CDP India Report 2011 indicates increase in voluntary carbon disclosures by Indian corporates

In the following article, the author provides an insight into the key findings of the recently released Carbon Disclosure Project India 2011 Report.

The Confederation of Indian Industry (CII) and WWF-Indiareleased the Carbon Disclosure Project (CDP) Report 2011 for India on November 15. The CDP isan independent not-for-profit organization holding the largest database of primary corporate climate change information in the world. Globally, CDP is an investor-driven initiative which intends to collect critical climate change data from the world’s leading companies with the objective to inform the global market about investment risk and commercial opportunity. Mr. Gregory Barker – Minister of State for Climate Change, UK Department of Energy& Climate Change, Mr. Paul Dickinson – Executive Chairman, CDP and Mr. Ravi Singh – CEO, WWF-India were among the honorable guests to officially release India’s fifth CDP report.

In his opening remarks, Paul Dickinson of CDP emphasized on the fact that 21st century belongs to the value of the mind, and highlighted the need for the companies to shift their focus from just engaging in profit oriented activities to making sustainability initiatives a crucial part of their strategic planning. He further reiterated that increasingly it has become inevitable for businesses to ignore consumer demand for more energy efficient products. Minister Barker stressed on the broader role the CDP framework plays in not just the carbon agenda, but as a part of the transparency idea globally.
In its fifth consecutive year, the CDP India report captures the GHG emissions disclosure made by 57 Indian companies as compared to 37 who did in 2010. The total disclosed emissions (Scope 1, 2 & 3) stands at 93.17 MT of CO₂e, which is substantially lower than 114 MT CO₂e reported in 2010. . For the analysis, the report considers only the responses from 46 of the 57 reporting companies as the emission of 11 of the companies’ have also been accounted for in the disclosures made by their global parent in the CDP’s Global 500 survey.

The project partners in India - CII, WWF and CDP – engagewith the top 200 Indian companies (by market capitalization on the National Stock Exchange) annually for these disclosures.At the global level this year, CDP information request was sent to over 3,000 companies in 60 countries on behalf of 551 institutional investors holding $71 trillion in assets under management.
Eight Indian financial institutions – namely SBI, HDFC, IDBI, IDFC, IndusInd Bank, Yes Bank, Tata Capital and Reliance Capital are part of the global investors seeking the information voluntarily from industry.

A review of the 2011 disclosure reports indicates that both the quality and the quantity of responses have experienced a hike of 12%, with the financial sector taking the lead, closely followed by the materials (covering chemicals, cement, iron ore etc.), IT and the industrial sectors. However, the telecom sector, despite being a prominent GHG emitter, still continues to disappoint with the lack of enthusiasm in disclosing the carbon emissions. “Reaching out to companies and convincing them to break the barriers and disclose the numbers which are so closely linked to business operations is the greatest challenge we face,” concedes Damandeep Singh, Senior Advisor of CDP-India.

CDP India continues to invest in training and industry engagement activities to catalyze more companies into reporting. Its recently unveiled verification whitepaper and the consultation roadmap (2013-2018) is expected to catalyze greater outreach as also enable capacity and tools for corporates to become more detail oriented in their disclosure efforts.
The responses this year provide valuable insight into the strategies and imperatives deployed by the Indian businesses towards creating and implementing low carbon growth plans.

Company responses are scored based on the quality of their reporting to CDP. Companies with the top scores for disclosure qualify to be listed in the Carbon Disclosure Leadership Index (CDLI). The carbon performance score recognizes companies that are taking positive measures on climate change mitigation. To qualify for inclusion in leadership index, a company also has to make its response public and submit it via CDP’s Online Response System. Tata Consultancy Services, Wipro, Yes Bank, ACC Cements, Tata Chemicals, Tata Global Beverages, Sesa Goa, GVK Power & Infrastructure, ABB and Tata Power made the cut this year for the Carbon Disclosure Leadership Index (CDLI) in India. The average CDLI scores in 2011 stands at 76 points – an increase of 4 points over the score in2010. The 2011 CDLI list includes a diverse mix of sectors such as Materials, Energy, Utilities and IT etc. “The quality and the completeness of the disclosure of the companies in the CDLI shows that there is an increasing level of interest in climate change and quiet evident that soon CDP will also be used as a framework by businesses to gather relevant information from their respective supply chain partners,” mused Mr. Dipankar Ghosh, Partner at Ernst & Young.

This year’s CDP report highlights an increasing trend of Indian companies’ efforts towards monitoring and disclosing their GHG emissions. 91% of the respondents (42 amongst the 46 considered in the analysis) have Board level or senior management oversight on climate change issues, indicating the strong governance and integration with business strategy. 89% of the respondents (41 companies) perceive regulatory opportunities, which show the transformation of the key business processes to meet new and emerging regulations. The outlook seems positive with about 87% of this year’s respondents reporting a positive revenue change by undertaking climate change initiatives under schemes such as PAT, REO and CDM. 38% of the respondents claim to have monetary incentives, while 32% have non-monetary incentives for management of climate change issues.

Despite the enthusiastic uptake by many corporates, most express a need for a more holistic framework, preferably on a sectorial basis, thus enabling a firm to benchmark itself against its industry peers.

In addition, the companies have time and again highlighted the lack of interest from the investment community to take such reports under consideration while choosing projects.  “If the companies are diligently reporting their GHG emissions to the stakeholders, a certain amount of priority needs to be provided from an investment perspective as well,” says Arunavo Mukherjee, Vice President at Tata Quality Management Systems.

Earlier this year, Mercer – an investment consultancy firm released a report signifying that the best way for institutional investors to manage portfolio risk associated with climate change is to shift 40% of their portfolios into climate sensitive assets and companies that adopt a low-carbon environment. Carbon Disclosure Project initiatives like Carbon Action, launched this year, helps investor driven actions to encourage their portfolio companies to reduce emissions through relevant investments with a satisfactory payback periods to gain market recognition and momentum.

It is important that the Indian investor community takes the lead and rewards pro-active action of the industry on these fronts – such a step will go a long way in shaping India Inc. as a global leader on emission reduction and sustainability action.

The author, Pramita Sen is a member of the India Carbon Outlook editorial team.

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Author: Pramita Sen