1. INTRODUCTION
1.1 Purpose
The purpose of this report is to highlight the green banking practices followed by ICICI bank in India and recommend ways to discuss the long-run benefits of investing in sustainable practices.
1.2 Why banking sector
Banking sector has a proactive role to play in adopting sustainable practices. Although banks are not directly related to the environment, their operations are responsible for massive carbon emissions through the industries which are being financed by the banking industry. Indian banks have a big role to play and they aren’t taking any initiative towards environment (Prasad, 2011). Therefore, there is an urgent need for Indian banks to undertake green initiatives for successful creation of a carbon low environment.
1.3 Background
ICICI Bank is an Indian multinational banking and financial services company established in 1994 by Industrial Credit and Investment corporation of India Limited, and head quartered in Mumbai. ICICI Bank provides various financial and banking services such as investment banking, retail and corporate banking, asset management. As India’s largest private sector bank, ICICI Bank is committed to providing various green practices to their customers such as Green communication, Green engagement, and Green incentives under Go Green program. By partnering with government and not-for profit organizations, ICICI bank is constantly striving to innovate comprehensive models and ways to deliver value to both its customers and the society.
2. ANALYSIS – CURRENT STAGE & REQUIRED MEASURES
2.1 Meaning 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 needs.”
—World Commission on the Environment and Development
2.2 Sustainable Development – Triple Bottom Line approach
FIG: Sustainable development and the "Triple bottom line"
Sustainability is all about finding right balance among
• Social progress while considering everyone’s needs
• Protection of environment with careful use of natural resources
• Steady economic growth
2.3 Stage of Sustainability – ICICI Bank
The most significant efforts made by ICICI bank towards green banking are as follows (D’Monte, 2010; Mishra, 2013; Singh and Singh, 2013):
• Partnering with few other organizations, ICICI bank is working on Green Business Centre with a motive to promote green buildings, energy efficiency, recycling etc.
• By collaborating with World bank and Indian Government, ICICI bank is financing small and medium sized enterprises for green research initiatives.
• In a conscious effort to widespread ISO: 14000, an Environmental Management System Certification, ICICI bank has provided assistance for various activities.
• In association with Indian Army, ICICI bank is working towards energy conservation initiatives and various water management techniques.
• ICICI bank also provides a processing fee waiver of 50% on car models which use alternate modes of fuel.
Through various environment friendly activities, ICICI bank saved around 30,000 trees and nearly 16 crore liters of water through efficient water and waste management techniques.
2.4 Implications of Porter hypothesis
Stringent environmental regulations provoke the discovery and introduction of cleaner technologies and environmental improvements, making production processes efficient. The cost savings that can be achieved are sufficient to overcompensate for the compliance costs directly attributed to new regulations (Michael E. Porter and Claas van der Linde, 1995). As a consequence of globalization and continuous change in environmental factors, banks face intense competition in the global market. In the light of this, ICICI need to adhere to the stringent environmental policies for competitive advantage.
2.5 Need for promoting Supplier diversity
For operating it’s 4,183 branches across the country, ICICI bank has to purchase a range of products and services including computers, stationery, vehicles, and catering. Thus, it has a tremendous opportunity to make a positive impact by supporting diverse suppliers with a range of capabilities and perspectives. Prior to engaging with new and existing suppliers, developing a framework is crucial to measure potential risks involved and assess compliance with the existing standards. Developing a sound strategy to engage with suppliers that are women led, transgender led, and social enterprises where possible will create a win-win situation. For example, Westpac Group Australia has committed to embed at least 10 Indigenous owned businesses in its supply chain every year.
2.6 Conducting Workshops and Training for Procurement Staff
A supplier conduct code must be framed encompassing social, environmental, and economic responsibilities. These should include environment, carbon emission, supply chain, work place safety, and public reporting. Setting up a code helps in identifying suppliers who perform consistently over time and where suppliers stand in terms of their sustainable business practices. To facilitate better understanding of supplier codes, procurement staff training is essential. Training must be provided to newly hired employees and frequent workshops be conducted for specialists. Structured training of staff results in increased supplier performance, and better overall economic outcomes for the company. For instance, Commonwealth Bank of Australia conducts Capability uplift workshops for procurement specialists, and supplier diversity training to all new procurement staff for better awareness.
2.7 Vehicle emission reduction
ICICI Bank had 67,857 employees and 13,651 ATM’s across India at 31 March, 2015. The amount of emissions from vehicles used by employees to commute daily to their respective branches and to fill money in the ATM’s will be huge. As counter measures, flexible work hours for employees and eco-friendly vehicles for staff commuting will prove helpful in emission reduction. Flexible work strategy allows employees to work outside the traditional timings and typical office spaces. Allowing employees to work from home facilitates considerable emission reductions and reduced operating expenses because little or no office space is required for them. For instance, in 2015 Commonwealth Bank of Australia reduced fleet by 307 vehicles contributing to reduction of 350,000 liters of fuel usage. Also, 45 per cent of Commonwealth Bank workforce work flexibly which contributed for their higher profits.
2.8 Setting up Capability Reporting Teams
For driving a real change, evidence is vital. Reporting teams should be either set up or hired to collect, manage and report carbon emissions, water usage, and energy consumption data of the bank. It is a better way to device an action strategy and minimize risks associated towards transforming into a more sustainable company. Establishing targets on emission reduction and publishing them in public domain will help create a positive impact an impression about company’s consciousness towards environment among shareholders and customers. As a result, more investments can be attracted as customers prefer eco-friendly companies.
3. RECOMMENDATIONS
Apart from initial investments, it is evident that by maintaining a diverse supplier base, training the procurement staff, reducing vehicle fleet emissions and setting up emission reporting teams could benefit the bank both commercially and environmentally in the long-run. This includes lots of benefits like cost reduction of the bank, reputation enhancement and contribution to environment. Environmental awareness of the ICICI bank can create benefits for society by putting pressure on its competitors. Thus, it is important that ICICI bank realize their responsibilities towards the environment as well as the society to survive in the global market.