These 7 companies are serious about sustainability. Should you invest in them?

Recent events highlight the tightrope walk companies must perform to balance environmental responsibility with business interests. The Cellular Operators Association of India (COAI) recently challenged the environment ministry’s decision to expand EPR rules for e-waste to include telecom equipment. This exemplifies the complexities of EPR, a policy designed to promote a circular economy by making producers accountable for the entire life cycle of their products.

First introduced in the European Union, EPR puts the onus on companies to design products with reusability and recyclability in mind, while also ensuring responsible waste-management practices.

Companies can fulfil their EPR obligations by directly collecting and processing their waste or by participating in a certificate-trading system.

As India strengthens its EPR framework, let's delve into the companies that are already embracing this policy.

#1 Hindustan Unilever

Hindustan Unilever (HUL) isIndia's leading Fast Moving Consumer Goods (FMCG) company, witha portfolio of more than 44 brands in 14 diverse categories such as fabric solutions, home and hygiene, skincare, and food.

HUL prioritises a circular-economy approach as in its pursuit of a "waste-free world" and has committed to reducing production waste, food waste and plastic pollution.

It is a participant in India's EPR programme for plastic waste management. While the programme began in February 2022, the company has been collecting and recording data on plastic waste since 2018. In 2021 it became one of the first companies in India to collect and responsibly process more plastic waste than it uses to package products and has continued to achieve this feat year after year.

HUL is also working with the United Nations Development Programme (UNDP) and Xynteo India to create a circular economy for plastic waste management. This underscores its proactive stance on sustainability and its dedication to pioneering waste management in the industry.

HUL remains dedicated to exploring innovative methods for waste reduction, reuse, recycling and recovery, and aims to become a zero-waste business by transitioning to a circular economy.

#2 Apollo Tyres

Established in 1972, the company manufactures automatic bias and radial tyres and tubes, catering to OEMs and replacement demand.

Its products are used in two-wheelers, passenger cars, trucks and buses, light trucks, and farm vehicles.

It sells its products under two brands – Apollo and Vredestein, a Netherlands-based brand it acquired in 2009.

Apollo Tyres products are sold in more than 100 countries in Asia Pacific, the US, Europe, the Middle East and Africa.

In 2023, EPR legislation on plastic waste and e-waste was extended to include end-of-life tyres (ELT) in India. Apollo Tyres’s R&D is collaborating with various recyclers to incorporate recycled materials into their products to comply with this regulation.

The company has partnered with Tyromer Inc, a leader in the non-chemical de-vulcanisation of end-of-life tyres.

Through its Indian associate Tyromer India LLP, Tyromer Inc will supply recycled rubber material produced using environmentally sustainable processes to Apollo Tyres, increasing the sustainable raw material content of their product mix.

Apollo Tyres is also making significant strides in creating climate-resilient operations, in line with its commitment to become carbon neutral by 2050.

As part of its climate adaptation strategy, it focuses on using renewable energy, energy efficiency, and shifting from coal to biomass. The company has devised a decarbonisation strategy to reduce its Scope 1 and Scope 2 emissions in the Europe and APMEA regions. Notably, Apollo Tyres has increase its Scope 2 emissions reduction commitment from 25% to 35%.

In FY23, the company recorded improvements of more than 21% and 19% in Scope 1 and Scope 2 intensities, respectively, from the baseline year of FY20, underscoring its commitment to achieving carbon neutrality. It aims to achieve 30% renewable-power usage by FY26.

#3 Tata Consumer

Tata Consumer Products unites the principal food and beverage interests of the Tata Group under one umbrella.

Its products include tea, coffee, water, salt, pulses, spices, ready-to-cook food, breakfast cereals, snacks and mini meals. It reaches more than 200 million households in India, which gives it an unparalleled ability to leverage the Tata brand in consumer products.

Tata Consumer Products is committed to the EPR plan in India, which covers the collection and reprocessing of plastic packaging waste on a brand-neutral basis across key markets.

All its beverage manufacturing facilities operate on a zero-waste-to-landfill basis. The EPR plan aims to collect and recycle the equivalent (or more) of 100% of the packaging used across its beverages, foods, and ready-to-drink (RTD) divisions.

The company has been fully compliant with EPR requirements in India since 2018. Its research and development division is dedicated to eco-friendly packaging solutions and innovations. These include minimising packaging material usage, optimising existing practices, shifting to sustainable alternatives, and promoting recycling among consumers.

It plans to achieve water-neutral operations across all its facilities by FY30.

#4 Nestlé India

The second-largest FMCG company in India, Nestle dominates in noodles with Maggi and hot beverages with Nescafe.

It has a nationwide presence, with eight manufacturing facilities and four branch offices. It is a subsidiary of Nestle SA of Switzerland, which boasts more than 2,000 brands and operates in 191 countries. Nestlé India's products span milk and nutrition, chocolates and confectionery, beverages, prepared dishes, and cooking aids.

The company has initiated several pilot projects with industry partners under the guidance of the Central Pollution Control Board (CPCB), state pollution control boards, and urban local bodies as part of its EPR initiative. These projects aim to collect, segregate, recycle, and recover plastic waste sustainably.

Through its waste management agency, the company has begun collecting and managing pre-consumer and post-consumer plastic packaging, ensuring processing by CPCB-registered plastic waste processors. Its collection network, which spans 35 states and Union territories, works with partners to ensure responsible waste management.

It follows the reduce-reuse-recycle model:

• Reduce: The company continuously optimises packaging through source reduction and value engineering. For instance, it has launched ready-to-drink (RTD) tetrapaks with paper straws instead of plastic ones. It has also implemented size reduction and value engineering for select brands in its foods and coffee business.
• Recycle: Nestlé encourages using recycled materials wherever possible, such as 50% recycled plastics for secondary packaging of multipack coffee sachets and rPET jars for chocolates and confectionery.
• Recover: Having achieved plastic-neutrality in 2020, Nestlé India has maintained this status through 2023, responsibly managing approximately 25,600 MT of plastic packaging consumed versus the 23,000 MT EPR target assigned by the CPCB.

The company is investing in R&D for new and innovative technologies in packaging.

#5 JK Tyre & Industries

One of the leading tyre manufacturers in India, the company makes tyres for all types of vehicles, including trucks, passenger vehicles, tractors and multi-utility vehicles. It is the leading manufacturer of tyres for trucks and bus radials. Its clients include Maruti, Hyundai, Volvo, Ashok Leyland, Eicher, Bajaj, and Escorts.

The company has a robust distribution network of more than 6,000 dealers, 500 distributors, and 140 sales offices, and is actively navigating the implications of EPR regulations.

It has allocated ₹110 crore to cover potential EPR-related liabilities for the past two financial years, a cost that will likely be passed on to consumers.

The EPR guidelines, effective July 2022, set a recycling target of 70% of the weight of new tyres manufactured or imported in FY22 for FY24. This target increases to 100% in FY25 and subsequent years. Under these guidelines, based on the quantity assigned in the EPR obligation, JK Tyre will buy EPR certificates from registered recyclers. It can also buy retreading certificates from registered retreaders to defer its EPR obligations. Upon submission of the EPR certification, the obligation will be deferred by a year for the corresponding quantity of waste tyres.

The company has emphasised that tyre producers are responsible for mitigating environmental impact throughout the tyre's lifecycle, but are not accountable for emissions created during the tyre’s use.

The company’s proactive approach to EPR demonstrates its commitment to environmental sustainability and complying with regulations.

#6 Ceat

The company manufactures tyres, mainly for trucks and buses, but also for two- and three-wheelers, passenger cars, farm vehicles, and light commercial vehicles. It has a strong domestic presence with a network of more than 300 distributors, 3,400 dealers, and 35,000 sub-dealers.

Ceat is aligned with plastic waste management guidelines and diligently practices EPR through the proper management of plastic pouches used for packaging tubes. This year, it achieved its EPR target of 100%.

Ceat is fully compliant with the permissible limits for hazardous waste generation and management under the rules. It manages non-hazardous waste and electronic waste through authorised recyclers and waste management service providers.

Through its EPR initiatives, the company ensures that its packaging waste is collected and disposed safely.

It has authorised implementation partners (producer responsibility organisations) for the collection, transportation, and end-of-life management of plastic waste. It plans to enhance its waste management practices and continue improving its environmental sustainability efforts.

#7 Balkrishna Industries

The company manufactures performance-focused tyres for the agricultural, construction, earthmoving, port, gardening, and mining industries.

It sells tyres in more than 160 countries and has extensive distribution networks in India and around the world. Its clients include reputed companies such as John Deere, New Holland, JCB, CAT and Turk Traktor.

Its waste collection plan, submitted to the CPCB, aligns with its EPR requirements. Balkrishna Industries recognises the importance of recycling in environmental protection and has established processes to recycle waste generated.

It has effluent treatment plants (ETP) and sewage treatment plants (STP) at all its production sites to reduce water consumption. Wastewater is recycled and used in horticulture in nearby areas, with water treatment monitored and maintained regularly.

Additionally, polythene used in various processes is sold to authorised resellers and reprocessed into plastic granules.

The company plans to further enhance its waste management and recycling efforts and improve its environmental sustainability practices.

Other companies embracing India's EPR policy

Here are a few companies that are participating in India's EPR programme. It’s important to note, however, that this is not an exhaustive list.

Conclusion

Investing in stocks of companies committed to EPR policies can be a smart decision for several reasons.

First, these companies proactively comply with increasingly stringent environmental regulations, reducing the risk of legal issues and fines.

Firms dedicated to EPR are often seen as leaders in sustainability, which enhances their brand reputation and fosters customer loyalty, leading to potentially better financial performance.

By managing waste and recycling efficiently, these companies save costs and ensure long-term availability of resources, which improves operational efficiency and profitability over time.

Companies engaged in EPR are also well-positioned to capitalise on new opportunities in the growing circular economy, and better equipped to handle environmental risks.

Nevertheless,it is always prudent to conduct thorough research before making any investment decisions. Ensure that the investment aligns with your financial objectives and matches your risk profile.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com