Over the past few years, there has been a growing consensus among businesses to lower their carbon footprint and imbibe ESG. Some of India Inc.’s biggest names have declared net-zero targets. And, 64 companies have pledged to reduce greenhouse gas (GHG) emissions under the Science-Based Target Initiative (SBTi)—a global alliance enabling businesses to establish their climate pledges.
Rahul Prithiani, Senior Director – Sustainability, Energy and Commodities, CRISIL shared his views with India CSR on recent development in the ESG space. Excerpts of an interview:
How can corporates contribute to India’s mission of ESG?
Corporates have a very critical role in India achieving its ESG goals whether it be net-zero plans, renewable energy, or Electric vehicle rollout. Just the public sector cannot support the emerging goals and needs from a sustainability perspective. Hence, for faster adoption of new technologies and innovation corporates have a large role to play.
Why Scope 3 emissions are recommended but not mandatory for net zero?
Scope 3 disclosures are linked to the value chain-related emissions which are not well captured today. The data availability for the value chain-related disclosures remains limited. Hence, in the early stages of BRSR reporting Scope 3 is recommended but not mandatory.
Why are IT, Banking and lending companies at the forefront?
Due to the low energy footprint, strong role in terms of the employment community and relatively evolved governance practices the companies in these sectors remain at the forefront. Further, many of the larger companies especially in the technology segment have been fairly evolved in their ESG reporting journey.
Given that power generation, cement, and chemicals industries are some of the biggest CO2 emitters, what kind of work can they do to lower their emissions?
Given the energy footprint of some of these sectors, there are challenges concerning reducing emissions. Some of the initiatives that can be taken are a move towards renewable energy with storage for round-the-clock operations, waste heat recovery, carbon capture and use of green hydrogen amongst others. The on-ground implementation is unlikely to be smooth given the feasibility and return profile of many of the emerging technologies.
If the nature of the company restricts them from lowering carbon emissions, how can they offset their carbon emissions?
They can look at offsetting emissions by exploring carbon offset investments like biomass, wind, solar energy, solar cookers, etc. Additionally, carbon offsets can be purchased. However, carbon pricing is yet to evolve and the market will take time to deepen.
Why ‘ESG’ is gaining importance and why investors – both institutional and retail – must invest in the companies?
Driving the ESG agenda through the funding institutions is a key focus area globally for Governments as well as development financial institutions. Hence, with increasing regulations, greater investor and Limited Partner focus on sustainability we are seeing a shift towards incorporating ESG in the evaluation process.
Additionally, given the change in the regulatory environment for the investee companies, there is a significant potential Capex cost for companies in ‘hard to abate’ sectors to make investments in greening their businesses which could have an impact on business models and financial metrics in the long term.
How will this space evolve?
We have already seen SEBI making BRSR mandatory for Top 1000 companies, stewardship codes are in place for institutional investors and furthermost of the large global institutional investors are increasingly factoring ESG as key criteria for investment. Hence, we expect the space to evolve rapidly in the near term.
Sustainability reporting is rapidly evolving across the globe, with the UN Sustainable Development Goals (SDG) sharply in focus and the climate action movement becoming a force to reckon with. This has also come a long way from the introduction of the Business Responsibility and Sustainability Report (BRSR). Will BRSR gain global investor confidence?
The BRSR reporting closely mirrors some of the global reporting standards. It will significantly improve the availability of non-financial data for investors which in turn could aid the overall decision-making of investors.
(CopyRight @ India CSR)
