The Paranjpe paradox: Sustainability in an era of shareholder scrutiny

Mint

09-07-2025

Nitin Paranjpe, Chairman of Hindustan Unilever (HUL), articulates a sentiment echoed by many leaders of global corporations: the pressing need for environmentally responsible growth. Addressing shareholders at HUL's 92nd AGM, Paranjpe spelt it out in unambiguous words: 'While the government is taking significant steps, 'India Inc. must play a crucial role in ensuring this growth is inclusive and environmentally responsible".
Laudable and unquestionable as the sentiment is, it flies in the face of multiple external realities.
Unilever's own journey offers a stark illustration. A decade-long pursuit of sustainable growth, championed initially by former CEO Paul Polman and continued by his successor Alan Jope, has been considerably diluted. The primary force behind the retreat is the resistance from US investors, who collectively own almost half of the company and increasingly viewed sustainability initiatives as a drain on financial returns. Under Hein Schumacher, who replaced Jope in July 2023, there's been a sharp cut-down on many of the goals the company had set for itself. That includes, as Bloomberg reported in an April 2024 piece, previous commitments to halving its use of virgin plastics by 2025 with a fresh target of cutting it to one-third by 2026. The company also dropped other pledges like ensuring 100% biodegradable ingredients by 2030, slashing food waste in its operations by half by 2025 and a commitment that 5% of the workforce would be made up of people with disabilities by the same year. Schumacher's concern has been shoring up the company's flagging performance. A hefty rise in its market cap since he took over suggests that shareholders believe refocusing on financials, away from sustainability, is the right way.
Unilever isn't the only company to play down the mantra of sustainable growth. In a reversal of earlier commitments to 'Net Zero' by 2050 and other climate goals, oil majors like BP and Shell, have scaled back investments in renewable energy and are pivoting to increased production of fossil fuels. While the oil and gas sector has a long history of climate scepticism, even consumer giants like Nestle and Coca-Cola have diluted earlier plans of reducing their use of plastic. Political pressures in the US do account for a part of the reversal. But there's also some justification for it. The money spent on sustainability initiatives doesn't guarantee immediate or even foreseeable returns, making it difficult for executives to justify such investments to their shareholders.
It's a role that responsible governments were expected to take on. Instead, the US government seems to be going after all major policies that were put in place to counter the deleterious effects of the climate crisis. The Climate Backtracker by the Columbia Law School lists dozens of steps taken by the Trump-Vance administration to scale back or wholly eliminate federal climate mitigation and adaptation measures. Thus, in June, the United States Department of Agriculture (USDA) announced plans to rescind the Roadless Rule, which prohibited road construction, reconstruction, and timber harvest on National Forest System lands. Trump's One Big Beautiful Bill also proposes drastic rollbacks in existing tax credits for renewable energy projects.
Mercifully, the Indian government is no climate-denier though it's some stretch from being called 'inclusive and environmentally responsible". Despite a steady upward trend over the last few years, India is still ranked 99th out of 167 countries on environmentally sustainable growth, according to the Sustainable Development Report 2025. While breaking into the top 100 for the first time is being hailed, much of that is owed to the country's success in poverty reduction (one of major goals of SDG), itself a contested claim.
More worrying is that on the parameter of 'Climate action", India's score has actually declined, with the report recommending 'urgent action to combat climate change and its impacts." In particular, the report flagged 'CO2 emissions from fossil fuel combustions and cement production", as an area of concern.
With countries like the US, India and notably China, which is the world's largest climate polluter contributing nearly 30 percent of global emissions, dragging their feet, all bets on saving the earth from itself are currently off. According to the World Meteorological Organization, as of May 2025, global climate indicators show continued warming trends, with the world experiencing its second-warmest May on record. This summer, parts of India recorded some of the lowest average maximum temperatures in the last 100 years, marking a significant departure from historical trends.
Clearly, pious pronouncements from corporate boardrooms and the halting steps of governments are not enough to mitigate the relentless march of climate change. Until the economic incentives for environmental responsibility align with the imperative of our planet, the chatter around sustainable growth will remain mere rhetoric, a green facade for a world rapidly warming.