Wednesday, May 9, 2007

Shaping managers for eco management

With global warming generating heated debates, B-schools have realised the importance of teaching environmental management strategies to future business managers. The course on Corporate Environmental Management and Carbon Markets introduced by IIM-L is a step in this direction, writes Sushil Kumar

While the global society is witnessing unprecedented economic growth owing primarily to large-scale industrialisation, the growing degradation of the environment is becoming the main threat to human survival in the long term.

Green goals

Studies from all across the world indicate that phenomenon like climate change and global warming, with their attendant physio-socio-economic consequences, are present-day realities. It is now accepted worldwide that the globe is warming to such an extent that the livelihoods of a large chunk of our population are under threat. In such a scenario, a major challenge confronting businesses is being able to reconcile economic imperatives with environmental sustainability. Consequently, in the recent past, environmental concerns have proliferated around the globe, and various concepts, ideas and approaches on environmental management and strategy have been developed.

On the right course

The objectives of the course on Corporate Environmental Mangement and Carbon Markets are as follows:

  • To provide an overview of global and national environmental policy/law issues.
  • To discuss the Environmental Impact Assessment (EIA), Environmental Management Plan (EMP), and Environmental Management Systems (EMS).
  • To examine and analyse various strategies of environmental management.
  • To describe implementation of the Kyoto Protocol and understand Emission Trading Systems.
  • To understand the Clean Development Mechanism from the perspective of business in India.

Many national and international organisations have started ranking businesses by taking into account environmental and social performance of the businesses in addition to financial performance. Such rankings help investors, especially the institutional ones, to invest in companies that are following environmentally and socially sound business practices. Many companies have responded by showing their moral and ethical responsibility towards managing the environment. They have declared their environmental strategy such as ‘green’, ‘eco-friendly’ ‘environmental excellence’, ‘sustainable development’, ‘minimum harm to the environment’, ‘triple bottomline’, ‘carbon neutral companies’ etc.

On the other hand, with the implementation of the Kyoto Protocol, the emission reduction targets of Green House Gases (GHGs)—the main cause of global warming—are now becoming a reality, with the focus for action turning to the private sector. Business and industry have a crucial role to play in the implementation of the Kyoto Protocol and Emissions Trading Schemes. Provisions of the Kyoto Protocol aim to control climate change by controlling the emissions of the GHGs into the atmosphere through a market- driven mechanism, Emission Trading, commonly known as Carbon Markets. Under this scheme, companies and nations (especially in the developed world), who cannot reduce their GHGs emissions can opt to purchase carbon credits from other companies or nations. Businesses in the developing countries like India can gain competitive as well as economic benefits through the Clean Development Mechanism (CDM) projects.

Corporate responsibility

India offers a vast potential for CDM projects. As per one source, the country can generate 248 million tones of carbon dioxide equivalent or certified emission reduction (CER) units per year, including 78 million tones from land use and plantation projects. In monetary terms, assuming the least price of $8 per CER, India can annually make around $2000 million. A CDM National Strategy Study predicts that India could take 10-15 per cent of the global CDM market. Accordingly, many of the big names of the Indian corporate world Reliance, Tata, Birla, Ambuja, ITC, JSPL — are moving in, in spite of earlier apprehensions that the market uncertainty and the complex procedures that the CDM involves would put off big companies. Two major projects in India — GFL in Gujarat and SRF in Rajasthan — are reported to have already sold 6.8 million annual CER to companies from the developed countries, who have to meet their targets of reduction in emission levels of GHGs by 2012 under the Kyoto agreement.

B-schools take initiative

Therefore, sound environmental business practices not only make sense from legal, moral and ethical perspectives, but, in the present context, from an economic perspective also. Business managers need to develop an understanding of environmental management strategies available to them and how these can be used to gain long-term competitive advantage.

Realising that business schools today cannot afford to neglect the importance of teaching environmental management strategies to the future business managers, IIM-L has introduced a course, Corporate Environmental Management and Carbon Markets. This course seeks to provide students with an understanding of the changing relationship between business and environmental management, and make them aware of the strategies being adopted by businesses throughout the world.

The course focuses on how businesses can move beyond an approach that seeks simply to minimise environmental impacts to strategies that seek to proactively manage various environmental issues. In addition to exposing students to intricacies of Carbon Markets and their potentials, the course describes various concepts related to environmental management systems.

The writer is a Professor at IIM-L