Understanding Business Sustainability from a layman's eye

Few days ago, my boss initiated a topic regarding Sustainability, Green and Recycling. Though it was not the first conversation on the topic, this time it was brief and interesting! He explained why the industry and world is moving towards sustainable solutions and how we've seen a huge upward spike in global carbon emissions which has triggered alarming climate control efforts. The conversation sparked an interest to research and understand the topic in depth. Until now I was only aware about CO2 Emissions and its effects on global warming, Recycling & Waste Management, Eco-friendly & Green Products - But it’s just the tip of the iceberg. There is a whole new business and economic activity that’s taking place beneath the sustainability ocean.

I'll be covering my understanding regarding the topic in a two part series blog. Initially we'll discuss about sustainability in business, understanding carbon emissions and its affects on the environment and society, and how businesses across the world are implementing and moving towards sustainability.

What is Sustainable Business?

In general sustainability in business means the pursuit or efforts an organization is taking towards conducting their business activities without any kind of negative impact to the environment, community or society and maintain an ecological balance. Confusing? Yes, as it sounds like the process towards attaining a sustainable business too is confusing and a long-lasting process. And Expensive!

Now you might think, why would a business organization deliberately harm the environment or Incur a huge operational cost just to maintain an ecological balance?

It is not that simple! Certain industries require adequate consumption of natural resources in-order to function their manufacturing process. Even if they are not into manufacturing, businesses require basic resources like power to keep their supply chain running. These basic necessities directly or indirectly consume global natural resources which impact the environment.

Environmental, Social and Governance (ESG) many organizations and investors follow this metrics to analyze a company’s carbon footprint, water & power consumption as well as its efforts towards developing a better community or society.

What does Carbon Footprint mean?

Have you ever come across the term Greenhouse Gases (GHG)? There are certain gases which absorb and emit infrared radiation that makes the planet warmer by keeping the heat in the atmosphere such as Carbon Dioxide CO2, Methane CH4, Nitrous Oxide N2O.

Simply put, the total amount of Greenhouse Gases a business is producing directly or indirectly to manufacture or operate its business activities, product or even household is calculated as Carbon Footprint.

Now you might think, this is all related to business and its operational activities and doesn’t have any effect on you! You are absolutely wrong! According to a survey, a normal family is emitting 12 tonnes of CO2 into the atmosphere every year. This number will keep increasing as the population increases marked by transportation and supply-chain, consumption of meats, fruits & vegetables, usage of plastic bags, consumption of more goods & services. It is impossible to bend the curve and achieve Net Zero immediately but it needs a strong mechanism to ensure the future generations are following the road-map towards sustainable living.

What is the source of Carbon Emissions?

1. Country

Carbon Emissions per country is calculated by the total amount of carbon dioxide emitted by the country as a consequence of all the industrial and non-industrial activities (production and consumption) divided by the total population of the country.

As per the data collected and analyzed by the Union of Concerned Scientists, China is the largest emitter of carbon emissions on the planet with 28% (10.06GT) of carbon emissions. The United States of America is next with 15% (5.41GT) followed by India with 7% (2.65GT).

China is the world’s largest population having manufacturing facilities of majorly every industry, but if you take a look at per capita data, China emits 7.1 Tons less than half compared to US with 16 Tons per capita carbon emissions.

1. Industry

Now as we understand from the above data, China, USA and India are the top 3 emitters of carbon on this planet, let’s understand how they are the source of this vast problem.

China & India being the biggest manufacturing hub across the world needs Energy in the form of Electricity & Heat to keep these factories running, Transportation to keep the Supply-chain on the run 24/7, Construction to ensure the infrastructure is supporting these needs, Agriculture to maintain the livelihood of the country. All these industries comprise 85% of the carbon emission of the country. Each and every Industry mentioned above directly or indirectly is depleting the natural resources of the planet by burning fossil fuels and emitting greenhouse gases.

1. End-Use Activity

Do you really think only the industries and companies across the world are emitting carbon?

NO! We as an individual too are equally responsible and contributing to this number. According to the EPA, the largest source of human activity emitting greenhouse gases into the atmosphere is Energy, Transportation and Building.

Now you’ve got to be wondering Building: but why? How can an already finished stand-alone building emit CO2?

The answer: buildings produce large amounts of carbon pollution both directly through heating and cooling processes and indirectly through electricity use. Together, direct and indirect building emissions represent roughly one-quarter of the world's total greenhouse gas pollution.

Same goes for transportation, taking public transport or driving your own car to the office, catching the next flight to attend a conference in another city, all these activities contribute to the carbon emission of the planet. So the next time you talk about climate change, think about how you are contributing to it!

How is CO2 changing the business landscape?

Adapting to the effects of climate change and developing a sustainable road-map is very challenging for any business. Many businesses are hesitant to the sustainable path as they incur significant changes to their business approach likely due to short term thinking. With worldwide government regulations in place, businesses need to take action on climate changes by adopting green policies, mitigating CO2 and other greenhouse gases, and still managing to keep the existing production up & running. But how will these changes benefit the business?

Many companies feel that making sustainable business changes will have adverse effects - as they not only have an impact on the climate but on the finances too! But stakeholders need to understand the long-term value. According to a Mckinsey survey, 33% of organizations that integrated sustainability practices increased their operational efficiency by reducing business costs resulting in a 19% increase YoY.?

You can reduce business costs by going green - For example: Using Solar Energy to run your manufacturing plants. Although it's a huge upfront investment, if you calculate the estimates, you recover the cost by saving the electricity cost within 5 to 7 years.?

Sustainable businesses gain a worldwide presence for their actions towards climate changes. Going Green adds value to your company by showing your customers and partners that you care and it's not just about the money. In simple words, it's good for marketing and brand management.?

Being ahead of your competitors is always critical for any business. Taking sustainable actions to your business gives you a competitive edge as it increases trust among your customers. A study by Harvard Business Reviews of 30 large corporations shows that businesses have 18% higher ROI by implementing and managing CO2 changes.?

So it’s not about changing the world. It's about doing and managing business in a more efficient way that’s adding value to the organization, environment and society as a whole.?

In the next series, I’ll be covering how a whole new business has taken shape beneath the sustainable world of carbon trading. Businesses are buying Carbon Credits at a global market in-order to balance their operational activities. How in the future, even we as individuals will need to subscribe to a Carbon Balance Monthly Plan just like Netflix Subscriptions. Stay tuned!

Sources:

https://www.ucsusa.org/resources/each-countrys-share-co2-emissions

https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions

https://www.mckinsey.com/business-functions/sustainability/our-insights/the-business-of-sustainability-mckinsey-global-survey-results

https://www.wri.org/

https://www.imd.org/