The Role of Sustainability in Corporate Governance and Operations

The Role of Sustainability in Corporate Governance and Operations

Rangaraj Ravindran, CEO, VST Group India, 0

Rangaraj Ravindran is a seasoned strategist and business turnaround specialist with over 34 years of global expertise in the Automotive and Engineering sectors across India and Oman. Currently as the CEO, he is dedicated to customer-centric, results-oriented and profit-focused leadership. Having successfully led Mahindra and Volkswagen businesses, he now steers the BYD Franchise with P&L responsibility. He is also a MCA qualified independent director.

In an interaction with CEO Insights India, Rangaraj shared insights on sustainable corporate governance, highlighting key integration strategies and government regulatory frameworks. He presented successful examples of Indian companies aligning sustainability for financial and social gains, while also offering suggestions to tackle common challenges in this alignment. Below are the key extracts from the exclusive interaction:

How do incorporating sustainability principles into corporate governance impact a company's long-term success and reputation?
The key elements of good corporate governance of an organization are its ability to consistently and successfully consider environmental, social and ethical factors across all decisions that it makes. Such decisions not only benefit the planet but also attracts responsible investors and customers. Sustainable practices can also lead to cost savings, improved efficiency, and innovation.

A commitment to corporate responsibility builds trust and enhances the company's reputation. Consumers today prefer businesses that care about the environment and community. Moreover, sustainable governance helps mitigate risks associated with environmental and social issues, safeguarding the company's future. By aligning with sustainability, companies demonstrate resilience and responsibility, which can result in long-term financial gains and a positive public image. Ultimately, incorporating sustainability into corporate governance is a smart strategy for both the planet and a company's lasting success.

What are some key strategies businesses can implement to integrate sustainability into their day-to-day operations and supply chains?
To foster sustainability in business operations, six key strategies are recommended. Firstly, businesses should prioritize energy efficiency and eco-friendly practices to minimize waste. Second, responsible material sourcing from ethical suppliers is essential. Third, engaging in recycling programs and promoting recycled materials supports sustainability. Fourth, integrating green technologies, especially renewable energy sources, can significantly reduce environmental impact. Fifth, fostering education and awareness among employees ensures widespread participation in sustainability initiatives, requiring collaboration with stakeholders. Lastly, establishing clear sustainability goals, measuring progress, and transparently communicating achievements help companies stay accountable. These strategies collectively enable businesses to make meaningful strides towards a more sustainable and responsible operational approach, contributing to long-term environmental and ethical goals.

How do regulatory frameworks and reporting requirements influence the adoption of sustainable practices in corporate governance?
Considering that industry and businesses have been run in a particular way these last 100 odd years, the need to adopt sustainable practices calls for a radical change in the culture and/or prevalent practices of the business. Only a revolution can successfully make this a reality and for this, as historical evidence proves, a regulatory framework incorporating rewards and punishments drawn up by the Government is absolutely essential.

Enactment of Rules, Laws and legislation with clear timelines for change-over to and implementation of sustainable practices is a must. An inclusive set of rewards and recognition for quick adaption and severe penalties and punitive actions for non-compliance will definitely be very effective in convincing and coercing businesses to recognize and respect the need
for environmental consciousness.

Could you provide examples of companies’ successful integration of sustainability into their corporate governance and how it has benefited them financially and socially?
Many Indian companies, alongside global counterparts, have embraced sustainability as a pivotal aspect of Corporate Governance, fostering substantial growth and garnering societal respect. A notable exemplar is Infosys, actively reducing its carbon footprint by enhancing energy efficiency, incorporating renewable energy, and prioritizing water conservation and waste reduction. Beyond contributing to global environmental objectives, Infosys's sustainability initiatives enhance operational efficiency and cost-effectiveness. The company's holistic approach extends to social responsibility, investing in education, healthcare, and community development.

To overcome short & long term financial goals, organizations need to emphasize the long-term benefits of sustainable practices, including cost savings, risk mitigation, and enhanced reputation.

Similarly, ITC Limited, a diversified conglomerate spanning FMCG, hotels, and paperboards, integrates sustainability seamlessly into its core business strategy. Demonstrating commitment to sustainable agriculture, water stewardship, and renewable energy, ITC achieves environmental preservation while realizing operational efficiencies and cost reduction. The company's engagement in social initiatives, particularly in rural development, has not only positively impacted communities but has also elevated its social standing. These success stories underscore how intertwining sustainability with corporate practices reaps both financial and societal dividends, showcasing a progressive and responsible approach to business.

What challenges do organizations face in aligning corporate governance with sustainability, and how should they overcome them?
Some of the common issues that organizations often face in this regard include:
Resistance to Change: Internal resistance to change, common across hierarchical levels, can be overcome through clear communication, engaging employees, and fostering a sense of shared responsibility for sustainability benefits.

Lack of Awareness and Education: In our diverse country, lack of awareness about sustainability can be addressed through targeted education and training programs, engaging employees, stakeholders, and leadership for a culture of sustainability.

Short-Term vs. Long-Term Focus: Companies tend to prioritize short-term financial goals over long-term sustainability. To overcome this, organizations need to emphasize the long-term benefits of sustainable practices, including cost savings, risk mitigation, and enhanced reputation.

Cost Considerations: Sustainable practices demand upfront investments, causing hesitation. Demonstrating long-term gains, like energy savings and operational efficiencies, helps justify and overcome initial costs for companies.

Regulatory Uncertainty: Companies may face challenges due to evolving sustainability regulations influenced by government and political will. Staying informed and adapting policies proactively aids in navigating regulatory uncertainty.

Supply Chain Complexity: Complex supply chains pose challenges in meeting sustainability standards. Clear guidelines, audits, and fostering collaboration among suppliers address these issues effectively.

Measuring and Reporting Impact: Implementing measurable sustainability metrics, robust tracking systems, industry-standard frameworks, and third-party certifications enhances transparency and credibility in organizational sustainability efforts.

By addressing these challenges through strategic planning, communication, and a commitment to continuous improvement, organizations can successfully align their corporate governance and operations with sustainability objectives.