Pavan Sukhdev is a banker who has taken due diligence to new heights and given a new meaning to corporate responsibility to the environment.
Welcome to this edition of CNBC-TV18's The Forbes India Show. Pavan Sukhdev is a banker who has taken due diligence to new heights and given a new meaning to corporate responsibility towards the environment. In his book 'Corporation 2020' he argues that companies should ensure sustainability of the natural environment and fairness in the social environment in the interest of their own survival.
Below is an edited transcript of the interview on CNBC-TV18.
Q: You have forecast that 'business-as-usual' won't work. Can you really argue against the profit motive?
A: Yes. The narrow profit motive is what I am worried and concerned about. Corporations have to think of profit with a wider outlook of not just financial capital for shareholders, but also capital for society and the planet.
Q: How should Corporate India plan for 2020? What should be the main features?
A: According to research, by 2030 humankind will be close to reaching the plantet’s limits of resources. And the reason for that because today's corporations are designed only for profit, having abandoned their original design for social purposes. years ago.
Q: In your book you argue for green taxes, green profit and loss accounts, green subsidies, green accounting standards and green actuaries. How would you have a green profit and loss account?
A: The green P&L is actually the idea of increasing wealth for society not just from the view point of share-holder profits but towards human capital. Infosys, for instance, has actually created human capital for the use of society. Another example is Natura, a company in Brazil which makes cosmetics based on natural products and sells USD 3-billion worth of cosmetics and personal products through housewives.
Q: How do you conduct an audit of a green P&L?
A: That is the challenge, especially with corporations going global. So you need a global set of calculations and that is actually what the TEEB Business Coalition is all about. It is a global five-year collaborative to create standards and guidelines for major corporate sectors that impact the environment and society.
Q: What is the solution to ensure equal distribution of wealth?
A: Offering a bonus only after accounting for profits, reserves, provisions for the long-term, cost of capital and credit, and distribution of team bonuses is not a standard procedure. So we need to reform this culture. Despite controls, the economic crisis occurred and refuses to abate .
The problem is not control of capital at the level of the intermediary - the bank - but the control of capital at the level of the too-big-to-fail corporations. Politicians are worried what will happen if the corporations fail as that will result in face high unemployment and reduced corporate profit taxes. The focus on political survival has caused this vicious cycle which needs to be broken.
Q: Is there any example of financial organisations who have behaved responsibly both towards leverage and towards environment?
A: The best examples are in developing countries. Banks like Santander in Brazil and IndusInd in India who have placed environmental awareness and action at the centre of their businesses. IndusInd is the first bank to setup solar-powered ATMs. Santander has excluded and got rid of accounts that not environmentally-friendly.
Q: What can be learnt from the protests, in Indonesia against cultivation and production of palm oil at the cost of large-scale deforestation, in front of the offices of Unilever, Nestle and Procter & Gamble?
A: The protests forced Unilever, Nestle and Cargil to retract their palm oil contracts. Unilever led the way by setting sustainability targets. So the only solution lies in companies sitting down together and creating business standards that ensure a sustainable environment.
Q: Is the environment a luxury for a country like India?
A: The challenge lies in providing public amenities that are environmentally-friendly. In Bangladesh, by providing loans under the Grameen Shakti programme, the Grameen Bank has setup solar panels in villages and small communities and it works because the pricing is equal to the opportunity cost of kerosene. In India, kerosene subsidies have not helped the poor and have instead flown into the hands of middlemen and small companies.
Q: What is your advice to the Indian government?
A: My first piece of advice to any government is that it has to assume responsibility and respect what the people want. Secondly, change has to be ushered at the micro level. Thirdly, leverage and establish controls and lastly, resource taxation. Today, we are fixated on taxing corporate profits and salaries, in other words, hard work and value addition by the corporation, while the extraction of resources is hardly taxed or is free. Resource taxation will ensure resource efficiency and energy efficiency will finally count.