Sustainability means different things to different people. Environmentalists see the origins of "sustainable development" in the World Commission on Environment and Development, chaired by former Danish Prime Minister, Gro Harlem Brundtland. Its report, titled Only One Earth was released in the late 1980s and timed to precede the Earth Summit in Rio de Janeiro in 1992. As is well documented, the term enjoins that one should ensure that the present use of natural resources should not deprive future generations of access to these resources.

Most will be puzzled to hear that this concept is now being prefixed to finance . sustainable finance. In the minds of many Greens, finance would be antithetical to anything sustainable, since one presumes that its sole object and role is to reap a handsome rate of return. One should remember, however, that both economics and ecology stem from the same Greek root, oikos, meaning home or household. While economics is the science of ensuring that the household's expenditure remains within its budget, ecology enjoins that the household is kept stocked with all the food and other essentials necessary for living. They are thus two sides of the same coin.

On 25 September In Mumbai, the German development agency GIZ, the UN Environment Programme's Finance Initiative (UNEP-FI), the Indian Institute of Corporate Affairs (IICA) and Yes Bank held a workshop to sensitise the media on how to cover social and environmental performance in any economic activity.

Till now, particularly after the emergence of neo-liberal doctrines espoused in the era of economic globalization, entrepreneurs have generally toed the Milton Friedman line that the business of business is to do business. As the die-hard conservative wrote in The New York Times in 1970:

"When I hear businessmen speak eloquently about the 'social responsibilities of business in a free-enterprise system', I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned 'merely' with profit but also with promoting desirable 'social' ends; that business has a 'social conscience' and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are . or would be if they or anyone else took them seriously . preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades."

However, a lot has changed since and the concept of corporate social responsibility or "triple bottomline" has gained considerable traction.

Green principles

Many corporates in this country, in fact, may wrongly conflate the paradigm of sustainable finance with the new law which compels companies with a net worth of Rs. 500 crore or more, or a turnover of Rs. 1,000 crore or a net profit of Rs 5. crore, to spend two per cent of their average net profits for the past three years on some socially responsible activity. In reality, to earn the epithet sustainable finance, any investment must be subjected to reporting on its business responsibility. To that end, the Ministry of Corporate Affairs, under the dynamic leadership of Sachin Pilot, has published a document which lays down nine "national voluntary guidelines on social, environmental and economic responsibilities" of business.

One should remember that both economics and ecology stem from the same Greek root, oikos, meaning home or household. They are thus two sides of the same coin.

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The ministry's first principle is that businesses should conduct and govern themselves with ethics, transparency and accountability. The ministry cites one of India's oldest private sector companies, which has been functioning since 1910. Typically, such official documents . whether by the government or multilateral or aid organisations . do not reveal the identities of companies. This particular company released its first Sustainability Report in 2005 and continues to do so, based on the Global Reporting Initiative (GRI) guidelines.

The company has also created a sustainable mechanism to consult with the key internal and external stakeholders, customers, employees, farmers, suppliers, government and community as part of its reporting process. It holds focus group discussions with villagers and incorporates their needs in finalizing community investment programmes. The Sustainability Report is validated by third party assurance providers.

Secondly, businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle. A company which has played a pioneering role in the growth of cellular technology in India focused on energy efficiency, sustainable use of materials and packaging as part of its life-cycle assessment. Its device has a feature which reminds the user to unplug their phone charger from the electricity socket when the battery has been charged. What are known as "end-of-life" practices close the lifecycle loop, putting energy and valuable materials back into circulation. As is well-documented, e-waste is emerging as a major health hazard in Indian cities, as old PCs and other gadgets are stripped to recover the minerals used in them.

A principle which is observed more in its breach than observance is that businesses should respect the interests of, and be responsive towards, all stakeholders, especially those who are disadvantaged, vulnerable and marginalized. A classic case in this regard is Vedanta's abortive attempt to mine bauxite in Niyamgiri, Orissa.

Due to a spirited campaign by the Dongria Kondh adivasis, among others, the project was called off. Green lobbies like Survival International and ActionAid demonstrated outside Vedanta's London headquarters, activists often masking their faces with aluminium foil to focus on the end-product of the bauxite refinery that the company had already established in Orissa. Celebrities like Bianca Jagger joined the protesters.

The combined resistance, a virtual David and Goliath struggle considering that the Dongria Kondhs number just 8000 and are in imminent danger of extinction, also caused major investors to withdraw from the project. Thus, in 2007, the Norwegian government withdrew its $13 million stake from the Vedanta project - Norway, as a major producer of aluminium, has an interest in this sector. Martin Currie Investment Management, an international company based in the UK, managing money for financial institutions, charities, foundations, endowments, pension funds, family offices, government agencies and investment funds, sold its £2.3m stake in 2009, and BP's pension fund reduced its holdings in Vedanta because of "concerns about the way the company operates".

But, from an ethical and moral perspective, what hurt Vedanta most in the UK, where it is headquartered, was the decision of the Church of England to sell its £3.8m stake in 2010 over concerns about the company's human rights record. The church had been under mounting pressure over the previous year to disinvest in the FTSE 100 company after it continually refused to back down on its plans to construct an open-cast mine. Activists believed it would destroy the area's ecosystem and threaten the future of the tribe, who depend on the hills for their crops and water and who believe the mountain and surrounding forests to be a sacred place.

"We are not satisfied that Vedanta has shown, or is likely in future to show, the level of respect for human rights and local communities that we expect," said the church in a statement, adding that maintaining investments in Vedanta "would be inconsistent with the church investing bodies' joint ethical investment policy".

Another instance of an unsustainable project was the extraction of water by the Coca-Cola company in Plachimada, Kerala, which was halted by the state government after protests from local people that their water supply was being compromised. This case, too, received international attention due to the fact that the soft drink company is among the top brands in the world.

The Indian experiment

Bodies like GTZ, which are helping implement the UNEP-FI initiative in India, observe that responsible business reporting at various stages of an investment can help avoid such failures. What you can measure, you can manage, is the mantra. The Global Reporting Initiative (GRI) has set up one of its five global focal points in India, in collaboration with GIZ.

In 2009, 56 companies across 12 industrial sectors produced sustainability reports, out of which 35 subscribed to the GRI guidelines. India is identified as the country with the most comprehensive use of GRI's guidelines in terms of level of disclosure and external assurance. As many as 78 per cent of GRI reports from India boast of observance to these two indices, as compared to a world average of 24 per cent.

Now, regulatory agencies like the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) have also launched a series of reports on listed companies' sustainability. There is a SEBI directive on business responsibility reports by the top 100 companies by market capitalisation.

The Indian Institute of Corporate Affairs is also monitoring "meaningful reporting" of the nine non-voluntary principles. The problem in this country is complicated by the fact that two out of every three businesses are family-owned. There is an "eco-system" comprising financial institutions, corporations and exporters who are being monitored for their sustainability practices. The Reserve Bank itself speaks of "financial inclusion"and in his first speech after taking over in August, Governor Raghuram Rajan highlighted the need for transparency and governance in financial institutions.

The Infrastructure Development Finance Co (IDFC) has been "mainstreaming" environmental and social risk management in the projects it finances, using concepts employed by the World Bank and International Finance Corporation, the Bank's soft loan affiliate. It funds large energy, transport and telecom projects, among other sectors. It has prepared an Environmental Framework Manual which looks, for instance, at whether a project can sustain the total displacement of a population, particularly in an isolated rural area.

Typically, these concerns are addressed after the financiers have signed on the dotted line and the project has to undergo an appraisal process. But IDFC has sensitised its teams to examine various parameters. In its Category A projects . for example, a thermal power station . consultants are hired at the IDFC's cost even before the finance deal is finalized. The first three disbursements require an environmental and social sign-in. On certain occasions, a tranche of a loan has been halted till the proper parameters are in place.

In June, IDFC became the first Indian company to sign what are known as the "Equator Principles" (EPs). The principles are based on the International Finance Corporation's Performance Standards on Environmental and Social Sustainability, and on the World Bank Group's Environmental, Health and Safety Guidelines. They provide a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in projects and is primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making. The EPs are adopted voluntarily by financial institutions and are applied where total project capital costs exceed $10 million.