Responsible Consumption and Production: A Corporate Roadmap
Introduction to SDG #12: Responsible Consumption and Production
The people of different countries have a unique lifestyle and consume a varying amount of resources of the planet earth. Everything was fine until the overall consumption didn’t threaten the existence of Earth. With increasing population and higher industrialization, the requirement for land to grow food, energy requirements, resources required to build real estate infrastructure have increased at an alarming rate. As per the analysis of the ecological footprint by Tim De Chant, using the data produced by Global Footprint Network (GF), the consumption in many countries has already reached alarming levels.
As per the United Nations, 1.3 billion tonnes of food is wasted annually, while ~2 billion people go hungry or are undernourished. The food sector alone accounts for around 22% of total Greenhouse gas emissions due to the mindless conversion of sustainable forests into farmland. The water has become an essential commodity despite being available in abundance and only 3% of it is fresh and potable, and current consumption levels are unsustainable [1].
If the earth's population of seven billion follows the consumption patterns of American, we will require four Earths to sustain them [2]. However, the U.S. does not top this list of consumption based on ecological footprint analysis. Kuwait comes first with (5.1 Earths), followed by Australia (4.8 Earths), UAE (4.7 Earths), Qatar (4 Earth) followed by the U.S. in fifth place. India, on the other hand, despite having a huge population, had an ecological footprint of 0.67 Earths in 2012, which has increased to 0.72 Earths by 2016 figures [3]. Due to the varying levels of consumption across the globe, the world’s total population of 7.4 billion is using 1.7 Earths as per the latest data available [3]. Even in the best-case scenario, if we follow the current consumption pattern in the future, we will soon have to find a new earth to live on!
Increased awareness about the unsustainable consumption patterns and production has forced the countries to pay attention to the current practices. Sustainable Development Goals by United Nations focus on dampening the adverse effects of anthropogenic activities by nudging towards responsible consumption. The Sustainable Development Goals (SDGs) were conceived in Rio de Janeiro in 2012 and were adopted by all the United Nations Member in 2015, replacing the Millennium Development Goals (MDGs) [4]. 17 SDGs focus on protecting the planet earth and ensuring peace and prosperity for its inhabitants.
SDG # 12, “Responsible Consumption and Production,” is extremely crucial for achieving all other goals, as it is closely connected with the rest of the SDGs. SDG 12 focuses on achieving economic growth and sustainable development by reducing our ecological footprint and changing our consumption and production patterns [1]. It focuses on the efficient allocation and utilization of the shared natural resources of the earth. SDG #12 has eleven global targets such as halving per capita global food wastage by 2030; reducing the waste generation by pushing reduction, recycling and reuse of the resources, spreading awareness among the people everywhere about sustainable development and lifestyles in harmony with nature and encouraging large and transactional companies around the globe to adopt sustainable practices and adopt sustainable public procurement and rationalizing the use of inefficient use of non-renewable resources to minimize their impact on planet Earth [5].
Relevance of the SDG to India
As a growing economy that is gaining more and more international importance, India’s commitment to the 12th SDG of sustainable consumption and production is absolutely essential. It is the world’s sixth-largest consumer market in the world, accounting for 3.5% of global consumption [6], but more than 22% of its population lives below the official poverty line, without being able to meet their essential minimum needs [7]. At the same time, India also has the third-highest emissions of CO2, accounting for almost 7% of global emissions [8], of which almost 90% is contributed to by the energy and agriculture industries [9]. India’s GDP grew over 350% in the last two decades as compared to Global GDP which grew by 95% [10]; whereas India’s greenhouse emissions grew over 180% in the same time period as compared to global emissions increase of 60% [11]. Thus, India’s emissions relative to its GDP is twice the world average.
All of the problems the data above shows leads to the same conclusion. As a fast-rising major player in the global economy, and a giant in the south Asian economy, India must focus on making its growth story marked by sustainability, and this can be achieved by enforcing responsible production practices. As a consumption focused economy which is home to more than 18% of the world population but with only 2.4% of total land area and 4% of water resources, responsible consumption should also be an absolutely essential practice for India. But despite this, less than 20% of urban waste in India is processed. As a signatory of the Paris agreement, India has already taken up on itself this responsibility for sustainable production and consumption and thus must now work on effectively implementing it. It is also India’s moral responsibility to help smaller nations achieve their sustainable production and consumption goals. A few steps - like the National Policy on Biofuels and National Clean Energy Fund - are already operational [8] for the same in India.
As India is set to become the most populous country in the world by 2024 according to UN projections [12], the stress on the limited and already stressed resources -such as water, clean air, energy, etc - will become even more. If India looks to keep its growth intact while maintaining good living conditions for its current as well as future citizens, SDG12 must be made central to our planning processes. Only more efficient methods of utilising our limited resources, with maximum application of the four Rs - reduce, reuse, recycle, recover - can help us grow in the 21st century and maintain our status as a world power with a strong growth story and improving standards of living.
Business Implication and Responses
The potential implications of SDG 12 for businesses are enormous in their scale. If followed through to its logical extreme, it is a massive commitment as this poses a huge question mark over the very essence of consumer-led markets and the long-term profitability generated from endlessly increased consumption.
Implementing sustainable consumption and production policies has the potential to create market turbulence with some industries that are heavily dependent on consumption, potentially facing an existential crisis. For example, industries such as food and beverages, consumer electronics and technology, ‘fast fashion,’ chemicals and fertilizers, plastics, and packaging have already started facing flak from environmental groups and regulators for their business models, based on linear resource flows and harmful levels of highly inefficient consumption. [13]
Some of the industries that will have a significant impact on their business if SDG 12 goals are adopted for them:
- E-commerce:
Increasing the use of cardboard and plastics by the e-commerce sector is posing huge stress on the environment with the cardboard used equating to more than 1 billion trees [14]. Many developing countries, including India, have become serious about plastic waste and have asked e-commerce firms to cut the single-use plastic in the packaging of products.
Flipkart promptly responded by announcing that it achieved a 25% reduction in single-use plastic through various initiatives across its packaging value chain and made a commitment to eliminate single-use plastic and move towards a 100% recycled plastic consumption by March 2021. It also announced that it had filed an application under the EPR framework, targeting 30% plastic waste collection in 2019 [15].
- Consumer Electronics:
India is the fifth largest producer of e-waste and is likely to generate 52 lakh metric tonnes of e-waste by 2020 [16]. Many firms, like in technology and e-commerce space, are pioneering new service-based or circular economy-style products, extending product life, sustainable procurement, and encouraging re-use and ensuring recycling occurs. Many firms operating in India like Apple, Dell, HP, Lenovo have partnered with Karo Sambhav, a Producer responsibility organisation (PRO) to close their material loop [17]. Cloudtail, the largest seller of Amazon India, has also partnered with Li Tong Group subsidiary for the implementation of take-back systems, establishments of collection centers, and channelization of e-waste. [18]
- Healthcare:
As per a joint report by Assocham and Velocity in 2018, the total quantity of medical waste generated in India is 550 TPD, and these figures are likely to increase close to 775.5 TPD by 2022. [19]. Health care waste includes surgical gloves, syringes, chemicals, pharmaceuticals, and radioactive materials. Pharmaceutical firms such as Roche have reorganized their supply chain to reduce lead time from their operating country to local warehouses significantly, saving tonnes of fuel per year. It has been ranked as one of the most sustainable healthcare companies in the DJSI (Dow Jones Sustainability Index) for the 11th year running [20].
- Tourism
SDG 12 stresses the importance of sustainable tourism that creates jobs and promotes local culture and products. In 2018, travel & tourism accounted for 9.2% of India’s GDP and facilitated 8.1% of employment. But, along with this growth, there is a growing problem of waste. Reports suggest that tourism and hotels in India account for roughly about 30 percent of waste from 62 million tonnes generated annually. [21] Several startups such as Himalayan Ark, Kipepeo, and Green People have taken a step in this regard to provide sustainable tourism to thousands of travelers.
- Fast-Moving Consumer Goods (FMCG)
Starting right at the beginning of the value chain, this would call for companies to initiate sustainable sourcing of key commodities such as palm oil, paper, soy, and beef. Creating products such as beverages require enormous amounts of water – a resource that is getting scarcer day by day. At the end of the production stage, these products are packaged in attractive containers and boxes – made of either cardboard or plastic. A move towards responsible use would not only entail using “less” packaging material but in some cases to think of creative ways to eliminate it altogether. [22]
Companies such as Coca-Cola [23], Nestlé [24] and Unilever [25] have led Carbon Pricing efforts by aligning themselves with the Business Leadership Criteria on Carbon Pricing. This involves setting the internal carbon price high enough so as to materially affect investment decisions and thereby help drive down greenhouse gas emissions.
Industrias La Constancia, SABMiller’s subsidiary in El Salvador, tried to reduce the waste dumped into the sanitary landfill. This was made possible through the development of a beer label recycling project, where labels removed from the bottle after the washing process are collected and sent to nearby cardboard recycling companies. These can then be used as secondary paper fiber – helping to produce notebook covers, etc. The project was estimated to generate benefits in excess of $10,000/year through the re-use of waste material, while also reducing CO2 emissions and preventing the cutting of nearly 3,200 trees per year. [22]
- Automotive
A modern automobile predominantly consists of steel, rubber and plastics. Furthermore, semi-solids such as adhesives, gases (refrigerants) and liquids (engine, transmission and brake oil; engine coolant) make up the rest. [26]
A typical vehicle is crushed and disposed off in a landfill, due to steel prices still being low enough to not generate significant demand for recycling. However, this also leads to the unsafe disposal of the other constituent materials detailed above. [26]
The SDG, in addition to the End of Life Vehicles Directive by the European Union [27] – has prompted automotive manufacturers to redesign cars for easier dismantlement and hence easier reusability of materials. Components such as seats – which were previously incinerated, are now being constructed of fabrics which have low Volatile Organic Compounds (VOC) emissions upon destruction.
Toyota Motor Corporation has undertaken numerous projects in this regard, making the removal of heavy battery components, door trim, wiring harness through tabs and layout optimization, and instrument panel significantly easier as compared to previous designs. An “easy-to-dismantle” mark was also designed and added to indicate the same. Toyota also prepared and released extensive guidelines and how-to material on how to safely recover fluids (refrigerants and oils) from the vehicle before disposing of it in the scrapyard. [28]
In a similar vein, Volkswagen AG – another leading manufacturer, has announced plans to use recycled steel for the manufacture of trucks, sourcing renewable materials such as cotton fiber and cardboard for vehicle upholstery and carpets. They have also moved in-house material recovery systems, which has saved the cost and environmental impact amounting to 1430 tonnes of CO2 that would have otherwise been produced due to transporting aluminum chips to external parties to melt and turn into solid billets for re-use. [29]
Analysis and the Path Ahead
What have we done till now?
The global success of the sustainability objectives is always dependent on the involvement and alignment of corporate business goals along with the sustainable development goals. Particularly in the case of the objective related to responsible production and consumption, the onus is even more on the corporations since the lion’s share of usage of natural resources for commercial activities stems from business operations.
The global success of the sustainability objectives is always dependent on the involvement and alignment of corporate business goals along with the sustainable development goals. Particularly in the case of the objective related to responsible production and consumption, the onus is even more on the corporations since the lion’s share of usage of natural resources for commercial activities stems from business operations.
If we break the processes in any business into its upstream and downstream components, this particular SDG can be broken down into clear actionable pain-points from a sustainability perspective. The consumption pertains to its upstream activities which involve material sourcing, use of natural resources, cradle to gate analysis of the entire breadth of the procurement process, sustainable supply chain practices, etc. On the downstream side, production can be related to activities including effluent and pollutant release, quality control of the goods produced from a consumer health and safety perspective, scrap and waste management, etc.
The 12th SDG consists of eleven global targets set by the UNDP [30] as a benchmark of achievements till 2030, and this SDG is one among the four SDGs which are at risk of failing to meet these target requirements. From a business perspective, here we are focusing on three most important global targets, analyzing the footprint of major corporations in those domains, and finally charting a path ahead for Indian corporates, citizens and the government.
- “By 2030, halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including post-harvest losses”
In FMCG organizations [31] operating in packaged food space or in consumer beverage producers operating through alcoholic or non-alcoholic drinks, a majority of the upstream material sourcing is of agricultural produce (in its raw form or in a processed state, either may be the case), or of potable drinking water. In the course of the manufacturing and sourcing process, a unique challenge faced by these sectors is that the waste occurring during procurement, processing and packaging is permanent and non-retrievable. The conventional argument concerning food waste at production and retail levels used to be that the financial burden of such loss is on the producers and distributors themselves and not on the consumers, but considering that India as a country in spite of tall claims by political leaders across multiple governments still lies at the 103rd position worldwide on the Hunger Index, stopping the waste of food is an area where corporates most definitely need to start contributing.
It is not sufficient to make sure that the procurement and production process is wastage-efficient; the consumption also needs inquiry. With growing consumerist mindsets stemming out of the unabated rise of capitalism, companies are finding it profitable to promote the ideals of “more the better” among consumers, which would very obviously impact their revenue generation and topline. The path to controlling irresponsible use on the consumers’ side is indeed more difficult than enabling corporates to reduce their waste. Organizations ranging from niche apparel manufacturer Patagonia [32] to beverage giant Diageo [33] have led the way in promoting responsible consumption by the consumers. Whether these were marketing gimmicks to create publicity and brand value, or whether there were good intentions behind the actions is up for debate. However, campaigns like “Don’t Buy This Jacket” and “Responsible Drinking” definitely create consumer awareness.
- “Promote public procurement practices that are sustainable, in accordance with national policies and priorities”
The business of procurement grows more and more complex with every passing year due to shrinking global boundaries. While the procured goods in themselves know no national boundaries, the source location from which they are procured from might be subject to the risk of irresponsible business practices which would harm the environment and ecosystem of that particular geography - the rest of the world consuming the procured products do not bear the brunt of it. Complicated international trade laws and fluctuating political rivalries make the issue further complex.
A classic example in the FMCG sector is Nestle’s procurement of palm oil from Malaysia. The entire business of palm oil cultivation and extraction in South East Asia has been facing flak for some duration. As a part of the Fortune 500 group of companies, Nestle faced a considerable amount of public outcry particularly, from environment-conscious NGOs like Greenpeace. Since then, Nestle has declared its objective of achieving 100% responsible procurement of palm oil by 2020. Till 2018, the organization had been able to reach 64% of its target; what it manages to achieve till the end of this decade remains to be seen. [34]
- “By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse”
While FMCGs in packaged food sectors are concerned about preventing wastage in procurement, production and consumption process, the inherent advantage they have lies in the fact that the products they produce are usually not inherently harmful if brought in contact with the environment in an uncontrolled manner. However, specialty sectors like Chemicals and Paints are producing hazardous and potentially harmful products with every single consignment that leaves their premises. It is not a feasible solution to halt the production altogether, but reducing harmful contact with the environment is a possible target worth setting.
Organizations like Asian Paints [35] produce are into the business of paints which let off huge amounts of toxic wastes as an unavoidable by-product of their manufacturing process. Theirs reduce and reuse policy has been focused on reducing power consumption per tonne of paint produced. More encouragingly, the organization has been investing in technology which would reduce waste produced (an anti-stick coating on emulsion trolleys helped reduce hazardous waste by 70% at their Kasna plant) and monitor the effluent content in discharge water.
How does the future look like?
In a developing country like India, responsible production and consumption have both an environmental as well as high economic dividends. It is therefore not only a sustainability issue but a potential business policy as well for corporates working in this country. Among the modern trends being adopted across the world, the following may be adopted in an Indian context to chart the path ahead:
- Technology and Innovation
Business objectives usually concern themselves with profit centers and revenue-generating activities; however, efforts into research and innovation translate into fruits of profit in the long run. This is a long term view of achieving sustainability goals - investment into research and high-end technology. While the scope here is too vast and often not realisable on a small scale, sustained investment can bring forth innovations in production and material sourcing technologies which would create fundamental process-related increments in sustainability drives.
- Circular economy
While production deals with one component of the value chain, packaging and end-of-life-cycle recollection are equally important but often ignored aspects of sustainable businesses. The concept of circular economy has been a paradigm-shifting one. German chemist Michael Braungart and American architect Bill McDonough (ref) came up with this pioneering concept in the 1970s. The added significance of implementing circular economy is that it can be related to all sectors from FMCG (ref) and electronics to steel and chemicals.
- Responsible Marketing
The only touchpoints organizations have with their clients is through the exquisite series of activities under the heading of marketing. If the sustainability initiatives by corporates are to be partnered by their partners in the business process - the consumers - then turning the consumers into stakeholders in the process is equally important. In the age of social media and information transfer on scales not imagined before, marketing can play a huge role.
Coca Cola had set a benchmark for taking initiatives to educate the consumer about the ill-effects of obesity, which is in fact a direct consequence of consuming their sugar-rich products (ref). In what can be called as a PR activity, Coca Cola also ensured that the message of responsible consumption was sent across to the consumers.
Conclusion
The
clock is ticking on the earth. The sustainability goals are not simply
corporate policies which are earmarked for compulsory lip-service for
creating a public image, but the importance of following these rules as
earmarked by the UNDP is a strategic need if the businesses are to
sustain themselves. From a corporate perspective, responsible
consumption and production is probably the single-most important SDG in
terms of the reach and relevance to almost every sector of the industry.
As 2030 approaches, it is a collective responsibility of the public,
the governments and the corporations to make sure the goals set are met
with due diligence.
Authors
Abhishek Chawla | Angshuman Pal | Athul Krishna A | D. Harish | Raj Gopal Tripathi | Siddhant S. Nair
References
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