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Indian corporates have crucial role to play in decarbonisation

India is expected to have highest growth in energy consumption in coming decades

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The future points towards clean energy as the only route map to achieve net-zero carbon emission goals. It’s a future where Indian corporates will have a crucial role, whether they have realised it by now or not.

“With accelerated heating being a real prospect, the focus of corporations has to shift to adaptation,” said Anish De, global sector head (power and utilities) of the consultancy major KPMG. “In this new and changing norm on climate mitigation and adaptation for corporations, boards carry the principal responsibility for making that change happen.”

One month after COP26 in Glasgow, they were talking on the eve of the energy and natural resources event ENRich 2021 which starts on Tuesday, and the launch of a report by KPMG in India titled ‘Decarbonisation and the evolving role of corporate boards’. The report highlights how companies, especially Indian firms, need to up the game to meet the challenges of the carbon constrained world and meet their net-zero targets.

Yet, it’s a goal many companies are confused about. But with many governments dragging their feet, “It’s not a choice any more,” according to an analyst.

Added Manpreet Singh, partner - ESG, KPMG, in India, “(Companies) recognise that stakeholders—such as investors, regulators, and customers—expect organisations to deliver a positive impact. The purpose-led CEO follows through and delivers on commitments with a big focus on ESG programmes. CEOs are under pressure to build back better, taking action to mitigate climate change risks and reduce emissions.”

The steps India—both its government as well as its big companies—takes will be crucial. The nation is expected to have the highest growth in energy consumption in the coming decades. India’s increase of 3 per cent is higher than that of China’s which is at 0.4 per cent (Both the US and Europe will have decreasing energy consumption during the same period).

While India played hardball at the negotiations at Glasgow and has announced an extended deadline of 2070 to achieve net zero, for companies, the heat is only likely to intensify. Many funding agencies are now increasingly taking money out of carbon intensive businesses and are looking for ESG compliance before they invest. Adani group, for example, had great difficulty in finding financiers for their controversial coal mining project in Australia, with some international organisations refusing to funnel money into it.

While support from governments will be crucial to how Indian companies fasttrack their adoption of clean energy—‘transition finance’ is a term that is being talked about more and more—experts also feel there are other factors that will prompt most organisations to switch. This ranges from taking into account long-term carbon costs and aspects like Carbon Taxes and Carbon Border Adjustment Mechanism that markets like the EU have been talking about.

But, eventually, it will be the fact that more than a risk or a major disruptor, the changeover would be too great an opportunity to miss. “It is not just de-carbonisation, but energy efficiency,” points out De. “A lot of companies are going to low carbon because it’s cheaper—and it is going to get progressively cheaper.”

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