Tomorrow's corporations must profit without causing social and environmental damage. So thinks Pavan Sukhdev, author of Corporation 2020, which deals with "transforming today's business for tomorrow's world".
Sukhdev, who is a goodwill ambassador of the United Nations Environment Programme, was speaking at Bengal Chamber Think, presented by Black Dog in association with The Telegraph, powered by Eden City Maheshtala at the Palladian Lounge on Thursday evening.
The idea of Corporation 2020 is to create businesses that would profit without a cost to society and the environment. "Tomorrow's corporation, called 'Corporation 2020', must not have any 'negative externalities'," Sukhdev said.
"This is an economist's way of saying that doing business as usual has costs to society, and that future corporations will have to avoid doing so," said Sukhdev. "'Instead of collateral damage, tomorrow's business will have collateral benefits'," he added, quoting Jochen Zeitz of Puma.
So what are the 'negative externalities'? "Some of these costs are well known, such as health damage from pollution caused by industry or water scarcity caused by overuse of water in dry areas. Some are not so well known, such as the economic damage because of climate-changing emissions of greenhouse gases or damage caused by coastal oil leaks," Sukhdev explained. "The problem is that these costs are mounting. We cannot go on with a system in which corporations make profits at the cost of society. A recent study showed that the costs to society ("negative externalities") from just the top 3,000 listed corporations was over $2 trillion."
Sukhdev estimated that the total social cost (unaccounted costs to society of corporations) was over $4 trillion.
So how does one manage to cut down on these costs and move towards a greener economy? "We first need to measure the costs, then disclose them to shareholders and the public. A rule should be made for all corporations above a certain size to disclose their 'externalities' with their annual results," said Sukhdev. "If the companies report their profits for shareholders every year in a standard form, why shouldn't they do the same for their losses for stakeholders? We cannot manage what we cannot measure."
Partha Bhattacharya, the former chairman of Coal India Limited, said educating shareholders was a key issue.
"When shareholders know the true impact of the companies they invest in, not just profits but also costs to society, they can make changes happen. That's what we need," Bhattacharya said.
Sukhdev said there was already a movement in this direction in companies like Puma, Wal-Mart, Infosys and Virgin.