<p>Is There a Miracle cure for the Polycrises?</p>
Is There a Miracle cure for the Polycrises?

We are living in a Polycrisis: a time of great disagreement, confusion, and suffering that is caused by many different problems happening at the same time so that they together have a very big impact, as per its definition by Cambridge.

However, these multiple crises happening at the same time are manifesting in different ways, some common and some unique, in different parts of the world: two regional wars that continue to escalate, global recessionary woes that are not going away any time soon, the impending doom of climate change, and growing inequality that is at the root of social unrest leading to new patterns of migration and crime. Not to mention supply chain disruptions driven by several of the above factors and biodiversity loss that could disrupt future food security for many.

Is it possible that all of these apparently disconnected symptoms may have the same root cause?

It is, indeed. The industrial revolution has been built on the foundation of the corporate structure of the joint stock, limited liability corporation model. This model forms the basis for most corporations in the world today. Why? It was first used by the British East India Company, which was among the most profitable corporations in history. At one point it accounted for more than 50% of the world trade. It enabled the industrial revolution in Britain and led to Britain becoming the leading industrial economy in the world.

Now let us look at the cost that was paid to secure the growth of this company. It not only pushed India into abject poverty by reducing its share of world GDP from 25% in 1600s to less than 3% by 1947. It also caused a massive transfer of wealth from India to Britain worth more than $45 trillion in today’s dollars. The social impacts were no less significant: It directly led to the loss of 10 million people in Bengal driven by the famine in 1770 – 33% of Bengal’s population at that time and twice that of England at that time.

Yet, from the European perspective, the British East India Company was so wildly successful that it became the de-facto model for corporations across Europe and America, and then around the world. Extraction at any cost is thus hard wired into corporate DNA!

No wonder that the single-minded corporate focus on growth and profits has led to multiple global crises. Why? Because the natural and social ‘externalities’ that are now covered under ESG factors have never been part of the accounting process while calculating profits. Nature alone has been subsidizing USD 7.3 Trillion of natural capital per annum to feed corporate P&L. This is 8% of Global GDP, as per numbers reported in 2013 by the Natural Capital Coalition – UNEP report.

Hence, none of the world’s top industries would be profitable if they paid for the natural capital they use. We are not accounting social subsidies here yet. Adding them would further increase the deficit. It is clear therefore that the corporate P&L is not even a true picture. This is why there is an increasing demand from Investors for companies to report TCFD (carbon accounting) and TNFD (natural capital accounting) to cover these gaps. Carbon taxes that are emerging around the world have the same purpose of getting Companies to pay for the true cost of doing business.

Only when we do a truthful account of a corporation’s P&L, factoring in all natural, social and economic subsidies would we know the real picture. Ignoring these costs inflates corporate profitability numbers in the short run but will show up as a deficit when we do a full accounting incorporating the loss of natural capital or social capital. This inadequate accounting creates an apparent conflict between economic prosperity against social well-being, when actually both go hand in hand.

If we think India is an exception, hold on. The rich-poor income divide in India, for example, has worsened significantly in the last 40 years, a result of the deployment of same western model of growth in India, without even realizing its consequences.

India is expected to grow 10-fold in the next 25 years. However, if we continue to use the same western model of the corporation, we will end up producing more crises in the Indian society. The tragedy will be that this harm will not be done by a foreign culture but self-inflicted.

It is crucial, therefore, that we create a new operating system for corporations…and capitalism itself. We need different software to run the corporate hardware. What should that software be?

It has to be a software that includes principles of Sustainability and ESG. Only by embedding these principles that guarantee a win-win-win for all stakeholders do we have any chance of eliminating the genetic defect in the corporate DNA that continuously produces new crises for the society.

Increasing air pollution leading to climate change; and water pollution leading to crop failure and loss of biodiversity that threatens food security are clear signs that what the British East India Company did to India, is now being done at a global scale in India and all over the world.

What are the economic consequences going to be, of embedding the Sustainability and ESG principles in the corporate structure?

We will unleash the creative power of companies to become solution providers of the polycrises’ that we currently face. There is a massive opportunity in doing so. Opportunity in excess of $100 trillion exists in solving the climate crisis, biodiversity crisis, and social equity crisis.

Interestingly, incorporating Sustainability and ESG principles has been in the blood of Indian culture since millennium. Respect for nature is embedded in the worship of fire, air, water, earth and Akasha as elements. Respect for social harmony is well summarized in the motto: “Vasudaiv Kutumbakam”, which literally means the world is one family. Only by re-establishing these principles in the heart of modern Indian businesses and by actually living them in practice is going to fuel the Indian growth story in the next 25 years, making it a bedrock for not only India’s prosperity but also India’s and global well-being. Without this, neither India nor the world has much chance of surviving the Polycrises we are facing.

In the Sustainability and ESG Masterclass on 22nd and 23rd Feb, we will reveal how companies can transform themselves by embedding Sustainability and ESG into their core purpose and operating systems. Join us to begin this transformative journey for your organization.

Join me in this ET Masterclass on Creating value through ESG and Sustainability

<p>Vipul Arora , Partner, ESG and Climate Solutions at Sattva Consulting </p>
Vipul Arora , Partner, ESG and Climate Solutions at Sattva Consulting

About the Author: Vipul Arora, Partner, ESG and Climate Solutions at Sattva Consulting.

Disclaimer: The views expressed are solely of the authors and ETCFO.com does not necessarily subscribe to it. ETCFO.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.

  • Published On Feb 9, 2024 at 10:31 AM IST

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22 thoughts on “Is There a Miracle cure for the Polycrises?, CFO News, ETCFO”
  1. Just as much as I did, I relished what you accomplished here. Your language is elegant and the drawing is enticing, yet you appear rushed to get to the next thing you should be providing. If you keep this walk safe, I’ll come back more often.

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