Net zero: Study shows Indian firms high on ambitions, weak at implementation

Bengaluru: How serious are Indian companies when it comes to reducing carbon emissions? A study of 33 companies across six high-emitting sectors by the Institute for Energy Economics and Financial Analysis (IEEFA) says that the ambitions are rarely translated into accountable targets and actions.

The IEEFA report picked the companies from power, steel, cement, chemicals, commodities, and oil and gas to assess how clearly companies define their strategic ambition for a low-carbon transition, including plans to reduce greenhouse gas (GHG) emissions and manage related risks and opportunities.

Of the 33 companies, 13 companies aligned with their net-zero timelines with Paris-aligned horizons. Within 13, eight do not specify scopes, undermining credibility. "Overall, companies tend to present strategic ambition, decarbonisation levers and scenario analysis in isolation which creates a fragmented, often contradictory picture of how they plan to achieve their wider GHG goals and how resilient their plans are," the study said, but added that some sectors perform better on transition levers than on strategic ambition.

The report showed three major gaps. First, transition ambitions are rarely translated into quantified, time-bound and financially integrated pathways. Secondly, governance structures are present in form but weak in substance with limited accountability, capacity building and incentive alignment to drive execution. Thirdly, disclosures remain fragmented and backward looking with inadequate Scope 3 (indirect emissions) coverage, weak scenario analysis and limited assurance.

“Only a limited number link their goals to capital expenditure plans, revenue assumptions or changes in business strategy, making it difficult for investors and lenders to assess the feasibility of transition pathways,” said Shantanu Srivastava, research lead, sustainable finance and climate risk, South Asia.

Gaps in implementation

While most of the companies had established environmental, social and governance (ESG) oversight structures, the arrangements remained largely procedural and have yet to translate into clear accountability, incentive alignment or execution capacity for delivering climate transition objectives. Only 10 companies, primarily large-cap firms, appointed dedicated key management personnel and only nine established a sustainability committee. Small and mid-cap firms typically lack internal ESG functions, resulting in weak oversight.

Further, an analysis of specific metrics and targets related to implementation strategy revealed the "weakest link" in corporate transition planning as metrics and targets remain the most neglected component across all sectors amid weak financial integration and the company policies lack specific guidance on climate risk, opportunities, or emissions reduction.

Lastly, third party verification of greenhouse gas inventory practices were still evolving. As a result, the verification process was limited.

The study recommended updating Business Responsibility and Sustainability Reporting (BRSR) guidance to embed transition planning elements, incorporate sector-specific guidance and templates, introduce an integrated transition plan specific metrics and ensure coherence with other regulatory policy instruments among others.