| A carbon footprint measures the total greenhouse | | | | reporting would become statutory requirement like |
| gas emissions caused directly and indirectly by an | | | | the annual financial reporting and auditing. |
| individual, event, organization or product. Carbon | | | | Investor requirements |
| accounting (also called GHG accounting) does assess | | | | Having realized the crucial importance of good |
| the carbon footprint to help organizations adopt | | | | disclosure and corporate governance practices, |
| strategies aimed at fighting climate change. As with | | | | investors across the globe are demanding companies |
| financial accounting and reporting, generally accepted | | | | to disclose their climate change strategies, perceived |
| carbon accounting principles are intended to underpin | | | | risks and opportunities created by climate change, |
| and guide carbon accounting and reporting to ensure | | | | contribution to climate change and efforts taken to |
| that the reported information represents a faithful, | | | | minimize corporate carbon footprint. To reduce the |
| true, and fair account of a company's carbon | | | | transaction costs of responding to individual investors |
| emissions. | | | | in unique format and vice-versa, Carbon Disclosure |
| Business community in India has started seeing value | | | | Project (CDP) has been created as a not-for-profit |
| in undertaking carbon accounting and reporting it in | | | | non-governmental organization. Active since 2006, in |
| public forums. Such forums include Carbon Disclosure | | | | 2010 CDP sent out information request to more than |
| Project (CDP) and company's Sustainable | | | | 3500 organizations across sectors and scales around |
| Development Reports. The number of companies | | | | the globe. In India, the information is sought from top |
| which responded the CDP's information request on | | | | 200 companies by market capitalization. The |
| climate change strategy, risk and opportunities | | | | responses from companies in relation to their climate |
| assessment and carbon accounting was answered by | | | | change strategies, perceived risks and opportunities |
| 37 companies in 2007. The number increased to 51 in | | | | and carbon footprint of their operations will be |
| 2008 and dropped marginally to 44 in 2009, partially | | | | analyzed, compiled in a report and sent to more than |
| explained by the global financial crisis. | | | | 530 investors across globe. Investors also become |
| There is still long way to go for Indian businesses on | | | | aware if the organization chooses not to respond to |
| the path of carbon accounting and disclosures. Even | | | | such an information request or decline to participate. |
| in the top 200 firms in India (by market capitalization), | | | | The list of investors who get seek such information |
| the response rate in last few years has steadily | | | | from corporations through CDP includes Goldman |
| increased and reached 20%, a rather dismal | | | | Sachs, Bank of America, JP Morgan Asset |
| performance compared to developed markets. | | | | Management among others. |
| There are a few sectors like the software and | | | | Such investor-facing communication should be taken |
| services which are clear leaders in being | | | | seriously taken by companies and pursued |
| carbon-aware, accounting carbon emissions from their | | | | pro-actively even if organization does not receive |
| emissions, taking efforts in reducing it and | | | | information request. |
| communicating it to the stakeholders. Part of this can | | | | Basis for Energy efficiency |
| be explained given the fact that these companies are | | | | Carbon emission is a direct indicator of the energy |
| most export dependent and draw majority of their | | | | consumption in a process or an activity. By mapping |
| clientele and revenues from markets of US and EU. | | | | carbon footprint in detail, an organization can identify |
| Clear laggards in efforts in this direction are | | | | ‘emission hotspots', the energy intensive |
| companies in the field of banking & diversified | | | | processes and take actions to reduce the carbon |
| financials, capital goods, real estate and retail. Very | | | | footprint/energy consumption per unit product |
| few companies in these sectors have responded to | | | | service produced/delivered. This can directly lead to |
| the CDP information request and have accounted for | | | | cost savings and thus addition to bottom-line, the |
| their carbon emissions. Part of the lack of drive can | | | | ultimate test for evaluating success or failure of an |
| be explained by significant domestic base, relative | | | | activity/intervention. |
| inelasticity of demand to seemingly peripheral factors | | | | |
| and relative less thought given to corporate social | | | | Impact the national policy |
| responsibility. | | | | Though the carbon accounting and disclosure efforts |
| In the following discussion, we summarize the key | | | | of an individual company may not have a direct |
| issues that would become increasing relevant to | | | | bearing on the climate policy decisions taken by the |
| Indian organizations and drive thorough and wide | | | | Indian government, a wide participation by India Inc. |
| spread carbon accounting, reduction and disclosure | | | | in activities in the area of carbon accounting, emission |
| efforts. | | | | reductions and reporting can send a strong signal that |
| Upcoming regulations | | | | Indian industry is proactively engaging in the climate |
| Industries such as steel and textiles could soon face | | | | change dialogue and response process. Such activities |
| a carbon entry barrier, one way or the other, while | | | | will contribute towards political process through |
| exporting goods to markets where the country has | | | | analysis and reporting. For example – the release |
| enacted regulations stipulating guidelines for the | | | | of CDP India 2009 report coincided with landmark |
| domestic industry. The domestic industry, to maintain | | | | session in parliament where the environmental |
| its competitiveness would ensure that less efficient | | | | Minister Mr. Jairam Ramesh announced that India will |
| (and therefore more carbon intensive) products | | | | reduce its carbon intensity levels by 20-25% on its |
| entering into the economy pay for the difference in | | | | 2005 over the next 11 years. The Economic Times |
| carbon levels by ‘carbon tax' or equivalent. | | | | carried an article quoting the CDP India report and |
| Though these regulations may take some time to be | | | | saying that India Inc. is well positioned to achieve the |
| widely implemented, it makes business sense for | | | | 20-25% emission intensity reduction targets given |
| companies in select sectors to be prepared with a | | | | that companies are already voluntarily disclosing their |
| clear understanding of where they stand with | | | | carbon footprints and undertaking measures to |
| respect to competition from developed countries and | | | | reduce them. |
| other developing countries such as China, Brazil or | | | | It is evident that voluntary initiatives such as the CDP |
| Vietnam. | | | | or company's sustainability reports highlighting their |
| Developing countries such as India, Brazil, China and | | | | carbon emissions, reduction measures and targets are |
| South Africa (BASIC) are facing increasing pressure | | | | influencing policy decisions and in future will play a |
| from the developed world to monitor and report | | | | significant role in India's climate change strategy and |
| their GHG emissions. This is due to the fact that the | | | | policy. |
| growth in GHG emissions worldwide in foreseeable | | | | ________________________ |
| future will come from these economies, thanks to | | | | EcoLogic Consultancy is a focused Carbon |
| their contribution to world economy and increasingly | | | | Management consulting firm. We provide services in |
| so. In order to make sure that the developed | | | | the wide spectrum of carbon management, helping |
| countries continue to finance emission reduction | | | | our clients identify the risks and opportunities in |
| projects, energy efficiency and other technology | | | | climate change, mitigate the risks, exploit the |
| development, the BASIC countries may have to | | | | opportunities, and thus tackle the environmental |
| undertake monitoring, reporting and verification of | | | | challenge. |
| their national GHG inventories. When such an | | | | For further details, reach us |
| mechanism becomes a part of internationally | | | | atenquiry@ecologicconsultancy. |
| negotiated agreement, carbon accounting and | | | | |