HomeSpotlightThe ‘E’ factor is gaining credence among the private sector

The ‘E’ factor is gaining credence among the private sector

The term ‘Environment’ has been the most neglected (and often the most hated) term among the business community. But the tides are changing – changing for the better. The industry seems to be realising the significance of environment and also benefits of respecting it. Though there have not been any drastic changes in our environment laws recently but with more emphasis given on monitoring and enforcement, efforts seem to be having their desired impact. Also, we are often being criticised for mimicking our Western counterparts – but this time the imitation is for noble reasons which is a welcome change in itself.

Recently, Mukesh Ambani, CMD Reliance Industries Ltd (RIL) told while addressing the shareholders at 44th AGM of the company “Our world has only one option: rapid transition to a new era of green, clean and renewable energy. The COVID pandemic has further put the climate issue in the crisis bucket.”

“Therefore, the global new energy agenda needs to move from dialogue to action, from commitment to urgent implementation on the ground. In reality, it is not enough to be carbon neutral; the world needs to achieve absolute reductions in emissions as soon as possible.” Reliance followed up these statements with announcement of massive investment in Green Energy Sector.

Many in private sector now talk Green

Its not just RIL, many others in the private sector have already committed to fight against climate change. ACC and Ambuja Cements have announced their plans to focus on carbon dioxide (CO2) reduction and decarbonisation, expand their green product portfolio and apply the principles of circular economy and environmental conservation more widely. Tata Steel has recently joined the ResponsibleSteel TM, the industry’s first global multi-stakeholder standard and certification initiative. The initiative helps its members achieve their sustainability goals by providing an independent certification standard and programme through a process that aims to align with the ISEAL Codes of Good Practice.  Infosys, one of the leading IT companies in India, is now carbon neutral in compliance with PAS 2060 standards. According to The Lawrence Berkeley National Laboratory, Infosys’ work campuses are some of the most energy-efficient in the world. In fact, over the past years, the company has reduced its per capita electricity consumption by over 55 percent with the ambition to transition to renewable energy.

Declaration on Climate Change

Last year, 24 key industry captains like TATA, Reliance, the Adani group, Mahindra, Sun Pharma and Dr. Reddy’s and Ministry of Environment, Forest and Climate Change had signed a Declaration on Climate Change listing out various clean processes and initiatives they have taken and their agenda towards further decarbonisation post 2020. Interestingly, then the corporate sector had espoused confidence and expressed their support towards a coordinated response by the Government and private sector on climate change which will help protect the country’s interests and ensure that India is on track towards meeting its climate change obligations under the Paris Agreement.

But involvement of MSME is negligible   

Roping in big corporates into decarbonisation net is a commendable job but the real challenge lies in doing the same thing with India’s MSME sector which still plays a predominant role in certain segments of the economy. Involvement of MSME sector in our fight against climate change is important as they have huge ramifications for national and local benefits and their sustainability is of critical importance. Also, this sector constitutes a segment where there is inactivity on its own in terms of pollution control and climate change and needs an external impetus. Broadly the technological change towards efficient process in most energy intensive MSMEs has been limited over a long period of time. So, bigger steps required to encourage the small units to adopt to newer environment-friendly technologies.

But, in general, it can be said that mindset about environment protection and pollution control is changing for the better which in itself a welcome development. But these changes have not come overnight and also many factors have contributed to the same.

Stricter regulatory enforcement   

There has been an upward trend in terms of regulatory enforcement, both at the central and state and local levels. The NGT not only actively supervises whether, and how, the CPCB and SPCBs enforce environmental laws, but quite importantly for companies which are new to India, the NGT also has the power to address environmental issues directly with the relevant polluting company, even merely on the basis of media reports of such activity. Importantly, the National Green Tribunal Act, 2010 contains penalty provisions which are considerably higher compared to previously adopted environmental laws.

Increased presence of institutional investors

Institutional investors now hold substantial stakes in some of the India’s blue-chip companies and this has helped them to influence some of the policy decisions of the companies in which they have substantial stake. Foreign Institutional Investors hold 22.3% stake in Nifty – 500 companies – a substantial ratio to influence certain policy decisions. So, most of the companies are forced to follow ‘Green Path’ to keep these investors in good humour. In case of real estate sector, there is huge FDI coming in commercial realty sector and unless the Indian real estate companies adopt green norms in their operations, attracting such funds would be difficult.

To please the global clients

Also, many Indian companies have their operations spread across the world. This has been the case, especially in IT sector and not following green steps in their operations in India may attract the ire of their clients abroad.

Further, the private sector is already taking lead in various developed nations by voluntarily opting for green initiatives and their Indian counterparts cannot lag them behind for long. Our habit of mimicking the foreign counterparts has proved to be a blessing in disguise in the present case.

Climate change is no more an environmental concern. It has emerged as the biggest developmental challenge for the planet. Its economic impacts, particularly on the poor, make it a major governance issue as well. Its, true that every human being contributes to the CO2  concentrations in the atmosphere and therefore, emission control cannot be possible without the cooperation and involvement of every section of the society – government and non-government, public and private sector and rich and the poor. Involvement of all sections of the society is essential in our fight against climate change.  So, the increased participation of private sector in our ‘green movement’ is a welcome change.

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