The ESG Journey of the Godrej Group

ESG is crucial for businesses as it fosters sustainable practices, builds trust with stakeholders, and drives long-term value creation. In the ‘Sustaining Sustainability’ podcast series, we explore how some of the leading global organizations are building a better working world by adopting technology and innovation in their sustainability journey.

In the third episode of the series, Nitesh Mehrotra, Partner for Sustainability and ESG at EY India, talks with Gayatri Divecha, Head – Sustainability and CSR, Godrej Industries Limited and Associate Companies, one of India's leading business conglomerates. They discuss the challenges and interdependencies of sustainability across diverse sectors, such as consumer products and construction. Gayatri emphasizes the importance of keeping sustainability simple and authentic and highlights why it needs to be embedded in every aspect of business. They also discuss the role of digitization and data in driving sustainability-led transformations.

Key takeaways

Simplify sustainability by focusing on basics like emissions, waste, and human rights to drive an authentic impact.
Embed sustainability at every level of the organization to ensure it becomes everyone's responsibility and is not limited to just the sustainability team.
Embrace digitalization and data to make informed decisions, track progress, build trust, and create value.

We built (ESG) board committees when we realized that our sustainability journey had to be more than improvements in emissions and manufacturing processes and that we had to pivot from process to product.

Gayatri Divecha

Head – Sustainability and CSR, Godrej Industries Limited and Associate Companies

It is important to listen to people from the community who have an outside-in view on sustainability; this could provide a competitive differentiation to a company.

Nitesh Mehrotra

EY India Partner Sustainability and ESG

For your convenience, a full-text transcript of this podcast is also available below.

Nitesh Mehrotra: Hello everyone and welcome to another insightful conversation in our ‘Sustaining Sustainability’ podcast series. My name is Nitesh Mehrotra, Partner, Sustainability and ESG at EY India. Our purpose is to share inspiring stories on sustainable change management and how leading enterprises are creating value for their stakeholders. We will also talk about the challenges and interdependencies that this transformation journey highlights.
Our guest for today is Gayatri Divecha, Head – Sustainability and CSR, Godrej Industries Limited and Associate Companies, one of India's most diversified business conglomerates. With a dynamic and visionary leadership, Gayatri has been at the forefront of driving sustainability in action and implementing sustainability initiatives within Godrej.
Welcome to the podcast, Gayatri.
Gayatri Divecha: Thank you, Nitesh, for having me here.
Nitesh Mehrotra: Pleasure, Gayatri. I want to talk about infusing business with sustainability, specifically focusing on sector and sustainability intelligence. As a large conglomerate with diverse businesses, how do you approach the complex sustainability challenges that are unique to sectors, such as consumer products and construction? How do you bring it all together so that the two can talk to each other and we are able to understand the interdependency and interconnectedness of the business with sustainability?
Gayatri Divecha: You are right, Nitesh. It is an extremely complex canvas and sometimes we make it more complex than we need to. The further along one gets in a sustainability journey as a company, whether it is a standalone company or a conglomerate, the more complex it becomes. There are more complex challenges that come up and there are much harder things to solve. But if we are at the beginning of our sustainability journey, the key is to keep it as simple as possible and as close to the ethos of sustainability as possible.
Sustainability is actually quite simple. ESG is about our impact on the planet, our impact on people and how are we governing this impact and our business at large. Start off from a simple place – how much water we use; what is the extent of our water pollution; what are our emissions; what kind of energy are we using; how much waste are we sending to landfills; are we recycling? These are simple questions that one does not need to be an expert at to answer.
Now we are quite far in the sustainability worldwide narrative. There is a lot of information out there, there are many frameworks, and there are all kinds of indicators available that one can refer to. It is important to ask ourselves the basic foundational questions: what and how are we polluting, how are we treating human beings and who is looking into all of this? Our emissions, whatever kind of pollution we have, and our people’s processes or our treatment of people, whether they are communities, employees, shareholders, or consumers – the simpler the questions, the easier.
There are broad frameworks available; many that are globally acceptable (but) which are not necessarily as relevant for markets like India or other markets in Asia. This is fine because there is a lot of stuff that exists in India and in other Asian countries as well that is specific to these countries. We should also not try to boil the ocean and focus on everything that a company in one part of the world is focusing on. We should bring things back to where we are located. Is there anything in place in our countries? Have regulators mandated certain principles of responsible business, for example, in India, that we can refer to? One needs to bring it back to where we are physically present.
The other piece is around sectors. There is fundamentally a difference between real estate and consumer products, between various kinds of agri-businesses. We have a large and diversified agri-business, which in itself is like a conglomerate. There is dairy, animal feed, crop protection, seeds, and palm oil plantations in India. The sustainability challenges and opportunities of each of these are quite different. That being said, there are overarching themes. Every human action has some form of emission associated with it. For some, it may be more thermal energy that is creating an emission. For some, it might be electrical. For some, the emissions in their immediate control may not be that high. There are certain specifics, but there is a broad theme that can connect everything together. We need energy to power all of human existence and economic activity. Where is that energy coming from? Is it renewable? Is it not renewable? Despite the fact that there are specifics in each sector, there are these overarching themes as well. The same is the case with human rights.
Human rights are human rights, regardless of which sector we are working in. The gaps and risks might shift a little bit, but the need to focus on human rights remains true for everything that involves value chains that involve human beings. There is enough in common while there is also enough to be specific . There is a lot of information out there; many primers that organizations have written on ESG priorities for different sectors.
Nitesh Mehrotra: I completely agree with your point on simplification. The more we simplify, the better. I also like the point that you alluded to that listening to your stakeholders eventually gives you the right perspective. As we all know, sustainability is more about actively engaging with your stakeholders.
The next question I want to focus on is the governance tone at the top – how do we manage this complex program? Environment and Social (of ESG) are goals but Governance is how we get there. Tell us about the framework that you have set up at Godrej. What is done at the group level versus entities? In a conglomerate this large and diversified, how do you ensure that everyone is coordinated and is collaborating for leading practices and learnings across the group entities?
Gayatri Divecha: Yes, it is not always easy to ensure everyone is working in the same direction. The larger the company, the larger the conglomerate, the more complicated it becomes. There are obviously inherent challenges, but we have been able to manage them quite well so far. Godrej Industries Limited and its associate companies are a group of six companies, four of which are listed and two are privately held. We have a Group Management Committee (GMC), which governs these six companies and all their aspects, including ESG. The GMC meets every month. There are presentations on various aspects of business across the group, including ESG and CSR. Sometimes, we deep dive into ESG and CSR, and the GMC is the body that has approved and signed off all of our long-term ambitions, goals, plans, and strategies.
GMC consists of the MDs of all of our group companies, as well as the promoters of the group. That is immensely helpful because it is right at the very top of the governance of our group. We have their sponsorship and more importantly, their feedback and guidance and they challenge us, which is what we need.
Thereafter, each of the group companies has its own board of directors and a sustainability or ESG committee, which is a subcommittee of the board. In the same way that CSR is regulated in India to have a CSR committee, we have taken a call to also have a separate ESG committee so that directors, including promoters; MDs; and independent directors have visibility into our sustainability (actions), have decision-making on our strategies, can assess sustainability risk at the highest level and can be accountable to our shareholders and other stakeholders. For us, these ESG committees are really important. We also make sure that all management committees or executive committees have visibility and oversight on ESG. We have strengthened this top-down approach in the past three to four years.
We started off by building bottom up, ensuring that every factory had somebody who was responsible for all our green initiatives – emissions reduction, water, waste, renewables; and every single factory head had these as part of their KRAs – improving our energy efficiency, increasing our renewables, reducing use of water, to name a few. We actually built it bottom up. At that point, each of our manufacturing companies also had KRAs along these lines.
We have a Green Council that would meet every couple of quarters or every quarter to share updates from all the group companies and regions on their initiatives. The Council was chaired by one of our promoters. We built it bottom up.
When we realized that our sustainability journey had to be more than improvements in our emissions and in our manufacturing processes, when we realized that we had to pivot from process to product, there was also this realization that for each group company, sustainability had to be more visible to and governed by each company's management committee. That is how we built the board committees.
Take for example, Godrej Consumer Products (GCPL), which is a multinational now and has operations in Indonesia, Latin America, the African continent, and of course, India and neighboring countries. All of these are clusters. India is one cluster. LATAM is another one. Within India, there are subclusters. Africa is one cluster, but within Africa, there are different markets. At every level, sustainability has been embedded. Whether it is human rights assessments held by HR teams, emissions reduction held by factory teams, or plastics improvements held by packaging and R&D teams – sustainability exists at every single level. We found that creating this huge matrix is incredibly important.
I feel really proud to be associated with a group where it is a reality that ESG is not just the sustainability team's job. If that is the case, then we are failing. ESG is everybody's job. Every single department, team and business has a stake in ESG. If we are able to deliver on that, then we are successful in an authentic manner where we are not greenwashing and putting out things that are not necessarily accurate. That is how we think about it. Without this matrix, it is difficult to stay true to that ethos.
It is great to have governance, but without the right kinds of values in place, that governance also becomes a checkmark exercise. What are our values when it comes to how we do business? Are we ensuring those same values are how we are going about our ESG journey and progress? I cannot tell you how important this is. We all know that ESG has become the flavor of the decade, but it is imperative that we do this in the correct manner because the effects of climate change are real. Not doing it authentically or in a way that is not values-based is really not going to help the climate crisis. Governance and the right structure do not go anywhere without values.
Nitesh Mehrotra: We cannot agree more. I love the way you said the two things that really resonated. One is how can our values create value. Eventually, that is what this journey is all about. Second is that sustainability is everyone's business. As you rightly mentioned, it is embedded in everything that you do. It is great to hear the journey evolving both top-down and bottom-up. As you said, Sustainability Committee at the board level does set the right tone at the top, but eventually, everyone needs to follow the same value system, and that is certainly a leading practice that we are seeing. The point that you talked about embedding KRAs is also very important. Eventually, people behave as per what their KPIs are. If we can instill the right and balanced scorecard, then that makes it a little bit easy operationally.
Moving on, talking about digitization and the role of data, we all know it can be a competitive differentiation, and also a great enabler for trust creation. Tell us how sustainability is getting embedded into digitalization/data/tech, and what are some of the examples to quote? How is (digitalization) enabling you to accelerate your sustainability-led transformation?
Gayatri Divecha: We can only make the right decisions about sustainability if we have access to high-quality, robust data sets that are also wide enough. Sustainability is a big space. There are considerations like where is derivative of oil is; where is our oil being grown in the world and how far has it come, how many hands and businesses has it passed through? This question of traceability of really complex global supply chains, especially with commodities, is a hard problem to solve.
It is difficult to get accurate and high quality data even for our Scope 3 emissions. Scope 3 emissions are connected to the purchases we make and thus it is important to know our suppliers’ Scope 1 and 2 emissions. That being said, we need to start with what is in our immediate control; things like what are we purchasing in terms of volumes, because there are emission factors that we can use. How do we capture data in existing systems, whether it is SAP or other?
Let us be honest. There is a lot of upfront, hard effort required in getting data together that nobody is excited about doing. Nobody wants to manually enter into systems what was in spreadsheets, but this is the reality of all businesses. We all could do better on digital systems and data collection because we need that data to make the right kinds of sustainability decisions, and to track our progress.
There are some solutions out there, but I think that there is still immense potential to build for this. I was quite happy to see the ESG Compass that EY has developed, which will effectively enable companies to pull ESG data into one place from different sources. That is a great development, and it can incentivize companies to clean-up their underlying systems. I cannot stress the importance of doing this enough. The other piece I find equally important in ESG is the right perspective and having access to different perspectives and access to people or organizations holding up a mirror.
It is great that data exists. One can also do anything one wants to with data. You can make data tell the story you want it to tell. (But) to remain authentic, to go deeper and deeper into the levels of transformative impact in ESG, it is equally important to have a set of advisors. Some companies have made advisory boards for ESG, who challenge them and give them this outside-in view. We have relied on you quite heavily for that in the past, to give us this outside-in view. To go out to our stakeholders, do things like materiality assessments or double materiality assessments, to ask our stakeholders what they honestly think about our businesses from an ESG perspective, knowing full well that they are going to be much more open and honest with you than they will necessarily with us. Access to organizations like yours and others who can provide different perspectives, who can hold a mirror up for us and say, what about this blind spot that you seem to clearly have; have you not considered this? That is immensely valuable in addition to the data.
Nitesh Mehrotra: Absolutely, Gayatri, you balanced it well because it is a complex problem to solve, especially from cradle-to-grave or farm-to-fork, because you do not know the supply chain, the supplier’s supplier. But as you mentioned, it is worth chasing that, because eventually that is what will build trust and really ensure that whatever is coming our way and the data that we are leveraging for decision-making is accurate and complete.
What are some of the dos and don'ts that you would tell our listeners so that they are better prepared for this complex and interconnected journey? What would be your key learnings that you would like to share with some of the practitioners on the call?
Gayatri Divecha: We have been on this structured sustainability journey for about 13 years now, and I am sure that there are many organizations that have been on this structured journey much longer than us. Even after 13 years, we sometimes feel that we have just touched the tip of the iceberg and there is so much more to do. There is always going to be more to do. We are always going to be able to do improve what we are currently doing. But the key needs to remain on the here and now. What do we need to do right now? How can we approach that in the simplest of ways? Simple does not necessarily mean easy, but how can we approach that in the simplest of ways that is genuine and create an impact?
It becomes so fashionable to talk about ESG, to do ESG. But we need to really be honest with ourselves as C-suite and as ESG professionals. Are we being authentic? I get that there is always a need to balance things to have a few quick wins.
We should definitely do that. But if our ESG is only about quick wins and not the tough questions, then we are doing a bit of a disservice. I think that honesty of approach, hitting the difficult things but also investing in a few quick wins, balancing things out is key.
Another big learning for us was that if the whole organization does not play a part, then it just does not work and it is not always easy to get the whole organization to play a part. Yes, climate change impacts everybody and it is everybody's business, but we have to be realistic as well because people have different priorities. Every single role at a company has its own set of goals.; Everybody is trying to do the best they can. We also need to demonstrate enough patience with our colleagues as sustainability professionals; influence but also give room for people to come up with their own ideas- and contributions. There is an urgency to the climate crisis, no doubt, but forcing people is not going to help them act with more urgency or in the right manner.
The other thing I learned quite recently Is to go out and listen to the activists a bit more, because businesses have typically positioned themselves at the opposite end of the spectrum from activists. People who are potentially the most critical of us might have the most to teach us about where we need to go and what we are not able to see about our own sustainability progress and blind spots. Engaging with those who disagree can potentially unlock the greatest amount of learnings and growth. Those have been a few of the things that I have learned on this sustainability path.
Nitesh Mehrotra: That is amazing, Gayatri. I loved the way you talked about authenticity because I also believe that may times it becomes a distraction. The point that you mentioned that at times there are no easy answers, so collaboration is the best we could do. This journey or this word ESG and other acronyms should not become a distraction . The other point that you mentioned is also very critical, and which I want to emphasize for our listeners – talking and having an outside-in view. If we listen more to the people who have a point of view from outside in, or from the societal communities, it could serve us really well. Being a little bit empathetic towards the point that they are making could give us competitive differentiation in our journey.
Thank you, Gayatri, for sharing such wonderful and authentic insights on this complex journey. There are no easy answers to your point and this journey is obviously evolving, emerging day by day. We would love to have you back at some point in time for our listeners to share how the journey continues to evolve and emerge.
Gayatri Divecha: Thank you so much for having me.

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Presenters

Nitesh Mehrotra

Consulting Partner, Sustainability and Climate, EY India

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30m 29s

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The ESG Journey of the Godrej Group

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Nitesh Mehrotra

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