The Green Rating Project (GRP) is an effort to rate industrial units within a specific sector on the basis of their environment friendliness. The project aims at encouraging companies to adopt better environment management policies. Environment risk liability is an issue that is gaining increasing attention in Indian company’s boardroom.
Reasons for pro-activeness:
International financial institutions and investors are keen to know more about the potential liability they could be involved in by investing in emerging markets like India, which lacks in environmental commitments. Investors associate poor social and environmental performance with financial risks and liabilities.
• Environment conscious consumers express their support to responsible companies by purchasing their products in the market.
• With the increased thrust on exports, the companies will have to present themselves as environmentally responsible to be able to withstand international scrutiny.
The age-old concept of inverse relationship between environment and economy has become obsolete. Today a company with better environment practices is more likely to improve its bottom-line than its not so environmentally conscious competitors.
It is happening today not because the economics has changed, but because environmental protection has been redefined as pollution prevention, from its earlier definition of pollution control. Pollution control through end-of-pipe treatment is a dead investment and has inverse relationship with the bottom-line.
However, pollution prevention is an investment, which leads to better utilisation of resources and hence, strengthens the bottom-line.
This was also proved during the pulp and paper sector rating. CSE analysed the financial performance of the 28 pulp and paper companies that had been rated. The conclusion; there is a 60 per cent likelihood of a pulp and paper mill with fairly good environmental performance churning out profits and vice-a-versa.
Public interest litigation, encouraged by an activist judiciary, has led to the closure of a number of industrial plants by the Supreme Court and the High Court. If a company closes down, it is obvious that its stock value will go down. Investors can lose substantial money, which for many could be their life savings. Therefore, with increasing environmental consciousness of investors, investments in companies with poor environmental track record are likely to go down.
This can be clearly seen in other European countries and the USA. In the US alone, US $600 billion is currently being invested using social or environmental criteria, which is nearly one out of every US $10 under professional management. With the current level of information exchange through modern electronics media like World Wide Web, similar investment trends are likely to happen in India, sooner.
Aims and objectives:
• To develop and function as a form of governance based on public participation, transparency, non-bureaucratic institutions and market-oriented policies.
• To monitor the existing environmental performance of companies and influence the future industrialisation in the country.
• To prepare an inventory of the environmental performance of companies by systematically collecting information. This information will be further analysed, comparatively evaluated and disseminated.
• To develop a market-based incentive through the rating to encourage industries to voluntarily improve their environmental performance;
• To empower communities and markets to proactively participate in accelerating sustainable economic growth;
• To aid in better regulation of industrial pollution by regulatory authorities and,
• To aid in better formulation of policies by the government leading to sustainable development of Indian industries.
In totality, GRP aims to get Indian industries to develop and implement on their own sustained eco-friendly practices to preserve the environment.
Key elements: CSE has taken the cue from the methods practiced in the West, but at the same time has suitably modified them to suit its own strengths and the peculiarities of the Indian industrial context. Following are the key elements of this modification:
• Focus on a company’s future environmental commitments rather than dwell on its past track record: We begin by assuming that most Indian companies have not come up to the mark on the environmental front, partly because of inadequate enforcement of Indian laws and partly because political and industrial leaders have not given enough attention to environmental management. Therefore, CSE wants to recognise companies that are making a serious effort to improve their current and future environmental record, even if their past performance has been poor. But it would verify actual commitments and targets of the company for its environment friendly initiatives by rating the sectors once in two years.
• Voluntary disclosure: A company that does not disclose any information will qualify for the lowest possible rating.
• Primary and secondary data: Since the project relies heavily on voluntary disclosure by companies, data collection from both primary and secondary source becomes very important to maintain the overall credibility of the rating. The primary data collection consists of a corporate policy questionnaire, a sector specific questionnaire and visits to the corporate headquarters as well as factory site. Secondary data collection consists of feedback from different sources like local communities, local media, NGOs, respective state pollution control boards, etc.
• Involve public: For both primary as well as secondary data collection, the project has developed a country-wide Green Rating Network. The network consists of qualified and spirited citizens willing to collect data of companies situated in their area on behalf of the project. The criteria used for screening and selection of the Green Rating Inspectors are educational background, experience and proximity to the selected companies.
• Sector-specific approach: Since it is not practical to rate a company of one type with a company of another type in technical terms. Therefore the environmental performance rating of companies will be done within a specific industrial sector by GRP.
• Initial focus: Multinational companies and major Indian companies on the stock market are conscious about their public image, especially those that are trying to raise funds abroad. They are also the ones that have the means available to obtain world class technology. Therefore, CSE’s initial focus will be on this segment. Large industries are generally trend-setters and as industry leaders, they can set the standards for other companies to follow.
• Rating of non-participating companies: In addition to companies that are voluntarily disclosing information, the project will also obtain data on companies, which are not disclosing their information. These companies will be rated on the basis of secondary information.
• Transparency: The project has set up an institutional mechanism, which has a project advisory panel (PAP) and sector-specific technical advisory panels (TAP), to involve the society in general and experts in particular in this rating exercise.
• First opportunity to companies to view their report: To bring in transparency at each and every step of this project, CSE will provide the rating report of a company to its managers, for their comment and feedback, before publicly disclosing any information about it.
Key Institutions: The institutional set-up of the project has been established taking into account the following key aspects:
• The project should have a transparent rating process
• The project should involve representatives from various sections of the society who can discuss, debate as well as charter the future of Indian industrialisation towards sustainability.
• The project should have technical experts from industry to guide the process through research and rating. This will ensure that the rating criteria will bring out the reality at grassroots and bring in practical rating methodology.
As a result, the key institutions of this project are:
TECHNICAL ADVISORY PANEL FOR AUTOMOBILE INDUSTRY
a. Project Advisory Panel (PAP): It was possible for the industry to assume that an NGO’S attempt to assess their environmental performance may lack credibility and capability.
An independent rating of an NGO was also vulnerable to charges of preconceived bias or notions given the mandate of the institution. Therefore, to give credibility to the entire rating process, a Project Advisory Panel has been set-up.
Comprising of eminent politicians, scientists, civil society leaders, lawyers and judges, and industrial leaders, this panel was formed to advise, guide and steer the project and give the entire rating process a holistic and credible outlook.
This panel is the final rating clearance forum, wherein the ratings are scrutinised and cleared by the panel members before public dissemination.
The panel also serves as a sounding board for testing new ideas and for building up pressure on the government in formulating fiscal and environmental policy to support sustainable development
b. Technical Advisory Panel (TAP): This is a sector-specific panel comprising of leading technical experts from academics, research institutions, consultants and industry. This panel, in general guides, the project team through research and rating.
The specific role of the TAP is to:
• Guide the GRP team in preparing questionnaires;
• Review the information supplied by companies and the company profiles prepared by CSE and identify the possible lacunae and technical drawbacks;
• Review the work done by CSE on the overall rating format, criteria and weightages;
TECHNICAL ADVISORY PANEL FOR
• Guide CSE in finalising the ratings.
c. The green squad: The Green Rating Network (GRN) includes volunteers from across the country who inspect the production unit of companies and undertake surveys for ascertaining the perception of local communities, NGOs, media, etc., on the environmental performance of companies.
Currently, there are about 300 Green Rating Network volunteers spread across the country. The network consists of highly qualified professionals, energetic technical students and high position government employees, all driven by the fact that Indian environmental problems needs to be addressed urgently.
d. The GRP team at CSE: The green rating project (GRP) team is young and dynamic, consisting of people with a background in science, social sciences and engineering. The team undertakes the whole rating exercise in consultation with the above stated institutions.