Does India have a policy and regulatory framework enabling stainability? If yes, how the Industry is responding to it with sustainable practices?
With thanks to my co-speakers and all audience, I am capturing how I recently responded to this question in a panel discussion on this subject in Mumbai.
I think a kind of cosmic event is happening right now on the planet. In this event, six heavy forces of the world are coming in one line for one agenda. And this agenda is “Sustainability and Climate Change Mitigation”.
And what are these six heavy forces? These are:
- Political ‘will’ of influential countries of the world.
- Policy and regulatory framework in the major countries.
- Investors committed to ESG linked funding frameworks.
- Customers committed to net-zero GHG targets and Sustainable Development Goals.
- Community norms and peer pressure dictating companies do business as corporate citizens and only after earning a social licence to operate.
- It is a continuously evolving technology working like a double-edged sword enabling corporates to do sustainable businesses and forcing them to keep updated or go out of business.
India has always sent positive vibes to the world. A few years back, India expressed its political will by communicating to the world that we are in to fight climate change. How? By being part of the Paris Agreement and setting National Action Plan for Climate Change with eight different missions in the country. Moreover, by submitting India’s Nationally Determined Contribution (INDC) for a reduction in GHG emission intensity of Gross Domestic Product (GDP) up to 35% over the baseline.
How does this political will of India trickle down into enabling policy and regulatory framework in the country? Let us take one example in the energy sector. And before I take this example of India’s energy sector policy framework, let me establish why I am taking the measure of the energy sector itself. The world emits ~45 billion tonnes of CO2 per year, including land use and land-use change. A significant portion of this comes from fossil fuel uses for primary energy requirements, ~35 billion tonnes of CO2 per year. From another angle, the world’s primary energy consumption is ~555 Quadrillion BTU (555×10^15), which is dominated by fossil fuels, Oil, Gas, and Coal at ~30%, 25%, 25%, respectively. The remaining ~20% is more or less equally distributed into Renewables, Hydro, Nuclear and other sources. And the majority of these fossil fuels for primary energy requirement is going into electricity generation. Hence, policies and regulatory framework in any country for the sustainability of the electric utility sector is the backbone of all governance for sustainability.
Now, come on to the example of enabling policy and regulatory framework for the electric utility sector in India.
- Various Solar Parks are identified in the country that acts as a land bank for renewable electricity companies.
- We have seen upscaling in Renewable Purchase Obligations for electricity distribution companies.
- There are net-metering initiatives in some states.
- The government of India also started consultation on Green Tariff Policy that will empower the customers who do not have their own roof-top solar to benefit from net-metering. The green tariff will enable such customers to buy pure green electrons from the DISCOMs at the committed rate under open access provisions under the Electricity Act.
Moreover, the political will of India communicated a few years back is renewed with rigour again in COP26 by a commitment to Five-Elixir Elements (Panchamart), which are known to everyone and need not be repeated here. India has joined the club of net-zero targets countries where Finland has the target to be net-zero by 2035, Australia by 2040, Sweden by 2045, France, Canada, United States, United Kingdome and the majority of the countries by 2050, Russia, China and Saudi Arabia by 2060. India has targeted net-zero by 2070, but the remarkable point is that India has committed to this outer boundary with time-bound intermediatory targets that are (a) achieving 50% of its energy requirement by 2030 from non-fossil fuel sources and (b) achieving 450 GW of renewable electricity installed capacity in the country. One more point is remarkable. India has also pegged up its earlier INDC of GHG emission intensity reduction by 35% of GDP to the 45%.
And the result of the enabling policies and regulatory framework for renewables is in front of us. We see quite a few companies have emerged in India as pure-play renewable energy companies with the mission to contribute to the nation’s achieving its target of 450 GW of renewables. These companies need not integrate sustainability into their strategy. Instead, ‘sustainability’ itself is their strategy. Such companies are part of the solution in the world. These companies are doing business with sustainability and helping the world fight climate change.
Some of these companies are not satisfied only by putting the renewable energy capacities. But, they are going beyond. I see they are systematically addressing their material issues. For example, they are implementing management systems as per different ISO standards, including:
- ISO:45000 for Health and Safety management,
- ISO:22301 for Business Continuity management to keep them self floating in the crisis like a pandemic,
- ISO:27001 for Information and Data Security to manage the risk related to data and be compliant with upcoming regulations on this subject,
- ISO 22095 for sustainable supply chain management,
- ISO:26000 and SA8000 for Social Accountability, covering Human Rights risk assessment and management in the business.
- Like a charry-on-the-top, these companies are going for Enterprise Risk Management (ERM) as per the COSO framework.
Moreover, what you will comment on if you find that these companies are also turning their renewable assets into Water Neutral Renewal Energy Plant, Single-Use-Plastic-Free Plant, Zero-Wate-To-Landfill Renewable Energy Plant, E-Waste-Free Life Cycle Renewable Energy Plant, Net-Positive-Biodiversity Impact Renewable Energy Plant.
One such company is Adani Green Energy Limited (AGEL). Its vision is 45 GW of renewable energy capacity by 2030 which means supporting 10% of the vision of the Government of India. I understand this company is going from ‘renewable’ energy to a ‘responsible’ energy company where lot of credit goes to the top-down approach from the leadership and the people who hold the torch for ESG, Finance, Investor Relations and other key functions.
Above are my personal views about the Indian companies. And what gives me more confidence to express these views is that these Indian companies are being rated very high by International ESG rating agencies like S&P Global, MSCI, Sustainalytics, Refinitive, ISS and Vigeo Eiris.
So, this is what is happening in India in the electric utility sector. Is not it sustainable? Is not it world-class? Is not this a benchmark for other companies to copy the best practices? That is why I think the world is moving towards sustainability with lots of positive changes every week in one or other country. India is one such country.
