Interview: Indian firms would invest in sustainability if there is a clear return and favorable economics

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Srivats Ram has been Managing Director of Wheels India Ltd. since May 1, 2008. Mr. Ram has over 3 decades of work experience in Vehicle and Component Industry and serves in various leadership roles across the TVS group including the Board of TVS & Co. and Axles India.

Green manufacturing and sustainability are used interchangeably, but sustainability goes beyond the boundaries into the supply chain. How do you define sustainability for auto component manufacturers?

Sustainability has two or three elements attached to it. Sustainability in manufacturing can be defined in the design stage as efficient use of resources, minimizing waste, focus on decreasing usage of toxic elements such as lead cadmium and mercury in the manufacturing processes. The second aspect is energy efficiency.- due to rising energy costs and issues with regards to availability of energy, manufacturers have to find ways of becoming more energy efficient in their processes.

Automotive Component Manufacturers Association (ACMA) has created a Sustainable Technology Committee that aims to promote innovations related to energy efficiency and energy conservation. For example, there is an auto component manufacturer which has a solar powered factory. There is also activity around the emission standards and depending on the emission norms and the customer requirements, manufacturers decide on the technology they need to invest in. Technological improvements lead to lower emissions which lead to better fuel efficiencies.

The next element of sustainability relates to packaging. Some countries have packaging standards like Euro packing in Europe. But in India as such we don’t have a standard packaging format. In India different customers also have specific requirements with regards to packaging and increasingly people are looking at reusability and recycle -ability of packaging. This movement which started in Europe is gaining momentum in India, especially with auto part manufactures.

Do you think is there a business case for sustainability?

Wherever sustainability initiatives are driven by regulation there is cost is associated with it. But other initiatives like those related to packaging are driven by cost cutting. If you ask me what types of companies should follow sustainable manufacturing, then they should be specially the older companies that are now based in areas which are now residential areas. It is very important to monitor their operations so as to have a net positive impact on the community as a whole. We have to ensure we are not damaging or impacting the environment and need to minimize the negative potential. The economic enterprise in the community should have a positive impact. In my understanding, sustainable manufacturing should be viewed on the basis of how a manufacturing unit positions itself inside the community.

Which Indian auto firms are shaping the agenda around sustainability?

Tata Motors and Maruti are undertaking a lot of initiatives related to sustainability. Tata Motors have a company-wide carbon footprint program in which they work also with their suppliers. For example, Tata Motors’ has a paint sludge initiative. Paint sludge is toxic in nature and a hazardous industrial waste which goes to dump sites. Tata Motors now recycles sludge into paint which it has approved for some of its auto components. So some component manufactures actually buy recycled paint from Tata Motors sludge. So in this way they are ensuring that there is a certain amount of recyclability in the process. The company is also carrying out multiple initiatives across the supply chain around improving energy efficiency and engaging with their vendors.

What are drivers for domestic automotive firms for adopting sustainable practices?

There are multiple drivers for sustainability and there is a certain amount of legislative mandate that also governs sustainability. First would be regulatory mandates say, the pollution control board norms; second would be customer demand (including decreasing use of toxic elements, use of sustainable packaging etc) and third would be cost (improvements in energy efficiency as well as resource efficiency). For example if a manufacturing facility is located in an area where there is water scarcity then the company would necessarily need to adopt water conservation practices. Domestic companies undertake sustainability initiatives driven by economic gain, community development, customer demand or individually as thought leaders.

The difference between an Indian firm and a foreign firm is that an Indian firm would invest in sustainability if there is a clear return and favorable economics. Manufacturers look at economic value as a factor for determining which technology they will adopt for pursuing sustainability agenda. This is regarding investing in sustainability over and above regulatory requirements.

Given your vast industry experience, what is most unique intervention and innovation you would have come across till now?

There are some cost positive initiatives being undertaken by the industry. An important innovation on the logistics and transportation front is the concept of “milk run”. As per this concept, a single truck would go from the company and collect small sized components from multiple suppliers in the same trip instead of making multiple trips. This way they save on the logistics with decreased travel time and distance covered thereby ensuring lower low fuel consumption for the transported good. It also ensures recycling of packaging thus leading to resource optimization. This is a good practice of the automobile industry and aligns with Just in Time (JIT) delivery mechanism that’s in place in the automotive and auto component industry.

Coming to specifics, weight of an auto component has a significant impact in the use phase especially with regards to efficiency. Have any innovations been made in that area?

Innovations in this area are happening more in the West. Due to end of vehicle life regulation, sometimes a vehicle is designed in a manner such that it is easy to dismantle and subsequently reuse the material and components at the end of its life. In India, economics is still driving the choice of the car for the consumer but in lot of western countries the choice of the car is also driven by the fact that at the end of vehicle’s life, it needs to be dismantled and parts are to be  reused/recycled. I see this method coming to India in the future but currently domestic companies who are following such a system are doing it out of their own wish and not out of compliance or legal requirement.

Are people doing Life Cycle Analysis in the Indian context?

I am sure all the large companies like Tatas are doing it but as a responsibility towards the community and not because of regulatory compulsions.

Given your involvement in a lot of policy related work and as the president of ACMA, what is your opinion on the regulatory / policy environment on the sustainability front in India?

There are toxics that are generated as by- products from the manufacturing processes which are usually sent to dump sites. The government should play a role in helping these organizations who are willing to re-use these toxic waste materials and get by-products out of the waste generated. The government should have regulations not only for the treatment of these toxic materials but also have enabling investment and financial policy frameworks for promoting technologies that help convert the waste into useful by-products. We need regulations as a driver for catalyzing innovation and new technologies to facilitate adoption of re-usability and recycle-ability interventions throughout the eco-system.  The current regulatory mechanism is prohibitive and not one which promotes innovation. We need to find a mechanism to make the regulatory body a driver for innovation and one which creates an enabling environment for innovations which enhance sustainability.

What business (read financial) impact do you foresee on companies ignoring the sustainability dimension?

Almost 20% of turnover of the Indian auto components industry is accounted for by exports. Indian manufacturers primarily export to the western world and have many clients who audit plants and mandate certain environmental standards to their India suppliers. Thus the larger companies already comply with high environmental standards. Therefore in the auto sector we now find more and more export oriented companies following the sustainability route.

Some industries like forging and casting are by their very nature categorized in the red category. These have been situated on outskirts of cities but since cities have grown they are now on the periphery so there is regulatory pressure on them. Government needs to facilitate the process of relocating these facilities at places where they are less harmful and reduce conflict with the environment and community.

Your final thoughts on the future of the Indian Automobile sector and the imperatives facing it.

The industry is going to see a strong growth over the period of next 10 years, driven by their customers in the domestic automobile industry and it’s now important for us to take up sustainable processes because 10 years from now the quantum of activity would be four-fold of what it is today. Unless we undertake our expansion planning in a sustainable manner the state of environment in India would be far worse than what it is right now.

This article was originally published in the our print publication Sustainability Outlook (March issue).

Image(s) Courtesy:
Joost J. BakkerIJmuiden