The world is dying. All over the world, climate change and the disasters associated with it have caused major catastrophes, particularly in the last few years.
The simple truth is that if climate change continues uninhibited, while the planet might survive for a while, collective human suffering will increase as fresh water supplies decrease and ocean levels rise, and those worst affected will be the most vulnerable segments of the population. Now, we can talk all we want about cutting our individual carbon footprint by not using plastic bags and driving hybrid cars, or even billion tree tsunamis, but the sort of rapid action we need to take with the planet dying as quickly as it is requires that large businesses that contribute the most to climate change alter their practices. Globally, 100 energy companies have been responsible for 71% of all industrial emissions since human-driven climate change was officially recognized. Locally, corporations produce everything we consume, and the way they produce these products affects the environment and in turn us.
Unfortunately, the moral argument does not sway industrialists and corporations, but the nature of the losses is still colossal. In Japan, heavy rains, heat waves, the Osaka earthquake and the Jebi typhoon caused 1,282 deaths on the island and caused economic losses of $35 billion in 2019. Germany had its hottest year in 2018, with damages of more than $3.5 billion for the agricultural sector. In India, the year 2018 alone had 2,000 deaths and losses worth $37 billion in connection with extreme heat, floods and sandstorms, among other devastating natural events. Similarly, Sri Lanka had over $3.6 billion dollars in losses and a collapse in per capita GDP of 1.24% due to climate change related events.
Pakistan is no different in this regard. The recent monsoon rains killed around 90 people this year alone. Floods and avalanches killed another 93. The Economic Survey of Pakistan 2020, citing data from Global Climate Risk index, noted that Pakistan had suffered economic losses worth $3.8 billion and witnessed 152 extreme weather events between 1999-2018.
The losses are profound and the challenge is real. It is more menacing for a country like Pakistan because of the already dwindling economy. And more so because Pakistan contributes less than 1 per cent to the global greenhouse gases, and yet, it is the fifth most vulnerable country to the effects of climate change. It’s a dual responsibility for a developing country; reduce gas emissions as well as protect the country from the impacts of climate change.
But there is a catch. Because companies can still turn a profit while economic harm hits through natural disasters, and changing the way they operate in order to reduce emissions means sacrificing productivity, and in turn profits. This is the challenge then, for businesses to optimise their processes and adopt sustainable business practices. Of course, most businesses would be reluctant to reduce productivity because that would affect the bottomline, meaning the only solution would be to either make adopting sustainable business practices easier or necessary.
The state of sustainability in Pakistan
In 1961, the World Wildlife Fund (WWF) was established as an international non-governmental organisation. Their symbol was the panda bear, which was then close to extinction. Since those early days, the body has taken on a much larger role of wilderness preservation and the reduction of human impact on the environment.
“If we trifurcate our industry into three different segments, the first one are multinational corporations (MNCs) that are operating in the country. The second is the cluster, the group that caters to local markets, whether they are textiles, whether they are tanneries or sugar or whatever. Then the third ones primarily focus on exports,” says Hammad Naqi Khan, the director general (DG) and chief executive officer (CEO) at WWF. In Pakistan, much like the rest of the world, the WWF has their hands full acting as both lobbyist and watchdog.
While the companies that Khan mentions fall under three different categories, the regulatory and policy frameworks are the same for everybody when it comes to conserving the environment. Hammad explains that for most multinational companies, the compliance of regulatory framework is good because of their corporate policies and the same goes for the companies that export.
In September 2018, a study by the Pakistan Business Council (PBC) encouraged companies, particularly large and multinational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle. However, the PBC report raised some concerning points as well. For example, even though they were focusing on larger corporations, only 75 percent of the respondent companies had short and medium-term strategies, while only 65% had a long term strategy, and only 55% companies identified that their board and management considers sustainable development impacts when reviewing or approving strategy or risk. This means that at least a quarter of companies surveyed had no sustainable goals set at all, while just a little over half of them even considered sustainability goals when making a decision.
Read under the surface and the survey becomes even more alarming. With the state of the planet, sustainability should be driving the conversation when policies are being reviewed or implemented instead of just being considered. In almost half the cases, sustainability isn’t even part of the conversation. Other than this, these are the numbers admitted by the companies themselves. In this regard, businesses in Pakistan lag far behind, since companies abroad keep the sustainability conversation front and center if only to maintain appearances.
In Pakistan, the main issue has been the gap that exists between the identification of sustainable development goals (SDGs) relevant to business and the actions undertaken towards their implementation. According to the survey, more than 70% of companies admit that they are yet to report on the SDGs. But things have slowly gotten better, according to Ehsan Malik, the CEO of the Pakistan Business Council (PBC).
There is increasing awareness among the leaders in business in Pakistan that resources are likely going to take a hit, and collective effort should be made to deal with it. And the awareness has become profound with the return of second and in some cases third generation of the owners of these businesses. They have come after studying from abroad and simply can’t stand the way the environment is treated as a non-issue.
“A prominent exporter who exports hundreds of millions of dollars worth of goods introduced his son to me at a gathering and said that his son had been talking strangely since his return; that he doesn’t talk about profits, he talks about the environment,” says Ehsan Malik, explaining how the business outlook is changing in Pakistan with the coming of younger generations in decision making. “They are visibly more responsible and conscious,” he adds.
Companies have had to focus on conservation of resources, such as water, not just as a part of corporate social responsibility (CSR), but also in its business processes. For example, if a business wants to improve its image, it could run a CSR campaign where it builds wells in far off villages or provides clean drinking water to an urban area that does not have any. These are commendable efforts and do much good, but they do not solve the problem that water is going to run out if these companies keep producing goods the way that they do. To prevent this, they need to integrate sustainability into their production process to save water, even if it comes at the cost of productivity and profits.
Some businesses do that because they are forced to do it because of regulatory pressures while others are responsible enough to pursue it proactively. For some, there is no way around it because it brings business. A large number of textile exporters, explains Ehsan, have buyers abroad who are very demanding in terms of what the vendor companies in Pakistan are doing for protection of the environment and after the Paris agreement on climate change, they have become even more demanding.
“When you have suppliers that demand strict standards when it comes to environment protection, you can not do business with them unless you do it. Responsible buyers abroad would not even buy something from you if they are not of really high standards in terms of environment,” says Ehsan Malik. “And when a responsible buyer develops confidence in a supplier, more business is given to that particular supplier.”
Essentially, to achieve these goals, either the government can force the hand of producers to be more environmentally friendly in their business processes,or companies can take on the responsibility themselves because it is common sense and in the greater good for everyone in the long run. The other option is that multinationals with uniform standards or local producers that export be forced into it by environmentally conscious importers.
The SMEs problem and WWF to the rescue
The conversation for the most part is about large companies and multinationals and what they can do, and rightly so. They have the most impact, are easy to regulate and by changing their practices can have the most impact on the environment. However, what does get overlooked in this is that small and medium enterprises (SMEs) when clubbed together, can also have an impact on the environment. And when we are trying to scale back, it is worth looking at how they can best be regulated.
Earlier, it was mentioned that no matter what category a company falls into, the regulations are the same for all of them. SMEs generally rank poorly on compliance. Now, it is difficult to keep track of them, but it is also worth noting that because of their small scale, they are always in need from the government to provide subsidies because they are apparently not earning a lot. These subsidies can then even be handed out based on compliance standards.
“Another reason is because when they work on the feasibility studies, when they want to set up any new plant, in many cases, environmental considerations, putting up state of the art equipment to address the environmental issues is not part of the feasibility studies,” says the WWF CEO. “They even do the environment impact assessment reports studies as a formality instead of treating it as a decision making tool and consequently, because they have not incorporated the cost of that equipment, infrastructure or operations, when they start the model, it does not work.”
The SMEs are not yet up to speed but in case of exports, things are getting better there as well. When international customers become demanding, they restrict the operations of SMEs because it is a challenge for them to monitor compliance on anti-environment activities.
Ehsan explains that international buyers install monitoring equipment in companies here in Pakistan to monitor their compliance and restricted companies to outsource their business operations to SMEs because it is hard for them to monitor compliance at these SMEs. However, recently, he claims that companies in Pakistan have been able to plead their case with international buyers to install monitoring cameras in those SMEs.
“If the SMEs are doing 90% of the work for a single supplier, it makes sense for the respective buyers to install such monitoring devices in those SMEs. For SMEs that, for instance, do 10% of the work for international companies, in that case, both parties have no interest in making such arrangements.” The regulation and oversight of the industries is loose. Which is why the majority of the SMEs have a lethargic attitude towards pro-environment business policies. This is where the WWF comes in. It advocates for adopting sustainable business practices and makes a case for introducing such practices for future benefits.
World Wide Fund (WWF) is the part of an international network that is the largest global environmental group and nature conservation organisation and is also the largest environmental conservation organisation in Pakistan. With presence in more than 100 countries, in Pakistan, it has slightly more than 300 people working for the Fund.
“If you look at our mission, as a nature conservation organisation, we have divided our work into six thematic areas. They are traditional work on wildlife protection, forest, marine, water, climate and energy, whereas food is comparatively a new practice that we intentionally included because a lot of food is wasted at the production side and at the consumption side,” says Hammad Naqi Khan the director general and chief executive officer at WWF.
“We also have three driver practices because we feel that these are the drivers we need to work on across the six thematic areas: governance; markets, where the role of the private sector and markets comes in; and financing. Financing includes both working with the financial sector and also to influence investment decisions that are sustainable. In a broader sense, these are our priority areas,” he adds.
The World Wide Fund has been actively pleading the case for conservation of water in Pakistan among others, because, as Hammad says, water change for Pakistan is climate change. WWF, being an advocacy group, can not enforce anything upon companies and therefore relies on making a case, based on scientific findings that certain business processes that are also environmentally friendly would be more beneficial for a business if those are implemented. It focuses on creating partnerships at all levels and with all stakeholders it is a solution-oriented organisation.
“So if we highlight an issue, that must be supported and supplemented by a solution. What can be done, what needs to be done. For instance, in cases companies are using, let’s say more water, it is also, in many places, in many industries a business risk more than reputational risk. That is where we take the findings and we identify gaps and then we develop programmes for that particular industry,” says Hammad.
Hammad explains that they have been diligently working towards the cause by adopting a two-pronged strategy. The first component is lobbying and advocacy on different forums, backed by a business case in support of certain measures. That is followed by the second component of the approach where WWF tries to promote better environmental management practices either generically or industry specific.