India Inc.’s Sustainability Record

LAST SEPTEMBER, Prof Amory Lovins, American writer, energy advisor, physicist and chairman emeritus of Rocky Mountain Institute, released a book published by IT services major Infosys. The book chronicles the company’s efforts to build energy efficient buildings and minimise environmental impact. The systems, disruptive technologies and new benchmarks in building design captured in the book have helped Infosys create 29.6 million sq. ft. green building space. For instance, Infosys started installing solar photovoltaic (PV) plants on its campuses 15 years ago. Today, it has 60.2 MWp solar PV capacity and a solar park in Sira, about 140 kms from Bengaluru. Over 67% power consumed by its India operations comes from renewable sources.

When Infosys started its sustainability projects, it was not mandatory for companies to disclose climate-friendly initiatives. Not anymore. The Securities and Exchange Board of India (Sebi) made Business Responsibility and Sustainability Reporting (BRSR) mandatory for top 1,000 companies by market capitalisation from FY23. Since then, dozens of early adopters of climate-friendly initiatives, including biggies such as Reliance Industries (RIL) and Tata Group, have reported hundreds of initiatives to tackle climate change and ensure sustainable development.

BRSR requires companies to disclose performance on environmental, social and governance (ESG) parameters. Since greenhouse gas (GHG) emissions are central to environmental and sustainability challenges, quantum of emissions and plans to reduce them are integral to BRSR reports. So are energy/water savings, adoption of energy-efficient technologies, afforestation efforts and attempts to make buildings green. The emissions are classified into Scope 1, 2 & 3. Scope 1 covers those from sources controlled/owned by the company. Scope 2 emissions are indirect, for instance, by those supplying power to the company. Scope 3 covers the entire value chain. The first two are easy to measure and, hence, the main focus of most companies. Here’s a look at how leading firms are fighting climate change, the challenges they are facing and whether their initiatives are good enough to be counted in global efforts towards no extra carbon footprint (net zero).

Net Zero Aspirants

‘Net Carbon Zero’ by 2035, going beyond compliance and business imperative. That’s the target set by RIL. IT major Tata Consultancy Services (TCS) has pledged to become net zero by 2030. Personal care products major Hindustan Unilever (HUL) is working towards net zero emissions for all products from sourcing to point of sale by 2039. All three are looking at emission reduction holistically.

The key elements of RIL’s strategy are shift from transportation fuels to chemical building blocks and fossil to renewable fuels for captive demand. It is also maximising adoption of biofuels and using bio-pathways to fix CO2 emissions and facilitate their conversion to renewable fuels and materials. It is also scaling up recycling and circularity across value chains. In FY23, the company reported 115% increase in renewable energy consumption and 19.8% reduction in energy intensity per rupee of turnover. It reclaimed 51.83% plastic pallets sold with partially oriented yarn and spent ₹3,001 crore on R&D and capex to improve the environmental and social impact of products and processes. The company, which has replaced almost 5.3% energy consumed at Dahej and Hazira plants with green power/steam, wants to set up 20 GW solar plants by 2025 to meet captive demand.

For Tata Group’s IT services arm TCS, FY24 was special — it became carbon neutral in North America, U.K., Ireland, Europe, Asia Pacific, Latin America, Middle East and Africa. Last year, Indian Green Building Council certified its 39 offices and campuses, over 25.74 million sq. ft., as green. In FY24, 74% energy consumed was renewable, up from 55.2% in FY23. TCS wants to be net zero by 2030. It spent ₹5,401 crore to develop climate-friendly technologies and processes in FY24.

HUL is another company with big plans to fight emissions. It is targeting net zero emissions for all products from sourcing to point of sale by 2039. “We recently announced collaboration with chemical companies for pilot production of near-zero emission synthetic soda ash, a key ingredient in laundry powder. We asked some suppliers to join our global supplier climate programme under which we will provide tailored support, upskill them, develop their emission reduction plans and measure (carbon) footprint for raw materials we buy,” says Rohit Jawa, CEO & MD, HUL. The company says it reduced CO2 emissions by 98%, water use by 47% and factory waste by 58% in FY24 compared to 2008. It sourced 48.1% key crops, including 81% tomatoes and 79% tea, in a sustainable manner. These efforts are reducing emissions by stakeholders and, hence, fall in Scope 3 category. Also, 94% paper and board in packaging was eco-friendly. The company used post consumer recycled plastic in packaging of brands such as Surf Excel, Comfort and Vim Dishwash Liquid. In FY24, 9.5% R&D expenditure and 25% capex went to green projects.

Priorities Matter

Not all companies are aiming for net zero emissions in one go. Some are following a staggered plan for different units. Others have specific targets for different levels of compliance. For instance, Adani Enterprises (AEL) wants airport and data centre businesses to achieve emission targets first, while Tata Motors wants passenger vehicle (PV) business to lead, followed by commercial vehicle (CV) business. IT major Wipro is planning net zero Scope 1 & 2 GHG emissions by 2030 and Scope 3 by 2040. Dr. Reddy’s is aiming for partial reduction in Scope 3 emissions by 2030.

AEL’s Mumbai International Airport recently achieved Airport Carbon Accreditation Level 4+ certification, showing transition to ‘net zero’ and compensation for residual emissions with offsets. A carbon offset means reduction in GHG emissions or increase in carbon storage (e.g., through planting trees) that is used to compensate for emissions elsewhere. It wants other airports — Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati and Thiruvananthapuram — to get this certification by next year. The airports will use only green electricity and electric vehicles. The aim is to make the business operationally ‘net zero’ by 2029. The company has announced a $100 billion energy transition plan across the value chain. According to AEL’s FY24 BRSR report, more than 40% vehicles in six airports (other than Mumbai, which is 100%) are electric, while 11.45% energy consumed by data centres comes from renewable sources. The data centre business is also working towards ‘net zero’ status by 2030. The New Energy Ecosystem, which leads manufacturing of green hydrogen, solar cells, modules and wind manufacturing, accounts for 9% turnover.

And the efforts are being led from the top. In a note to shareholders of Tata Motors, N. Chandrasekaran, chairperson, Tata Group, has outlined the group’s sustainability vision. “The initiative, Aalingana, outlines Tata Group’s approach to planet resilience, aspiration of net zero emissions by 2045 and vision of securing the future by innovating today. It commits to embedding sustainability into business strategy by focusing on three interconnected pillars: driving decarbonisation of businesses and value chain; applying a systemic, circular economy approach to reduce resource use and waste; and preserving and restoring the natural environment,” he said in FY24 Integrated Annual Report of Tata Motors. Tata Motors’ transition plan goes beyond green fuel options to developing charging infrastructure, fuel cell technologies and material substitution. “Our goal is net zero emissions for PV business by 2040 and CV business by 2045. We are committed to using 100% renewable electricity by 2030 and exploring powertrain technologies such as battery electric, hydrogen fuel cells and hydrogen-powered internal combustion engine,” says S.J.R. Kutty, chief sustainability officer, Tata Motors. In FY24, Tata Motors partnered with U.N.-backed initiative Leadership for Industry Transformation to learn global best practices, take part in policy making and collaborate with other members for smooth transition towards net zero emissions. “We have developed facilities to dismantle end-of-life PVs and CVs of all brands. In FY24, we operationalised five such facilities in Delhi-NCR, Jaipur, Chandigarh, Surat and Bhubaneswar with combined capacity of 72,000 vehicles,” says Kutty. In FY24, 80% R&D expenditure and 71% capex went into technologies for improving the environmental and social impact of operations.

A 2040 target of net zero GHG emissions has put another IT services company, Wipro, in the list of prominent firms serious about fighting climate change. It also has a more immediate target — net zero Scope 1 & 2 GHG emissions by 2030. It wants renewable energy to power all facilities and 50% suppliers by value to be assessed for environmental impact. Share of renewables in energy consumed was 60% in FY23.

Meanwhile, pharmaceutical major Dr. Reddy’s Laboratories is investing in solar, wind and hydel projects, acquiring solar plants through JVs, moving from coal to cogeneration systems and using more energy efficient briquette-based boilers to reduce GHG emissions. It is aiming for a complete shift to renewable power, carbon neutrality in direct operations (Scope 1 & 2) and 12.5% reduction in indirect emissions (Scope 3) by 2030. The company has built an ESG framework for indirect emission targets. It plans to cover the entire gamut from afforestation and sustainable agriculture to improvement in energy productivity and water management. By FY23, it had automated all its sewage treatment plants and effluent treatment plants and ensured that 100% inputs are sourced from companies which abide by Supplier Code of Conduct, which includes sustainability requirements. Also, it sends 99% hazardous waste to cement industries and recyclers. It says 100% R&D expenditure and 3.3% capex went into developing green technologies and processes in FY23.

Carbon Neutral

Not all companies are aiming for zero emissions. Some are trying to be carbon neutral or balance their emissions with offsets. HDFC Bank is aiming for carbon neutrality in Scope 1 & 2 categories by FY32. Infrastructure major L&T is targeting water neutrality by 2035 and carbon neutrality by 2040.

HDFC Bank’s strategy involves aligning operations with stringent internal targets for increasing use of renewable energy and becoming more energy efficient. It plans to help clients transition to a sustainable low carbon economy and prioritise lending for climate change solutions. HDFC says it has planted over 30 lakh trees so far and saved about 33.1 lakh sq. ft. paper through digital and green marketing initiatives. With 947 branches certified under the Green Interiors Rating System as on March 31, 2023, it has pledged carbon neutrality in direct operations and immediately sourced services and products by FY32.

For infrastructure major L&T, being nimble is the only option as unlike firms that have brick & mortar plants, its project sites are not permanent. The targets of water neutrality by 2035 and carbon neutrality by 2040 mean delivering results on the move. For instance, it will have to commit to using more renewable energy without being certain about its availability on all project sites. Still, L&T has pledged to increase use of renewable energy in 700-plus EPC projects. It plans to plant 1.5-2 million saplings per year to act as carbon sinks and neutralise emissions. L&T Construction Research and Testing Centre is experimenting with sustainable construction materials. L&T says it reduced GHG emission intensity by 12.2% in FY24. It planted a record four million saplings and spent ₹86.1 crore on R&D and capex to implement environment and social impact friendly services and processes.

Challenges & Results

The National Stock Exchange (NSE) has received over 1,000 BRSR filings so far. A PwC India analysis of reports by top 100 companies found that 34 reported reduction in emissions caused directly by them (Scope 1) in FY23. While 29 reduced Scope 2 emissions, only 12 reported reduction in both Scope 1 & 2 categories. PwC says initiatives included transition to energy-efficient technologies such as LEDs, efficient temperature control, use of renewable energy, apart from purchase of carbon offsets and off-site power purchase agreements. Of these 100 companies, 31 disclosed net zero targets.

New Delhi-based Centre for Science and Environment (CSE) has also looked at BRSR reports closely. Its report, ‘Strengthening Environmental Reporting under BRSR: A CSE Guidance Brief’, reviewed 28 reports by 14 companies for FY21, FY22 and FY23. The analysis shows reduction in GHG emissions (Scope 1 & 2) by six companies — Dr. Reddy’s, Lupin, Sun Pharmaceutical Industries, IOCL, GSK and Tata Power, and increase in case of seven others— Bharat Forge, Cipla, ITC, JSW Energy, L&T, Orient Cement and Tata Chemicals. The report says most companies that reported lower emissions did not explain what contributed to the reduction. Of the 14 companies, only six provided information on long-term strategies and goals. The rest just mentioned their initiatives. The study says the BRSR format is at a nascent stage and there is potential for improvement in structure and coverage of questions. It has suggested a provision for seeking clarifications from companies on trends and deviations in data. Also, since existing format is generic, a sector-specific approach, similar to international frameworks, might be more useful for analysis and comparison, it says. “Under energy consumption, the format asks about quantity of fuel used, but it is also important to collect information about types of fuels used as well as energy sources,” says the report. It wants Sebi to explore the possibility of asking for quantitative details, specifically of projects for reducing GHG emissions.

Now & Next

UK’s Science Based Targets initiative (SBTi) is the world’s leading corporate climate action organisation that develops standards and tools to help companies meet GHG emission targets. SBTi’s dashboard has 8,778 companies, with 5,511 having approved emission targets. It has 342 India-based companies; nine have near-term net zero targets and 174 have committed to reducing emissions.

Another indicator of where Indian companies stand comes from U.S.-based Verra, the non-profit corporation that manages the world’s leading voluntary carbon markets programme, Verified Carbon Standard (VCS). Its registry of VCS-certified projects that can turn GHG reductions into tradable carbon credits shows that out of 2,230 projects registered on its website, 650 are from India, of which 345 are in the pipeline. One such project is being developed by Reliance BP Mobility, the joint venture of RIL and British Petroleum Plc. The electric mobility business, which operates under Jio-BP Pulse, works on installation, operation and maintenance of EV charging stations through partnerships to scale up the EV market and act as an enabler of government’s National Electric Mobility Plan. Another project in the validation phase is Maruti Suzuki India’s plan to use railways to transport vehicles from its sales and distribution facility at Hansalpur village in Gujarat. The project is expected to achieve emission reduction of 25,639 tCO2e per year till 10 years ending March 31, 2033.

SBTi commitments by Indian firms and participation in VCS programme indicate that quite a few of them are getting aligned with global climate change action. “Indian companies in export-oriented sectors like gems and jewellery, diamond, steel, textile, cement, even agri and fertiliser, are looking to reduce emissions in a measurable manner. International customers are driving the shift,” says Gautam Shiknis, founder, NettZero Environmental Advisory Technologies Pvt. Ltd. NettZero works with companies to quantify reduction in emissions for getting carbon credits. “By following a climate positive policy and reducing carbon footprint, your bottom line will go up, because you are reducing expenses,” he adds.

Experts raise another issue. While Sebi mandates certain listed companies to file BRSR disclosures, there is no compulsion to reduce emissions. But it is only a matter of time before government legislation tightens further as in E.U. and U.S. On July 12, 2023, Sebi notified BRSR Core, a subset of BRSR, consisting of a set of key performance indicators/metrics under nine ESG attributes. This has been made mandatory for top 150 listed entities by market capitalisation from FY24. It will be applicable for top 250 companies from FY25, top 500 from FY26 and top 1,000 by FY27. The companies will also have to make disclosures for the entire value chain. This will be apply to top 250 listed entities from FY25.

NettZero’s Shiknis strikes a note of caution and says India is yet to have sufficient infrastructure to measure emissions if government mandates such disclosures for all companies. He also says different ESG rating agencies have their own protocols. However, considering that climate action is an emerging area globally, India has already made a mark. And as regulations become more stringent, awareness will spread, business opportunities emerge and a lot of new-age companies focusing on removing carbon from industrial processes will come up. These, along with established players, will ensure better results for India’s sustainability efforts.