Prabodha Acharya is the Chief Sustainability Officer (CSO) of JSW Group, one of India’s largest conglomerates with core activities focused on steel production and manufacturing sector. The $22bn group multinational has several business lines and ventures, from energy, cement, paint, logistics and social development activities through JSW Foundation and JSW Sport. Acharya has more than 30 years of experience in environment and sustainability roles in various corporates and sectors including the steel sector.
In the first instalment of our series examining the evolution and characteristics of the role of CSOs, Acharya shares JSW’s sustainability vision and strategy, as well as his approach to make all business functions buy into sustainability.
How do you differentiate ESG and sustainability?
We don't bundle sustainability and ESG together. They are different. ESG is primarily a risk management tool whilst sustainability is driven through efficient business management processes by the organisation. As an organization, we must align to what criteria investors are following and tracking to place their investment. But we must establish systems that manage externalities and external factors. To build a sustainable business, we need to be aware of how our operating environment is changing and how we meet the challenges, as well as take advantage of the opportunities it provides.
ESG evaluates the risks due to environmental, social, and governance factors that could impact the investor/investment. It adopts an “outside-in” perspective that is best described as an investor- and company-centric framework which seeks to de-risk portfolios and increase the economic resilience of a company. However, sustainability adopts both “outside-in” and “inside-out” perspectives. That includes how the company builds resilience to manage the changing forces that have the potential to affect the operating environment of a business and therefore its sustainability. It also includes the impacts of the business on the health of the planet and society.
I strongly believe that embracing sustainability as an opportunity and as a responsibility for the business.
How have you approached embedding them in your corporate strategy?
We have adopted a sustainability vision based on three main pillars of responsibility: social, ethical and environmental.
For our sustainability strategy to be effective, we have developed a structure, which will ensure that the strategy is implemented consistently and so we continue to operate effectively. In developing the architecture and details of our sustainability framework, we considered, the national and international standards that already exist across the corporate world, for example the National Guidelines on Responsible Business Conduct principles, UN Global Compact, International Finance Corporation performance standards, OECD guidelines, ISO standards, UN Guiding Principles on Business & Human Rights, UN Sustainable Development Goals, Global Reporting Initiative Standards, etc.
Our comprehensive sustainability framework comprises 17 core focus areas, where we can create significant impact. Each of these focus areas were supported with a detailed policy statements covering health and safety, climate change, energy, raw materials conservation, water resource management, waste water management, waste management, air emission management, biodiversity, local considerations, social development and community involvement, human rights, indigenous people management, cultural heritage, labour practice and employment rights, business conducts that include anti-bribery and corruption, conflict of interests, fair business practices, etc.
Could you provide some examples of these initiatives and what results they have brought?
The first area of focus is the fight against climate change and mitigation. We have set ourselves a specific target to cut emissions by 42% by 2030 in our own integrated steel operations. For our downstream operations, we have set a net zero target to be achieved by 2030, which is very ambitious.
The energy transition is going to be the major driver. This is followed by efficiency improvement. Most of the emissions is from metallurgical coke. If we reduce the consumption of met coke, that will give us a more efficient production. With regards to energy efficiency, we are using most of the waste heat and energy that accounts to around 30% of the total energy need of our steel plants. We can also use better quality of iron ore, and reduce coking coal consumption, we are investing a lot of money in this and other alternative sources of fuel.
At JSW Energy, which is another listed company primarily an energy generation company, we have set a carbon neutrality target to be achieved by 2050. By 2030, we aim to produce 80% of energy from renewable sources. JSW Cement currently has the lowest carbon footprint among the cement companies in the world, with intensity of less than 300kg/ton of cement. It aims to become carbon neutral by 2050.
Which processes and governance initiatives have proven the most effective in incorporating sustainability into all aspects of the business governance?
On the governance, we have set up a mechanism that starts at the board level. We have set up a sustainability committee which is represented by independent board members and executive directors in the board. They review the performance of the business every six months and provide strategic directions whenever it is needed.
Below that, we have an executive committee which comes together every month. The sustainability performance is the most important aspect for the review. We set KPIs for carbon reductions, for water reductions, for energy reduction, for emissions reductions for sulphur oxides (SOx) nitrogen oxides (NOx), biodiversity improvement and for diversity, etc. As part of our 2030 targets, we set goals for each year. We break it down at an operational and factory level. There we have monthly KPIs. These are reported and monitored by the executive committee on a monthly basis.
Below, we have set a multidisciplinary Climate Action Group (CAG) which also reviews the performance monthly. Along with their business performance, managers can review profitability as well as what is used for carbon emissions, for water consumption, so the process is integrated with the business.
What are the biggest challenges you have faced when taking on this transformative change perspective?
The biggest challenge is the mindset and getting acceptance by the business leaders, specifically CEOs. One should not look at sustainability as a cost or a hindrance but rather as an opportunity. If this is addressed at the top level, then this is accepted across the board.
I believe that my job, as the sustainability manager, is to change the mindset of the people who can change the world.
How have perceptions changed with regards to sustainability over the years?
Several aspects have helped recently. Investors’ expectations are increasingly concerned on how the business is managing their ESG metrics. This is helping people like me, the CSOs to put this agenda in front of the manager. The second driver is that, increasingly, customers are demanding for greener products, as well as more sustainable management of companies. The third aspect is that the regulators are also pushing to change the way businesses are managed. The recent, new reporting format in India, the Business Responsibility and Sustainability Reporting is one example.
Most importantly, and based on my experience, the success of a CSO, depends on how he or she puts the sustainability agenda in the agenda of other functional areas. A CSO is a catalyst for change to happen.
How do you achieve this?
When I speak to my operation colleagues, I must speak the language they use. For example, if I need to convince my Operations Head to reduce their emissions, I do not speak to them carbon emissions target only. I speak to them about how we can increase their productivity, or how to reduce energy costs by reducing our energy use.
When I speak to my marketing colleagues, I tell them about consumers asking for greener products, how can we increase our sales. With finance, it’s about including sustainability as your KPIs and how that could improve the cost of borrowing. For example, last year, JSW as a group sourced around $1.6 bn of sustainability instruments like green bonds, sustainability-linked bonds and loans.
What challenges in both hiring and retaining sustainability talent have you faced in your company and in the industry?
There is a problem in finding the right talent at this moment. There aren’t many people available who are competent to understand the sustainability terminology, the business language and subtle aspect of becoming an agent of change. The combination of all three is needed if you want to be successful in this area.
If you get a person who is well-versed with sustainability language, he or she may not be know your sectorial business. For example, if I do not understand how iron and steel are made, I can’t engage with the business.
What approach have you taken to bridge this gap?
Demand for talent is very high and supply is tight. I have taken a different approach: I create a mix of external and internal individuals to train because my internal teams are well versed with the company’s and business processes.
This role also requires a lot of external facing and advocacy. We also try to talk to various organizations outside our own to bring change and create a brand, which is very important.
I have a direct team of 6 individuals. Then, we have an indirect team across the business and operations. At the corporate level, we need people who understand sustainability, understand business and talk to senior members, because this is all about how you convince people above your ‘pay grades’ and put sustainability in their agenda.
Therefore, the skillset that we require at the corporate role is different from the skillset required at the operational level. Those have operational knowledge and need to be trained on sustainability terminologies, which is an easier task than training on business processes. For example, at one of our biggest integrated steel plants at Vijayanagar, Karnataka we are running an efficiency improvement programme known as ‘Sustainable Environment Energy Decarbonization (SEED)’. During this change management programme, we are training more than 50 senior and mid-management employees to understand and apply sustainability into their day-to-day operations. The plan currently has a 12 mtpa capacity, which will be expanded to 19 mtpa.
When building a sustainability team in your industry, do you target experienced talent in sustainability or newer entrants to the sustainability market?
It depends on the role. When we have a junior candidate who is just out of college, we do not mind if he or she has a sustainability degree or not. We have young professionals with Statistics, Engineering, MBA degrees. They are in their formative years, and they have career aspirations. Those young people coming out of college are the best to engage with. We try to give them exposure in the areas of their interest since sustainability touches each function of an organization.
For mid-level managers, there are multiple solutions. One is to offer formalized trainings, because you’ll get lots of people, who have different experience in different sectors, and they don’t have sustainability experience. It’s easy to train them on sustainability needs. In India, the top-class colleges have started those degrees to bridge the gap. We see more master’s degree programmes and MBAs, postgraduate diplomas in management and sustainability. Many organizations have started their corporate programmes; they have started building their own curriculums. We are also training our employees on sustainability. – FS
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