GREEN GDP

KEVAL KOTHARI

WHY GREEN GDP?

Traditional measurements of performance, such as

gross domestic product (GDP), account for economic development but do not accurately reflect human or environmental well-being.
Ecosystem

services such as climate regulation, carbon sequestration, and nutrient cycling are not part of traditional economic accounting.

Estimation of world ecosystem services to be around

$33 trillion on an average.

WHY GREEN GDP?

GDP omits many of the important goods and services that

we derive from nature.

In GDP accounting, no distinction is made between

activities that contribute to well-being and those that detract from it.
Oil spill example: April 2010 in Gulf of Mexico. Oil spill example: MV Rak carrier sinking in Mumbai on 4th

August.
A rising GDP merely signals an increasing level of market

transactions, without regard for whether these activities are beneficial to humans and nature in the long run.

Green GDP
It highlights both the contribution of natural resources

to economic development and the costs caused by pollutions or resources degradation.

It

incorporates the use or depletion of natural resources in economic growth, and tells us more clearly the quality of the growth in terms of sustainable development.

Sustainable development is development that meets

the needs of the present without compromising the ability of future generations to meet their own needsEx Norwegian Prime Minister Gro Harlem Brundtland.

Sustainable Development
Social

sustainable Environment viable

Economic

Methodology
Methodology to calculate can be theoretically divided

into 3 types.
Green GDP based on resources depletion, Green

GDP based on environment degradation, and Green GDP based on expenditure for environmentprotection.
Green GDP based on resources depletion is simplest

out of the three.

Green GDP = GDP - Depletion of Natural Resources -

Cost of Pollution

History
Idea gained popularity 20 years ago in 1992.

In

2006, the Chinese government released environmentally adjusted GDPits Green GDP.

its

Wen Jiabo declared that financial loss caused by

pollution was 511.8 billion Yuans, 3.05 % of Chinas economy.

Large criticisms were observed as the GDP reduced to

politically unacceptable levels.

Many factors were not considered and methodological

Cases of Green GDP

Norway: One of the earliest to establish accounts of

environment. Pollution costs and depleted natural resources have been included in green accounting system.
Japan: Adopted the green accounting system in 1991. Philippines: It has 2 green accounting systems;

ENRAP & SEEA.

USA: Adopted the green accounting system in 1994.

Challenges
No consensus on contents of Green GDP. SNA is a complex system consisting of many widely accepted accounting standards. Difficulty in pricing natural resources. Natural resources are difficult to price as most resources are public goods and not tradable. Unclear stock of natural resources. Green GDP needs to calculate the current stock of natural resources for which a qualitative nation wide survey needs to be done.

Comparable Green GDP

Comparable Green GDP is to produce a number which is

approaching real Green GDP based on relatively uniform indicators and data so as to make it comparable and meaningful.
Hence a geographic comparison and a time series

analysis can be made to reflect current situations and future trends of sustainable development among regions.
Advantages: Easier to calculate More practical and applicable Good for long term sustainable development

Green GDP and India

March 2011:Environment minister Jairam Ramesh

said several factors make green GDP calculations a must:

Livelihood and health concerns of marginalized sectors Vulnerability of economy towards climate change Long term sustainability of natural resources

Nov 2009: Jairam Ramesh stated government plans

to release Green GDP fighures by 2015, one of the very few countries to release Green GDP estimate.
He believes it is necessary to create a single

indicator capable of reflecting both economic prosperity and the health of ecological system.

ITC: Commitment towards Green GDP

Y

C Deveshwar, chairman, ITC Ltd.: 100 years completion speech in ET on August 1, 2011. demonstrated outstanding achievement in environmental and social dimensions of triple bottom line.

ITC

For 9th year in a row ITC a water positive company:

Creating freshwater potential twice its consumption.

For 6th year in a row ITC a carbon positive company:

Sequestering twice its emissions.

Solid waste recycling positive for 4 years.

ITC: Commitment towards Green GDP

Only company in the world to achieve these feats. All luxury hotels of ITC are accorded with LEED

platinum rating: greenest luxury hotel chain.

Believes in PPPP (Public-private-people partnership)

for socially responsible growth and it should occupy a larger space in corporate strategies.

Limits to future growth will be defined by vulnerabilities flowing from social inequalities, environmental degradation & climate change.

ITC: Commitment towards Green GDP

It is no longer a debate about making lifestyle

choices, it is about finding life changing solutions required for worlds poorest and most vulnerable.
It is abundantly clear that the challenge before India

is to enlarge size of its Green GDP while accelerating the creation of sustainable Livelihoods.
ITC believes that it is going to be a joint & multi-

dimensional efforts on the part of Government, Business and Civil Society.

CSR & Competitive Advantage

Michael Porter and Mark Kramer in their article in

HBR Dec 2006 have mentioned the link between Competitive Advantage and Corporate Social Responsibility (CSR).
CSR has emerged as an inescapable priority for

business leaders in every country.

Two reasons CSR hasnt been nearly as productive

as it could be.
They

pit business against society, when two are interdependent Companies think CSR as a generic responsibility instead of a firms strategy.

Prevailing

approaches are disconnected from business as to obscure many great opportunity for

4 Prevailing Justifications For CSR

Proponents of CSR used 4 arguments:
Moral Obligation - Achieve commercial success in a way that

honor ethical values & respect people, communities & natural environment.-Business for Social Responsibility, a nonprofit CSR business association in US.
Sustainability - Emphasizes environmental and community

stewardship.
License to operate - Derives from the fact that every company

needs tactics or explicit permissions from governments, communities & other stakeholders to do business.
Reputation - Justification that CSR will improve a companys

image, strengthen its brand or raise stock value.

Moral Obligation
Moral obligations are commands, however, most

corporate social choices involve balancing competing values, interests & costs.
Googles entry into China. The moral calculus needed to weigh one social

benefit against other, or against financial costs, has yet to be developed.

What

should a pharmaceutical company do? allocate revenues for a deficient today, a better future or pay dividends.

Sustainability
An enlightened self interest invoking the triple bottom

line of a company.
Companies should operate on ways that secure long

term economic performance by avoiding short term behavior that is socially unacceptable & environmentally wasteful.
DuPont saved $2 b from reductions in energy since

1990.
McDonalds changed material used to wrap its food

reducing tastes by 30% .

Without strategic understanding of CSR, short term

costs are postponed which results in far greater costs

License to Operate
It offers a concrete way for businesses to identify

social issues that matter to stakeholders the most. Prevalent among companies that depend on government consent, like in areas of mining and regulated extractive industries. Also common in areas like chemical manufacturing where operations are environmentally hazardous. To satisfy stakeholders, companies cede CSR agendas to outsiders. A stakeholder view is important but it cannot fully understand a corporations capabilities, competitive positioning. Generally such CSR activities are just public relations

Reputation
It also focuses on satisfying external audiences. Companies do CSR for insurance in a hope that its

reputation for social consciousness will help in avoiding criticisms during a crisis.
Studies of effect of a companies reputation on

consumer preferences or stock value have been inconclusive.

CSR as insurance is also debatable as connection

between good deeds and consumer attitudes is impossible to measure.

Nestl's Milk District

CASE STUDY

A Value Chain Involving CSR

Nestle s approach for working with small farmers

exemplifies the symbiotic relationship between social progress and competitive advantage.

The corporations impact in developing countries

has often been profoundly positive.

A Territory Not Meant for Business

In

1962, company wanted to enter India. government permission to build a dairy in Punjabs district of Moga.

A farmer owned less than 5

Acres of poorly irrigated land with infertile soil.

Many

Received

one cow / buffalo for own consumption of milk. of newborn. calves died

kept

Poverty in the region

was severe.
Infrastructure: No

60%

telephones, no electricity, no

No

methods to test for quality of milk, frequent

Transformation In The Making

Nestle came to Moga to build a business and not to

engage in CSR.
Nestl's

value chain, derived from origins in Switzerland, depended on establishing local sources of milk from a large & diversified base of farmers.

This value chain required Nestle to transform the

competitive context in ways that created tremendous value for company and the region.

The Transformation
Nestle built refrigerated Farmers were given

dairies in each town and sent trucks to collect the milk.

monthly training sessions.

It enabled them to learn

With trucks went vets,

nutritionists, agronomists & quality assurance experts.

that milk quality depended on cows diet which in turn depended on feed crop irrigation.
It provided technical &

financial assistance to dig bore-wells.

Irrigation improved, crop

Medical units were

The Effects
Number of farmers supplying milk increased from 180

to 75000.
Collection is twice a day from 650 village dairies. Calves death rate decreased by 75% and milk

production increased 50 times.

As quality improved, more prices were paid than set

and enabled farmers to obtain credit.

More competition came up and an industrial cluster

developed.

The Effects
The

standard of living of the people of Moga improved than other regions.

90% homes have electricity & telephones, all villages

have primary, secondary schools & 5 times more doctors as neighboring regions.
The

increased purchasing power expanded the market for Nestles products, further supporting firms economic success.

CSR Into Strategy

The commitment of working with small farmers is

central to Nestles strategy.

It enabled it to obtain high quality commodities without

middlemen intervention.
Coffee and Cocoa, its other products, are also

produced in a similar manner in other developing countries.

The success of Moga has been repeated by Nestle in

Brazil, Thailand, China & dozen other countries.

Nestle has prospered so has the community for which

Responsive CSR v/s Strategic CSR

Respons ive CSR
Good Corporate Citizen: Attuned to social concerns of stakeholders. GE Example. Mitigating harm from value chain.
B&Q example.

About choosing a unique position. Innovativeness in competitive advantage, product offering and value chain Toyota and Credit Agricole examples. Investing in social aspects that

Strategic CSR

 A substantial portion of corporate resources and attention must migrate to truly strategic CSR. It is through strategic CSR that the company will make the most significant social impact and reap the greatest business benefits.

Michael Porter

Grameen Danone Foods Limited

A Unique Model Of Social Business Enterprise (SBE)

Bangladesh Statistics
Area : 144,000 sq. km.

Population : 150 Million.

Population growth rate: 2.05% Population below poverty line: 45% Literacy rate: 43.1%
Male: 53.9% Female:38.1%

Life expectancy: 63 Years.

GDP growth rate: 6.1% ( 2006 estimated)

GDP per capita:$2200 (2006 estimated) Children up to 14 years: 33.1%

Population Pyramid: Percentage of Population by Household Income

> 333 Tk 233 Tk-333 Tk 167 Tk-23 Tk
A - 14%

> $5.56 $3.93 -$ 5.56

B - 11%
C - 16% D - 37%

$2.71- $ 3.96

83 Tk 166 Tk
< 83 Tk
$1 = 74.14 Tk Rs. 1 = 1.61 Tk

$ 1.35- $ 2.7

E 22%

< $ 1.35

All values on per day basis Source: 2004 statistical yearbook of Banglad

Grameen Bank at a Glance

The Largest Micro Credit institution. Founded by Prof. Muhammad Yunus, the Noble

Laureate of2006.
Launched as an Experimental Project in 1976.
Established as a Bank in 1983. It Reaches 7,062,088 borrowers of whom 97% are

women.

Grameen Bank at a Glance

Cumulative loan repaid since inception: USD 5.459

billion.
Average monthly loan disbursement: Over USD 50.00

million.
Total savings in various forms since inception: USD

2.725 billion.
Balance in Savings: USD 666.11 million Total No. of Branches in operation: 2,399

Grameen Bank: Features

Exclusive focus on the poorest population.

Borrowers are organized into small homogeneous

groups.
Special loan conditionality which are particularly

suitable for the poor.

Simultaneous undertaking of a social development

agenda addressing basic needs of the clientele. This is reflected in the "sixteen decisions" adopted by Grameen borrowers.
Design

and

development

of

organization

and

Grameen Danone Joint Venture

The idea came from an informal meeting between Mr.

Frank Riboud,Chairman & CEO of Groupe Danone and Prof. Muhammad Yunus, during October 2005 in France.
In November 2005 a high level delegation from Groupe

Danone visited Grameen.

During the visit of Danone delegation and after several

meetings
Grameen and Danone both agreed on the principle to

establish a Joint Venture.

Subsequently

surveys

and

feasibility

studies

were

undertaken.
On March 16, 2006 a MoU was signed between Prof.

Yunus and

What is a Social Business Enterprise?

Prof. Muhammad Yunus termed Social Business

Enterprise (SBE) as: Social benefit maximizing kind businesses which are created to do good to people, not paying any attention to making personal gain.
Prof. Yunus featured a SBE as: to be designed and operated to pass on all the benefits to the consumers.
to be operated without incurring losses. to be operated competing with Profit Maximizing Enterprises

What is a Social Business Enterprise?

Prof. Yunus featured a SBE as:
making profit by an SBE shall be consistent and

desirable because: to generate enough surplus to pay back the invested capital to the investors as early as possible. to generate surplus for: Expansion Improvement of quality Increasing efficiency through introducing new technology Innovative marketing to reach the deeper layers of low-income people and disadvantaged communities. Undertake research and experimentation to

Social Business Enterprise

Dividend Policy of SBE:
Investors capital out of the profit will be paid back

within a time period agreed upon by the investors. After the capital amount is paid back, SBEs may even give a nominal annual fixed dividend (not above 5%) Bottom line for a SBE will always be to deliver benefits to people, rather than to earn money for the investors.
Share Transfer
If an investor wants to withdraw his investment

from a SBE at any point of time, he may do so, provided he sells his shares to the existing

Groupe Danone
A leading Food Company in the world. The global leader of fresh dairy products and joint

leader in bottled water, biscuits and cereal products market.

Its famous brands include Danone, Evian and LU. It is present in 120 countries. 88,000 employees are working in Danone all over the

world.
In 2006 its turnover was 14 billion Euros. Since it was founded, Groupe Danone has built its

Grameen Danone Foods Limited (GD)

A no loss Company A Social Business Enterprise. Established in collaboration between Groupe Danone

and four Grameen Companies

Grameen Business Promotion Services Grameen Welfare

Grameen Energy and

Grameen Telecom.

Ownership 50:50 by Groupe Danone and four above

Grameen Companies. Authorized Capital is $3.67 million and the Paid up Capital is $ 1.103 million. The Company is registered under Companies Act of Bangladesh.

The 4 Grameen companies

Grameen Business Promotion Services:
Established for promoting micro and small enterprises for low and lower-middle income families through financial and technical support.

Grameen Energy:
A not for Profit Company, created to develop and popularize renewable energy and technologies in remote areas. Its two main programs are Solar PV Technology and Biogas Technology. Grameen Energy is one of the first companies that successfully developed a marketbased approach to serve the energy needs of the rural people through Solar PV

The 4 Grameen companies

Grameen Welfare:
For dedicating welfare activities to Grameen Bank beneficiaries, employees and for extending support to the Grameen Companies.

Grameen Telecom:
As a not for Profit Company, Established for improving the standard of living and eradication of poverty. Under its Village Phone Program, it provides Grameen Bank Members with access to mobile telephones for generating income by selling services.

Grameen Danone Foods Limited.

A unique model of Social Business Enterprise (SBE)

Mission:

Reduce poverty by a unique proximity business model that brings daily healthy nutrition to the D & E class.
Objectives:
To bring daily health nutrition to low income (D & E

class) and nutritionally deprived population of Bangladesh. To alleviate poverty through the implementation of a unique proximity based business model. To contribute in creating independent business and job opportunities in the farming, processing, sales and distribution sectors. To provide easily affordable dairy product especially developed to fulfill the nutritional needs of children, To protect the environment relying on solar & biogas

Other Unique Features

Investors will not take profit from the business They will help in using profit for expansion and

development of the business

Investors will provide/ arrange for technical and

expert support for the benefit of the Company

They will arrange support of professionals to facilitate

development of business
The

investors will keep continued support for sustainable and smooth growth of the Company

Current Operation of GD
First Plant At Bogra, a northern district of Bangladesh, 220 km from Dhaka. Inauguration of First The plant inaugurated on 7th November 07 by Plant Football icon Zinedine Zidane. Plant Size 800 Sq. m factory.

Present Products

Yogurt from fresh milk that includes cornstarch, date molasses, sugar and micro nutrients. A single 80-gram cup provides 30% of a childs daily requirements of vitamin, iron, zinc and iodine

Production Capacity 3,000 kgs yogurt/day and maximum10,000 kgs/day

Product Brand

SHOKTI DOI- means Energy Yogurt

Current Operations of GD
Product Selling Grameen Ladies (Village Ladies) & tiny shops in rural areas are engaged in product selling process 7 cents/ 80 grams
The company is actively considering developing about 500 mini dairy farms with 3-5 cows each. Such farms will be supported with micro credit by Grameen Companies and The Grameen Bank.

Cost of Product Milk Supply

Production Short Term Plan

Production and marketing are underway on trial basis Two More plants to be established by 2008.

Global Alliance for Improved Nutrition (GAIN)

GAIN is participating with the Company since its

inception.

It is helping in developing proximity marketing.

Within a couple of months GAIN will undertake an

efficacy study about the impact of the product on children.

Go Green Before Blue Goes Over You

THANK YOU.