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Contributions from
the Column
InWEnt Forum
Biotechnology opens up new opportunities
Automotive suppliers‘ fast-track to sustainability
11/2005 |
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[ India ]
Automotive suppliers’
fast-track to sustainability
For years, sustainability has been a core matter of debate at the IAA Motor Show in Frankfurt. Gearing production to meet the challenges of the future has also become an issue for the automotive industry in developing countries. InWEnt advises Indian automotive suppliers on how to better manage the social and environmental challenges.
[ By Berthold Hoffmann ]
Sustainability is increasingly becoming imperative all over the world. As more large companies employ sustainability strategies, the pressure is mounting on suppliers to meet their standards. The underlying notion is that of triple reporting, addressing not only businesses figures such as turn-over and costs but environmental and social impacts as well. Sustainability today means more than just eco-friendliness for the sake of future generations. It also signifies long-term planning for the good of the company and society in general.
K. P. Nyati, the head of the environmental management department of the Confederation of Indian Industry (CII), views corporate sustainability as a strategic requirement. India is eager to become a major location for the international automotive industry and its ancillary suppliers. The country is already the second-biggest market for two-wheeled vehicles in Asia. Market research points to it becoming the world’s fourth-largest automobile market by 2020. The present number of vehicles per capita is low but experts anticipate annual growth rates of 13.5 percent through to 2009. Thanks to “cheap” skilled labour, India can make vehicles and vehicle parts at low cost. The companies profit from globalised markets but are under pressure from customers to meet higher social and environmental standards.
Traditional values and the global market
Since liberalisation in the 1990s, investment decisions no longer depend on India’s central government. The responsibility for sustainable manufacturing rests squarely with the companies. Some of them have acknowledged this responsibility and started to act. They know that by gearing production more closely to sustainability criteria, they will ensure their medium- and long-term competitiveness on the world market. Interfaces are forming between traditional Indian values and global market requirements.
Honda Motorcycle and Scooter India (HMSI), a subsidiary of the Japanese Honda Group and major manufacturer of two-wheelers, has established a profile as a pioneer of environmental management. At its manufacturing plant in Manesar near Delhi, HMSI has not only introduced a highly efficient waste disposal system but also improved resource efficiency from water and coatings to oils and coolants. HMSI reduced CO2 emissions during production by 60 percent per vehicle.
HMSI was also one of India’s first two-wheeler manufacturers to extend sustainability management to its dealers’ network and ancillary supply chain. ISO 14001 has been established as a mandatory environmental management standard. According to HMSI, 37 ancillary suppliers and 17 dealers had acquired the requisite certification by early 2005.
HMSI is not the only manufacturer taking sustainability seriously. Maruti Udyog near Delhi and Bajaj Auto near Pune have also introduced ISO 14001. Maruti is India’s largest automobile company, turning out 350,000 vehicles a year. Many manufacturers and ancillary suppliers have made significant progress in recent years, notably in terms of waste management, resource efficiency, pollutant emissions and noise pollution. Some have managed to reduce waste by 75 percent by using recyclable packaging or have cut fresh water consumption by half by introducing intelligent water utilisation and treatment systems. Innovative projects like biogas plants – fuelled by waste from the workers canteen – as well as social commitment show that many companies are taking a longer view and see sustainability as intrinsic to their corporate mission.
Social commitment
Some companies provide crèche facilities for their employees’ children. At Maruti, for example, 85 children are accommodated and supervised. In addition to that, the company participates in a school project for children living below the poverty line and a training programme for the mothers of such students. Bajaj helps poor rural communities in the district through a trust fund established 15 years ago; activities range from health and hygiene projects through literacy campaigns to microcredit. These initiatives show that sustainable management and social responsibility are not due only to global trade requirements. They have specific cultural roots in India.
InWEnt supports such efforts within the framework of the EU-India Network on Sustainability Management (EINS), a project financed by the EU and the German development ministry. One of this year’s highlights was a visit to the IIA Frankfurt Motor Show by representatives of Indian automotive suppliers. The visitors were particularly interested in how socially and environmentally acceptable manufacturing operations can be compatible with market success at highly developed locations. Also on the agenda were visits to General Motors and Daimler-Chrysler plants as well as to other automotive industry institutions and associations in Germany and Austria.
Sustainable
management tools
EINS makes small and medium-sized companies familiar with sustainable management tools. It combines environmental, quality and social aspects with issues of health and safety at the working place. InWEnt runs the programme in conjunction with CII, Austria Recycling, the German association of chambers of commerce (DIHK) and Adelphi Research. The main focus is on companies in Delhi and Chennai (formerly called Madras). 213 enterprises and 65 multipliers have benefited from the training provided to date.
Along with appreciating the need for sustainable production, Indian companies are increasingly harnessing the opportunities of this approach. The introduction of management systems such as ISO 14001 requires investment but the costs are easily recouped through lower resource consumption, greater energy efficiency and enhanced workforce thanks to better labour relations. Jamil Ashraf, vice-president of Sandhar Locking Devices, reports that his company reduced its energy bill by as much as five percent thanks to modern technology, giving him financial leeway for further investment.
Domestically, Indian companies that employ dubious business practices are coming under mounting pressure from watchdogs such as the Consumer Unity and Trust Society (CUTS). In the wake of public sustainability debates, middle-class consumers are becoming more and more aware and critical. So a business’s “reputation” is of increasing relevance. Companies practising sustainability management are less vulnerable to attack and perceived in a better light than those that do not. Indian consumers see them as more responsible and credible.
Challenges for small businesses
There are more than just economic and environmental dimensions to the way forward-looking companies understand sustainability; there is also a social aspect. Examples show that the implementation of sustainability strategies in a company do not result in a loss of competitive strength; they can provide a crucial advantage in global competition.
In many instances, however, small and medium-sized companies have difficulties meeting social and environmental requirements. They often lack the relevant information and have at best limited opportunities to see how their manufacturing methods measure up to international environmental and social standards. This restricts the companies’ ability to exploit cost advantages and scope for economies of scale which could easily be achieved by appropriate action.
EINS helps bridge that information gap. Stefano Gatto, head of the trade and finance department at the EU’s Delhi representation, sees the initiative as a good example of how the difficult issue of benchmarks and standards in international trade can be made consistent with extended trade relations between Europe and India. He believes the significance of such requirements in global trade is more likely to increase than decrease. “The EINS programme promotes a two-way exchange of experiences and transfers expertise, paving the way for trade from which both sides profit equally.”
Berthold Hoffmann
is a senior project manager in InWEnt’s Business Development and Infrastructure division. He manages EU-Asia projects on trade and on environmental and social standards.
berthold.hoffmann@inwent.org
Further information:
Project findings and experiences are published at
http://www.eu-india-automotive.net
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