Ensuring Environment Protection For Sustainable Economic Growth

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Indian Industry has started appreciating the concept of sustainable development. More and more companies are migrating away from the “business as usual” approach; as these companies strive to achieve long-term sustainability, they are realising the need to integrate social and environmental issues into business decisions. Confederation of Indian Industry (CII) has always been voicing its concern for the growth of Indian industry with due consideration to environmental issues and sustainable solutions. This issue of Policy Watch focuses on various challenges faced by the Indian industry with regard to environmental regulatory compliance and has outlined some specific recommendations to overcome those challenges.
  • 1. 1policy watch this IssueInside Message From the Director General........... 1 Chandrajit Banerjee, Director General, CII Policy Barometer.......... 9 Industry Voices........... 12 CEO Speak............................................................................................2 August 2013, Volume 2, Issue 4 Policy T he next decade is likely to see two facets of development gaining prominence. On the one hand, industrial growth will play a vital role in resolving some of the major challenges faced by societies–supporting economic growth, meeting basic needs, lifting millions of people out of poverty, facilitating mobility and social interaction. On the other, environmental pressures in the form of changing climatic conditions, scarcity of natural resources and so on are likely to increase, turning the spotlight firmly on the quest for sustainability. In spite of a wide range of environmental regulations and policies in place, India still faces many environmental issues such as resource depletion (water, mineral, land, forest, biodiversity etc.), environmental degradation, loss of resilience in ecosystems and livelihood security for the poor. The Economic Survey 2012 by the Government of India acknowledges that India ranks 125 out of 132 countries in the Environmental Performance Index (EPI). As the country’s population and economy continue to grow, so do the challenges. All human activities including business cycles derive resources from the natural environment in one way or the other, and therefore, it is in the interest of all stakeholders that the quality of the natural environment and biodiversity is maintained and conserved. The key requirement is continued adoption of technology and scientific management of resources, continued increase in productivity in every economic sector, entrepreneurial innovation and economic expansion. To address the environmental challenges, the three key stakeholders: civil society, Government and industry need to play their own unique role. The first guides society and cautions us that the planet is endangered. The second creates an enabling environment for implementing solutions through appropriate policy interventions. But the ultimate responsibility of devising and actioning the solutions rests with industry. We need to consider the growth requirements of our country vis-à-vis the challenges of sustainability and therefore, the real challenge is of accelerating economic growth while placing equal importance on regenerating – and not just preserving – the environment. The Confederation of Indian Industry (CII) has always been voicing its concern for the growth of Indian industry with due consideration to environmental issues and sustainable solutions. It was during the first Rio Summit in 1992 that CII initiated sustainability services for its members. At that time, CII had to develop a business case for environment management as then industry could not see value in being environmentally conscious. Twenty years hence, CII takes pride in the efforts of our industry members to create solutions that help India and the rest of the world not only reduce the environmental impact of human activity, but also regenerate environment. CII has been proactively working on these issues to find sustainable solutions through the involvement of all relevant stakeholders. It has a national level Environment Committee under the chairmanship of Mr Arun Bharat Ram, Past President, CII and Chairman, SRF Limited, with membership from diverse industrial sectors. The Committee, along with various stakeholders, is spearheading policy advocacy to create an enabling ecosystem for an effective environmental regulatory regime in the country. CII is actively organizing various capacity building programmes for its industry members to build awareness on the latest amendments and trends in environmental legislations, encouraging them to adopt best available practices and technologies for the protection of the environment. In this issue of Policy Watch, we focus on the various challenges Indian industry faces with regard to environmental regulatory compliance, along with CII’s suggestions to overcome those challenges. I hope continuous time-bound efforts and ongoing reforms will help India tackle major environmental issues in a planned and systematic way. n Chandrajit Banerjee Director General Confederation of Indian Industry Arun Bharat Ram, Past President, CII; Chairman, CII National Committee on Environment and Chairman, SRF Limited Pradeep Dhobale, Co-Chairman, CII National Committee on Environment and Executive Director, ITC Limited Dr Nik Senapati, Co-Chairman, CII National Committee on Mining and Managing Director, Rio Tinto India Private Limited Kamal Meattle, Chief Executive Officer, Paharpur Business Centre Focus: Ensuring Environment Protection For Sustainable Economic Growth
  • 2. 2 policy watch CEOSpeak With growing awareness amongst general public about conservation and protection of the environment and an active judiciary, business organizations need to consider environmental protection while formulating their long-term business strategies. What are your views in this regard? For long-term sustainability of business processes, we need to ensure sustainability of the natural environment. Indian businesses are increasingly recognizing their impact and dependency on the natural environment. Besides providing key inputs for business processes, the natural environment also receives unused resources and energy as byproducts. To ensure a sustainable supply of natural resources, businesses are required to take care of their impact and dependency on the natural environment and adopt efficient processes, thereby reducing wastage of precious natural resources. Globally, there is a new breed of investors known as responsible investors. They specifically look at long-term sustainability parameters of a business before investing in it. These parameters are broadly classified in the domains of environmental, social and corporate governance.As businesses have an ultimate objective of increasing shareholders' value, the concept of long-term sustainability essentially fits into the framework of valuation of a firm to its shareholders. On the regulatory front, we have seen a wide range of regulations from the Government for environment protection and conservation. The active role of judiciary, especially the National Green Tribunal (NGT), is catalyzing adoption of the concept of environmental protection and conservation by the industry. But we must also ensure that enough safeguards are built in the system so as to avoid creating barriers to the growth and development of the industry. Despite the wide range of environmental regulations notified by the Government of India, we have not been able to achieve the desired level of environmental quality. What are your views on the efficacy of the current regime of environmental regulations in India? After independence, our economy has grown in an appreciable manner. However, we need to analyse whether the existing command and control regime is able to support the next level of environmental regulation or do we need an innovative approach for prevention and control of pollution considering the carrying capacity of the environment to maintain long-term sustainability. With increasing pollution levels in air and water across all the tiers of cities, the current regime of the environmental regulatory framework is being criticized on the grounds that it is unduly rigid, cumbersome, and costly; fails to accommodate and stimulate innovation in resource-efficient means of pollution prevention; fails to prioritize risk management wisely; is patchwork in character, focuses in an uncoordinated fashion on different environmental problems in different environmental media often ignoring functional and ecosystem interdependencies and relies on a remote centralized system that lacks adequate accountability. While acknowledging its past accomplishments, the existing system appears to be reaching its inherent limits and seems no longer capable of ensuring sustainable environmental protection at tolerable social cost. The CII National Environment Committee is actively working on providing inputs to the Ministry of Environment and Forests (MoEF) to enhance the efficacy of the current environmental regulations. It is specifically looking into the issue of the next generation of regulatory standards. Future regulations can be designed to be more effective Business for Environment Arun Bharat Ram Past President, CII; Chairman, CII National Committee on Environment and Chairman, SRF Limited
  • 3. 3policy watch CEOSpeak and SMART by including certain market- based instruments. These could go beyond compliance and provide inherent benefits to those who would do ’extra’ to curtail their emissions. Some of the major issues with respect to the current command and control regime are as follows: a) Need for Market-based Regulatory Instruments: Our current environmental regulations come under criminal laws which imply a ’prohibit and punish’ regime. Under criminal law, the companies are either subject to compliance or non-compliance and not to the extent of compliance with the standards, thereby resulting in the absence of any incentive for business organizations to go beyond compliance. The command and control regime stresses static economic efficiency. It ignores dynamic efficiency gains resulting from the adoption of environmentally sound technologies/clean technologies which would result in saving material, energy, lowering pollution, improving product quality and greater market access etc. There is a need to shift from substantive law to reflexive law. Reflexive law aims to create incentives and procedures to induce people to continually assess their actions and adjust them to society’s goals. b) Need for Institutional Strengthening: The State Pollution Control Boards (SPCBs) have the prime responsibility of implementing and monitoring the environmental regulations in their respective states. Very often, it has been highlighted that the SPCBs don’t have adequate technical manpower as well as financial resources to undertake compliance monitoring in an effective manner. c) Ineffective Monitoring/Verification of Compliance: In the country at large, due to the absence of online monitoring of point sources of pollution, neither industry nor pollution control boards are able to monitor compliance effectively. Despite the best efforts by the industry, the spot/ grab sampling provides only a snapshot of the compliance at a particular time but doesn’t provide overall compliance, leading to ambiguity in reporting. d) Technological Barriers: On account of an increase in the quantity of waste as well as variation in its quality, there is a need for upgradation of technology, depending upon changes in the product or the process. More emphasis should be given on process technologies rather than end-of-pipe treatment technologies. e) Lack of Directional Clarity: Industry usually takes capital investment decisions keeping in view the long-term policy environment. Currently, since there is no long-term road map for the review of regulatory standards, the industry is finding it difficult to take such decisions. Further, it is also adding risk complexion to the projects in hand. India is the President of Conference of Parties (CoP) to the Convention on Biological Diversity (CBD) for a two year term till CoP-12, to be held in October 2014. What are the enabling factors for businesses to actively engage with the Government for biodiversity conservation? The industry is an important stakeholder in biodiversity and how companies manage their impact and dependencies on biodiversity is increasingly seen as relevant to their bottom- line performance. CoP-11 vide its decision XI/7 on Business and Biodiversity has inter alia called upon businesses to adopt practices and strategies that contribute to achieving the goals and objectives of the CBD and its strategic plan. The MoEF has a Biodiversity Conservation and Rural Livelihood Improvement Project (BCRLIP) which aims at conserving biodiversity in selected landscapes, including wildlife protected areas/critical conservation areas while improving rural livelihoods through participatory approaches. The development of Joint Forest Management (JFM) and eco- development in some states are models of new approaches to provide benefits to both conservation and local communities. The probable role of industry in such initiatives needs to be incorporated, especially for business organizations using ecosystem services in one or the other operation in the value chain. On a voluntary basis, there have been many initiatives by Indian industry for the conservation and protection of biodiversity but the enabling factors for the businesses to actively take it to the next level are: i) Policy Support for Public Private Partnership Model: Industry needs a clear policy by the Government of India for adoption of a Public Private Partnership (PPP) model for conservation and protection of biodiversity. We are seeing an increasing number of good examples of partnerships that cross the boundaries between the public, private and non-Government spheres to bridge public financing gaps for various types of projects. Why not biodiversity conservation projects? This will help to ensure long-term sustainability of voluntary initiatives of the industry in biodiversity conservation and protection. Further, it will also encourage industry to locate some of its operations near the sources of raw material and employ local people, thereby providing them livelihood. ii) Tools forValuation of Biodiversity and Ecosystem Services: An appropriate tool for assessing the valuation of ecosystem services to the businesses needs to be brought out by the MoEF. There are certain tools developed by international organizations working in this domain but a customized tool as per the requirement of Indian conditions needs to be prepared. iii) Clarity on the First Use of Bioresources Needs to be Spelt Out Clearly: Globally more than 1.3 billion people depend on biodiversity and on basic ecosystem goods and services for their livelihood. Biodiversity values are implicit in general rather than being explicit. The industry needs clarity on the rights of first use of bioresources so that biodiversity conservation efforts can be planned accordingly. n
  • 4. 4 policy watch CEOSpeak In its Sustainability Report 2012, ITC stated that it is a Water Positive, Carbon Positive and Waste Recycling Positive company. What are the policy bottlenecks faced by ITC while planning and executing environment friendly projects? In line with the Government of India’s National Action Plan on Climate Change (NAPCC), ITC has adopted strategies to address climate change related impact and accordingly developed mitigation and adaption plans. Our approach has been to integrate these plans with our business strategies. I would not say that there have been policy bottlenecks in executing these programmes. However, the potential to which these initiatives can be scaled up can be enhanced substantially with certain policy changes.Take the case of the afforestation initiative. There is a need to introduce appropriate amendments to the Forest (Conservation)Act, 1980, and related rules to permit industry to use degraded forest land for afforestation linked to the end-use of such wood. An enabling policy framework that encourages public private partnerships (PPP) for the development of degraded forestlands would serve the multiple objectives of Pradeep Dhobale Co-Chairman, CII National Committee on Environment and Executive Director, ITC Limited Achieving Sustainability Through An Enabling Policy Framework enhancing the competitiveness of the Indian paper and paperboard industry, reducing import dependence, creating sustainable livelihoods in rural India and contributing to the national objective of enhancing the country’s green cover. The multi-stakeholder partnership model proposed some years ago by the Ministry of Environment and Forests (MoEF) needs to be reactivated. Involvement of industry in Joint Forest Management (JFM) as a partner is another area which can help scale up afforestation. Agri-businesses can play a crucial role in soil and moisture conservation and the promotion of sustainable agricultural practices. However, there is no Government mechanism which recognizes that businesses can play an important role in these areas, both to meet national priorities and ensure sustainability of agri-supply chains. A multi-stakeholder partnership is strongly recommended to implement Government programmes on watershed development and increase the resilience of agriculture to global warming and extreme climate episodes. These partnerships can unleash synergies for more efficient and large scale implementation of such programmes because it will bring together (a) the scale and resources of the Government programmes, (b) the mobilizing skills of the NGOs and (c) the project and financial management capabilities of the private sector. What are the key measures that the Government needs to take to ensure effective participation of the business community in the conservation and protection of the environment? In my opinion, the Government needs to move away from a prescriptive and mandating approach. Industry feels that the legal system of our country needs to give a helping hand to the organizations doing more than meeting their regulatory compliance requirement. Conservation and protection of environment can be built into business models as demonstrated by ITC but there is a need to incentivize such an approach. Under the present legal system, we can’t have economic instruments in place which have a specific focus on the extent of compliance. The National Environment Policy, 2006, notes that ‘although criminal sanctions, if successful, may create a deterrent impact, in reality they are rarely fruitful for a number of reasons’. Civil law offers flexibility and its sanctions can be more effectively tailored to particular situations i.e. the concept of carrying capacity of the environment can be take into account under civil law. We need to look at innovative and inclusive approaches towards conservation and protection of the environment. Can we
  • 5. 5policy watch CEOSpeak Achieving a Net Positive Impact evolve a green rating for business entities and then incentivize top rated companies in terms of faster project clearances? Can we evolve REC (Renewable Energy Certificate) and PAT (Perform, Achieve and Trade) type mechanisms for water consumption? Or even for discharge parameters related to effluents and emission? Another way of incentivizing industry is to provide additional benefits like entitlement for import of raw materials at a 50 per cent concessional rate of duty, full exemption from excise and VAT for products made with specified clean technology and accelerated tax depreciation at 150 per cent of the normal depreciation rates under income tax laws for investments in environment-friendly technology. n There have always been concerns about the operational impact of the mining industry on the natural environment and biodiversity. How does Rio Tinto see the connect between biodiversity and sustainable mining operations? Rio Tinto owns and manages more than 110 operations around the world and the concept of sustainable development is integrated into all aspects of our business through our corporate and operational policies, standards, strategies, programmes and performance indicators. Our aim is to have a net positive effect on biodiversity, which means minimizing the impact of our business and contributing to biodiversity conservation through sustainable mining operations. Our approach to driving environmental perf
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