Driven for and by the people

GRP has emerged as a truly democratic indicator of the direction in which corporate environmental governance is headed

Published: Friday 30 November 2001

Driven for and by the people

-- (Credit: Kumar)I n the past few decades, society has played a proactive role in purging the market of toxic products. This has been largely possible due to sustained information campaigns, highlighting the damage these noxious substances cause to the environment and health. Cases in point are public disclosure drives that have led to the banning of ddt (dichlorodiphenyl trichloro-ethane) and intermediate dyes, and forced the paper industry to consider chlorine-free bleaching.

The foundation for the Green Rating Project (grp), too, is laid on public participation -- from evaluation to revelation (see box: Five steps to final assessment ). Awareness, transparency and voluntary disclosure are its hallmarks.

grp assesses corporate environmental performance within a specific sector and disseminates the results to a wide audience, which includes investors, consumers, financial institutions and the media, both within India and abroad. It seeks to develop and function as a form of governance based on non-bureaucratic institutions and market-oriented policies.

Today, a company's eco-friendliness is seen to give it a reputational advantage. This reaffirms the close link that the environment has with economics and underscores the importance of such a monitoring exercise.
The genesis grp was conceived in the mid-1990s and is inspired by the work of New York-based non-governmental organisation (ngo) Council of Economic Priorities (cep), which rates the social and environmental performance of industries in the us. In view of the dismal track record of government agencies in controlling pollution in India, the Centre for Science and Environment (cse) seized the initiative and embarked on the venture -- the first of its kind conducted by an ngo in a developing nation. The pulp and paper industry was selected as the pilot project because of its impact at the raw material and production stage. The automobile sector was chosen next as its most visible effect on the environment is felt during the product-use phase. In tandem, they enabled grp to develop a generic model for life-cycle analysis.
The bottlenecks The project hit many a roadblock before its inception. Unlike the us, there is no centralised database in India. Whatever little information exists, is not easily accessible. Within the environmental community, there is little credibility in the data being supplied to the government. By contrast, the United States Environment Protection Agency's Toxics Releases Inventory has yearwise facts and figures on the wastes and emissions of companies. Moreover, they are readily available and authentic. To overcome this problem, grp based its exercise on voluntary disclosure of environmental performance. It verified the information supplied by subjecting it to rigorous technical scrutiny.

Key elements
Assessment is based on life-cycle analysis

Sector-specific approach to environmental performance rating

Forces the image-conscious and stock market-sensitive companies to become trendsetters because they have the wherewithal to improve

Focuses on a company's future environmental commitments rather than dwell on its past

Develops data after its voluntary disclosure by companies

Involves the public in this exercise as green inspectors who survey the plants on grp's behalf

Ensures transparency through an institutional mechanism consisting of independent expert panels

Evaluates primary data given by companies and secondary data provided by green inspectors and other independent agencies

Assesses non-participating companies on the basis of secondary data

Takes into account the companies' feedback before making the findings public

Recognises outstanding performers and exposes errant companies

Involves public dissemination of rating results

The scoring scale
Weightages are assigned to various stages in the product's life cycle depending upon their impact on the environment. Consequently, even as the broader criteria remain constant for all sectors, weightages may vary substantially. While maximum importance was given to the raw material procurement and production phase in the pulp and paper industry, product-use stage got top priority when the automobile sector was rated.

The scoring scale is based on grp's principle of pushing companies to perform much better than what the prevalent regulations stipulate. Whenever a regulatory standard exists, it is, therefore, fixed as the lowest benchmark. In the absence of this, the Indian average performance is the yardstick to measure minimum eligibility.

To arrive at a comparative scale, the average of all companies is calculated and given 2 marks. The best performer gets 8 and those below average are given 0. A linear scale is used between 2 and 8. The most eco-friendly companies are awarded 8 marks out of 10 because even in their case there is room for improvement.

Mileage for all
grp has laid down the path for coherent corporate environmental governance. Even as investors associate a company's poor green record with financial risks and liabilities, a high rating increases its goodwill brightening business prospects. Public interest litigation (pil) has also helped heighten public consciousness in this regard.

The age-old concept of there being an inverse relationship between environment and economy has become obsolete. In the previous rating, it was seen that a mill with a sound environmental management programme had a 60 per cent chance of earning profits and vice-versa.

The project includes an environmental awareness programme with special emphasis on management graduates, environmental managers and government officials. Training workshops covering media, regulatory authorities, industry and financial institutions are a part of this programme.

It also plans to push for the introduction of fiscal and environmental policies to support sustainable development.

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