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Case Background
David Lowish, the director of the global industrials sector at Generation Investment Management, was required to develop energy infrastructure in India. His research in the area allowed the Generation to build a positive relationship with the ABB India that was a part of the Swedish-Swiss ABB Group. Lowish saw India as a potential area of investment but was hesitant in terms of capitalizing on it. Despite the strong financial position of ABB India, Lowish was interested in protecting the Generation’s image, especially given the coal-based energy generated by ABB India. Even if the quality of life could be improved in the region, it would lead to increased CO2 emissions.
Case Issues
The problem with the current case is that the market share of ABB India and its willingness to innovate do not go in line with the environmental impact that ABB could have on the region. The regulatory environment of the Generation would not allow Lowish to give up on environmental safety for the sake of financial benefits. Given that Lowish would invest in ABB India, he would have exposed the company to significant negative backlash from the environmentalists, as vast cheap coal reserves would generate excessive CO2 emissions and devastate the local natural environment. This co-accountability for the contribution to global warming (paired with incredibly high returns on investment) created a paradox that split the decision-making team. One half advocated for the alleviation of poverty through a more stable economy, while the other sided with the idea that a CO2-intensive path is not the right one, even if the GDP growth will be substantial.
Recommendations and Alternatives
A clean environment is a critical asset itself, leaving the GDP out of the return-on-investment equation. This may be a hint at the fact that there may be no clear trade-off between the income and well-being of the environment. Lowish should turn down the idea of investing in ABB India if the latter refused to seek innovative energy sources and discontinue coal utilization. In order to stay away from unethical decisions, the Generation should promote technical progress in the area to motivate the industry to give up on coal mining and switch to more environment-friendly assets.
The energy industry and its structure allow for on-the-fly amendments that could help ABB India reach common ground with the Generation. If the environment is going to be sacrificed for the sake of the energy sector, the damaging backlash is going to bury the Generation under a ton of negative reviews.
Coal fire is not a decent source of energy, meaning that ABB India should make more ethical decisions instead of focusing on increasing its GDP. On the other hand, this is also the responsibility of the Generation to ensure that the power generation sector in India is going to emit less carbon. The main focus for the developing nations should be to invest in intelligent development. In the case where the Generation is going to be persuasive enough, they will get ABB India to promote green economics. This would create additional investment opportunities across the region, making India a much more workable asset for investment companies from developed countries.
For Lowish, this means that the commercial application of outdated energy sources could be a means of promoting new-energy initiatives. By investing in new energy sources, the Generation would create extensive growth and replace the existing intensive growth that merely depends on the presence of coal in the region. The research and development unit of ABB India could collaborate with the Generation. The latter would invest in the application of new sources of energy across the region. It would slowly create premises for the popularization of low-carbon technologies, helping ABB India enhance its international competitiveness.
The gap between ABB India and the Generation is evident, but it does not mean that only companies from developed countries should perform innovation activities. Overall, the recommendation is to invest in ABB India’s research and development unit and promote the use of environment-friendly energy sources.
Reflection
Based on the information presented in the case and examples from real life (such as Volkswagen), it may be safe to say that environmental policies represent much more value than an increasingly high GDP that is based on unethical practices. The Generation should invest in initiatives aimed at controlling carbon emissions. This would protect India from an environmental catastrophe in the long term and provide the Generation with an opportunity to penetrate the market ethically, without having to navigate through the loose policies on environmental impact. The Generation would only have to invest in ABB India in the case where the latter would come up with new indicators of pollution and carbon emission measurements.
While the process of economic development would be rather slow, it would protect the Generation from the negative societal backlash across the globe and broaden the company’s horizons in terms of how they could bring environment-friendly energy sources to the region.
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