By Manish Prasad
The impact of recent global trade uncertainty is hitting Asia hard, with tariff disruptions clouding economic outlooks. Australia and Korea report slowed growth due to rising uncertainty, Japan’s GDP is projected to contract by over 1% despite new trade deals, but what’s the impact on India? While GDP growth remains resilient, downward revisions highlight not just financial stress, but emerging sustainability risks—prompting Indian businesses to rethink how trade dynamics influence both supply chains and long-term sustainability strategies.
For Indian companies trying to meet new sustainability norms, tariff-driven input costs are complicating ESG reporting. Most rely on a spend-based method that ties emissions to supply costs, but this approach falls short in capturing the distortions caused by fluctuating tariffs.
Tariff push up carbon numbers
In India, this challenge is evident across manufacturing, automotive, pharmaceuticals, and electronics – sectors. Tariffs on goods from the US, China, and the EU have raised input costs and inflated carbon estimates in ESG disclosures. This distorts emissions intensity, complicating efforts to align with global frameworks like the Science Based Targets initiative (SBTi) and the EU’s Carbon Border Adjustment Mechanism (CBAM). Using spend-based calculations, businesses estimate carbon impact by multiplying import costs with emission factors. But tariffs can artificially raise these costs—and therefore the emissions figures—especially since many emission factors are conservative by default.
This results in higher perceived emissions, inflated decarbonisation goals, and increased offset purchases, ultimately leading to an increase in unnecessary costs. Most spend-based datasets also fail to track tariff changes in real time, leaving businesses unclear on their actual carbon footprint. In India, as regulators and industries shift toward transparent ESG frameworks, reliance on spend-based carbon estimates is becoming a strategic blind spot. These estimates result in inaccurate carbon data, leading to misguided investments, poor sustainability decisions, and unclear net-zero targets.
Operational data gives clearer emission counts
Exporters and supply chain players in India can benefit from activity-based emissions reporting, which uses operational data, offering more accuracy than spend-based methods. Under the GHG Protocol, this method avoids tariff distortions, cuts costs, and speeds decarbonisation, since tariffs don’t affect physical data like distance or weight—making emissions more reliable.
Though not mandatory, many Indian MNCs follow global norms like the EU’s CSRD, which allows both methods. Early adoption of activity-based reporting offers greater clarity amid volatile supply chains. In today’s climate-conscious economy, data is a business advantage. For Indian firms eyeing global growth, using operational data can cut ESG costs, build investor trust, attract green capital, and ensure compliance. The opportunity is clear: make sustainability profitable, and profitability sustainable.
The writer is president and MD, SAP Indian Subcontinent
