SunCorp

Vedanta ruling should encourage eco-friendly business

 The recent Indian Supreme Court ruling that restrains UK-based Vedanta Resources from going ahead with its bauxite-mining project in Orissa underscores the merits of globalisation. Two weeks after Norway’s state pension fund pulled out $13 million from Vedanta citing environmental reasons, the apex court said that Vedanta’s Indian arm, Sterlite, would have to set aside about $180 million for forest regeneration and tribal development in Orissa if it is to go ahead with the project. The verdict marks a first in many respects.
    An important lesson to be drawn from it is that it pays to go green in a globalised world. Environment is not merely the concern of naysayers. Shareholders and consumers take decisions based on environmental factors, which can have a global impact. Only a few months ago, Canadian aluminium major Alcan withdrew from a bauxite-mining project involving an Indian partner after its shareholders were persuaded that the joint venture did not comply with environmental norms. The World Bank is chary of projects that have uncertain environmental implications. A number of companies have figured out that being environmentally and socially conscious can work wonders for their brand image, particularly in the West, where consumer decisions are hugely influenced by such factors. Oil companies are forced by such pressure to set aside funds not only for greening the earth but also for finding ways to curb carbon emissions.
    Vedanta is perhaps the only ‘globalised’ verdict to have come out of the Indian legal system. The apex court was forced to take cognisance of the Norwegian government’s observations and issue directives to the Indian arm of the UK-based company. In an age of free exchange of goods and ideas, this does not come as a surprise. Just as companies based in the developed world earn consumer goodwill through acts of corporate social responsibility (CSR) in poorer regions, they stand to pay a price for neglecting social objectives. Whether one likes it or not, civil society groups and the media will play a greater role in shaping decisions of those in the government, judiciary and corporate world than ever before.
    Globalisation has done wonders for India Inc. If firms like Infosys are central to creating a new brand image of India, it is not only for the quality of their products but also for their corporate governance practices and record on CSR. The wider the perspective, the better the bottom line.