New Delhi/Mumbai: Indian companies view climate change more as an opportunity than a risk because they see themselves earning revenue from the Clean Development Mechanism (CDM), according to a new study.
CDM, defined in the Kyoto Protocol as an agreement on reducing greenhouse gases arrived at under the aegis of the United Nations, allows companies in developing countries such as India to earn carbon credits from so-called clean projects that curb the emission of carbon dioxide. They earn revenue from the consequent sale of these credits.
The study is the first India report of the Carbon Disclosure Project (CDP), a non-profit and non-governmental organization that provides information to institutional investors on the action undertaken by companies to mitigate the adverse impact of climate change.
According to the study, of the 110 companies contacted, including 51 from high-impact industries such as chemicals and mining firms, 35% responded to a questionnaire which sought information on direct and indirect greenhouse gas emissions, emission reduction strategies, company-level climate change management and governance, and opportunities and risks the company perceived in climate change. The 35% response rate was the lowest in the 12 countries where CDP conducted the study. “For the first shot, I think it’s not bad,” said Jamshyd Godrej, chairman of CII Mission for Sustainable Growth & Climate Change and chairman and managing director of Godrej & Boyce Manufacturing Ltd. “I think the first thing is awareness, we have to raise the awareness level,” he added.
Although the response rate from high impact sectors was similar across the entire sample, there were wide variations in response across sectors ranging from 25% among diversified chemicals companies to 56% for electrical utilities.
Ravi Singh, secretary general and CEO of environmental group and CDP partner WWF-India, said he wanted to see more participation from the diversified chemicals, pharmaceutical and automotive sectors. Singh said he plans to speak to the Reserve Bank of India, the Bombay Stock Exchange and the Securities and Exchange Board of India about their potential involvement, but said he was not looking for any intervention at this point.
According to the report, 79% of Indian companies surveyed saw several commercial risks arising from climate change. These included following emission-reduction norms, dealing with shrinking resources such as water, and those related to changing consumer preferences for environmentally responsible companies and products.
The report said that 85% of the Indian companies saw an opportunity in the global move to combat global warming. India has hogged the major share in carbon projects under the Kyoto Protocol.
According to data from the United Nations Framework Convention on Climate Change, India accounts for more than one-third of the 844 registered carbon reduction projects and has twice as many projects as China.
Almost half the companies surveyed said they were looking at emission trading (carbon credit trading) opportunities and 21% already have CDM projects in the pipeline. Paul Simpson, chief operating officer of CDP, said that this trend of companies looking at climate change as an opportunity was fairly consistent throughout the world.
Automobile firm Mahindra & Mahindra Ltd did not participate in the survey. But CDP has convinced it to do so next year and the company has hired a team to be able to complete the survey next year, according to the firm’s technical adviser Kavi Arya.
Purumedh Gupta, deputy supply chain of Bharti Airtel Ltd, India’s largest cellphone provider, said the company participated in the study because “we strongly believe carbon emissions is a big issue.” He added that the report would encourage voluntary efforts in reducing carbon emissions, as companies see benefits such as carbon credits. He said that companies also saw the report as something that would boost government support for companies working to reduce emissions.
Next year, the CDP questionnaire will be sent to 200 companies in India, Simpson said. email@example.com