India Inc needs new approach to ESG

India, as a country, has seen an accelerated transformation in the last decade. Starting with digital and technological advancements, the country has seen a burst of talent that is sure to propel it towards becoming a world leader on many fronts. The country is witnessing robust growth across all sectors - industrial and general. However, as a responsible nation that is aware of its impact on the global scenario, India is committed and aligned to the 2015 United Nation’s Sustainable Development Goals (SDG), a charter of 17 action points that all UN member states follow to become responsible global citizens.

However, continued climate change, Covid-19, and unforeseen wars have put the global SDGs in danger. According to a UN statement, the cascading and overlapping concerns have an influence on the environment, food and nutrition, health, peace and security, as well as education. In contrast to the Paris Agreement plan, which calls for a peak in greenhouse gas emissions in 2025, followed by a 43% fall by 2030, emissions are expected to climb 14% during a ten-year period. Energy-related carbon dioxide emissions have increased by 6%, negating any reductions seen during the Covid-19 pandemic.

While India has been a staunch supporter of the cause, the global scenario and a raging pandemic has pushed it back in the race to implement SDGs. The nation has dropped three positions from last year’s ranking of 117 to 120. With the most recent rankings, Pakistan, which is ranked 129th, is the only country in South Asia behind India. The numbers make us realise that it is not merely government measures that will pull us through, but a concerted effort by industry is needed to ensure that we don’t flounder. Indeed the spotlight is on the industry, which is taking immense measures in ensuring that it profits sustainably.

Need to approach ESG differently

Businesses, investors, and even regulators are beginning to recognise the need of meeting environmental, social, and governance (ESG) requirements since it is our collective responsibility to protect the environment. ESG, sometimes used interchangeably with sustainability, refers to the pursuit of ethical and moral corporate practices with an emphasis on both economic growth and social and environmental equality. It concerns quantifying or semi-quantifying sustainability using data. Since the deadline remains unchanged and the country has fallen behind, fulfilling the target will require a different approach by India Inc.

Measuring emissions

According to a 2020 Carbon Disclosure Project research titled ‘Building Back Greener: India Inc demonstrates climate resilience’, climate-related risks can cost Indian enterprises Rs 7.14 lakh crore while they stand to gain Rs 2.79 lakh crore if they take advance action. Elimination or reduction of emissions has been a cornerstone of business operations for a cleaner planet. The fact that Prime Minister Narendra Modi set 2070 as the target for India to achieve net-zero emission last year, also serves as support for the proven business case for net-zero emissions. Numerous Indian businesses have pledged to either achieve net-zero goals or cut their emissions. Businesses, in particular exporters in industries like cement, steel, and iron, must do more than just map their carbon dioxide routes if they want to maintain their competitiveness in the global market.

The effort starts at home

With the growing emphasis on reducing carbon emissions using renewable fuels, a transition to greener and cleaner technologies is urgently needed. Through the adoption of “clean fuel” technologies, such as efficient boilers that can burn biomass fuels, the fuel utilisation paradigm for energy generation can change. The provision of “Waste to Energy” solutions should be the goal to support India’s sustainable growth.

India relies on coal for power. Renewable energy sources can reduce this. But for the move to be practical in the long term, energy storage systems must be amplified. This is where the move toward a gas-based economy is important. Excess green electricity may be turned into synthetic natural gas and hydrogen using power-to-gas technology before being injected into the current natural gas network. As a result, chemical energy in huge amounts may be made readily available for extended periods of time. The solution also lies in revamping the entire value chain with green technologies, from hydrogen to synthetic natural gas, ammonia, and methanol.

Saving the environment: Go beyond

Businesses have generally been urged to concentrate on environmental sustainability. Businesses that care about the environment have been trying to control waste while sourcing, allocating, and using resources like air, water, and raw materials in a sustainable manner. Although protecting the environment may not be a business’s top priority, ethical firms have been working to prevent its degradation. Businesses will need to concentrate on social and governance challenges in addition to environmental sustainability, which will continue to be a top priority area of action. Social indicators are increasingly becoming more significant due to evolving ESG regimes.

Leverage your data

It is crucial to gather, examine, and produce customisable databases of information on processes, supply chains, and clients. Such databases will be useful for responding to consumers, the general public, and a variety of authorities and investors.

In compliance with the Task Force on Climate-related Financial Disclosures (TCFD), companies worldwide have started making disclosures. Businesses now understand the risks and opportunities presented by climate change and the importance of being future-ready.

Cooperation is key

The SDGs provide businesses with a roadmap for collaborating with internal and external stakeholders to develop sustainable plans that have the potential to alter not just their operations’ business models, goods, and services, but also the communities in which they operate. A shift in perspective may be necessary to increase a business’ ESG efforts with a focus on the SDGs. The objectives are intricate and intertwined, and cooperation between industry, government, and civil society is of utmost importance for success.

(The author is the managing director and chief executive officer of thyssenkrupp Industries India)