You are here

Sustainability “watch-outs” for the Indian industries

Near term sustainability legislation and initiatives would impact the power generation, textile, financial and automobile industries the most among the Indian businesses, according to a recent survey by cKinetics.

The survey which studied 34 upcoming initiatives, throws three key insights on near term sustainability implications for a number of Indian industries:

1.Regulations dealing with resource conservation and sustainability will become more imposing in the future.
2.Voluntary initiatives provide an opportunity for market differentiation
3.A number of soft capital schemes in the renewable energy sector are being introduced to catalyze the sector.

Regulations to be more imposing
The study found that regulations are the most important driver of sustainability in businesses in the near-term forming 29% of the initiatives surveyed (see Figure 1). Majority of these initiatives are either cap & trade or benchmark guidelines or performance target set up for industries. Since regulations are likely to pose compliance requirement, we looked at the industry sectors that are going to be impacted. 63% of the 30 industries identified in the survey were found to be influenced by one or more such regulations.  Textile sector has emerged as the most impacted industry sector followed by power generation, construction and real estate, chemical, automobile and pharmaceuticals among others. Apart from compliance requirements, regulatory initiatives will also have the effect of cost escalation as also offermeans for newer revenue streams for industries.

Competing for market differentiation
In terms of number, regulations are followed by initiatives on sustainability (rating, labeling, and reporting) and these form 23% (see Figure 1) of the initiatives surveyed. The reason for having all these initiatives together is because they can be seen as opportunities for gaining competitive advantage as and when consumer and investor desire more transparency in industries’ sustainability practices. Expectedly all such initiatives are primarily voluntary in nature and find most takers among construction and real estate, retail and textile industries.

Soft capital flow for the energy sector
Finance schemes are found to be among the next most prevalent (at 9%, see Figure 1) of the surveyed initiatives because of their concentration on three sectors - power generation, financial institutions and renewable technology. Schemes are introduced in form of both soft loans and subsidies and aimed at leveraging entrepreneurial and private capital’s role in India’s power generation sector. Most of these are also tied to Indian government’s ambitious target of electrification and renewable power generation in the coming years.

Besides, there are number of guidelines, public private partnership and demonstration projects (at 23%, see Figure 1) of sustainability that the survey touched upon. These are initiatives primarily at an announcement stage and likely to impact agriculture, biotechnology and information technology and industry sectors already mentioned in previous sections.

Surveyed initiatives and industry watch-outs
initiatives and legislations which impact 30 industries (Fig 2) were studied. They fall under the following 6 categories:
b.Financial support schemes,
c.Sustainability rating, labeling, accounting and reporting,
d.Guidelines for industries to adopt,
e.Public private partnerships, and
f.Demonstration project or new announcements to bring sustainability into mainstream business thinking.
Power generation, construction and real estates, textile, automobile and financial institution emerge as the industries that has attracted the maximum number of initiatives.

List of initiatives surveyed
Table 1 below, lists out all of the 34 sustainability initiatives which impact Indian businesses (or are likely to do so) in the near term. It also outlines the underlying market intervention mechanisms. We have mapped them to 6 mechanisms:

1.Cap & trade schemes
2.Interventions which encourage disclosure
3.Programs for soft capital
4.Technical assistance and grant support funds
5.Initiatives that define benchmark targets
6.Initiatives that just define benchmark guidelines 
Table 1 List of near term sustainability initiatives and legislations included in the survey

The author, Jyoti Deka is a Senior Associate at a sustainability consulting firm cKinetics.

Image(s) Courtesy:
J.J. Verhoef