Challenges Multi-industry Multi-national Conglomerates face in making the Sustainability Transition

The transition to greener and cleaner technologies and management practices is not an easy one for business, and it is especially challenging for multi-industry, multi-national conglomerates.

Most large business conglomerates have the following features:

  1. A combination of businesses operating in different industry sectors : primary (raw material extraction), secondary (manufacturing and construction) and tertiary (services)
  2. A combination of old and new businesses
  3. Operations in multiple countriessustainability transition

For business conglomerates, the sustainability strategy flows from the top, following from the group-wide sustainability vision. Customizing the sustainability message of the top management to individual companies (discrete strategic business units) within the group is a challenge.

Companies within the same group, but operating in different industry sectors face different sustainability issues. While businesses engaged in raw material extraction such as mining, oil&gas, forestry, fisheries and agribusiness are faced with the problem of mitigating impacts resulting from unsustainable extraction, businesses in the manufacturing sector have to manage the impacts caused due toinefficient use of materials and energy and due to emissions and wasteemanating from their operations. Service industries operating in the IT, telecommunications, retail and financial services sectors seem to have small environmental impact (except energy and material consumption of their commercial installations) but, in reality, their impacts are quite significant  – while the impacts of retail companies lie in their supply chains, those of the financial service companies arise out of the projects they finance or insure. In fact, being customer-facing, service sector companies have to be more cognizant of their environmental impacts.

Another challenge conglomerates face in making the sustainability switch comes when they have a mixture of old and new manufacturing units. Old factories face the classic problem of having been locked into decades-old technology and machinery, compliant with the regulatory requirements of the time when they were deployed. With time, however regulations are bound to get more stringent and transition to cleaner and more efficient technology either requires huge investment or retrofitting. Pre-empting change in regulation is thus a very important strategy to ensure smoother transition in the future. A similar problem is faced when a conglomerate purchases a business – the business brings with it a legacy of environmental performance which may not be easy to reverse.

Multi-national conglomerates have unique hurdles to overcome to make the sustainability transition. When a conglomerate has operations located in different countries, it has to be cognizant of compliance requirements specific to those countries. In such a case, it pays to go beyond compliance and be an industry leader in environmental performance – it is easier to apply consistent performance norms across all locations.

Notwithstanding their diverse challenges, large conglomerates are the ones who have the wherewithal to blaze a trail towards greater business sustainability.