Indian companies stand to lose ₹7.14 lakh crore to climate change — but they could end up making ₹2.9 lakh crore too
- Indian companies stand to lose ₹7.14 lakh crore to the impact of climate change if they do not take mitigation measures over the next five years, according to the Carbon Disclosure Project’s (CDP) 2020 annual report.
- If they do it right, the firms also stand to gain ₹2.9 lakh crore from the opportunities that will emerge.
- This means having more efficient production and distribution processes, using lower-emission sources of energy — like solar — and manufacturing low-emissions goods and services.
AdvertisementClimate change is not just making skies more grey, killing off biodiversity or risking coastline flooding — it may also cost Indian companies a whopping ₹7.14 lakh crore ($100 billion) over the next five years.
A new report by the Climate Disclosure Project (CDP) highlights, “India is walking down a parallel and inconsistent pathway.” On the one hand, it is pushing for electric vehicles, solar power and other forms of renewable energy. And, on the other hand, it is also promoting coal mining and allowing private investors into the market to dig up more fossil fuels.
Which, is why it is unsurprising that companies within India see regulation and the uncertainty around it as one of the biggest risks in pursuing climate mitigation initiatives.
If done right, it also puts up an opportunity worth ₹2.9 lakh crore on which these same companies can capitalise.
The main drivers behind these opportunities were use of more efficient production and distribution processes, use of lower-emission sources of energy and the development or expansion of low-emission goods and services.
Countries like India will bear the brunt of climate change
The worrying aspect is that countries like India are more at risk from the negative effects of climate change than others. According to a working paper by researchers at the Princeton University, the welfare loss for hotter countries — like India, and those in South America and Africa — is much higher than its counterparts.
Welfare loss accounts for migration costs, trade costs, and the cost of innovation. The sooner companies get ahead of the curve, the easier it will be to stay on top of the climate crisis before it reaches a point of no return.
The impact of climate change is different not only between countries but there are large deviations within a country. The Reserve Bank of India (RBI), in a report released in April 2020, said that agricultural states, like Punjab and Bihar, will be more affected by global warming than others.
More Indian companies are taking the fight against climate change seriously
Around 220 businesses in India disclosed their climate action plans to the CDP this year. Among them, four Indian companies have received the prestigious CDP A-grade for the first time.
A score of ‘A’ means that a company is at leadership level. The companies are scored based on the comprehensiveness of disclosure, awareness and management of environmental risks and demonstration of best practices associated with environmental leadership — like setting ambitious and meaningful targets. That means not only do they have to look good from a branding perspective, but also be backed by actual action.
Top ten Indian companies on the CDP’s list:
Source: CDP *Based on the information that companies provide they get a score from A to D. A=Leadership level, B=Management level, C=Awareness level, and D=Disclosure level.
|Company||Grade given by the CDP*|
|Mahindra and Mahindra||A|
|Godrej Consumer Products Limited||A-|
Around 51 Indian corporates announced science-based targets to aid India’s transition to becoming a next-zero carbon economy — putting India ahead of Switzerland and the Netherlands.
Top 10 countries with science based targets (SBTs) to mitigate climate change:
|Country||Number of companies with SBTs|
The CDP believes that the business community is uniquely positioned to innovate and execute solutions with greater rigour and efficiency by integrating sustainability in the core business decision making.
This is in line with what the billionaire founder of Microsoft, Bill Gates, disclosed at World Economic Forum (WEF) Davos 2021, “I think the way forward here is to connect these private sector payments to innovation. If you just have some wealthy companies that are not in the industrial sectors, where the extra-green cost would make their products non-competitive. If they are just dealing with their portion, it is a very small percentage.”
The impact of climate change is not the same everywhere — some parts have something to gain but that’s not a good thing overall
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