How have companies across the world come to terms with climate change?

Jan: The global reaction has been mixed. We have to consider the fact that it is a challenging environment today, given the different regulatory frameworks that businesses have to contend with. It leads companies to look at their businesses in different ways in different countries. I have seen companies across the spectrum — some are doing a lot for the climate while some are doing too little. Also the reasons for companies working to mitigate the impact of climate change are mixed. Companies are doing this on account of one or more of the following four reasons:

• Cost reduction opportunities: Reducing carbon emissions cuts costs. Some people, particularly in an economic downturn, are using it as an opportunity purely to bring down costs, but in a way that it is also perceived as doing the right thing.
• New business opportunities: Companies are finding opportunities for new services, new products and new ways of doing things in new marketplaces.
• Regulatory demands: Regulation is playing a key role. Depending on where a company stands in the use of carbon and other greenhouse gases, there will either be a cost or an opportunity.
• Stakeholder response: Companies are looking at their competitors and the benefits they are reaping in terms of new products or stakeholder endorsements, or the costs they have saved. They are also, in some cases, being forced to change by their customers and their employees.

Sudipta: The story is similar in India. Companies are looking at it from two angles — one is how the change in climate will affect business, and another is how regulatory systems will impact them. We can see that businesses are transforming with the increase in awareness among business leaders.

What are the principal challenges that businesses around the world face in dealing with climate change?

Jan: Some businesses look at it as a challenge, while some others as opportunity. I would say that for global players like the Tatas, this is an opportunity. There is, for one, the possibility of earning revenues through the carbon-trading mechanism, which many companies are exploring, but it is important to remember that the mechanism ceases to be effective if the businesses don’t become efficient in the process. I see efficiency as being the big differentiator for businesses in the years to come. Climate change regulations and mitigation efforts must lead businesses to become efficient. That will be the key to change.

Also businesses must understand the need to look at climate change as impacting every part of their operations — whether it is waste management, energy efficiency, HR or anything else.

Could you elaborate on how it could impact HR?

Jan: One way is that climate change is leading to more green-collar jobs being created, and companies would need to see whether these opportunities are being generated internally. Another way in which this is impacted is the way in which fresh graduates are viewing their careers. Many are asking companies about their green policy and combining that knowledge with the way they plan their careers.

Sudipta: They are concerned, and naturally so, because many of them realise that they will be here beyond 2050 and that they will have to work with the consequences within their lifetime. And here I think efficiency plays a vital role — an efficient business can see climate change changing every part of its business.

What is a catalyst for action on climate change?

Jan: It is almost always around the leader; the tone at the top is fundamental. It tells the entire organisation how to take the climate change initiative forward. Another big catalyst for change is the customer. Increasingly companies are being driven to set up climate change mitigation or adaptation efforts as a result of customer demand. One large retailer in the US has had to ask its suppliers to comply with climate change regulations because of customer insistence.

Sudipta: In India there is a lot of awareness and I think the government has been quite proactive on the matter too. Businesses are changing the way they operate and to a large extent, the leadership is playing a critical role.

Should there be different standards on climate change for the developing world, for countries such as India, for instance?

Jan: My answer to this would be that we need to start by looking at what we are trying to do. We are all trying to cap temperature increase to less than two degrees. So we have to do something and we all have some responsibility to fulfil. If not, everyone will be disadvantaged by the consequences. There is no doubt that mitigation and adaptation efforts must be universal and suffering too will be universal. Having said that, I do not think that it is fair for developed countries to say that the developing world needs to adopt more stringent measures. But neither is it fair for the latter to pass on the entire responsibility. This is not about the past but also about the future. We should expect more of some countries, but we should expect something of everybody. I don’t think it is fair to set a per capita carbon footprint limit for all, but frankly, I think the real challenge is to bring about awareness through education.

Sudipta: In India we need to understand that per capita greenhouse gas emissions is an important indicator, but in our country the levels for the rich would be comparable with those in the West. It is the poor and the middle class emission levels that are bringing the average down. We too have to do our bit, by adopting simple and better practices that were the norm in earlier days, and by creating better awareness. However, the Indian economy as such may not be in a position to accept any regulatory emission capping as suggested by many in the West.

Is there a need for a regulatory framework for businesses on climate change? Should this be national or global?

Jan: Regulation is critical, and I would simply point to California as an example of the impact it can have. Its carbon footprint is half the national average due to strong legislation. So a regulatory framework is absolutely necessary, and I would say a common body is a necessity too. Today we have way too many regulators trying to set the standards. The more we can do things on a global scale, the better it is. The Kyoto Protocol too aims to do that by setting a target and leaving it to each country to do it the way it thinks best.

Would you say that one regulatory framework will help businesses?

Jan: Yes, definitely. It is very important actually as it would help streamline the multiplicity of regulations in existence today. There are 250 pieces of major legislation today — and these are among the more recent ones, which have been built upon thousands of old laws. In 2008, the Financial Times 500 used 34 protocols and guidelines for reporting emissions. It becomes very difficult for businesses to operate out of multiple locations given the vast number of conditions, that have to be fulfilled. I would say that it is imperative that we bring it all down to a global set of norms that apply to all businesses. Also, the multiplicity of norms leads to inconsistencies in reporting, which has led to a phenomenon called ‘green wash’, which is making false claims about a product’s environmental virtues. This in turn leads to ‘green fatigue’, where consumers tend not to believe a company’s claims about its green products.

What is the kind of difficulty that a business house like Tata faces in dealing with climate change?

It is primarily those that I have mentioned above — a multiplicity of regulators and regulations force companies to spend more time managing the legislations than getting down to the real business. The vast number of legislation in countries all over the world, leads to regulatory complexity. The unintended consequence of this is impeding progress in an area where efforts should be exponentially accelerated.

Is there a need for dealing with different industries differently, since some have a deeper and more damaging impact on the environment?

Jan: There is a need for a global-cum-sectoral response, but we need to understand that every industry has its leaders and laggards. We also need to understand the scope of our cumulative actions on a sector’s climate change record. For instance, the aviation sector is high on emissions and can be considered as one that damages the environment more than other industries. But then we need to ask ourselves, “Who is flying?” All of us as customers are playing a role in the high emissions of the aviation sector.

Another example is that of the auto industry. It is also a high emissions industry, but 95 per cent of the emissions emerge out of the tailpipe, after the automobile has left the factory. There is a need to consider the entire scope of actions and consequences on climate change.

Could you tell us about your involvement with Tatas on the climate change issue?

Sudipta: We have been working with Tata Quality Management Services, which is leading the climate change initiative for the Tatas. We have been a part of all discussions from the start, and our first initiative covered five large companies whose carbon footprint was mapped and abatement levers identified. We are now moving into the second phase, where the initiative is expanding to other Tata companies.

Jan: I see there is a significant involvement of the top management, and we are definitely keen to work with them over the long term.

How will the climate change challenges and the debate around them evolve in the coming years?

Jan: Maybe I should get my crystal ball out for this one! My one hope is that the brilliant minds of the US, India and China come together to create innovative solutions to the problems at hand. I think that there are wonderful technologies that need to be discovered and some that need to be applied, but for that, a lot of the past has to be dismantled. I think what the industrial revolution achieved for its time can be done by the technological revolution today. There will be a need for behaviour changes — in consumption patterns, in choices at work and in the manner in which we commute. Also there should be, I feel, a lot of education and awareness around climate change, and this should be available as information to customers. I should be able to make an informed choice, and if that is possible, all of us will do the right thing.

For instance, we in the west often wonder whether it is greener to buy a plastic tree at Christmas or should we go in for a real tree which means chopping down a tree. Actually a plastic tree is greener because it can be recycled and protects the forest cover. We need this kind of information to be easily available to all customers for a change in behaviour.

Could you explain what technologies need to be discovered?

Jan: Technology that can give the consumer control over his or her impact over the climate. For instance, in London, in my house I have an electronic ticker machine that tells me exactly how much energy is being consumed by my household appliances. There are times when the reading is too high and we just go around the house switching off stuff and the reading is down again. Things like these will make a difference.