CHAPTER

ENVIRONMENT AND
3 STRATEGY

“In a time of exploding change—with personal lives being torn apart, the existing
social order crumbling, and a fantastic new way of life emerging on the horizon—
asking the largest of questions about our future is not merely a matter of intellectual
curiosity. It is a matter of survival.”
—Alvin Toffler in The Third Wave

LEARNING OBJECTIVES
After reading this chapter, you will be able to:

 Understand the concept and characteristics of the environment and identify its divisions
 Classify internal and external environment as well as the internal and external variables
responsible for environmental changes
 Establish methods and techniques for environmental scanning
 Evaluate an environmental scan and its impact on strategy formulation
 Develop forecasts of environmental changes using different forecasting techniques
 Understand how the synthesis of external factors is applied

CHAPTER OUTLINE
CASE: EID Parry India Ltd—Management of the Environment
ϯ͘ϭ ŽŶĐĞƉƚŽĨKƌŐĂŶŝnjĂƟŽŶĂůŶǀŝƌŽŶŵĞŶƚ͕/ƚƐŚĂƌĂĐƚĞƌŝƐƟĐƐ͕ĂŶĚŝŵĞŶƐŝŽŶƐ
ϯ͘Ϯ džƚĞƌŶĂůŶǀŝƌŽŶŵĞŶƚ

43

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 ഩϰϰപപ^ƚƌĂƚĞŐŝĐDĂŶĂŐĞŵĞŶƚഩ

ϯ͘ϯ WŽůŝƟĐĂůŶǀŝƌŽŶŵĞŶƚ
3.4 Economic Environment
ϯ͘ϱ dĞĐŚŶŽůŽŐŝĐĂůŶǀŝƌŽŶŵĞŶƚ
ϯ͘ϲ ^ŽĐŝŽĐƵůƚƵƌĂůŶǀŝƌŽŶŵĞŶƚ
ϯ͘ϳ >ŝƐƚŽĨdžƚĞƌŶĂů&ĂĐƚŽƌƐ
ϯ͘ϴ ŶǀŝƌŽŶŵĞŶƚĂů^ĐĂŶŶŝŶŐ
ϯ͘ϵ ^LJŶƚŚĞƐŝƐŽĨdžƚĞƌŶĂů&ĂĐƚŽƌƐ;&^Ϳ
ϯ͘ϭϬ ^LJŶƚŚĞƐŝƐŽĨ/ŶƚĞƌŶĂů&ĂĐƚŽƌƐ;/&^Ϳ
CASE͗ƐŚŽŬ>ĞLJůĂŶĚͶ^ƵĐĐĞƐƐĨƵůDĂŶĂŐĞŵĞŶƚŽĨƚŚĞŶǀŝƌŽŶŵĞŶƚƵƌŝŶŐƚŚĞWĞƌŝŽĚϮϬϮϬͲϮϮ

CASE
EID Parry India Ltd—Management of the Environment
EID Parry is about two hundred thirty-five years old, starting in 1788. The company has become
an icon in the sugar industry in India for more than 175 years, surviving wars, famines, epidemics,
industrial and technological revolutions, evolving agrarian trends and patterns, and other seemingly
insurmountable upheavals. EID Parry always looks forward to opportunities that come as challenges.
The legend of EID Parry dates back to 17 July 1788, when Welsh trader Thomas Parry first set foot
on Indian soil. He foresaw tremendous prospects in India and established a piece goods and banking
business. In 1819, Parry and John William Dare became partners.
After India gained independence in 1947, there was a strong impetus to Indianize the company. In
1972, the company’s board resolved to apply to the government of India for conversion into an Indian
company.
EID Parry has always been a forward-looking company. It plans to bring large-scale investments in the
sugar business by leveraging its strengths in this sector in the following directions:

^ƵŐĂƌƵŶŝƚƐ
EID Parry has six sugar factories with a throughput capacity of 40,300 tons crushed per day across its
sugar mills. The company has focused on optimizing the crushing period by the increase in throughput,
with improvements in process efficiencies, sugar recovery gains, and reduced energy consumption.
Table 3.1 provides the capacity and the rationalization achieved by the company.

TABLE 3.1: ĂƉĂĐŝƚLJĂŶĚZĂƚŝŽŶĂůŝnjĂƚŝŽŶĐŚŝĞǀĞĚďLJ/WĂƌƌLJ

Location ĂƌůŝĞƌd ĚĚŝƚŝŽŶͬĞůĞƚŝŽŶ Current TCD
AP - Sankili 5,000 5,000
KN - Haliyal 7,500 4,500 12,000
KN - Bagalkot 6,000 6,000
KN - Ramdurg 5,000 5,000
TN - Nellikuppam 7,500 7,500

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 Environment and Strategyപപϰϱ

Location ĂƌůŝĞƌd ĚĚŝƚŝŽŶͬĞůĞƚŝŽŶ Current TCD

TN - Pugalur 4,800 4,800
TN - Pudukottai 4,500 24500 0
TN - Pettavathalai 3,500 23500 0
Total 43,800 23,500 40,300
Note: Assets of Pudukottai, Tamil Nadu, were transferred to Haliyal plant in Karnataka as the surplus cane is available and
higher recovery in this region.

It may be noted here that in the earlier period EID Parry was predominantly in sugar in Tamil Nadu.
In the last two decades, quite a change has happened in restructuring the location of plants and
the business geography. It started focusing growth opportunities in Andhra Pradesh and Karnataka.
However, Karnataka has become the lead state and interestingly instead of Mandaya district of Cauvery
belt, the company has set-up in North Karnataka districts and the biggest plant in Hariyal which is
part of Uttar Kanara district. This may have a lot relationship with changing water resources across
states and yield of sugar from sugarcane in factory zones.
In addition, EID Parry has been exploiting the value from bagasse by co-generating to meet the
country’s growing energy demand. Table 3.2 below provides an overview of this initiative.

d>ϯ͘Ϯ͗ഩĂƉĂĐŝƚLJŽĨŽŐĞŶĞƌĂƚŝŽŶŽĨWŽǁĞƌĂŶĚŝƐƚŝůůĞƌLJĐƌŽƐƐWůĂŶƚƐഩ
Location WŽǁĞƌ;DtͿ ŝƐƚŝůůĞƌLJ;<>WͿ
AP - Sankili 16 48
KN - Haliyal 49 50
KN - Bagalkot 16 60
KN - Ramdurg 13
TN - Nellikuppam 25 75
TN - Pugalur 22
TN - Sivagangai 64
Total 141 297
Note: Addition of 120 KLPD at Sankili is in progress.

sĂůƵĞͲĂĚĚĞĚƉƌŽĚƵĐƚƐ
The company has been adding manufacturing units across the entire value chain, from distilleries to
industrial alcohol and rectified spirit to extra neutral alcohol (ENA) and fuel ethanol production. The
government of India has decreed the 5 percent blending of ethanol with petrol, a regulation that is in the
process of being implemented across all states. In India’s major sugar-producing states, it is proposed that
this percentage be increased to 10 percent. According to published reports, the target of supplying petrol
mixed with 10% ethanol (10% ethanol, 90% petrol) was achieved in June, ahead of the original schedule
of November 2022 (The Hindu, 15 August 2022). It is expected that the Government, encouraged by
the success, may target making petrol with 20% ethanol by five years to 2025.
It may be observed from the Table above that the company has a high distillery production capacity
in Karnataka and Tamil Nadu sugar plants. Further, it also has larger capacity than based on molasses

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from the plant at a few locations like Bagalkot, and Sankili and Sivagangai plant is a stand-alone
distillery. It shows the focus in value-added business, the ability to leverage industry opportunities
and cross-subsidize operations across businesses.
Another important joint product while processing sugarcane in sugar manufacture is bagasse which is
used for the co-generation of power. Sugar plants utilize steam for processing juice and make crystals
using vacuum pans. Milling sections used to have steam drivers for milling. Now largely power is used.
The plant uses a low volume of steam and power. However, by using high power boiler and at times
making it fired by bio-fuels and coal. Nellikuppam plant was one of the earliest to start co-generation
across the industry and thus a pioneer. Now, a sugar plant of the normal average size of 3750 TCD
couples with a co-generation plant of matching capacity as long as power export to the grid is feasible.

ĂƌďŽŶĐƌĞĚŝƚƐ
Under the Kyoto Protocol, signatories have committed to contain the emission of greenhouse gases.
Developed countries are increasingly looking towards the use of renewable energy sources. The
opportunity for India arises from the demand for carbon credits that developed countries can buy,
to honour their commitments under the Kyoto Protocol.

/ŶǀĞƐƚŵĞŶƚŝŶŶƵƚƌĂĐĞƵƚŝĐĂůƐ
The nutraceuticals division, which became a part of EID Parry on 1 September 2006, continues to grow
in all markets. Its products are currently exported to 35 countries. Spirulina continues to be in the
forefront in the nutraceuticals business. ‘Organic Spirulina’ has the highest number of certifications
in the world. EID Parry, the only company in the world with dedicated research and development
for all the three types of algae, is expected to outperform competition in the business for the years
to come. With increasing medical care costs and an aging population in the West, the nutraceuticals
market is estimated to be well over $375 billion per annum, as a category of preventive health care is
bound to grow at a steady pace. Table 3.3 below provides the company’s nutraceuticals product mix

d>ϯ͘ϯ͗ഩ/WĂƌƌLJ͛ƐEƵƚƌĂĐĞƵƚŝĐĂůƐWƌŽĚƵĐƚDŝdž
ZƐ͘ƌ
WĂƌƚŝĐƵůĂƌƐ &zϮϬϭϴ &zϮϬϭϵ &zϮϬϮϬ &zϮϬϮϭ &zϮϬϮϮ
Greens 30 27 30 44 69
Joint health 111 117 83 96 80
Prostate health 75 67 97 115 128
Total 216 211 210 255 277

EID Parry has always been an eco-friendly company. Its environmental management system policy
commits the business to prevention of pollution, optimal utilization of resources and reduction in
generation of wastes. Be it in the production of sugar, bio products or nutraceuticals, the company
uses all renewable resources of nature, thus, maintaining the equilibrium in the ecosystem.

ZŝƐŬŵĂŶĂŐĞŵĞŶƚ
The company must have deployed risk management practices to increase the probability of achieving
its set goals and objectives.
The following are the major risks associated with the sugar business:

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 Environment and Strategyപപϰϳ

Raw material risk

Sugarcane is the main raw material for sugar and any disturbance in its timely availability will have a
substantial impact on operational cost. This is likely to be caused by the following reasons:
Climatic condition: The crop and availability of cane in the southern Indian states namely Karnataka,
Andhra Pradesh and Tamil Nadu are influenced by both southwest and northeast monsoons. Local
weather conditions over the crop cycle affect the quantity and quality of cane.
Cane economics: The profitability of alternative crops will influence the planting area under cane.
Pests, crop disease, and availability of farm labour also have impacts on the costs incurred by the cane
grower. It is also influenced by cane procurement price and group decision of farmers who involve
in contiguous farming.

Mitigation measures
The company has always maintained an amicable relationship with its farmers. It has paid up all dues
on time, despite arrears having been on the rise in the industry as a whole. With its goodwill and the
time-tested policy of ethical dealing, the company manages the risk of a short supply of raw material
with the farmers in the addressable area where they continue to plant sugar cane. Further, with
experiments in farm mechanization, drip irrigation, improved cane varieties developed by the research
and development facility, and carefully monitored scheduling of cane planting, and harvesting, the
company is confident of mitigating the risks it faces.

Policy risks
Both the central and state governments regulate the policies on cane. They currently have a
considerable hold on this industry as they are able to fix the raw material price and to influence the
sales price of sugar.
Further controls imposed on the industry by the government are in the following areas:
€ Exports (permission/incentives)
€ Imports (permission/tariffs)
€ Sugar pricing
€ Command area demarcation from time to time
€ Molasses movement control

Mitigation measures
The company works closely with ISMA and SISMA towards developing an industry point of view and
facilitate appropriate policy recommendations to have dialogue with the government. These include
formulation of policy on ethanol doping, review of cogeneration policy, de-control of sugar, review
of sugar weightage in WPI etc.

Price risk
The cyclicality of the sugar business does have a final call on prices and thus affects profitability.
Figure 3.1 shows the sugar price cycle.

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Switch back to
Increase in Sugarcane
Sugar Prices

Higher Cane Lower Cane

Production Production

Higher Cane
Production
Alternate Crop
Shifting

Increasing Farmer
Bearish Sugar Arrears
Prices

Fig.3.1: Business cycle of sugar price

Mitigation measures
The company has taken the following two measures to insulate itself against price risk:
€ Focusing on value-added products like pharma-grade refined sugar, high-quality plantation white
sugar, and retail packs to derive a better margin.
€ Direct supplies to large institutions and retail chains.
We note that the Indian sugar industry would go through a very critical phase where within a short
period of time the situation can turn from one of short supply and high prices to one of excess supply
and low prices.
While part of the problem could be due to government interventions, some are due to increased
alignment with the world market. While in the short-term, relief measures have been announced to
bring back stability in sugar prices, the long-term outlook for the sugar industry remains positive and
promising for the following reasons:
€ Growing demand for sugar, especially internal consumption, led to strong GDP growth and
changing food habits
€ Opportunity from fuel ethanol blending program
€ Opportunity from co-generation of power
€ Opportunities for India to become a structural sugar exporter and participate in the South Asian
sugar market, provided an enabling conducive policy framework is put in place by the government
€ Important developments in the world ethanol program and its impact on world sugar availability

YƵĞƐƚŝŽŶƐ
1. Analyze the impact of environmental factors on the growth and performance of the company.
You may analyze the corporate and businesses like sugar, distillery and co-generation of power.
2. Review the outlook for the sugar industry in relation to the sugar price cycle. You may look into
open-source data.

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References
1. https://www.eidparry.com/wp-content/uploads/2022/05/SEInvestorPresentationUpdated.pdf
(Accessed on 15 March 2023).
2. https://www.thehindu.com/news/national/india-achieved-10-ethanol-blending-target-ahead-of-
schedule-pm/article65770941.ece, 15 August 2022 (Accessed on 15 March 2023).

CONCEPT OF ORGANIZATIONAL ENVIRONMENT, ITS CHARACTERISTICS,

3.1 AND DIMENSIONS
In general, an object’s environment refers to its surroundings. In science and engineering terminology, a
system is the part of the universe being studied, while the environment is the remainder of the universe
that lies outside the boundaries of the system. It is also known as the surroundings, and in thermodynamics,
as the reservoir. Depending on the type of system, it may interact with the environment by exchanging
mass, energy (including heat and work), linear momentum, angular momentum, electric charge, or other
conserved properties. In some disciplines, such as information theory, information may also be exchanged.
In the managerial universe also, the environment plays an important role in strategy formulation and
performance. Depending on the type of business, it may interact with the environment by exchanging
resources, get impacted by attributes of people, politics of the government, and cross-border events,
leading to linear momentum as well as angular momentum.
Figure 3.2 shows the environmental forces that impact a firm.

Firm
Internal • Resources
Environment • Capabilities
• Distinctive Competencies

Industry/Task
Environment

• Demand and Supply

• Technological Changes
• Competitive Forces

External
Environment

• Natural
• Political
• Economic
• Technological
• Social

Fig.3.2: Environmental forces impacting a firm

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The external environment can be generally divided into five major divisions—natural, political,
technological, economic, and social. The task environment relates to the industry and competitive forces in
which the firm is operating. These include suppliers, investors, employees, competitors, trade associations,
special interest groups, and governments. The internal environment comprises a company’s resources,
capabilities, and distinctive competencies.

3.2 EXTERNAL ENVIRONMENT

The external environment influences the behavior and performance of a firm. To be successful in its
business, a firm needs to handle external factors judiciously and proactively. Here, we will discuss some
external environmental forces that could influence a business.
The natural environment, commonly referred to as the environment, encompasses all living and non-living
things occurring naturally on Earth and some regions thereof.
The following components can identify the concept of the natural environment:
€ Complete ecological units that function as natural systems without massive human intervention,
including all vegetation, animals, microorganisms, soil, rocks, atmosphere, and natural phenomena
that occur within their boundaries
€ Universal natural resources and physical phenomena that lack clear-cut boundaries, such as air, water, and
climate, as well as energy, radiation, electric charge, and magnetism, not originating from human activity

3.2.1 Environmental Sustainability

In this context, environmental sustainability becomes significant. Environmental sustainability is the
process of making interactions between a firm’s business-related activities with the environment and
is pursued with the objective of keeping the environment as pure as naturally possible based on ideal-
seeking behavior to ensure sustainability.
An ‘unsustainable situation’ happens when natural capital is used up faster than it can be replenished.
Sustainability requires that human activity only utilizes nature’s resources at a rate at which they can be
replenished naturally. Inherently the concept of sustainable development is interrelated with the concept
of what traffic can bear. Theoretically, the long-term result of environmental degradation is the inability
to sustain human life. Such degradation on a global scale could lead to extinction for humanity. Table 3.4
gives the consumption of resources and their sustainability.

d>ϯ͘ϰ͗ഩZĞƐŽƵƌĐĞƐĂŶĚ^ƵƐƚĂŝŶĂďŝůŝƚLJ
ŽŶƐƵŵƉƚŝŽŶŽĨRĞŶĞǁĂďůĞRĞƐŽƵƌĐĞƐ State of Environment ^ƵƐƚĂŝŶĂďŝůŝƚLJ
More than nature’s ability to replenish Environmental deterioration Not sustainable
Equal to nature’s ability to replenish Environmental alignment Steady-state

Business should be transacted so that the natural environment is preserved. Fundamentally it is necessary
that a good business responds to the following factors:
1. Society has become aggressively aware of pollution of environment and has started resisting it.
2. This resistance has been channelized all over the world into specific troops for environmental advocacy.

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 Environment and Strategyപപϱϭ

3. Consumers have started demanding environmentally safe products.

4. Companies seeking loans from financial institutions must identify liabilities arising from environmental
impact by insisting on social benefit analysis for any funding.
5. Environmental law has become more stringent, and pollution control procedures have been laid
down through statutory regulations.
6. Many companies have opted for an environmentally friendly approach in order to avoid ecology-
based lawsuits.
7. Business transactions take place between companies and stakeholders only if they adhere to a well-
laid-out eco strategy. This is specifically required where there could be the use of local resources
which need to be recreated, or those which would be depleted by nature and the local community
need to be compensated.
The following are some of the further studies that are being conducted to quantify the impact of industrial
activity on the environment:
a. To search for resources in the natural environment that affect the sustainability and challenges of
activities in the industry
b. Rio Convention introduced to the world the idea that development should consider not only the
economic but also environmental and social aspects.
Moreover, the growing demand for ‘green’ products has created major new markets in which precocious
eco-entrepreneurs are reaping material rewards.
Continuing our discussion on the environment and business, we want to show the importance of
environmental determinism. According to environmental theorists, culture is determined by the physical
environment rather than social conditions. The basis of such an argument is that physical geography
mainly influences climate, which further affects the individual’s response to the environment and, thus,
their mindset, attitude, and behavior. This means that the physical environment has a bearing on social
culture, in contrast with the belief that social culture is a manifestation of the behavior of a group of
people in society. Such theorists also believed that a tropical climate encourages laziness and a relaxed
attitude, while the varying climatic conditions in middle latitudes built up a more social work ethic. For
these environmental influences to operate slowly on human biology, it became essential to track the
migrations of groups to find out the environment from which they had evolved.
Another version of environmental determinism was popular among Marxists, and was based on employing
the dialectical materialism concept of history. Besides, Marx’s fundamental model of the ideological and
cultural superstructure being determined by the economic base, economic base is also determined by
environmental conditions according to communism. This brings out bi-directional relationship between
economic base and environment, one influencing the other. For example, Russian geographer Georgi
Plekhanov argued that the cause of his country continuing to be in the feudal age was that the wide plains
of Russia permitted class conflicts to be easily diffused.

3.2.2 Climatic Determinism

Climatic determinism is another aspect of economic geography. It is also sometimes called the equatorial
paradox. According to this theory, about 70 percent of the economic development of a country can
be predicted from the distance between that country and the equator. In other words, the farther it is
from the equator, the more developed a country tends to be. The paradox applies equally well to both
north and south of the equator. Australia, for example, has a higher level of economic development than

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Indonesia. The paradox also applies within countries—the northern US states are more developed than
the southern US states.
Singapore is a notable departure—it is located at 1.22° N and is one of the world’s most prosperous
countries. This prosperity is based on its position as a port. Other exceptions to the paradox tend to have
large natural resources. Middle East countries are a good exception.
One popular theory to explain this phenomenon is that the development of an economy is less necessary in
tropical regions—‘you can lie in a hammock and pick bananas,’ as opposed to the need to invent agriculture
and economy in order to prosper and survive. This explanation, while convenient, may not be sufficiently
adequate to explain the equatorial paradox truly.
Another aspect of the natural environment that has gained momentum and is becoming a matter of
concern for the entire world where they continue to experience increased global warming due to the
excessive use of fossil fuels – coal, oil, and natural gas. This was a result of advances in industrialization
and civilization, and as people demanded more goods of comfort and luxury. Unfortunately, this has led
to an increase in global temperature to 0.74 6 0.18 °C between the start and the end of the 20th century.
This is also likely to continue in the 21st century where the global surface temperature could go up by
1.1 °C to 6.4 °C. This leads to a faster rate of depletion of natural resources as desert regions expand and
glaciers melt.
As the earth gets warmer, society comes under stress and so do business conditions. The demand and
supply of goods under such conditions may not be the same as what is being now. Fossil fuel is the key
to industrialization and consumption, as energy is one of the main inputs in production. Fossil fuels are
also needed for society to derive utility from many consumer products such as fans, televisions, cars, air
conditioners, air travel, etc.
World leaders met at Copenhagen in 2009 to discuss various aspects of managing global climate change.
The World Wildlife Fund (WWF) suggested some changes in the policy to be adopted in the new climate
treaty among 193 participating nations. One of the main objectives was to create a fund for communities
vulnerable to global climate change. It also observed that though there is a political commitment to
reduce global warming by below two degrees, it was felt that a reduction below three degrees would bring
meaningful impacts. However, the summit proceedings created more differences between developed and
developing nations as the latter had to give up more compromising their development initiatives. Countries
such as Brazil, China, India and South Africa also took strong exceptions to the proposed treaty on the
grounds that it will affect their economic growth. This led to an embargo on the proceedings.
The then US President Obama proposed a compromise to end the embargo. The United Nations Framework
Convention on Climate Change (http://unfccc.int/2860.php) and a number of open sources provide useful
information for the corporate planner to understand environmental challenges due to global warming.
The World has moved forward a lot on global warming combat initiatives, demands and negotiations
among different groups based on their long-term benefits and power. There are upward-moving goalposts,
but interestingly, developments have been more understanding and accommodative as certain disasters
like melting of glaciers, unpredictable monsoon changes, excessive heat waves and cold seasons pushing
hard various factions into negotiation.
There is a natural environment within which humans live and perform economic activities including
business for survival. The built environment refers to the interface of humans with the surrounding
geographical area to facilitate economic activities. Under the field of urban and town planning, mankind
tries to harmonize the natural and built environments through parks, afforestation, and management of
waste disposal and so on. Humans need to balance the natural and built environments in order to ensure
the sustainability of nature and the resources it provides for human survival.

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 Environment and Strategyപപϱϯ

Environmental science is the subject that links up physical sciences such as physics, chemistry, and so
on with social sciences such as management, economics, and politics. For instance, climate is influenced
by the flow of heat energy and radiation from the sun. The heat generated by the earth is absorbed by
gases in the atmosphere—such as carbon dioxide (CO2), water vapor, methane, nitrous oxide, ozone,
and halocarbons—which lead to an imbalance in greenhouse gases in the atmosphere and thus affect
the ecosystem. Changes in climatic conditions in the ecosystem impact business and hence company
strategy. This would go in continuum as there is likely to be changes with explosion of human and
usage of natural resources for business. Such compelling need has to be managed better, or else we
risk the society.
Climate change also often increases the effects of existing threats to the environment. Problems relating
to the greenhouse effect have developed over many decades but sufficient attention has not been given
until the Kyoto Protocol. This change in the natural environment has a drastic impact on human beings and
their economic activity. For example, the insurance industry is facing a business risk of billions of dollars
each year because of the increase in natural disasters and global warming.

3.2.3 Climate-Related Strategy

Companies all over the world have acknowledged the dangers of global warming and have started
developing climate-related strategies. Developing such strategies requires four underlying criteria. These
are as follows:
1. Strategic timing: While this varies between companies, management has to comply with various
legislative and legal protocols, which usually are time-bound in nature. It is therefore important that
companies develop products for the environmentally-conscious consumer.
2. Necessary level of commitment: Reducing the level of greenhouse gas emissions will require a high
level of commitment and extensive expenditure. As corporate expenditures on this front will be both
short-term and long-term it is important to establish cost/benefit relationships.
ϯ͘ DŽŶŝƚŽƌŝŶŐƚŚĞŝŵƉĂĐƚŽĨŐŽǀĞƌŶŵĞŶƚƉŽůŝĐŝĞƐ͗ New policies are on the anvil for regulating GHG
emissions and arresting global warming. These will lead to adherence to new norms impacting the
existing competitive advantage enjoyed by various companies. Companies need to participate in
developing and deploying such policies to gain credibility and leverage participation.
ϰ͘ ƌĞĂƚĞŶĞǁďƵƐŝŶĞƐƐŽƉƉŽƌƚƵŶŝƚŝĞƐ͗ The field of climate-related strategy development has opened
up pathways for a range of greener, cleaner and more efficient products. Companies that seize such
opportunities early will naturally stand to gain.
Climate-related strategy can be developed in three stages as follows:
Stage I: Formulate climate strategy
(a) The first step is to assess the profile of emissions, which is done as follows:
(i) Identify direct and indirect GHG emissions and their sources.
(ii) Quantify such emissions and develop metrics for the same for the level of emissions.
(iii) Identify/develop technological techniques required for such a control for monitoring.
(b) The risks and opportunities then need to be measured as follows:
(i) Compare the risk of GHG emissions of the company with those of the competitors.
(ii) Check if there is a probability of reducing the levels to such an extent to clearly obtain a
competitive advantage.

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 ഩϱϰപപ^ƚƌĂƚĞŐŝĐDĂŶĂŐĞŵĞŶƚഩ

(iii) Check the response to the products in the marketplace.

(iv) Identify new products taking into consideration relevant norms.
(c) Then the options for action need to be analyzed:
(i) Reduction opportunities
(ii) Innovation opportunities
(iii) Short-term steps
(iv) Long-term steps
(v) Impact on bottom line
(d) Targets must be set as follows:
(i) Milestones for ultimate target must be identified.
(ii) The milestones must be linked to topline sales.
(iii) The milestones should also be linked to bottom-line profit.
(iv) An adaptation roadmap must be created.
Stage II: Evaluate and implement climate strategy
(a) Financial requirements and mechanisms must be developed as follows:
(i) Assess financial requirements—short-term and long-term
(ii) Available vehicles of finance
(iii) Cost of shadow pricing, i.e., the maximum price management is willing to pay for an extra unit
of a limited resource
(b) The entire organization needs to be involved in the process:
(i) Create awareness in the entire organization.
(ii) Identify responsibilities across all levels.
(iii) Identify possible implementation problems.
(iv) Identify critical areas of implementation and move slowly from critical to non-critical areas during
deployment.
Stage III: External assessment
This can be done by analyzing the following:
(a) Policy options
(b) Impact of such policy options on climate-related activities
(c) Extent of company participation in governmental policymaking
(d) Extent that the government can influence such policy development which depends upon support
from different stakeholders
(e) External relations
(i) Develop external constraints
(ii) Develop contact programs
In conclusion, developing a climate-related strategy is a must, but the timing can vary for different
companies. It is to be fully understood that there are both risks and opportunities and the corporate world
necessarily has to wake up to this situation and act.

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