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Hello, this is Silloo, and I welcome you yet again to a new episode of the fortnightly EY ESG podcast, where we look at some of the most critical sustainability issues that India Inc needs to deal with in its ESG (Environmental, Social and Governance) journey.

Today, we will talk about the net zero concept and get some insights on how companies are approaching sustainable measures — a buzzword among business leaders as net zero took over some key decision-making. Since Prime Minister Narendra Modi committed that India will achieve net zero carbon emissions by 2070, Indian corporates have been talking about their own net zero goals and targets. But exactly how will the Indian firms go about meeting that goal? Do the businesses have concrete plans, or is it greenwash? To answer all these and other such interesting questions, we are joined today by Saunak Saha, Partner, Climate Change and Sustainability Services (CCaSS) at EY India.

Saunak has over 15 years of experience in climate change, energy management, renewable energy, carbon management, and sustainability. He specializes in ESG strategy development and low-carbon transition in the manufacturing and services sectors. Welcome to the hot seat, Saunak.

Saunak: Thanks, Silloo. This is really an interesting subject and yet very complex, so I will try my level best to answer all your questions.

Silloo: Sure, Saunak. So, tell me, Saunak, what strategies are the big corporates following to achieve their net zero goals?

Saunak: To my mind, most Indian companies are focusing on a three-pronged approach. In the first part, the focus is on reducing their operational emissions, where they are looking to improve their energy efficiency. They are also looking at ways to upskill renewable energy to ensure substitution of more fossil-based energy. Lastly, they are also looking at the circular economy or the 3R principle to reduce, reuse, and recycle and reduce their operational phase emissions. 

In the second part, they are focusing more on redesigning their processes and products so that the emissions from the use phase of the products are reduced. Just to give you an example, most of the automotive companies in India today are focusing on lightweight vehicles, which will be more fuel efficient and, to an extent, reduce light emissions when they are being run. This would require a lot of research and development focusing on processes and products to reduce the emissions from the use space. 

Having said that, there are still emissions that are unavoidable. To that extent, companies are focusing on creating carbon sinks, carbon capture utilization, and carbon capture storage technologies to ensure that those emissions are also not released into the atmosphere.

Over and above these, companies are also looking at offset strategies for the emissions they are not able to reduce. They are working back with other companies to ensure that the latter can reduce their emissions. Collectively, we are moving toward a more low-carbon path.

Silloo: But Saunak, all this will require quite a lot of investment, right? What do you think?

Saunak: That is absolutely right. Any sort of net zero transition strategy is going to be quite capital intensive. Therefore, all large corporations focusing on net zero are also looking at different ways of financing these technologies. In fact, any new technology we talk about today, — be it hydrogen or carbon capture utilization, is very capital intensive. However, our traditional project evaluation mechanisms still do not factor in most of the cases of cost of carbon emissions. 

Globally, the regulations are getting stricter. Many countries are now taking a carbon tax. So, if we factor in the cost of carbon in our project valuations, then eventually, these low-carbon technologies will start becoming more viable.

Silloo: What can the government do over the years to help make the corporate transition faster?

Saunak: In my mind, the Government of India is very proactive toward net zero transitions. We all have seen the ‘Panchamrit’ commitment. The government has been doing a lot to enable the uptake of renewable energy throughout the country, which will make many sectors move toward net zero transition. Having said that, we can definitely look at some incentives or policy interventions. For example, providing tax breaks on technologies that can help reduce emissions or incentivizing products that lead to lower emissions or disincentivizing companies through some penalty or tax that will lead to these companies lowering their emissions. The government is also looking at creating a carbon market domestically, which will facilitate companies to move toward a low-carbon path.

Silloo: Right. So, toward the end, let me ask the tough question - how serious is corporate India when it talks about net zero? Do they have concrete plans, or is it just ‘greenwash’? 

Saunak: This is interesting because corporate India is quite a large universe. When it comes to the large Indian companies, I would say they are taking it very seriously. Most large companies are now developing their strategy toward net zero transitions. They are working out a road map or an action plan with specific timelines in mind, specific goals, and defined KPI. They have also been looking at renewable energy research and development on new generation technologies and energy transitions. But when it comes to medium and small enterprises, a bit more traction would be required. And I would say that the Indian government is creating a lot of enabling infrastructure where these companies will also start focusing on the net zero transition.

Silloo: Thanks a lot, Saunak, for explaining all these issues so clearly and lucidly.

Saunak: Thanks, Silloo. I enjoyed the talk too.

Silloo: Excellent. Well, this was our quick insight. Watch out for our next show, where we will be joined by another Partner from our CCaSS practice to help us understand the ‘S’ of ESG, the social aspect of ESG, and how India Inc is contributing to it. Till then, this is Silloo signing off.

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