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Revisiting Retail Sustainability During Lockdown-COVID 19

Brief Profile of Mr. Arvind Bodhankar

Mr. Arvind is an experienced industry professional with 31 years of work experience in Fertilizers, Petrochemicals, Steel, Cement, Shipping, Glass, FMCG, Pharma, and Automobile sector in National and Multinational environment.

Currently, he is working as a Jt. Executive President & Chief Sustainability Officer at UltraTech Cement Ltd. (An Aditya Birla Group Company) India’s largest and world’s leading Cement company. Besides Sustainability, he has also worked in the area of Operations, Business excellence, Marketing, and HR, etc.

By education, Mr. Arvind is an Environmental Engineer with MBA in Marketing. He is also a certified director from the Institute of Directors. Owing by virtue of his diverse experience and knowledge he has been nominated on various boards and advisory bodies like:

  • Director on the Board of Global Cement & Concrete Association- India 
  • Director on the Board of Society of Safety Health Environment & Sustainability Professionals (SHESPRO)
  • Director – CSR & Sustainability Institute (CASI)
  • Director on the Board of National Safety Council India
  • Advisory board member of prestigious international not for profit organization ‘We Mean Business’ (WMB)
  • Director on the board of Taloja Manufacturers association
  • Member of Board of studies like ITM, IIM Lucknow and Symbiosis 

Having such a diverse knowledge across various subjects, he has spoken at more than 100 National and International conferences. Lastly, Mr. Arvind has 25 research papers/publications to his credit which has been referred by more than 100 researchers for their Ph.D. work.

 

Agenda

  • Introduction to Sustainability
  • Value Creation
  • Retail in Lockdown
  • How to remain sustainable amid crisis
  • Learning from Lockdown

 

Introduction to Sustainability

As we all know due to the current COVID pandemic, these are some of the most unprecedented times we all are going through, and as the world is striving towards normalcy more and more companies are focusing on sustainability.

Various myths surround sustainability, for instance, are only limited to environmental protection. Although this is not entirely false just a part of the definition. Sustainability majorly includes the Triple Bottom Line Approach- 3Ps i.e. people, profit, planet protection.

For any company to flourish and sustain in the markets, their bottom-line is very important. But even though profits are important, sustainability can only be achieved when the company cares for its internal and external consumers (employees and end customers) along with the safety of the environment. Hence, when combining profit considering its own people, the end consumer and the environment gives sustainability.

Scope of sustainability

It mainly consists of:

1.Economic: - Innovation, Capital efficiency, Risk management, Growth enhancement

2.Social: - Social justice, Diversity, Human Rights, Community outreach, Labour relations

3.Environmental: - Clean Air/Water, Emissions reduction, Biodiversity, Environmental   research, Recycling/ composting

 

Sustainability is about

Endurance

About 30 yrs ago, there were many textile mills, chemical plants, refineries, etc. having their manufacturing plants located in Mumbai. Due to rapid urbanization coupled with changing market scenario, many of these companies have shifted their base, closed down their operations. For e.g. there were 850 acute companies in Taloja out of which a prime example would be Nocil a dream company for many of the candidates during recruitment that doesn’t exist today.

Business continuity

Companies need to map their entire supply chain in order to mark the presence of their products or services within the market keeping in mind the fluctuating demand, technology, factors involving risk, and the measures taken to mitigate the risks.

Creating value for stakeholders

All in all, the companies must always strategize in a way to continuously create value for all its stakeholders by optimizing their performance, reducing costs, and increasing revenue.

Along with all the mentioned factors, sustainability is also about resilience and recovery.

Thus, sustainability not only involves the green environment, CSR, social community but also endurance, business continuity, and creating value for stakeholders.

 

Why Businesses pursue Sustainability?

Improved brand image and protection against reputational risk

Renowned companies such as Tata and Birla are always known for what is to be done and they know how exactly they are going to do it hence are always respected for who they are, whereas small firms only look at bottom-line profits in order to sustain in the market. It has to always be a holistic approach wherein the companies need to look at both their topline and bottom-line, internal& external customers, resources capability along with the evolving technologies, economic conditions, and changing market scenario in order to sustain and remain relevant in the market. For example, Cadbury had been under accusation for issues pertaining to the infestation of worms in their chocolates. However, due to its brand value and the trust, it built towards its customers' people knew it might have been some negligence or an accidental error on their part for having such a situation to arise, thus it was able to pull back up and gain back its loyal customers.

Increased productivity and reduced costs

The cost has become a major driver for sustainability. In such pandemic times, where people do not have regular cash flow and there are no buyers in market companies need to ensure to keep the fixed cost as low as possible. Also, they need to focus on sweating their assets meaning optimizing the output of machines and people with lower input (time & resources).

 Attract employees and investors

Every organization is built by its people (employees) and not by their machines. Recently there was a message by Chairman of Tata Group, Mr. Ratan Tata that states companies that are laying off their employees in such times must rethink their actions as their employees

are the ones that stick with the company through thick and thin. People always look for bigger brands for employability as sustainable firms (Tata, Birla) are the ones that attract a better pool of talent. Coming to foreign investors and banks such as HSBC, for them to lend capital and invest in companies is not viable if the companies are able to generate profits but unable to sustain it. If the firms think about community, environmental changes and accordingly strategize their business operational plan, maintain brand value, and are able to generate revenue then that will make the companies sustainable and investors would willingly invest in such companies.

Assured Business continuity and Competitive Advantage

Today all companies (big/small) have come down to an even level in the market. Automobile brands such as Maruti, Hyundai, Mahindra irrespective of their previous market share can capture the market first depending on the robustness of their supply chain in reaching out to the customers by closing the gaps and creating an opportunity. Thus, those companies that have an overall better and efficient supply chain will have a competitive advantage over the others to sustain in the market. Taking an example of a cement, retail buyers do not know about all brands of cement, so whatever is available on the shelf in the brick and mortar store becomes their preferred choice for buying, which means a company’s products must be always available on the shelf whenever a customer wishes to make a purchase.

Stakeholder satisfaction

When the companies supply chain is efficient and robust, able to sell quality products and are able to create value for the goods delivered, then satisfaction for stakeholders is achieved.

 

Who are the stakeholders?

Stake means directly/indirectly associated with a company.

  • Consumers

Consumers are checking for the desired value in a product/service that they are willing to pay at a price. If the desired value derived after consuming the product/service does not match their expectations, they may switch over to a firm’s competitors, impacting the cash flow of a company due to the loss of a valuable customer.  

  • Suppliers

The value created for the suppliers is dependent on the type of the market (buyer/seller). Suppliers are willing to sell the raw materials to those firms who provide them greater value in terms of profit.

  • Employees

An organization is built by its people and not the physical space or brick and mortar. Hence employees are an integral part of an organization. If a company does not care for its employees there will be more dissatisfaction, higher attrition rate, labour strikes, etc.

  • Community

It is what surrounds one’s business. If setting up a plant and running its operations creates a nuisance for the community like feeding on their livelihood, ecosystem, increase dust & smoke, pollution, noise and they see no value in terms of employment opportunity then they will ultimately force the company to shut down.

  • Government

They expect the companies to comply with the rules & regulations in paying their taxes& duties on time.

  • Investors

Investors need a timely return on their investment, if they somehow withdraw their funding then companies may face trouble with respect to accessing capital.

  • Shareholders
  • Opinion makers/Civil society
  • Media

 

Value is of 4 types

1. Functional value

A customer who wishes to purchase a car will look at all the features of that car such as safety, mileage, cost of maintenance & operations and whether the product will be able to meet the sustainable value in the long run that the customer aspires for, and then would likely make a decision whether to purchase it or not.

2. Monetary value

Every consumer is looking at the derived value benefitted after consuming the product and whether it meets their expected value in terms of the price paid to acquire the product.

3.  Social value

It’s the value derived due to prestige and self-esteem. For e.g. a luxury car such as Mercedes is purchased in order to get the eminence value from the social community even though it may provide the same features of a regular car.

4.  Psychological value

It is the core value expectations that a customer perceives from a given product.

Value for consumers

1. Price

A consumer when making a purchase always looks for a better product at the same price or a product being offered at a discount or a product that has another product being given free of cost.

 

2.  Timely delivery

A product being offered through e-commerce website has a delivery estimation of 7 days, but when the customer gets his order within 4 days, customers are delighted and higher satisfaction is achieved.

 

3. Quality

Right quality standards need to be maintained in manufacturing the product and minimizing any defects (TQM).

 

4.  Safety

All safety standards must be adhered to in making and delivering the product until its final consumption.  

 

5.  Environment friendly

There is a significant growth in the market for sustainable products and services and consumers are becoming more educated about the environmental and social impacts of the products and services they consume.

 

As per a survey conducted by Nielson, 65% of the global respondents are willing to pay more for products from companies that are committed to sustainable business practices.

1/3rd of the 250 business executives surveyed by Accenture, could not keep up with consumer demand for sustainable products and services.

 

450 ecolabels in 199 countries are helping inform consumers about the sustainability credentials of products and services. For example, Starbucks coffee has eco-labels signifying its environmental footprints, carbon emissions in helping the customers to know that their products are eco-friendly.

 

Value for suppliers

  • Timely Payment

Suppliers expect a right & timely payment of cash from their buyers.

  • Procurement Plan

A robust, clear written specification plan must be devised with appropriate quality check, for procuring the optimum quantity.

  • Clear specifications
  • Right quantity
  • Feedback

 

Value for Employees

  • Job security

Due to momentary disruption in the operations, not laying off the employees due to lockdown is being well implemented in companies such as Aditya Birla, Tata Group providing them adequate security with respect to their job.

  • Timely and right payment

Every employee expects the right payment to be provided to them at the right time without any delay.

  • Motivation/Appreciation

Mask/ sanitizers are being provided to the employees who are working onfield and in office premises. Also, employees are given due recognition for their hard work, achievements when they are able to successfully achieve their targets on time, contribute to developing new frameworks for innovation and business revenue enhancement.

  • Welfare

Employees must always try their best to deliver as per the expectations of the company.

  • Clear expectations/goals

There must be clear goals assigned to the employees working in the organization.

  • Growth opportunity

Indian employees prefer a vertical growth as per hierarchy in their organization.

 

Value for Community

  • Improvement in livelihood

All the people part of the community where the plant is set up expect an improvement in livelihood in terms of more job opportunities and employability.

  • Social upliftment

The standard of living of the people part of the community where the manufacturing plant has been set up must increase.

  • Conservation of nature

There must not be any ecological imbalance due to the setup of the manufacturing plant.

  • No nuisance

If hundreds of trucks are moving in and out a day, there are chances of an increase in traffic congestion, noise pollution, etc.

  • Environment protection

The company must give due consideration to the dust, smoke, pollution emanating from its plant, such that it minimizes its effect or brings out alternative ways to deal with them so as to protect the environment and the ecosystem of the place.

Value for Government

  • Strict adherence to rules and regulations
  • Timely payment of taxes and duties

Value for investors

  • Return on investment

The investors expect a good return on investment in order to make the business profitable and having a steady growth in market share.

  • Protection of principle

The investors expect a sustainable return on capital with all legal issues and compliances being adhered to.

  • No liability issues

Value for shareholders

  • Appreciation of price
  • Dividend

If the demand increases, the prices rise, thus making the shareholders more delightful.

Value for opinion-makers/Media

  • Continuous engagement with Political leaders/NGO/civil society
  • Timely and right disclosures
  • Transparency in performance in order to create value

NGOs, activists are raising their voices and highlighting corporate malpractices and sustainability.

Learning from Lockdown

  • Humility & Respect for all

Lockdown has removed the hierarchy in the organization. COVID has brought everybody at the same level i.e. it has affected all strata (lower class to upper-class people) of the society.

  • Power of connectivity

The key learning is having humility & respect for all people and having a strong connection from suppliers to customers, due to this connectivity the firm is sustainable.

  • Technology is a reality

Technology has made work from home possible which has been proved to be very productive as one can deliver at their own pace and deliver better value for the company.

  • Supply chain robustness

It means the firms need to ensure that their products are always available on the shelf and not run into a situation of stockout.

  • Risk management is an absolute necessity

What-if analysis, robust implementation along with efficient business process needs to be executed considering all the risks involved.

  • Need to be more confident than panicked
  • Sentiments and thought matters, not money
  • Consumption patterns will not remain the same all the time

 

Impact of COVID on business sectors

Potential Gainers              Potential Losers

Financial services                Travel &Tourism

Insurance                             Aviation

Online education                 Automobile

Agriculture                           Real Estate

E-commerce                          Consumer durables

Information Technology        Luxury/business hotels

Telecom                                 Sports & Entertainment

HealthCare                             Restaurants

Pharmaceuticals                     Fashion & Retail

 

To remain sustainable amid lockdown

Reduction on the fixed cost : During these difficult times, many sectors that had not hoped to revive are actually pulling through by reducing their fixed cost and overheads to a minimum.

Continuous customer engagement : This can only be plausible by constant engagement with the internal employees and external customers of the organization.

Innovation : Companies are bringing in new ideas, changes to their business model in order to engage better with their customers, and add extra value in the process.

Technology adoption : Work from home has become a reality due to internet technology.

Employee retention : It is difficult to bring back the same experience as prior if the core specialty of the place the employees working in has been laid off or switched job. E.g. Dosa /Biryani maker of a restaurant specializing in that domain may have left for his hometown resulting in a loss of original taste of the items prepared in the restaurant.

Right forecasting : As demand fluctuations have become more and more uncertain, accurate forecasting is of utmost necessity for companies to be sustainable.

Alert/insightful : Firms must be alert and vigilant with respect to any market changes, economic conditions, Government policies, etc.

Always market-ready : Firms need to be market-ready in order to adapt to any changes observed in the market.

Supply chain integrity : Companies need to integrate their supply chain more effectively right from their suppliers, transporters, warehouse owners, agents to consumers in order to satisfy the demand of the end customer.

Source of finance : Conventional products will always have a demand but in order to remain sustainable firms need adequate sources of funding from their investors, banks.

 

Consumer sentiments one must not ignore

Social distancing : As social distancing has become the new norm, more spacious retail outlets will have more footfall resulting in more business.

Health & Hygiene : Appropriate care must be taken by the firms especially in today’s times by regularly sanitizing, cleaning, and maintaining proper health & hygiene of its people and products by doing periodic checkups and maintenance.

Income uncertainty : As the income of the consumer has taken a massive hit due to COVID, people are not having the buying capability to purchase desire-based products. With demand being more inclined towards need-based products, firms need to capitalize on that demand.

Atmanirbhar (Strictly no to China) : Lastly, companies should not be dependent on the import of goods from China due to a strict ban on Chinese products by the Govt and in order to make India self-sustainable.