How Green is your MBA?

Careers in Carbon Finance and Related Areas - Kavita Krishnamurthy Madiyal As mankind takes higher leaps in progress and nations increasingly add to the li st of developed countries, newer technologies and processes emerge across the glob e. Inevitably, the new ranges of technology give rise to newer challenges. Perha ps the greatest challenge facing us today (and one that is being acknowledged by experts in all fields across the globe) is that of combating the threat of clim ate change that could well push all of humanity into disaster and destruction. M ore specifically, tackling global warming and controlling increasing emissions o f greenhouse gases (GHG see box) that can bring about climate changes are turnin g out to be key existential and sustainability issues for individuals, businesse s and world institutions. But as the wise would say, every threat gives rise to newer opportunities. Carbo n dioxide and climate change have jolted the world into working out ways to cont rol their releases into the air that destroy the earth s atmosphere. Such regulato ry controls have led to the birth of a whole new area in business called carbon management. Carbon management from a corporate organization s point of view would include managing the eco-friendliness of the company to earn carbon credits (see box) and make the most of it by selling/ trading it at the right time. Evidentl y, therefore, this also creates a potentially vast and attractive area for manag ers of the current and future generations to operate in. Opportunities for businesses Carbon credits are the emission reduction credits that a company gets for reducin g any of the six greenhouse gases covered under the Kyoto Protocol, explains Seem a Unnikrishnan, Fellow (NITIE). As far as India is concerned carbon credits are i n the form of certified emission reduction units as we are participating in Clea n Development Mechanism [CDM see box] Projects under article 12 of the Kyoto Pro tocol. Unnikrishnan, teaches CDM and Air quality for the PGDISEM batch at NITIE a long with other subjects. She feels that CDM presents a good opportunity for com panies, as it helps the bottom line of projects by bringing in cleaner technolog ies as well as getting carbon credits for each ton of emission reduction of gree n house gases that is implemented. In many cases the crediting period will be aro und ten years or so, which means that throughout the crediting period, the compa ny gets paid for the reduction of green house gases, she explains. According to former Union Minister for Power and Environment Suresh Prabhu, this is a growing area. It is an evolving area and no business can be ignorant to it, says Prabhu, who also takes a course on Business Environment in the Goa Institut e of Management (GIM). Damodaran A, Professor of Economies of Global Environment issues at IIM B, expla ins that we do not have an organized market in this field yet. Europe is mostly f ull of developed countries and they follow the Cap and Trade system (see box), w hereas the opportunities in India will be in CDM. We are turning out Certified E mission Reductions (CER - see box) and the commodity exchanges will also trade i n CER. B-schools moulding Green graduates Most B-schools today are realizing the need for green graduates and have introdu ced courses to help students realize the criticality of the issue and generate a n interest in this area. NITIE has a full-fledged two year course the Post Gradu ate Diploma in Safety and Environmental Management (PGDI-SEM). This course aims at redefining the relationship between business and environment on the basis of the cardinal principles of sustainable development. Students are fully geared to play this role and are aware of the situation. India has the largest number of C DM projects under the Kyoto protocol wherein by implementing cleaner technologie s, firms can earn multi-fold revenue, says Anup Guruvugari, first year PGDISEM st

udent. In fact even if you consider the Railway budget announced a few days back, you will notice our minister has talked about the implementation of green toilet s which will fetch the government carbon credits! he adds. Jayendran Panneerselvam , first year PGDISEM Student (class of 2009), adds, Apart from providing opportun ities in the field of carbon management, the course enables us to get into fiel ds like SHE (Safety, Health and Environment), supply chain management, audit and certification, consultancies etc. Many institutes have also made this a compulsory elective in the first year of m anagement. We have a business environment course, which is compulsory, says Neha A rora, student, GIM. 20-25% of the course is focused on Carbon management. Damodaran, however, believes that this is not a new field coming up as such. It s a ll about integrating newer information within the existing curriculum, he says. Yo u are moving with the times to upgrade, which is what any good B-school would co ntinuously strive to do. IIM Bangalore does not have a separate course, but as pa rt of courses in finance, students are taught about carbon trading. Awareness com es through various other course subjects, adds Damodaran. Also, most students are aware of this issue and the ones who are interested in the field do take special interest to learn more. Sandeep Kumar J, another first year PGDISEM student, says A premier B- School equ ips the manager with knowledge of best practices in the industry; recent deals i n carbon trading has garnered revenues upto Rs.1000 crore, highlighting the fact that Carbon Finance constitutes a sizeable revenue stream that no company can a fford to ignore. Moreover diverse methodologies enable diverse companies from th e service sector to the manufacturing sector to earn carbon credits. With our Railway minister announcing plans to earn carbon credits for the Railwa ys in his budget speech, the awareness, if anything, is bound to increase. Moreo ver, CRISIL has announced its sustainability ratings and the BSE its sustainabil ity index. Thus, a company today has no option but to consider managing its envi ronmental footprint and Carbon Finance. The largest banks in India have dedicate d Carbon Finance cells to enable funding opportunities. Roles for Indian Managers There are many roles for young managers in this field. Damodaran gives a broad o verview of related areas in which a young management graduate may be interested: - Management graduates with an interest in the areas of hydel power and fertiliz er will find this field a good area for growth - MBAs can specialize in Carbon Finance or CER trading - Consulting in investment banking companies as an investment advisor, or in car bon funds, derivatives or spot trading would be a good prospect - At a strategy level, they can work in the image makeover of a company - At an operational level, they can work in the area of sustainability reporting Upon review, the three main areas where young managers would be required are: CDM This would include carbon trading profiles, where it is all about carbon credits how to go about a CDM project and sell resulting credits for the best price. Th is would primarily be a consulting role. A regular growth path would typically b egin with the post of Assistant Consultant and thereafter graduate successively to that of Consultant, Senior Consultant, Project Manager and Project Head. You could work with various banks or with consulting companies. When with a bank, yo u analyze the client s role, evaluate proposals and give him loans. As a bank repr esentative, it s about how to gauge a client s value on the basis of carbon credits that he may earn. Will the company crumble in 20 years?

EHS Environmental Health and Safety This is in a manufacturing role. Here, you will take care of manufacturing healt h and safety issues. At the fresher level, it could be at the plant level and la ter you could graduate to a strategic role. CSR Corporate Sustainability Reporting This is mainly a consulting role on financial reports. It s a complete reporting s ystem where you work with a company or a client to figure out whether a company is focused on EHS, the people who are affected or benefited, and so on. So how or what is the work on-the-job? Rajesh Singla, consultant at Ernst & Youn g (E&Y), who works on the CDM domain talks about carbon finance/trading and crea ting portfolios. My profile relates to the execution part, he explains. It primaril y involves facilitating companies to give carbon credits. So basically you go to a particular client site and try to reduce his carbon emission, and in this way increase efficiency. Then you find out ways and means to convert credits into m oney over a period of time. The job also involves paperwork concerning registrati on with the UN. Let s suppose the company has a process in place for saving credits but until it is registered with the UN, it is of no use. Every project has to b e certified by the UN. So it involves an entire process audit-paper work and the n finally, securing certification. What would be the qualification required to work in this field? A basic engineeri ng degree is sufficient, coupled with management and knowledge of Environmental Health and Safety (EHS) issues, says Singla. Consulting in this field is about mak ing a strategy for companies and telling them what comes in their kitty and how to convert the certificate into money. Then, you would have to locate the money for them and spot selling opportunities, adds Singla, a chemical engineer and an alumnus of NITIE. Sabyasachi working as an EHS manager (Strategy) in the Asian Paints Corporate of fice tells us more about his role. He believes that the basic strategy of EHS co mes into play in design. When you are coming up with a paint plant, strategy begi ns right at the stage of designing the plant, he says. We need to obtain permissio n for the plant from the ministry, ensuring that it meets the minimum legislativ e requirement. As of now, EHS laws are pretty stringent in India. His role also i ncludes evaluating the opportunity of CDM and building a bridge between the tech nical and managerial aspects. Designing a green building is good, he says. And the strategic decision to build the plant in such a way that the cost of consumption of power is low may be worked out by the engineer. But he wouldn t be able to thi nk of the amount he may earn in carbon credits by doing so. So a manager s role is all about knowing how much that would be and maximizing resources. Future of Carbon Trading The clean development mechanism is a golden opportunity for Indian business house s to make carbon credits, as well as to become an environmentally committed orga nization, says Unnikrishnan. The future of carbon trading will continue to be attr active even when India becomes a developed country. In fact, at that stage we wi ll be able to participate in emission trading and joint implementation projects with the developed countries. Considering the fact that India will trade differently as opposed to other develo ped countries, nothing can be predicted as of now, says Damodaran. There is some r isk if CDM fails, thus creating greater challenges for management students conce ntrating on this field. So what would be his advice in terms of walking the tight rope? Students have to be aware and fully conscious of what they are getting into . Not only should they be aware of Indian circumstances but also be aware of wha t s happening globally. They have to channelize and customize it for India. So it s complex and challenging and therefore, very interesting indeed, he concludes.

The author has been a journalist reporting for various leading educational newsp apers.