). Renewables energy has accounted for a bulk of the alternative energy investments over the last few years. 

Thus, the rise and convergence of financial incentives to the environment and social aspirations of all stakeholders, has led to a change in approach, thinking and business strategies in the last few years towards decarbonization and environmental goals.

What are the incentives for all the stakeholders ? 

Global firms see better market valuations, government authorities visualize lower pollution and emissions while activists, like Greenpeace, gain more traction and funding with their contributions for global wellbeing.   

  

What can be done in India?

India, like any developing country, is faced with a dilemma of balancing development vs environmental concerns. Like China, India too is plagued by issues like high air and water pollution, some of which can be attributed to the high usage of fossil fuels like coal, diesel, etc. 

Some of the initiatives that can be pursued by the Indian authorities:

1. Alternate Fuels :  Push towards cleaner sources of energy needs to be incentivized for greater penetration. The shift towards solar power was given a boost with the financial incentives to the producers. Installation costs crashed by about 80% between 2010 and 2019 which helped Indian capacity to about 31GW from 2.6 GW in 2015. Indian solar power prices, at present, are estimated to be one of the lowest in the world. Hence, the government needs to continue such an approach not only to solar power but also to other alternative energy sources.
2. Electric vehicles (EV`s), have been sustained in the western nations, with government incentives. Charging stations are required for higher penetration of EV`s. Indian government needs handhold the auto industry to manage the transition to EV`s through tax breaks especially support the charging station infrastructure development.
3. Incentivize companies to reduce carbon footprint with regular audits and tax breaks to support such initiatives.
4. Hydrogen as a clean fuel is being actively pursued in China and other western nations. India can adopt hydrogen quickly and leapfrog in its adoption. 

     

   

 

 Convergence of financial and aspiration goals is important to make any sustainability, climate action and environmental initiatives work by making it an economically sustainable model.The recent global shift in this direction is an encouraging move which will lead to benefits for the global society as whole.

         Let’s hope for the best!

---

[1] Posted on the website Thinkunthink : https://www.thinkunthink.org/latest-unthinking/2020-07-28-oil-giants-and-sustainability-campaigners-the-new-common-cause

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!!