if we do not curb greenhouse gas emissions and start to adapt, climate change could seriously disrupt our revenue and profits. Warmer temperatures, sea level rise and extreme weather will damage property and critical infrastructure, impact human health and productivity, and negatively affect almost each and every sector. Climate action failure, extreme weather events, and biodiversity loss and ecosystem collapse are the leading three of the top 10 global risks by severity over the next 10 years, according to the World Economic Forum’s Global Risk Report 2022. We need to change with change before change force us to change.

Identification of Physical climate change risk and developing mitigation strategy around it is need of an hour and this demand behavioural change right from senior management level to the lowest level of worker in any organization.

According to BlackRock, an American multinational investment management corporation, Climate risk is investment risk, but at the same time, the climate transition presents a historic investment opportunity. Businesses with more genuine environmental, social, and governance (ESG) profiles have, and will continue to exceed their peers. Corporations need to build a sincere connection with stakeholders, so they can be able to recognise and react to the transformations occurring in the world.

Businesses with more genuine environmental, social, and governance (ESG) profiles have, and will continue to exceed their peers. Corporations need to build a sincere connection with stakeholders, so they can be able to recognise and react to the transformations occurring in the world.

Post Paris climate change agreement in 2015, many countries started taking commitments centred on achieving “net zero” – that is, building an economy that emits no more carbon dioxide than it removes from the atmosphere by 2050. Looking forward, every year has the potential to be another vital year on the journey to net-zero. This transition of the world towards Net-Zero economy by the year 2050 can uplift the environment in a remarkable way.

Environmental, Social & Governance

ESG stands for Environmental, Social and Governance, and refers to three central factors in measuring the sustainability of an investment. It was derived from the ‘Triple Bottom Line’, also known as the ‘People, Planet and Profits’ (PPP), a concept introduced in the 1990s. It argued that businesses should focus on each of the three ‘P’s and not just on ‘Profits’, since they were equally important for any commercial enterprise to be sustainable. This concept evolved into the focus of ESG, which today is the bedrock of Sustainable and Responsible Investing (SRI).

ESG reports are most often used by investors — both institutional and personal — as a way to analyse and measure factors they consider important. ESG reports are key indicators for regulators in industries to keep tabs on issues like carbon emissions, use of natural resources, and human rights.

With each day, ESG is gaining momentum worldwide because of constant demand and requirements from stakeholders like financial investors, government bodies, communities, suppliers, customers, employees and many more. There are dozens of different ESG frameworks available—each with their own metrics to track and standards to meet. Because every industry is different, so the metrics on which one focus will change depending on the work which is being carried out. Sustainability and social impact metrics—such as carbon emissions, energy efficiency of workplace, or employee wellbeing—will be crucial elements of ESG reporting irrespective of the industry. One of the most commonly used ESG frameworks is the Global Reporting Initiative (GRI) framework, a set of standards for responsible environmental, social, economic, and governance conduct covering a wide range of topics. 73% of the world’s 250 largest companies report on sustainability using the GRI framework.

Some other popular ESG Frameworks include:

  • • Carbon Disclosure Project (CDP)
  • • Climate Disclosure Standards Board (CDSB)
  • • Science Based Targets initiative (SBTi)
  • • Sustainability Accounting Standards Board (SASB)
  • • Task Force on Climate-related Financial Disclosures (TCFD)
  • • UN Principles for Responsible Investment (PRI)
  • • Sustainable Finance Disclosure Regulation (SFDR)
  • • World Economic Forum (WEF) Stakeholder Capitalism Metrics
  • • Business Reporting and Sustainability Report (BRSR)

Recently, UK has become the first G20 country to make the TCFD reporting mandatory from April 2022. From 6 April 2022, over 1,300 of the largest UK-registered companies and financial institutions will have to disclose climate-related financial information on a mandatory basis – in line with recommendations from the Task Force on Climate-Related Financial Disclosures.

Same way European Union new regulations, such as Sustainable Finance Disclosure Regulation (SFDR) is becoming mandatory. Its level 1disclosure is already in force from March 10, 2021 and level 2 disclosure is also mandatory from Jan 2022. This regulation will focus on pre-defined metrics for assessing the environmental, social and governance (ESG) outcomes of the investment process.

India is not far in ESG mandate due to increasing pressure from financial investors and Government. Facing the heat, The Securities and Exchange Board of India (SEBI) in May 2021 issued a circular notifying new disclosures norms on sustainability related reporting for the top 1,000 listed companies by market cap by FY 23. Such a reporting will now be under a new business reporting and sustainability report (BRSR) format. Reporting will be voluntary for FY22 and mandatory from FY23.

Decarbonization and Net Zero

Decarbonization targets reflect a company’s commitment to reduce its emissions of greenhouse gases. If the target is net-zero, it means the company aims to first decrease its emissions and then offset the remaining emissions with carbon removal.

There are two aspects to decarbonization. The first entails reducing the greenhouse gas emissions produced by the combustion of fossil fuels. This can be done by preventing emissions through the use of zero-carbon renewable energy sources such as wind, solar, hydropower, geothermal and biomass, which now make up one-third of global power capacity, and electrifying as many sectors as possible. Energy efficiency will reduce the demand for energy, but increasing electrification will increase it, and in 2050, the demand for power is expected to be more than double what it is today.

Consequently, decarbonization will also require absorbing carbon from the atmosphere by capturing emissions and enhancing carbon storage in agricultural lands and forests.

To achieve decarbonization, all aspects of the economy must change—from how energy is generated, and how we produce and deliver goods and services, to how lands are managed. The carbon dioxide and methane emissions that are warming the planet come largely from the power generation, industry, transport, buildings, and agriculture and land use sectors of the global economy, so these sectors must all be transformed.

The Net-Zero Standard by SBTi (Science Based Target Initiative) covers a company’s entire value chain emissions, including those produced by their own processes (scope 1), purchased electricity and heat (scope 2), and generated by suppliers and end-users (scope 3). Most companies will require deep decarbonization of 90-95% to reach net-zero under the Standard. There are five key areas where businesses of all sizes can act to accelerate on a pathway of decarbonization and become Net Zero. For each of these areas, we customize roadmap for business to kick off the start, build momentum and achieve a leadership position

As per SBTi, to date more than more than 2,000 businesses and financial institutions are working with the Science Based Targets initiative (SBTi) to reduce their emissions in line with climate science. Government of India has also committed to achieve Net-Zero target for India by 2070 at COP 26, Glasgow, UK in 2021 and to meet this target for India, industry will need to step up. Until 2021 as many as 56 Indian companies have already committed to reducing greenhouse gas emissions, according to the Science-Based Target Initiative.

Why Decarbonization important?

As per United Nations, the science shows clearly that in order to avert the worst impacts of climate change and preserve a livable planet, global temperature increase needs to be limited to 1.5°C above pre-industrial levels. Currently, the Earth is already about 1.1°C warmer than it was in the late 1800s, and emissions continue to rise. To keep global warming to no more than 1.5°C – as called for in the Paris Agreement emissions need to be reduced by 45% by 2030 and reach net zero by 2050. Getting to net zero requires all governments – first and foremost the biggest emitters – to significantly strengthen their Nationally Determined Contributions (NDCs) and take bold, immediate steps towards reducing emissions now. The Glasgow Climate Pact called on all countries to revisit and strengthen the 2030 targets in their NDCs by the end of 2022, to align with the Paris Agreement temperature goal.

Problem of Carbon emission is so severe that around 27 countries has started imposing carbon tax as one of the largest financial tools to combat climate change. A carbon tax is imposed by a government to put a direct price on greenhouse gas emissions (per tonne) produced by companies or industries. It works an economic incentive for polluters to lower emissions or switch to more efficient processes or cleaner fuels.

With each day, companies which are proactive and progressing on a roadmap to become carbon neutral and net-zero will win the battle not only for their bottom-line but for the betterment of entire world.

How to become Climate Resilient

Earthood can develop customized sustainability and ESG strategies that achieve net-zero and circularity goals in compliance with 2050 targets. We have circularity roadmaps for business, corporates, that protect shareholder value, create opportunities for growth and innovation, and set the foundation for long-term success.

Dedicated technical services on all components of ESG and Decarbonization framework:

  • 1. Developing business specific ESG Framework
  • 2. Sustainability & ESG reporting as per leading reporting framework
  • 3. India specific Business reporting and sustainability report (BRSR) advisory
  • 4. GHG accounting and Inventory development as per ISO 14064-1, 2
  • 5. GHG Audit and verification as per ISO 14064-3
  • 6. Resource optimization & reduction strategy
  • 7. Carbon offsetting advisory
  • 8. Comprehensive Net-Zero Advisory following SBTi and other leading guidelines/standards