Energy Management and Auditing in Indian MSMEs: A Business Ecosystem Perspective

Energy Management and Auditing in Indian MSMEs: A Business Ecosystem Perspective

Shounak Basak (Indian Institute of Management Calcutta, India), Kushal Saha (Indian Institute of Management Calcutta, India) and Sudhanshu Shekhar (Indian Institute of Management Calcutta, India)
Copyright: © 2018 |Pages: 27
DOI: 10.4018/978-1-5225-5267-3.ch008

Abstract

Energy management has emerged as a comprehensive framework for implementing sustainable accounting initiatives. This chapter elaborates and explains the energy management and auditing practices in the context of Indian micro, small, and medium enterprises (MSMEs). MSMEs form a neglected but a large part of the Indian economy. The chapter delves upon the importance of implementing energy management in MSMEs. Moreover, MSMEs are generally inefficient in their energy usage due to lack of technological upgradation. Therefore, energy management initiatives are of greater relevance for this sector. Energy management requires the coordination among a network of organizations including the focal organization, the government bodies, NGOs, and trained energy consultants. For energy management practices to take root, a business ecosystem perspective is required. The chapter highlights the theoretical dimensions of energy management and emerging ecosystem of energy management through case studies of the Firozabad glass industry and the Morbi ceramic tiles industry.
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Introduction

Sustainability means meeting the needs of the present generation without compromising the ability of the future generations to meet their own needs (UN Documents, n.d.). It is a multi-dimensional concept that aims to balance the economic, social and environmental objectives of the society. The business sector has an important role to play in achieving sustainability related objectives as the activities undertaken by them have significant economic, environmental, and social implications. Therefore corporate sustainability constitutes an important prerequisite for creating a sustainable economy and society (Schaltegger, Bennett, & Burritt, 2006). However, shareholders’ expectations of value creation – often solely concerned with economic profit– makes it challenging for the concerned management to remain committed towards all the three aspects of the sustainability triangle - economic, environmental, and social (Schaltegger, Burritt, & Petersen, 2003; Van Marrewijk, 2003). To balance these often-conflicting set of sustainability objectives, managers need accurate and timely information about implementation costs and impacts of various sustainable interventions. This has led to the emergence of field of sustainable accounting in the recent times. Sustainable accounting is concerned with reporting of social and environmental costs incurred by the current business practices and associated economic benefits of adopting sustainable business operations (Schaltegger & Müller, 1997). Sustainable accounting and reporting – through the collection, analysis, and communication of such information – is thus crucial in facilitating an organization’s journey towards sustainability (Schaltegger, Bennett, & Buritt, 2006). International conventions like the Kyoto Protocol, the United Nations Framework Convention on Climate Change (UNFCC) (UN, n.d.) and the recently concluded Paris Agreement on Climate Change (C2ES, n.d.) too have highlighted sustainable accounting as an important aspect of sustainability.

Implementation of the sustainable practices with the help of accounting framework contributes to ingrain the benefits of the energy management systems into the operating profits of the company. Though there has not been sufficient number of studies on the use of accounting in sustainability (Hopwood, 2009), sustainable accounting practices have been in use for quite some time now and include examples such as sustainable balanced scorecard (Figge, Hahn, Schaltegger, & Wagner, 2002) and full cost accounting (Bebbington, Gray, Hibbitt, & Kirk, 2001). Another increasingly popular and comprehensive form of sustainable accounting relates to energy management and auditing (Environmental Protection Agency, 2008). Energy management and auditing forms an important aspect of sustainable accounting and can guide a business entity to manage the conflicting set of sustainability objectives. Energy management and auditing involves calculating, reporting and optimizing the energy costs incurred by businesses.

Sustainable accounting and energy management has been adopted by large enterprises to some extent (Kannan & Boie, 2003). However, the same cannot be said about micro, small, and medium scale enterprises (MSMEs). Further it has been noticed that many MSMEs contribute significantly to environmental pollution due to unsustainable business practices. The pollution footprint of these enterprises can be considerably lowered by introduction of sustainable practices such energy management and auditing (Jain, 2011). However, it has remained a concern in policy circles that energy management and auditing has not yet witnessed widespread adoption among the MSMEs. It is only recently that a specialized group of private organizations has emerged with an objective to help MSMEs to implement energy management and auditing practices and seamlessly transition towards sustainable operations.

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