The environment does not figure anywhere in business decision-making

This interview between CSR and ESG veteran Meena Raghunathan and leading illuminem voice Praveen Gupta explores why corporate responsibility so often fails to move beyond compliance, what environmental education has and hasn't achieved in India, and why she believes ESG must become part of every manager's everyday decision-making.

Meena Raghunathan has been involved in the impact sector for four decades, with extensive experience in CSR, sustainability education, health, livelihoods, skilling, and community development. She was Executive Director, CSR, at GMR Varalakshmi Foundation, where she set up and led the CSR function for the GMR Group. Earlier, she worked at the Centre for Environment Education on national and international projects supporting sustainable development.

The Responsible Manager: Building Blocks of an ESG Perspective is Meena's latest book. She is also the author of Doing Good: Navigating the CSR Maze in India (HarperCollins, 2022) and co-author of To Every Parent, To Every School (Penguin, 2024). Meena also writes for children and educators, and blogs regularly. She serves on corporate and non-profit boards and is Visiting Faculty at MYRA School of Business.

Praveen Gupta (PG): Let us start from where we left off last time. During our conversation on your book 'Doing Good', you mentioned: "But I would say that ESG and CSR are not two journeys..."?

Meena Raghunathan (MR): Yes, I agree. They are part of the same journey towards Responsible Business. I see this journey has three key requirements:

A shift of mindset from maximisation of profit to optimisation of value across profit, people and planet. If we continue to weigh businesses only in terms of financial outcomes, we will never achieve sustainability.

A shift of mindset from shareholder focus to stakeholder focus. Businesses basically play to the gallery made up of shareholders. The other stakeholders are very, very secondary. They take salience only when there is a good chance their actions or reactions can disrupt profits. And while customers or employees are somewhere on the radar, affected communities and the environment often bear the brunt, but have no voice.

A shift of mindset from short term to long term. Quarterly financial results are what move the corporate world and financial markets. So, anything for a good result, every quarter. And environmental and social good are seldom going to show up in these. In fact, in the short run, they may seem like taking away from profits.

The traditional mindsets are ingrained, and the challenge is to move the corporate world away from these.

PG: From a "tragedy of horizon", climate breakdown is now at our doorstep. Do we have a plan of action for how we educate our coming generations and managers? Are there any signs of it embedded in our business practices?

MR: I would say at the school level, Education for Sustainability, under one name or another, has been around for four decades. As part of the Centre for Environment Education, I myself have been part not only of developing model nationwide programmes and innovative materials, but also of policy development. The National Policy on Education also pays service to this. There are efforts to address these issues through curricular and co-curricular routes. However, it is also true that while we have seen some increase in environmental awareness and even action, it is also true that the devastation of the environment in this period is also very real. So, have we educators been having an impact? The answer is a bit depressing.

Environmental Studies is a compulsory subject in all Indian colleges due to a landmark Supreme Court directive from the 1991 Public Interest Litigation (PIL) filed by environmental lawyer M.C. Mehta. Following this, the University Grants Commission (UGC) mandated that all undergraduate students must complete a six-module course on the environment to graduate.

I am not sure how seriously this is taken. I again fear that it has not really had a great impact.

And while some business schools have started modules on sustainability etc. in their curricula, it is not across all schools. And definitely not embedded in a way that makes thinking about these issues an integral part of their business decision-making DNA.

"So, have we educators been having an impact? The answer is a bit depressing."

PG: "The economy is a wholly owned subsidiary of the environment", the great Herman Daly stated the obvious. Doesn't it remain a blind spot? Just as corporate social responsibility looks a mirage, and DEI is off the radar? Corporate environmental responsibility is generally not in sight.

MR: You can't be more right. The environment does not figure anywhere in business decision-making. The laws offer some protection, but even these measures are rolled back sometimes in the effort to bring in 'ease of doing business'.

Why go as far as DEI? Look at worker pay and working conditions. We want to say that we are a good destination for mass products and offer good prices. But those prices are at the cost of someone, and that is usually the worker. Look at the job security of workers. Very often, smaller set-ups don't even give appointment letters; they don't give a break of salary and other elements of their pay; there are no means of redressal. Think of a not-very-educated woman who depends on that salary. Will she speak out? So yes, the 'S' angle is not something that is taken seriously. Even when a company in itself is 'good', do they really get into the working of their supply chain, which is in fact what they are supposed to do?

PG: Is there too much emphasis on ticking the box rather than the substantive issues? Do you believe quarterly reporting could be an impediment?

MR: Yes, while some companies do things by the spirit and not just by the law, many do not. Take the example of even CSR: the scramble to ensure 100% mandatory spend by March 31 leads to a frenzy of hardware projects (easier to spend and larger amounts are spent) sanctioned in January, as well as donations to eligible entities. Or the exercise of the BRSR. I have seen this being filled by junior people in different departments, without understanding the importance or the larger picture. To most of them, it is just one more format that trickles down from the top with a deadline. And few people at the higher levels look at it to see a coherent picture or use it as a means of feedback and areas of improvement.

"Yes, while some companies do things by the spirit and not by the law, many do not."

PG: The climate window is rapidly narrowing. Seven of the nine planetary boundaries have breached; Earth systems are wobbly. Are we being good stewards for the coming generations, or is it just business as usual (BAU)?

MR: No, we are not being good stewards. We do not even fully recognise, understand or accept that we are stewards. At some level, corporates do not even see their role in all this. They think it is the business of governments. This is because managers do not even register that the environment is where they get all their raw materials and inputs, and that it is where they dispose of all their wastes. And that both these aspects, environment as source and environment as sink, have their limits. We have been surpassing some of these limits, and have even surpassed them, and we are all in danger.

PG: A new UN brief courtesy of the Potsdam Institute for Climate Impact Research highlights the governance challenge of Earth system tipping-point risks. It requires governance approaches that can anticipate long-term change and account for interactions across different parts of the Earth system. Doesn't it take the governance challenge way beyond our current level of imagination?

MR: Absolutely. But where is this to come from? Not the international level. The intergovernmental mechanisms are arguably at their weakest at this point in time. The world is facing armed conflict, disruptions and fractures at a scale I don't remember. Countries are trying to hold their heads above the water. I don't see anyone trying to rise above this and take on a statesman-like role. So where is this governance going to come from?

PG: Do you believe extra-territorial regulatory demands like CBAM will compel our exporters in designated products to become environmentally conscious?

MR: If I were to take an example, I have seen that suppliers to multinationals like Walmart or Primark definitely follow better labour standards, health and safety measures, as well as environmental standards, than factories which are not in these value chains. So yes, extra-territorial regulations such as CBAM can encourage exporters of covered products to become more environmentally conscious because they create clear economic incentives. Exporters with lower emissions will incur lower compliance costs, making investments in energy efficiency, renewable energy, cleaner technologies, and emissions monitoring commercially beneficial.

But most firms may comply merely to retain access to the European market rather than from genuine environmental commitment. Smaller exporters may struggle with the cost of emissions measurement and verification, while firms with limited exposure to EU markets may have little incentive to alter production practices. Furthermore, the ability to reduce emissions depends on access to affordable clean technologies and supporting infrastructure.

Personally, I have concerns that such extra-territorial regulations may disproportionately affect developing economies and function as non-tariff trade barriers.

PG: I'll pick up a red alert from my interaction with Dr Mark Trexler, an authority in the climate risk knowledge management space: "Focusing on shareholder concerns implicitly gives a company permission to heavily discount the future, to take advantage of economic externalities, to play down worker health and safety, all of which are fundamentally at odds with the stated goals of ESG." Without the guidance of public policies and measures, would this be achievable, given SEBI struggles with the BRSR even for a limited few?

MR: Yes, BRSR is only the first step. But it is a necessary step. I have mentioned earlier how the form is filled. So, we know that just compliance and filling forms does not do it. We have to change the mindset and perspectives across the corporation. It is not enough to have an enlightened leader. ESG has to be in the DNA of every executive, every manager. That is the purpose with which I wrote my book.

"The purpose is to sensitise managers to these issues and help them relate ESG concerns to their everyday work."

The purpose is to sensitise managers to these issues and help them relate ESG concerns to their everyday work, whatever their domain or sector. It is founded on the premise that integration of these concerns is the right thing to do and will, in the long run, benefit the business as well as all stakeholders. Once every manager internalises the need to incorporate these perspectives into their business approach, ESG concerns will start getting addressed, and the company also establishes a more ethical foundation.

It tries to bring about three mindset shifts, which I mentioned earlier, that I think are fundamental to the change process:

The realisation that the success of a business must be measured not on profit maximisation alone but on benefits to people and planet as well. From shareholder value to stakeholder value. From short-term to long-term perspective.

Although the book is written in a business context, there is also the hope that it will prompt some reflection on how these issues relate to us as individuals, what personal decisions and actions we can take and what changes we can make for a more sustainable and just world.

I want to end with a quotation from Gandhiji (1937): "True economics never militates against the highest ethical standard just as true ethics, to be worth its name, must at the same time be also good economics. True economics... stands for social justice, it promotes the good of all equally, including the weakest, and is indispensable for decent life."

PG: Many thanks, Meena. I really appreciate your candid insights, as always. With best wishes in all your ongoing endeavours.

This article is also published on the Diversity Blog. 

illuminem Voices is a democratic space presenting the opinions of leading Sustainability Thought Leaders, their views do not necessarily represent those of illuminem.

The world needs sustainability knowledge. At illuminem, no interest group or shareholder can influence our work. Thank you for supporting our mission to make high-quality and independent sustainability information free for all. Every contribution helps. Thank you for donating today.