To build back better after the pandemic, there’s a need to prevent and mitigate negative impacts of businesses on workers, communities and the environment
Competitiveness indices have been used as barometer by business leaders, investors and analysts globally to test business friendliness of countries for making trade and investment decisions. A big question post Covid-19 is about the extent future trade and investment decisions can be made solely based on such indices, given their narrow focus on economic indicators and infrastructure.
Expansion of such metrics by incorporating indicators pertaining to resilience, inclusivity, equity, environmental protection, social protection, climate change impacts, among others, seems to be imperative now.
Covid-19 has exposed the fault lines in the conventional way business, state and society are governed and interlinked. There is a growing emphasis globally on the need to build back better and ensure resilient and green recovery post Covid-19.
We can’t afford to slip back to business as usual and should learn from our past mistakes; it’s time to think business unusual. Covid-19 has forced us as individuals, institutions and societies to rethink the way we have conducted ourselves and the basis of our decision-making at home, at work and in society at large.
Consensus is emerging globally about greater attention and investments towards preventing and mitigating negative impacts of businesses on workers, communities and the environment. Businesses are scrambling to be better informed in future about risks and vulnerabilities in their value chains and investments globally.
Global investors and multinational corporations have made commitments to integrate sustainable development at the heart of the recovery process and deploy finances accordingly. Global Investors for Sustainable Development (GISD), an alliance comprising investors and companies worth USD 16 trillion, pledged to promote Covid-19 response and recovery that integrates sustainability and resilience.
India stood 43rd on the World Competitiveness Index 2020, released this June by IMD Business School. India’s movement on this Index has been rather sluggish, hovering in the mid-40s (44 in 2014, 44 in 2017 and 43 in 2020). This is in spite of a flurry of measures by the government to present our business environment as safe and lucrative for trade and investments.
Later in the year, the World Economic Forum (WEF) will release the Global Competitiveness Index, where India’s performance has been comparable. Out of the 140-odd countries that are assessed by WEF annually, India has ranked 68th in 2019 on Global Competitiveness Index. Its ranking had jumped to 55 from 71 in 2015 then to 58 in 2018 and further slipped to 68.
An interesting addition to this year in IMD’s metric was inclusion of a set of new criteria to reflect importance of achieving the Sustainable Development Goals (SDGs). The criteria provide a perception of where a country stands with respect to the SDGs and related indicators on education, environment, inclusion, empowerment, ageing and health.
It remains to be seen if WEF takes a cue from IMD and introduces some of these indicators in its analysis, marrying sustainability with competitiveness.
There is no doubt that the going remains tough for businesses in India. Capital and labour markets remain stressed, as the wheels of industry slowly start to roll forward. So, this might be the right time for India to present itself as a favourable trade and investment partner as companies tread gingerly forward on a path to recovery.
More and more buyers internationally are realising their (shared) responsibility post Covid-19 to share the burden with suppliers and producers in their supply and value chain. Should business and economic recovery be planned by pushing the pursuit of sustainable business to the backburner? Current global trends suggest that it might just be the opposite.
Labour and environmental regulations are being relaxed to give businesses some breathing space in India, and perhaps send a signal to investors and international businesses about our continued commitment to reforming the enabling business environment. However, these measures should be targeted and might prove to be counterproductive if applied across the board and over the long-term.
Experience from the Covid-19 pandemic and the lockdown that followed in India has underlined that protecting workers, communities and environment is not only the right thing to do for Indian businesses, but also key to long-term business resilience. Let me explain further through an illustration why this makes good business sense as well.
Sustainability: the highest common factor
The European Union (EU) is India’s largest trading partner, accounting for Euro 80 billion worth of trade in goods in 2019, or 11.1% of total Indian trade, at par with the US and ahead of China (10.7%). The EU is the second-largest destination for Indian exports (over 14% of the total) after the US.
Earlier this year in April, the European Commission made an announcement to introduce a legislation for mandatory social and environmental due diligence in the supply chain of EU companies by 2021. A baseline that led to this decision has already flagged human rights-related risks that EU trade and investments face in India.
EU companies will need to disclose social and environmental impacts of their trade and investment activities. India can capitalise on this opportunity and further strengthen its position as a preferred trade and investment partner of EU, if industry, government agencies and key stakeholders collaborate to develop transparent supply and value chains supported by an enabling policy and regulatory ecosystem.
Indian exporters have already urged the trade minister to revive the long pending EU-India free trade agreement. A key will be to explore a win-win, joint commitment to sustainable trade and investment that might just clinch it for both parties.
Rijit Sengupta is chief executive officer at Centre for Responsible Business