How to Improve ESG Performance and Build Sustainable Business Practices

In an exclusive interview with Industry Outlook, Prabodha Acharya, Chief Sustainability Officer, JSW Group, shares his insights on how businesses can incorporate sustainability without losing their market relevance and emphasize the implementation of the right technology to make it happen. In his current role, he partners with CEOs, senior executives, and operations heads to develop and drive sustainability strategies for the group companies. He has more than three decades of working experience in the field of corporate sustainability, environmental management, emissions reduction, climate change, corporate strategy and policy development.

Given the growing emphasis on environmental, social, and governance (ESG) criteria, what are the most significant trends currently shaping ESG performances in businesses?

Three key elements that are significantly going to impact the business are due to Climate Change, Nature or Biodiversity and Inequalities. Therefore, it is important that the business strategies are realigned to take appropriate climate action, nature action and tackling growing inequalities both within and outside the business world. If you look at the results of the global risk reports being published by the world economic forum (WEF) on an annual basis, these trends, specifically environmental risks due to climate change and biodiversity are being perceived as the biggest challenge by the top business leaders across the globe.

In ESG, Governance (G) is fundamental to any business operation; without proper governance, nothing can be moved, regardless of whatever is being done. Though environmental issues are becoming more significant than social issues, all three are interrelated. Due to climate change, there is a lot of uproar and social disturbances, which is resulting in a domino effect that is impacting business productivity. Investors, Regulators and NGOs are demanding actions to be taken from the business side. From a business perspective, it is increasingly making sense to manage risks related to ESG and use the opportunities due to the changing stakeholders.

Please note that nature is not dependent on business or society. Business is dependent on nature. It is a common sight to see industries being closed down for a long stretch due to lack of water and raw materials.

Could you shed some light on how companies are developing strategies that effectively integrate ESG considerations into their core business strategies and decision-making processes?

As I had stated, governance is fundamental to having a successful business practice and, therefore, the development of business strategy. The absence of a proper governance mechanism makes businesses unable to function properly. Investors, regulators, and communities are expecting the corporations to develop strategies to integrate sustainable solutions as part of their decision-making processes. The way to integrate into business strategy is to ensure that the perceivable business risks and opportunities are well integrated to business practice and strategy. The starting point should be looking at the opportunities while managing the risks. For example, if we see, JSW Steel, while producing steel, also produces a lot of waste materials called “slag”. Now, the disposal of slag has become not only an economic challenge by adding to the cost of disposal but also an environmental risk. Therefore, to address the problem, JSW Cement uses all this slag and produces cement. The cement so produced is not only an economic value addition but also the greenest of all cements by having the lowest carbon footprint, therefore tackling the climate change issue. This business practice is an excellent example of converting risk into an opportunity by applying the circular economy principle and addressing environmental challenges. We have also similar examples by way of using plastics in steel making, using steel slag as an aggregate in road making, producing manufactured sand out of slag that replaces river/natural sand that helps support environmental degradation, using the waste energy and gases for the generation of electricity etc.

We launched a change management program named SEED (Sustainable Energy Environment and Decarbonisation) in two of our flagship steel factories to increase productivity and drive emission reduction. The program has identified a combined reduction of 18 million tonnes of CO2 reduction by 2030 from a business-as-usual scenario, i.e., equivalent to taking out almost 3.5 million cars from the road. It not only drives emission reduction, but provides cost savings due to efficiency improvements. The program was recognized as a change maker in the COP28 in Dubai.

These are examples of how climate action and business strategy can result in innovation without compromising anything that may harm the business—profitability and efficiency rise, resulting in increasing economic value.

In light of technological advancements and innovations, how do these contribute to advancing ESG initiatives? Could you provide any notable examples?

There are two kinds of technologies when it comes to sustainability: those that are feasible and commercially viable and those that are technically feasible and commercially not viable. All the technologies that fall in the first category should be implemented. For example, in iron and steel making, technologies like coke dry quenching (CDQ) or Top recovery turbine (TRT), Waste Heat Recovery etc, must be implemented. These are technically feasible and commercially viable, providing direct cost advantage. However, technologies like the use of green hydrogen in steelmaking would take time to become commercially viable, although it is now technically feasible. These are to be tested and tried before being scaled up.

The other area of technology adoption across sectors is digitization. It is impacting everyone’s life. It is essential that businesses adopt it. At JSW, we have a dedicated Chief Digitisation Officer (CDO) whose job is to examine and digitize processes so maximum benefits can be derived. Digitization allows operations to become more efficient and results in a sustainable outcome for the business.

With consumers increasingly favoring environmentally responsible companies, how can businesses leverage this trend to enhance their competitive edge and improve their ESG performance while building sustainable business practices?

The drastic progression of the IT industry, with the iPhone being a market leader and numerous companies following their footsteps to innovate, is a prominent example of taking the lead and others following suit. Similarly, when it comes to green products, someone has to take the lead. There is consumer favor now, and people are now aware and looking for environmentally friendly products.

But, the question still remains, are we ready to pay for the price? Is society ready to pay a premium for green products? This is the cross roads that the market is stuck at. But if the cost can be brought down, the greener product will have a greater demand. This is good for the business, leaders will focus on greening the supply chain, greening the operations and offering a greener product at a competitive price.

With over 30 years of experience in sustainability and environmental management, what note would you like to offer to emerging leaders, or what legacy do you aspire to leave in terms of environmental stewardship and sustainable business practices?

It is crucial for businesses to adopt better technology and make themselves greener to remain leaders in the future. It is an evolutionary process. Businesses have to take a lead and green their processes according to consumer demand. They shouldn’t slack around in any of these processes.

My mission is to change the mindset of the people who can change the world. Decisions are taken by top management and CEOs/entrepreneurs, and my job is to ensure that they make the best decisions. Hence, the impact on society is favorable, and the next generation will flourish. This is the legacy I aspire to leave behind.