Corporate Climate Action

Indian companies increasingly opt for sustainable business strategies

Pratik Sanadhya, Senior Disclosure & RE Officer, CDP India

Shouts, whistles! There were cheers and tears. It was December 2015 and it appeared as if Christmas arrived two weeks earlier. After long and tiring negotiations and on the backdrop of major corporates supporting a strong climate action, almost 200 countries adopted an ambitious plan to keep global temperature well below 2, preferably 1.5 degree Celsius.

The Paris Agreement in place, countries committed to nationally determined contributions (NDCs), and build resilience to adapt to the impacts of rising temperatures. Options devised included reducing fossil fuel emissions, using more clean power, putting a price on carbon. Everyone was ecstatic. But the recent IPCC’s AR6 has put a red flag on the emissions trajectory that the world is moving towards. And the new projections for current global warming temperatures and the time we cross the 1.5-degree Celsius global warming mark are not positive indicators.

History tells us that our biggest global problems won’t be solved just by penning treaties and laws. Nor will regulations be sufficient to tackle climate change. Persuading a majority of cohort to commit to limiting carbon emissions by personal austerity is an uphill conflict, if not impossible.

The most powerful motivator for humankind is an enlightened self-interest and the best way to prevent catastrophic damages of climate change is to showcase the brighter side of tackling climate change. The process of avoiding carbon emissions not only have positive impact on planet but also on people and profit. A vast surge in opportunities is often associated with tackling climate change and it is a well-established fact that fixing climate change can not only save money but also enhance lives and livelihoods. And it is at this juncture, the corporate sector seeps in. The targets of countries to move towards a net-zero future is cascaded down to corporate actions and targets. Considering the most important climate summit following Paris Agreement – the COP26 aims at targeting a net zero future by 2050 and the corporate sector would be at the heart of these negotiations.

The Indian corporate sector is steadily moving towards making business strategies that are coherent with sustainable development. There is a core understanding amongst several corporates regarding responsible behavior. However, these markets are not essentially always rewarding. There is still a need for state action which should be a balanced step from Indian policymakers, regulators, and standard setters towards issues of climate change. Even if businesses are taking steps towards behaving responsibly beyond the regulatory requirements, they still strive for an attractive business case which in turn is largely driven by investor/stakeholder pressure.

However, the tides are turning, and businesses have started realizing the importance of sustainable behavior. These are quite evident from the CDP (formerly Carbon Disclosure Project) India 2020 report which stated a climate imposed risk of USD 100 billion. Corporates have understood that climate change has a direct impact on the financial performance of the company not only from direct physical damages but also through changing customer behaviors. Corporates in India have not only started taking actions but also started aligning their businesses according to the climate science target by committing to Science Based Target Initiative, not only to limit global warming below 2 degree C but to 1.5 degree C. The rise in the number of such commitments is a loud and sharp call for other businesses – that a development path innocent of sustainability is not a business case at all. Many corporates have devised various tools to align their business with the required climate science, such as Internal Carbon Pricing (ICP), Scenario Analysis etc. CDP 2020 data states that a total of 58 companies have either a carbon price in practice or are planning to adopt one in the next two years. A majority of corporates are working on double materiality aspect to look at the possible pathways through the lens of different scenario analysis. The first signpost for moving towards a climate action by corporates is by initiating a sustainability report and disclosing on voluntary platforms like CDP, GRI, etc. There is a steady increase in the corporate respondents on these platforms which is evidence enough of the starting point of climate actions from different CEOs.

Despite the significant strides made by corporates towards battling climate change, a huge gap must be filled in terms of making surmountable changes to reverse the impacts of climate change. The push should work in top-down approach where the state actors should lead the baton along with the large business houses. Indian investors should also convey strong signals to factor sustainability in their decisions and with the new BRSR on the horizon, they should tilt more towards indices and reporting standards that are been envisaged by bodies like National Stock Exchange and Bombay Stock Exchange.

Looking at all the challenges and the opportunities, it can be inferred that corporates are also led by humans who want to leave a livable planet for their coming generations.

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