What Thoothukudi tells us about sustainability
Companies must take on board shifting trends in public opinion about environmental sustainability and the reputational consequences of not doing so
As the noise from the deaths in Thoothukudi dies down, and the dust literally begins to settle, let’s ask ourselves: What’s going on? Is it a simple case of crony capitalism where all the checks and balances have failed? Or, is the corporate world missing the (turning) point of it all?
Let us start with the process that is at the centre of all this commotion: copper smelting. Copper smelting is the process by which the metal (copper) is extracted from the concentrated ore, which has copper combined with sulphur and oxygen. If you remember your high school chemistry, one such compound is copper sulphate, with the gorgeous blue colour. Smelting essentially means separating copper from the sulphate, which gives rise to part of the problem: the sulphur dioxide gas. Sulphur dioxide is a pollutant—and a toxic one at that—causing asthma and acid rain. Most smelting plants capture the sulphur dioxide gas and make it into sulphuric acid, which can then be sold separately, or further used in the manufacturing of phosphoric acid. However, this capturing process is not foolproof, and there have been gas leaks in the past, resulting in the temporary closure of the Sterlite plant.
The smelting process also uses water—in cooling, processing and washing, and also to convert the sulphur dioxide to sulphuric acid. Economics dictates that most of the water is recycled, but some of it could end up released into the environment or into the groundwater. Depending on the ore that provided the copper, the contaminants in the water vary—including heavy metals like arsenic and cadmium. The wastewater can, of course, be recycled and cleaned, but at a cost.
There is the rub: cost. It takes both capital investment and running costs to minimize the adverse environmental impact of copper smelting. Do keep in mind that this is a global commodity, where if one company in one country “cheats”, it brings down the effective global price at which everyone competes. World over, cost pressures and environmental concerns have seen copper smelting move out of developed countries. Today, the largest smelters are in China, Chile and India. But China, with an eye on its grey skies, is beginning to shut down smelters, squeezing global supply and making copper prices shoot up. On the demand side of the equation, electrification and a flourishing automotive industry mean that copper demand is booming, growing at 7-8% a year. In an era of rising crude prices, India, understandably, will not want to expend more money importing copper, or, indeed, stomaching higher metal prices.
Cost leadership vs sustainability: a false choice
Vedanta’s investor reports place its copper operations in the lowest quartile of cost. What lies behind this cost leadership is harder to fathom. There have been claims and counter-claims that Sterlite Copper, part of the Vedanta group, has gamed the system to get environmental clearances for a plant that was not up to the (environmental) mark. The company leadership, on the other hand, points to the multiple awards from prestigious organizations, including one for good water management.
But is the company missing the forest for the trees?
By failing to sense the shifting trends and the costly reputational consequences, is Vedanta doing the smart, let alone the right, thing? Vedanta’s stock price has tumbled since news of these protests began, while some investors and investment advisory groups are getting skittish and backing away.
Perhaps the most important questions we need to ask and answer are: What is the price of copper that will allow for environmental concerns to be addressed, and are we, the world and India, willing to pay it? This is not a question limited to Thoothukudi and Vedanta. This is a question that resonates in the carbon tax (or water price) debates around the world—should there be a price put on carbon pollution (or on water)? For the most part, there is not one today.
Not answering this question means that we are ignoring a changing reality: Environmental resources are becoming more precious due to dwindling supply, rising demand and rising awareness. Climate change means that water resources in parts of India (including and especially Tamil Nadu) are going to become very scarce, and fights like these are going to become more common. Customers (and voters) are becoming better informed about environmental hazards and are beginning to buy, vote and protest on environmental grounds. Global Shapers (born out of the World Economic Forum) runs a survey asking nearly 32,000 young people what they think on multiple topics. The 2017 survey showed that 25,000 respondents (your current and future markets and voters, companies and politicians) overwhelmingly judged climate change and the destruction of nature to be the most critical issue. The tragic deaths and protests in Thoothukudi herald the rise of environmental centralism.
Companies and institutions should note that reputations have become more fragile and transparency more widespread thanks to laws like the Right to Information Act and social media. Climate change and shrinking water and other environmental resources mean only one thing: Mainstreaming sustainability is not a choice. It’s a survival imperative.
Mridula Ramesh is a cleantech investor and the founder of the Sundaram Climate Institute, and the author of The Climate Solution. Comments are welcome at firstname.lastname@example.org