From investing in improving operational sustainability through greater efficiencies and responsible sourcing of materials, to improving disclosure, India’s top companies are increasing their sustainability quotient, but much more effort is needed to reach the net-zero targets set for the country .
Several Indian corporations have set internal decarbonization targets to become carbon neutral by 2050 or sooner. These include Vedanta, Aditya Birla Group, JSW Group, Adani Transmission, Mahindra & Mahindra and Dalmia Cement, among others. Reliance Industries, India’s most valuable company by market cap, aims to reach net zero by 2035.
Companies have also set internal carbon prices, which are referenced in all business decisions. For example, Vedanta has set a carbon price of £1,125 per tonne of CO2 emissions while Mahindra & Mahindra have set it at $10 (Rs 824).
Indian companies have increased investment in areas such as renewable energy, waste heat recovery systems, more efficient machinery and renewable fuels to reduce their carbon footprint. For example, JSW Steel is building a 175 megawatt waste heat boiler this year. Meanwhile, Ultratech Cement added 121 megawatts of solar capacity and 42 megawatts of waste heat recovery system in FY22. Tata Steel is targeting one million tonnes per year steel recycling capacity by 2025 through less carbon intensive electric arc furnaces in India.
Companies have also increased supplier screening and oversight to ensure sustainable practices throughout their value chain, as shown by sustainability claims from top companies.
Up to 100 companies have voluntarily disclosed information for FY22 under the Corporate Responsibility and Sustainability Reporting Standards (BRSR) recommended by Indian market regulator Sebi. BRSR will become mandatory for the top 1,000 Indian companies from FY23.
“Companies have made significant efforts to improve sustainability disclosures, build the capacity of their teams, define and quantify indicators for environmental, social and governance aspects, conduct their businesses in an ESG-centric manner and Make commitments to net zero targets,” said Rahul Prithiani. Senior Director – Sustainability, Energy and Resources, CRISIL.
To date, about 100 Indian companies have committed to the Science-Based Target Setting Initiative (SBTi), he said. More than 30 Indian companies have also made commitments to SBTi to achieve net-zero emissions by 2050 or sooner.
SBTi is a collaborative initiative involving CDP, the United Nations Global Compact, the World Resources Institute and the Worldwide Fund for Nature, and provides companies with methodologies for setting environmental sustainability goals and guidance.
According to a CDP report, over Rs 5,400 crore was spent in 2021 by leading Indian companies linked to SBTi to reduce around 5.5 million tonnes of carbon emissions.
There is a particularly strong focus on cement, iron and steel, refineries, non-ferrous metals and chemical industries as these sectors account for nearly 70% of India’s total industrial emissions, according to a Crisil report.
For metals companies, the adoption of green hydrogen as an energy source is the polar star for their net-zero journey. While the technology to produce and consume green hydrogen on a large scale is still a few years away, companies such as Tata Steel, JSW, Vedanta and SAIL are already testing the feasibility of implementing new technologies by forging technical links with other industrial value players Chain.
According to experts, the sustainability efforts of Indian companies have been driven in part by the volume of global capital chasing green investments. For example, last year Tata Motors raised $1 billion from TPG Rise Climate, a dedicated climate investment fund.
Businesses are also keen to take out Sustainable Loans (SLL) to fund their expansion plans to take advantage of the slightly lower interest rates that this debt brings. Recently, JSW Cement, Birla Carbon and Glenmark Pharmaceuticals are some of the companies that have launched SLLs in India.
However, the pace of fundraising in this area needs to increase given the sheer volume of capital required to reach net-zero targets. According to a CEEW study, as part of the net-zero path, India would need a total investment of US$10.1 trillion (over 830 lakhcrore) by 2070. This equates to an annual investment of over US$200 billion for India.
“Therefore, both action and sustainable finance need to be significantly accelerated to reach the net-zero targets,” Prithiani said. According to an estimate by Crisil, India would need nearly 20 lakhcrore of green investment by 2030.
This article is part of a series on sustainability in collaboration with BCG. BCG played no role in the editorial decision-making.