India’s $5 trillion economy plan runs into Rs 7,14,000 crore climate change risk

climate change and the record-breaking heatwave
Planet Earth swelters as record-breaking heatwave engulfs the globe, signalling the dire consequences of climate change and urging immediate action.

By M Rajendran

Climate change risk to Indian economy: The economic crisis triggered by the Covid-19 pandemic has dented the Narendra Modi government’s ambitious plan to make India a $5 trillion economy by 2024-25. The plan is likely to receive another jolt if the country fails to put together a plan to mitigate the risk posed by climate change.

A soon-to-be released global study by Disclosure Insight Action (CDP) shows 42 Indian firms that responded to the CDP’s environmental disclosure system reported a staggering Rs 7,14,000 crore risk. According to the report, 60 of the top 200 Indian companies on the Bombay Stock Exchange (BSE) were among the 220 that disclosed through CDP in 2020. The study says a mammoth effort will be needed from the Indian government and top corporates to meet the already set environmental goals.

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The climate change challenge

India has already witnessed devastation by floods, cyclones and the COVID-19 pandemic, which has impacted the economy and industries. The imminent climate emergency is already manifesting itself through extreme weather events across the world. India is ranked fifth among world nations in the Global Climate Risk Index 2020.

The Indian corporates need to innovate and execute solutions with greater rigour and efficiency by integrating sustainability to the core business decision making, with or without changes in the regulatory landscape. Undoubtedly, they need government support through clear long-term policies on energy and climate to instil the confidence required to invest in technologies and innovation towards a zero-carbon future, indicates the CDP report.

Growing disclosure requirements should prompt an increasing number of Indian businesses to wake up to the threat of climate change and commit to urgent climate action. It is critical that regular compliance checks, increased stakeholder concern and sustainably evolving consumer demand, climate-related risk assessment procedures are adopted on priority, suggests the report. This will make companies better equipped to handle longer-term uncertainties and liabilities.

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Positives from war on climate change

Companies are getting serious about engaging in a comprehensive dialogue on climate change, as this will allow them to have inputs in shaping public policy, says the report. In an attempt to influence climate policies, India’s corporates and the public sector units (PSUs) have establish communication channels with stakeholders. They are reaching out to policymakers, trade associations, research funding organisations and employees.

A positive sign emerging from such effort is that most businesses agree to comply with environmental legislation unconditionally. An overwhelming majority of companies studied by CDP have incentivised their managements to undertake climate action, says the study. About three-fourths of these incentives are in the form of financial compensation. For example, energy PSU GAIL has a portal where staff members can give their suggestions on managing climate risks, and employees whose suggestions are accepted are given a financial reward of ₹1,00,000.

Several companies are offering non-monetary rewards. BPCL recognises employees for undertaking health, safety, security and environment (HSSE) initiatives through an annual performance award. Mahindra & Mahindra gives certificates to employees for energy efficiency projects that and for contributing to the annual sustainability reporting.

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Reliance Industries and JSW Energy have taken voluntary commitments to go net-zero by 2035 and carbon-neutral by 2050. “Consciousness, Commitment and collaboration are the emerging cornerstones of successful delivery of Climate outcomes in the Indian context. More than ever, the Indian companies are moving forward in proactive action which involves stakeholders including community, supply chain, customers and employees as the way forward,” said R Mukundan, CDP India Board member and managing director and CEO, Tata Chemicals.

The rise in climate consciousness among Indian companies is evident from the growing corporate commitment to the Science-Based Target Initiative (SBTi). By the end of last year, 52 companies have committed to it, about 37% more than the last year, reveals the report.

Science-Based Targets are the greenhouse gas emissions targets consistent with the decarbonisation level. Climate scientists have highlighted the importance of limiting the global temperature increase to 1.5- 2 degrees Celsius, compared with preindustrial temperature levels. Science-Based Target ensures that companies are taking short-term action to reduce emissions at a pace consistent with the target of keeping the rise in temperature below 1.5 degrees Celsius.

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Opportunity in climate crisis

The pandemic-induced global lockdown led to a sharp drop in emissions, and India is expected to record 6-10% lower greenhouse gas emissions in 2020 compared with the previous year. This is an opportune time to build on this momentum by strategising a green COVID-19 recovery strategy, suggests the report.

Among the top focus areas suggested by the report include planning revised strategies by the government and corporates for renewable energy, air, water, forest and agriculture. Data shows that Indian companies have upped their game on climate action. :This bodes well for future-proofing India’s ambitious growth plans, which are manufacturing centric,” says Damandeep Singh, director, CDP India.

There is a fast-growing global demand for pollution-free products. So, there is a considerable opportunity for companies to cover up the ground they lost out due to the pandemic.

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The government and corporates will need to be aligned with changing consumer demand. If they respond to these opportunities, then market differentiation, resilience and profitability are on the table. This can reduce the estimated Rs 7,14,000 crore economic impact of climate change.

CDP is a not-for-profit organisation that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. The report lists a few tasks that Indian corporates need to undertake on a priority basis.

(M Rajendran is a senior journalist with more than 25 years of experience with news agencies, newspapers and magazines. He writes on policy and corporate sectors. The data is sourced from CDP India Annual Report 2020.)