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Understanding circular economy – a key ESG imperative

The ways in which businesses function and execute their operations have changed as the global economy has undergone major transformations in the past few years. Organisations today are shifting towards adopting circular economy and engaging in sustainable practices that are environment friendly. In the fifth episode of PwC’s ‘ESG: A bridge to action’, in association with Moneycontrol, leaders deliberate upon the concept of circular economy and its impact on the long-term ESG goals of organisations. 

Shivanshu Chauhan, Partner, ESG – Circular Economy, PwC India, and Mohit Malhotra, CEO, Dabur India, were the guests who discussed circular economy and its impact in detail. Dr Rupinder Singh Sodhi, Managing Director, GCMMF (Amul), in an exclusive message before the beginning of the episode, reiterated the importance for organisations to be energy efficient and sustainable. Citing the example of dairy plants, Dr Sodhi said that such plants are capable of producing biogas and bio-fertilisers. He also said that manufacturing processes should be environmentally sustainable as all products nowadays undergo the scrutiny of sustainability, which will eventually become the measurement of efficient manufacturing practices in future.

Explaining circular economy and its relationship with ESG, Shivanshu Chauhan said that unlike linear economy in which a lot of resources are utilised and a significant amount of wastage is generated, circular economy minimises waste generation and maximises value creation, leading to reduced extraction of resources and more increased reusing/recycling of materials. With policy and regulatory measures on circular economy gradually being developed and implemented, and conversations about the subject becoming mainstream, organisations are able to focus better on their ESG goals. The pressures of finite resources and shifting demographics faced by organisations can be addressed by shifting to circular economy aided by technology, and PwC’s ESG services can assist them during the transition.

Discussing the incorporation of circular economy in Dabur’s operations, Mohit Malhotra said that the organisation is committed to waste management and recycling, and believes in the larger agenda of being responsible towards the planet and not merely adhering to ESG regulations. Dabur aims to become a plastic waste neutral organisation in 2022 and plans to recycle the 22,000 metric tonnes of plastic waste it generates every year.

Mohit Malhotra also reiterated the importance of involving communities for an organisation’s successful transition to ESG. Citing the example of Dabur, he said that the company ran a plastic waste management programme which is now operational across 27 states. Pilot projects are a good way of executing such ideas and addressing operational loopholes, if any. Working directly with stakeholders as well as organisations like PwC which provide ESG services have ensured a smooth and sustainable ESG transition.

Deliberating upon the cost aspect of ESG transition, Shivanshu Chauhan said that sustainability should be seen from the lens of value and not cost. The social, environmental and future cost of ESG transition should be considered and circularity creates more value for stakeholders, making them more resilient. From prioritising inputs to recycling and reusing waste, corporates today are doing more responsible and sustainable business. While there may be a significant cost involved in ESG transition, corporates should look at it from the perspective of long-term value.

Mohit Malhotra also identified consumer behaviour as a critical enabler of ESG. Urban Indian millennials and centennials are buying sustainable products to encourage corporates’ sustainability efforts. However, the real challenge would be to cater to the rural consumers at the bottom of the pyramid. India’s ESG transformation would only be possible on a larger scale when both rural and urban consumers help corporates in their sustainability journey.

Consumer acceptance as well as a functional return-on-investment (RoI) structure play important roles in a circular economy. Products and services that provide environmental, social and economic benefits will find more traction with improvement in the spending capacity of consumers and an improved understanding of sustainability.

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