Carbon accounting in india


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Carbon accounting in india

  1. 1. Carbon Accounting and disclosure in India______________________________________________________________________________________ Carbon Accounting and disclosure in IndiaAgneya Carbon Ventures
  2. 2. Carbon Accounting and disclosure in India______________________________________________________________________________________ Introduction 3 Upcoming regulations 4 Investor requirements 4 Basis for Energy efficiency 5 Impact the national policy 5Agneya Carbon Ventures
  3. 3. Carbon Accounting and disclosure in India______________________________________________________________________________________IntroductionA carbon footprint measures the total greenhouse gas emissions caused directly andindirectly by an individual, event, organization or product. Carbon accounting (also calledGHG accounting) does assess the carbon footprint to help organizations adopt strategiesaimed at fighting climate change. As with financial accounting and reporting, generallyaccepted carbon accounting principles are intended to underpin and guide carbonaccounting and reporting to ensure that the reported information represents a faithful,true, and fair account of a company’s carbon emissions.Business community in India has started seeing value in undertaking carbon accountingand reporting it in public forums. Such forums include Carbon Disclosure Project (CDP)and company’s Sustainable Development Reports. The number of companies whichresponded the CDP’s information request on climate change strategy, risk andopportunities assessment and carbon accounting was answered by 37 companies in 2007.The number increased to 51 in 2008 and dropped marginally to 44 in 2009, partiallyexplained by the global financial crisis.There is still long way to go for Indian businesses on the path of carbon accounting anddisclosures. Even in the top 200 firms in India (by market capitalization), the response ratein last few years has steadily increased and reached 20%, a rather dismal performancecompared to developed markets.There are a few sectors like the software and services which are clear leaders in beingcarbon-aware, accounting carbon emissions from their emissions, taking efforts inreducing it and communicating it to the stakeholders. Part of this can be explained giventhe fact that these companies are most export dependent and draw majority of theirclientele and revenues from markets of US and EU. Clear laggards in efforts in thisdirection are companies in the field of banking and diversified financials, capital goods,real estate and retail. Very few companies in these sectors have responded to the CDPinformation request and have accounted for their carbon emissions. Part of the lack ofdrive can be explained by significant domestic base, relative inelasticity of demand toseemingly peripheral factors and relative less thought given to corporate socialresponsibility.In the following discussion, we summarize the key issues that would become increasingrelevant to Indian organizations and drive thorough and wide spread carbon accounting,reduction and disclosure efforts.Agneya Carbon Ventures
  4. 4. Carbon Accounting and disclosure in India______________________________________________________________________________________Upcoming regulationsIndustries such as steel and textiles could soon face a carbon entry barrier, one way or theother, while exporting goods to markets where the country has enacted regulationsstipulating guidelines for the domestic industry. The domestic industry, to maintain itscompetitiveness would ensure that less efficient (and therefore more carbon intensive)products entering into the economy pay for the difference in carbon levels by ‘carbon tax’or equivalent.Though these regulations may take some time to be widely implemented, it makesbusiness sense for companies in select sectors to be prepared with a clear understanding ofwhere they stand with respect to competition from developed countries and otherdeveloping countries such as China, Brazil or Vietnam.Developing countries such as India, Brazil, China and South Africa (BASIC) are facingincreasing pressure from the developed world to monitor and report their GHG emissions.This is because the growth in GHG emissions worldwide in future will come from theseeconomies, thanks to their contribution to world economy and increasingly so. In order tomake sure that the developed countries continue to finance emission reduction projects,energy efficiency and other technology development, the BASIC countries may have toundertake monitoring, reporting and verification of their national GHG inventories. Whensuch a mechanism becomes a part of internationally negotiated agreement, carbonaccounting and reporting would become statutory requirement like the annual financialreporting and auditing.Investor requirementsHaving realized the crucial importance of good disclosure and corporate governancepractices, investors across the globe are demanding companies to disclose their climatechange strategies, perceived risks and opportunities created by climate change,contribution to climate change and efforts taken to minimize corporate carbon footprint.To reduce the transaction costs of responding to individual investors in unique format andvice-versa, Carbon Disclosure Project (CDP) has been created as a not-for-profit non-governmental organization. Active since 2006, in 2010 CDP sent out information request toAgneya Carbon Ventures
  5. 5. Carbon Accounting and disclosure in India______________________________________________________________________________________more than 3500 organizations across sectors and scales around the globe. In India, theinformation is sought from top 200 companies by market capitalization. The responsesfrom companies in relation to their climate change strategies, perceived risks andopportunities and carbon footprint of their operations will be analyzed, compiled in areport and sent to more than 530 investors across globe. Investors also become aware if theorganization chooses not to respond to such an information request or decline toparticipate. The list of investors who get seek such information from corporations throughCDP includes Goldman Sachs, Bank of America, JP Morgan Asset Management amongothers.Such investor-facing communication should be taken seriously taken by companies andpursued pro-actively even if organization does not receive information request.Basis for Energy efficiencyCarbon emission is a direct indicator of the energy consumption in a process or an activity.By mapping carbon footprint in detail, an organization can identify ‘emission hotspots’,the energy intensive processes and take actions to reduce the carbon footprint/energyconsumption per unit product/service produced/delivered. This can directly lead to costsavings and thus addition to bottom-line, the ultimate test for evaluating success or failureof an activity/intervention.Impact the national policyThough the carbon accounting and disclosure efforts of an individual company may nothave a direct bearing on the climate policy decisions taken by the Indian government, awide participation by India Inc. in activities in the area of carbon accounting, emissionreductions and reporting can send a strong signal that Indian industry is proactivelyengaging in the climate change dialogue and response process. Such activities willcontribute towards political process through analysis and reporting. For example – therelease of CDP India 2009 report coincided with landmark session in parliament where theenvironmental Minister Mr. Jairam Ramesh announced that India will reduce its carbonintensity levels by 20-25% on its 2005 over the next 11 years. The Economic Times carriedan article quoting the CDP India report and saying that India Inc. is well positioned toachieve the 20-25% emission intensity reduction targets given that companies are alreadyvoluntarily disclosing their carbon footprints and undertaking measures to reduce them.Agneya Carbon Ventures
  6. 6. Carbon Accounting and disclosure in India______________________________________________________________________________________It is evident that voluntary initiatives such as the CDP or company’s sustainability reportshighlighting their carbon emissions, reduction measures and targets are influencing policydecisions and in future will play a significant role in India’s climate change strategy andpolicy. Agneya Carbon Ventures is a focused Carbon Management consulting firm. We provide services in the wide spectrum of carbon management, helping our clients identify the risks and opportunities in climate change, mitigate the risks, exploit the opportunities, and thus tackle the environmental challenge. For further details, reach us at Indrajeet - +91-90287 88430 Kedar - +91-96654 07848Agneya Carbon Ventures