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Introduction

Mandar (00:05): Hello everyone. Welcome to Position Zero, stubbornly optimistic about the Net Zero. In today’s episode, we will discuss with Dr. Ravindra Utgikar a very interesting topic, the role small mid enterprises play in Nation’s journey towards the Net Zero. Dr. Ravindra is Vice President and corporate Strategy at Praj Industries. In his 27 years of industry experience, he has established track record in the sales, marketing, business development and strategy domain with leading corporations in India and abroad.

Mandar (00:53):
Dr. Ravindra, welcome to Position Zero podcast. Thank you for joining in.

Dr. Ravindra (00:58):
Thanks, Mandar. It’s pleasure to be here.

Mandar (01:05):
Recently we celebrated the 50th Environment Day and like every year, Environment Day emphasizes the importance that we need to take care for the planet. So people have heard the term sustainability. How do you would like to describe the term sustainability?

Dr. Ravindra (01:28):
Okay, there are several definitions of sustainability, but before we get to the definition let’s be mindful about the fact that not a single newspaper, not a single television channel, radio channel, would broadcast anything without word sustainability. These days, it’s that central to everything that we do. So simple way, I think sustainability is, is that anything and everything we do, we do with the consumption of energy and resources, when we mindlessly consume our energy and resources, we are doing irrevocable damage to the planet Earth. So the new generations to come will have to pay for our deeds of today. So to my mind, sustainability is about consumption of resources diligently, mindfully. So much so that we live this planet earth in a better shape and size than we inherited it from our ancestors. And to be able to do that, we need to question every single action we do in our daily course and ensure that it is sustainable so that we leave the planet green and resources resourceful enough for our next generations. That’s very broad based term of sustainability

Mandar (03:20):
Within the industry. If I look at particularly the MSME sector (the medium and small enterprise sector), they contribute 30% to the India’s GDP. And MSME product and services contributes close to 50% of India’s export.

Dr. Ravindra (03:42):
Absolutely.

Mandar (03:43):
In my research, I also read that MSME contributes. If I look at carbon emission as a parameter, they contribute close to 110 million ton every year,

Dr. Ravindra (03:56):
Which is about 25% of India’s greenhouse gas emissions. Correct?

Mandar (04:00):
Correct. India has demonstrated is responsibility to make sure that they change and then they contribute with the sustainability emission. Overall, some of our NDCs also talk about we reducing the emission intensity of its GDP by 45% by 2030. If you look at these commitments and the MSME sector contribution to this overall from industry standpoint to its overall sustainability goal; how you think it is sustainability is relevant, essential for small and midsize enterprises and India?

Dr. Ravindra (04:46):
That’s a great question. Look, we started by saying that sustainability is important to every single one of us, whether it is government, whether it is society, whether it is NGOs, whether it is small medium enterprises, right. Or an individual. So it’s very, very, very relevant and central to each one of us. Right? I’m reminded of a nice quote by Mahatma Gandhi, who said that Mother nature has given us enough for everybody’s needs, but not for everybody’s greed. So I think if we keep that on the top of our mind in all our actions, it is relevant to us. Anything that is not sustainable is going to perish. And I think we are talking about in the context of sustainability. We are talking here in the context of environment and not in terms of business sustainability, right?

Mandar (05:47):
Right.

Dr. Ravindra (05:48):
So I repeat what I said. Anything that is not sustainable will eventually perish. That’s very, very sustainability. And I think you already laid out very clearly that there are over 650 lacs (65 million) registered MSMEs in India, which happens to employ the second largest number of working hands next to only agriculture, contributing over 50% to India’s export, contributing to over 30% of India’s GDP, and also responsible for 25% of India’s emission greenhouse gas emissions. Now, just imagine if India is to realize its goal of net zero by 2070, how on the earth can it do keeping the MSS n sector out? One fourth of the emissions are coming from MSME, and with the given thrust on startup culture innovations a lot of entrepreneurships that is being promoted in the nation, this MSME is only going to grow. So if we don’t contain the greenhouse gas emissions, if we don’t follow the sustainability path in the MEME rim of things, we would never be able to achieve our net zero targets. We would never be able to achieve our nationally determined contributions, and therefore we will never be able to curb our greenhouse gas emissions. So, any sustainability is just as relevant to MSME just as it is to anyone else.

Mandar (07:38):
MSMEs are also a big part of the value chain Yes. For large companies. Right? And in our research we also understand that for carbon emissions, the way you account it is scope 1, scope 2, and scope 3, right? And, and the, your value chain emissions are coming into the scope 3. For most of the industries are the bigger footprint is in the scope 3. Yeah? So, what role you think the large companies can play in introducing sustainable practices in the MSME Sector?

Dr. Ravindra (08:21):
Again, that’s a very good question. You see, large companies have ample resources at their disposal, whether it is investment in latest technology, hardware, facilities, clean and green energy sources, they’re a very important constituent to India’s GDP growth. So it is not merely a responsibility, but an obligation for the large corporations to handhold and to carry with them MSMEs in this journey of carbon neutrality. And how can they do it? They have, because even large companies are going to get measured by the carbon footprints, carbon emissions across the value chain. And when we say across the value chain somewhere, MSME sector, which is responsible at the delivery portion of the goods equipment services also is factored in. Right? They cannot say that I am green, but my supply chain is not green as an instance. Right? So they have an obligation to impart knowledge to the MSME sector, do the necessary know-how transfer of the best practices help MSME sector in the energy transition to help them graduate to cleaner greener energy sources to help MSME sectors follow the world’s best practices in terms of health, safety, environment, compliances, affluent disposal, sewage disposal, west management, every single thing that we speak actually goes into making this planet more sustainable.
We can extend this further. They can conduct some training programs. They can do some on-the-job training. They can help with some kind of certification program. They can put the incentivization mechanism. They can actually go ahead and make MSMEs as a part of their entire value chain, which together allows the large companies to minimize their carbon and greenhouse gas footprints. Large companies have a bigger role to play. Does that mean MSMEs have to just wait for help? They have to also be proactive about it. They also need to do all on their, all that is possible on their own. If they don’t do that, they must realize that they’re going to fall behind. So they also need to learn to be proactive. Everyone is mindful that MSMEs are resource constraint. They have hand to mouth existence. More often than not, they have limited budgets to invest in technology, limited budgets to make the green energy transition happen. But that doesn’t absolve them of their responsibility to do their 2 cents in this journey to sustainability and therefore making planet a better place. So yes, large companies have got a big role. They have an obligation to carry MSMEs along with them, and yet MSMEs also need to be mindful, proactive, and also exercising some of the asks. In this journey for carbon neutrality,

Mandar (12:02):
We are also increasingly seeing the regulations being introduced by not only in India, but also countries upside. A lot of MSMEs are also export-oriented units. The acronym ESG is being, you know, talked about a lot of times in these regulations and conversations; can we put a little bit light on what ESG is and how it is relevant for this small and which I setting,

Dr. Ravindra (12:37):
And I’m so glad, Mandar, you asked this question. Environmental social governance – ESG is extremely important. I recently wrote an article where I said that ESG is akin to ECG for the industry’s health. So industries complying to the ESG norms will be found fit to move forward and do business. Whether you are a publicly listed company wanting to raise capital, whether you are a privately held company wanting to restructure your capital, whether you are MSME wanting to go public, whether you are just startup looking for funding, the investor will evaluate you through the ESG lens.
How compliant are your standard operating proceeds with the environmental norms? How are you doing, for example, rainwater harvesting? How are you minimizing your waste? How are you treating your sewage or affluent? How are you making sure that the place is safe to live? So the environmental compliances, environmental adherence to environmental norms is extremely important when it comes to social aspects. How are you actually being doing as an equal opportunity employer? How are you making your business journey more inclusive? How are you harnessing the diversity in the workforce? How are you helping people or the section of the society at the bottom of the pyramid in terms of their upliftment by way of education, by way of health, by way of safety are some of the social aspects that are being closely watched. And finally, when it comes to governments, how are you fulfilling not just tax session statutory obligations, but also all other obligations?
How are you running your business, which is consistent with the standard operating procedures defined by the Ministry of Corporate Affairs? How are you fulfilling all those statutory norms? Whether it is filing time to time of your sales tax, whether you are GSTs, whether you are income tax, advance tax, whether you are business sustainability and responsibility reporting, all those things will be evaluated very closely. So at MSME level, some of the ESG norms may not be enforceable yet, but as they often say, the objects in the rear view mirror are often closer than what you think. So before it becomes mandatory, it is better that MSME sector also learns about some of these aspects related to ESG starts their journey in preparing themselves on the ESG part. Because in the vendor evaluation, pre-qualification registration, there will be a questionnaire that will ask MSEs about their initiatives in this regard.
So irrespective of what your nature of business be, whether it is business to business, business to consumer, business to government, or business with the social organizations, you will still have to ensure that you minimize your energy, utility, carbon and water footprints. You’ll still have to minimize that the impact you live on the society is only positive or you are more inclusive in your approach. Or you’ll have to still make sure that as a good corporate citizen, you are complying with the government statutory rules, regulations. So, this ESG is extremely important. And within no time, some of the aspects that are applicable to the large, listed companies now will start becoming applicable even to the MSME sector. So it’s better to prepare, start preparing early so that we are not wrong footed when actually the mandates and the ESG norms kick in.

Mandar (17:17):
So, Dr. Ravindra this year, India has focused on Mission Life as a theme for the Environment Day, how mission life is relevant for MSME sector.

Dr. Ravindra (17:30):
Yes, I think we just had World Environment Day on the 5th of June, and although the global theme was Beat The Plastic Pollution, India took a theme of Mission Life that is lifestyle for environment. This mission life was launched by Honorable Prime Minister during COP summit in Glasgow, I think a couple of years back. And since then, we have been actively promoting this mission at all international forums. In fact our environmental minister honorable Bupender Yadav ji also spoke about the life theme in the sheik COP summit that was held last year. So the concept of life is very, very important. It is all about reduce, recycle, replenish, replace, repurpose rescale. So there are several Rs in there and all put together, they form a circular economy. So you got to keep the product as much as in use, maybe in different shapes and size and formats till that time, it has finished its utility value.
And this whole concept of circular economy was always very akin to the Indian philosophy in the, in the yesterday years, we’ve always taken great pride in using you know, the bicycle of our sibling elder siblings, or the textbook of our elder siblings, or for that matter, in the middle class households, even the clothes and, you know, notebooks and whatnot. So the whole concept of life to make the whole journey sustainable is not, is very, very central to our living. And to that, in the modern management sense, we have added this reduced recycle, reuse, replenish, replace, repurpose, which means that everything can be put to some or other use, and we have to just minimize the waste. So if all of us adopt this environment friendly lifestyle, probably we’ll be able to conserve on resources. We will be able to contain the emissions. We will move away from mindless consumption to mindful and diligent utilization of resources. And that’s the core philosophy of life. So it is very central to everything that we do, be it again, like I said, whether it is government, whether it is industries, NGOs, society, individuals, and obviously MSME included. So mission life is a very powerful mission that government of India is actively promoting, and we should all be proud of it.

Mandar (20:14):
Dr. Ravindra, we are also seeing the ill-effects of climate change all around us. Extreme weathers like fires in Canada in the recent news we saw, what do you think are the pathways for the companies to go towards net zero? Or how do we address this climate change?

Dr. Ravindra (20:34):
Yes, I mean, again no discussion can be complete without the, the sustainable climate actions or the initiatives to curb or fight the climate change. So if you look at the climate disasters, whether it is extreme weather events, floods, heat waves, cyclones, earthquakes and whatnot, if you look at the climate disasters, the number of climate disasters in last two decades of previous millennium versus the number of climate disasters in the first two decades of present millennium, you will see that there is a substantial rise that has resulted in properties damage. Were trillions of dollars, several lacks of human lives have been lost. The economic losses can only be computed into multiple trillion dollars. Some say that it’s not even possible to compute the economic losses. Recently, world Meteorological Organization ran a report and they said that the cost of climate change is about 4.3 trillion in last 50 years.
And it has resulted in loss of over 2 million lives. And if we dissect that report, we find that most of the economic losses are in the developed nation. But nine out of 10 deaths are in the developing nation, which is very, very serious. So we got to take climate actions on a war team. Now, there are four pathways to go to net zero. First pathway is about energy transition, which is about moving away from fossil fuels and going towards green and clean energy services. Second pathway is about circular economy, the mission life we spoke about, you know, reduce, recycle, reuse, repurpose, replenish, replace rescale. The third pathway is about forestation. Because of natural calamities or even manmade events, we are losing the forest cover fast. So how we can conserve our forest, how we can grow our forest because they’re the largest carbon bearing capacity.
And then there are, last pathway is about carbon capture, which is about absorbing the carbon from the atmosphere and storing it beneath the earth surface. But the entire scheme of things, what is easier for all of us to do is to harness the bioeconomy, which is nothing but using the products goods made from biological, looser knowledge-based biological processes and keep them in the cycle. Now, we all understand that plants absorb carbon dioxide for photosynthesis and goods and products made from plants when consumed emit carbon dioxide. So when you use biological products and goods, you are creating a carbon neutral or a low carbon cycle. So everything that is actually possible from hydrocarbon resources, which are found beneath the earth surface, which is crude oil and materials, is also possible from carbohydrates which are grown above the earth surface. So hydrocarbons, hydrogen and carbon and carbohydrates, carbon and hydrogen, all it needs is we have to graduate to instead of traditional refineries, to bio refineries where biological resources are used as feedstock.
Unlike the crude oil in the conventional refineries. And unlike you have various products coming from traditional refinery, you have several products coming from Biorefinery in the form of biofuels, biochemicals. They’re more environment friendly. They’re less toxic. They facilitate carbon recycling. They help decarbonization of the sector such as industry and transportation, which are number one and two sectors in emission of greenhouse gases. So if we use the bio economy to the fullest advantage, we are on a sure fire path to achieving sustainable development. And that’s why bio economy has emerged as a very promising pathway for sustainability.

Mandar (25:41):
I come from a technology background and obviously, you know, technology plays a very critical, important role. You know, absolutely in every sector. We know anything on the digital side, there are a lot of technologies, you know, like ai, machine learning, blockchain, and also the, on a traditional technology sector side, look at energy or materials, there are advancements that are happening in this space. In your opinion, how this advancement in technology would help companies take their journey on sustainable? What is the role of technology in this space?

Dr. Ravindra (26:27):
So I have a strong conviction that technology has the progress to change our world for better. So every time we upgrade the technology, every time we stick, change the way we do things by harnessing the latest available practices, whether it is industry 4.0, whether it is artificial intelligence, machine learning, whether it is to do with some of the advancements on the energy side, we are definitely making a progress towards better throughput, minimizing our energy bills, optimizing our resources, and actually making our business journey more sustainable. So technology has great role to play. No discussion today, especially in today’s times is complete without a mention of artificial intelligence and machine learning. The business landscape for these technologies is, or the technology landscape for these initiatives, artificial intelligence and machine learning, it’s still evolving. There is a lot of talk about how this is impacting businesses. There is absolutely no doubt about the fact that when these technologies were invented, they’re invented in the better interest of humanity in terms of helping achieve more from less.
To that extent, wherever machine learning, artificial intelligence applications are, they’re going to give you a fantastic performance. Having that said, the concerns remain or unethical and un mindful and usage of that technology, which could be detrimental to the mankind and a bigger cause at large. While the development of these technologies cannot be slowed down, clearly the world, the best brands in the world are putting their heads together as to how they can regulate the advancements in AI and ML so that the deployment is appropriate in and in the best interest of mankind. And let me give you a couple of analogies. It take enormous time for the new drugs to kick in. But equally long time for the introduction of those drugs for masses at large, there are regulated procedures or there are very, very new technology, automobile vehicles are being developed. But again, they’re to undergo the rigorous process of impact on the safety environment and so on before they’re put in the deployment.
Same way, AI ML kind of technology, which is taking the world by the storm, many are saying that it is in its worst form could be existential question on the mankind will also have to be reviewed by way of regulations and by way of contentment, that doesn’t mean the businesses will have to wait. The MSMEs too will have to look for how they can make some of these technology developments relevant to their value chain. Right. And we spoke about digital, but that’s not where the story ends. Digital is the talk of the town. But there are conventional technologies which allow them to do energy audits, which allow them to reduce their energy bills. There are technologies which allow them to cut the deployment cycles. For example, there are many MSME businesses which are moving to modular SKD plants.
Instead of supplying all components and SKD at the site, they are now trying to make skied or modular units, which can be shipped and sent to the project site. What that does is that minimizes the cycle time. Most of the time it’s spent in the control environment and, you know, some untoward effects of environment or some exposure to unwanted practices can be controlled when it is done in a controlled environment. So I’m trying to say that technology is a big role even for MSMEs journey. And, and although I appreciate that MSMEs will have little resources to invest for the technology advancement whose returns are spent over lifetime, but they cannot be, again, caught wrong-footed in this journey. So they will also carefully evaluate what are the technology advancement that are relevant to their businesses and have to actually start thinking about it. Yeah.

Mandar (31:38):
Typically, the businesses earlier were looking for time, cost and quality when some company wants to engage with a supplier, they would look at particularly these three things. Traditionally, now the environment is changing. Businesses are looking for not only cost time and the and the quality part, but they also want to see how sustainability is important to you, how you’re taking care of those. So how you think the steps that MSMEs needs to take to remain relevant to this changing business environment and add regulatory compulsions on top of it. So it is becoming quite overwhelming for them, isn’t it?

Dr. Ravindra (32:19):
Yeah, I like this question. So time, cost, quality, quantity risk are the five parameters in which everything gets measured and managed. But yes, there is now environmental dimension to this story also. So what can MSMEs do in this regard? They need to critically assess their business model. They need to figure out which part of their value chain they are making money and which part of the value chain. They’re losing money. They also need to critically evaluate which are the customers which are helping them progress and prosper in this journey of sustainability. And which are the customers who are actually just bullying them. So they also need to critically evaluate the new skills. They have to also actively invest in the talent in terms of learning, unlearning, skilling, reskilling, so as to remain relevant in the changing landscape. They also need to invest in the new processes, in the new product development areas, in the new practices, and also figure out what are the areas where they’re able to add more value to their customers.
And all this cannot be done in isolation. So typically, we have seen that MSMEs are spreading themselves too thin. So they need to also do a critical evaluation of who are their today’s customers, who are going to be there, tomorrow’s customers, who are the most profitable customers, who are the customers who are partnering with them, who are the customers who are simply treating them, that another supplier. And this critical assessment will help them actually shape up their business plan, their growth plans in the overall business sustainability journey, which also includes the environmental sustainability aspects, because only progressive customers will have one eye on the environmental norms and sustainability. And if MSMEs can dovetail their processes, their products, their practices aligned with the customers who are going to help them make this transition, this journey will be more rewarding to MSMEs. So just to recap, MSMEs have got a lot of introspection to do, which is not always easy.
Sometimes they can seek external help of consulting agencies. There are number of initiative government of India has taken under the MSME ministry in terms of helping uplift the overall quality of the deliverables of MSME. There are a number of knowledge banks that are available. There are a number of industry associations, which specifically focus on the development of MSME sector. So help is available, but you’re not going to get it right in your doorsteps. You have to make some effort in that regard. So just pulling out your antenna, being mindful of where the world is heading, where are the customers, their customers heading, where are the customers that MSME would like to do business with? Our heading in terms of their product, their practices, and simply going back and drawing the blueprint to be able to align with those needs will help MSME definitely make a step change in this journey of sustainability.

Mandar (35:57):
I’m confident our audience will find this conversation very interesting insightful. So Dr. Ravindra, thank you for your time and we would look forward to have a second conversation in the future.

Dr. Ravindra (36:11):
Absolutely. I enjoyed this discussion a lot Mandar, and I only want to say by going that sustainability is not a matter of choice anymore. So we have to look at it as our friend. We have to find opportunities in the, in the world of sustainability. There are, there is ample when one door closes, there are 10 other doors opening, and we have to be mindful of it. Whether it is green products, green practices, there are several opportunities that are opening up. So MSMEs need to look at sustainability more like an opportunity than anything else. And I think together we can make this world much better place to do. Thanks again for having me,

Mandar (36:51):
Thank you very much, sir.

Dr. Ravindra (36:53):
Thank you.