India Inc.’s Big Bet on Net Zero

In January 2020, the World Economic Forum sent out letters urging companies attending the Davos summit to commit to net-zero carbon emissions by 2050 or earlier. While most companies started thinking about this, an Indian company—Infosys—was well on its way to turning carbon neutral. In October 2020, it became carbon neutral across its value chain, 30 years ahead of the 2050 timeline set by the Paris Agreement.

How did Infosys do it? First, it built a strategy around energy efficiency, renewable energy (RE), and carbon offsets. Then, it evolved a pathway for Scope 1 (direct emissions from controlled sources), Scope 2 (indirect emissions from purchased electricity sources), and Scope 3 (other indirect emissions), to achieve carbon neutrality. “Over a decade of focussed effort has gone into becoming carbon neutral. We started the journey in 2008. In 2011, we made a voluntary commitment to become carbon neutral by 2020,” says Bose Varghese, Head of Green Initiatives at Infosys. Over this period, the company invested heavily in energy efficiency, RE and community-based carbon offset projects, he adds. In 2020, when Infosys turned carbon neutral, its RE component was 44 per cent, while emissions from the remaining 56 per cent of electricity had to be offset to achieve carbon neutrality. RE usage has grown to 53.8 per cent in FY22.

Over the past few years, there has been a growing consensus among businesses to lower their carbon footprint. Some of India Inc.’s biggest names such as Reliance Industries, the Adani Group, TCS, HDFC Bank, Wipro, Mahindra & Mahindra, JSW Energy, ITC and Dalmia Cement have declared net-zero targets. And, 64 companies have pledged to reduce greenhouse gas (GHG) emissions under the Science-Based Target Initiative (SBTi)—a global alliance enabling businesses to establish their own climate pledges.

But why has India Inc. taken to this endeavour with such gusto? One reason, says Rahul Prithiani, Senior Director of Energy, Commodities and Sustainability at CRISIL, could be that a class of investors is looking at a more ESG-friendly world. “If corporates want to access those pools of capital, they need to move the needle on ESG,” he says. And while it might happen quickly in services-linked sectors, it will take some time for the manufacturing sector to get there.

Every step counts

India is neither a top polluter, nor does it have a high per capita emission (at 1.77 tonnes in 2020, it was about 1/8th of the US and 1/4th of China, while Qatar and New Caledonia were the top contributors at 37.02 tonnes and 30.45 tonnes, respectively). Still, it is never too early to start. The top contributors to India’s total carbon emissions include power (above 40 per cent); steel and cement (25 per cent); transportation (15 per cent); and agriculture (14 per cent), say industry experts. Many industries have implemented RE projects like putting up solar-based power plants and replaced fossil fuels with biomass/agro-waste. Metal industries, too, are shifting to gas-based power plants.

For instance, Vedanta, with interests in power generation, oil & gas, and metals, plans to use 2.5 GW of round-the-clock RE for operations by 2030. “The focus on renewables will lead to a more mineral-intensive world since electric cars require six times more minerals than conventional cars,” explains Sunil Duggal, Group CEO and Chief Safety Officer at Vedanta. The company has partnered with academic institutions to research hydrogen fuel in steelmaking furnaces. “If successful, it will reduce our dependence on coke,” he says. Given the industries it operates in, its net-zero goal is set for 2050.

As a fast-growing economy, controlling India’s emissions is a challenging task, but companies have been at it for over a decade. Cement major UltraTech has been converting municipal solid waste (MSW) into fuel pallets to be used in cement kilns since 2007. With tie-ups with 80 municipal corporations in the country, UltraTech used 74.19 tonnes of MSW in FY21. “We are scaling up our investments and... increasing the share of RE and the use of alternative fuels and raw materials,” says a spokesperson. The company aims to be net zero by 2050.

The textiles sector, meanwhile, is a top contributor to water pollution, GHG emissions and landfills. Many textile companies have come up with ways to promote ESG. “Many brands have given their road map for the reduction of GHG emissions by 60 per cent by 2025, and Indian textile companies are doing their best to achieve the target,” says Arvind Mathur, CEO of Raymond UCO Denim. It runs a 100 per cent biological zero-liquid-discharge effluent treatment plant, and also manufactures denim using fibres made of post-consumer cotton waste and recycled PET bottles.

Then there’s Godrej & Boyce, the flagship company of the Godrej group, which operates in various verticals. It has started inventorying emissions for all categories, and aims to reduce absolute emissions by 63 per cent and carbon intensity—grams of CO2 emitted per unit of electricity produced—by 60 per cent by 2034. Its initiatives include process improvement, introduction of energy efficient utilities and plant machinery, and reduction in value chain emissions. “Across units, we have already achieved reduction in specific energy and water consumption by 48 per cent and 57 per cent, respectively; 13 per cent RE use, and 53 per cent carbon neutrality,” says Raghavendra A. Mirji, Senior VP and Business Head of the Electricals & Electronics Division at Godrej & Boyce.

The road ahead

How do companies plan for net zero? They have to first measure emissions from direct (its own activities), and indirect (from purchased electricity and along the value-chain) sources. Once estimated, the next stage is to develop a strategy to reduce and finally eliminate these emissions. For instance, a company may find it easier to replace its cars with electric vehicles, or sign a contract for solar electricity. While execution of decarbonising strategies will be key, corporates face many obstacles on its way. On the climate front, one of the main challenges in setting science-based net-zero targets is the unavailability of accurate data that takes into account all elements of an organisation’s emissions. Given that many of the Scope 3 emissions are not in direct control of the organisation, and not all of them measure and report them, accounting for all of it is challenging. Moreover, sourcing RE across all locations in different states can be difficult for industries, and to offset their carbon footprint, they might have to design their own projects. Also, modifying their existing setup to achieve carbon neutrality might turn out to be more complicated and capital intensive.

Industry has taken the first steps towards the use of hydrogen fuel, carbon capture, decarbonisation strategies, controlling air pollution, water recycling and the like, but in many cases, technology and costs may appear to be a barrier—especially for decarbonisation. “My experience... tells me that when one begins this journey, there are several reasons to turn back. Costs don’t align, technology is not always available, and regulations are evolving,” says Duggal of Vedanta.

But every cloud has a silver lining. According to Niranjan Banodkar, Chief Financial Officer and Head of Sustainable Finance at YES Bank, these challenges provide a significant opportunity for Indian companies. As they try to meet their net-zero targets, a lot of innovations and a low-cost transition to an emissions-compliant ecosystem can emerge from India, which can then be offered to the rest of the world. What is good for the environment could also be good for business. 

@nidhisingal