By Anirban Ghosh
The climate emergency is getting worse. India has just experienced a heatwave that was more widespread and more intense than ever before. Temperature rise, melting of polar ice, receding glaciers and extinction of species continue unabated and the IPCC report, the most authoritative body on global warming, tells us that the pace is faster than what we had expected it to be. Given the commitments that exist today, and the emission trajectories we are currently on, the globe will be warmer by 1.5°F by 2040.
The transition to a low carbon world is posing a significant change of course and given the resources at our disposal and the level of impact we are capable of, businesses ought to lead the way to create tangible impact on climate action.
We have seen it in the case of the pandemic. The full extent of the impact of COVID-19 is yet to be ascertained, with its consequences still unfolding every day—it has affected not just physical health of people, it has jeopardized the economic health of countries, and had its own attendant environmental problems. During this upheaval, businesses over the world rose to the occasion and offered support to their employees, communities, and governments to tide through the health emergency. Today, in the third year since the pandemic hit us, companies that stepped up and those that didn’t continue to be judged for the integrity with which they conducted business and the leadership they showed in overcoming a global turmoil.
It is undeniable that climate-change induced events will produce consequences for us that will exceed our capacity to manage. Steps taken in the direction of climate action and adaptation will create resilient communities, improve quality of life, reduce socio-economic inequalities, boost the economy, generate employment opportunities, and foster a culture of inclusive growth—all traits of an ‘ideal society’ in the present day—businesses that help turn this into reality will have an upper hand among their stakeholders.
Another perspective with which to view the linkage between business and climate change is through risk. This year we are in a situation where Mahindra’s XUV 7OO has a one to two-year waiting list. While we are delighted by the excitement caused by the product, we are equally perturbed by the supply chain disruption that has exacerbated the waiting list situation. Suddenly, the possible scale of impact of crippling supply chain disruptions caused by insufficient or ineffective climate action has become all too evident.
The present sustainability conversation has helped focus on improving the environment—clean air, clean water, water availability, lesser pollution, better soil, and better biodiversity. It, however, completely misses the perspective that, for a corporation, sustainability action is as much about the environment as it is about business resilience.
Beyond improving overall well-being, climate action will throw up opportunities for business
As decarbonisation has come to the top of the global agenda, it has triggered technology transformation that is going to overhaul various sectors such as transportation, energy, construction, and the industries associated with them. Those who fail to adapt will be pushed to the brink, and those who do will reap the reward. Businesses must shift their portfolio to low carbon solutions to make the most of climate action.
A transition to low carbon solutions in business portfolios across industries will radically reduce the global emission profile, help businesses tackle indirect emissions (Scope 3), reduce climate-induced disruption, and therefore make business more stable and resilient. The transition will be turbulent – there will be ‘hares and tortoises’, or, put another way, leaders and laggards. Businesses that lead in this transition will attract greater investment and get better valuation. The idea of a new type of ROCE, i.e., ‘Return on Climate and the Environment’ will become increasingly relevant.
The pace of money moving towards climate action is accelerating. More than one-third of IFC’s new investments are in the climate space. Sustainable Finance Platform has come up in Gift City, a ‘Carbon Market’ is being established in the state of Gujarat, investments by automobile companies & PE firms are growing in the climate space. These developments indicate that by the next World Environmental Day, ROCE in its new avatar of ‘Return on Climate and the Environment’ will achieve greater prominence among businesses around the world.
(The author is Chief Sustainability Officer, Mahindra Group. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).