Impact of Climate Change on your Business/ Organisation

Author : Shriram Bharathan R, Advisor, Environmental Sustainability

Anthropogenic emissions (Emissions caused by human activity) have caused climate change and the impacts of this climate change are negatively affecting all life from microbes to humans and oceanic behemoths on the planet. The European Environmental Agency estimates that the economic loss due to Climate Change in Europe between 2010-2020 was 145 Bn Euros. For organisations, climate change poses challenges on aspects of everyday operations including: 

• changing market dynamics along with demand – supply considerations
• employee well-being
• business infrastructure
• supply chain management including health and well being of supply chain stakeholders
• resource utilization constraints including availability and changing economic value

This, in effect, requires organisations to shift from an economic centric shareholder growth paradigm to a comprehensive collaborative stakeholder growth paradigm. 

But what causes Climate Change in our context? 

Greenhouse Gases emitted into the atmosphere have accelerated global climate related effects. Since the Industrial Revolution, human activity has driven the quantity of CO2 (Carbon Dioxide – A Greenhouse Gas) up by 50% in the atmosphere (to 421 ppm in 2022 up from nearly 280 ppm maintained over the previous 10,000 years) (Source: NOAA). Nearly every human action is causing some effect on the overall emissions levels of the planet, over and above the minimum required to sustain life on the planet. This increase in Human induced Greenhouse Gases in the atmosphere causes Global Warming as one of the key impacts, which results in the following repercussions (this is a sample list): 

• Loss of Food and Fresh water systems
• Increased Occurrence and Severity of Natural Disasters
• Increased migration leading to high pressure on cities and urban infrastructure
• Extinction of Natural Habitats and Species
• Warming of the Oceans and Changing weather patterns affecting monsoons and via correlation drought
• Melting Polar Ice Caps and Subsequent rise in sea levels

At 500 ppm (estimated to reach by 2050 at current linear growth numbers or earlier), we will reach a global temperature increase of 3C by the turn of the century (Source: Yale University). There are various tipping points that have been identified and occurrence of these tipping points will ensure that the temperature rise becomes more difficult to reverse. 

Image Source: Carbon Brief

Take for example, the cities of Bengaluru, Gurugram and Mumbai. Peak Summer temperature over the last decade has risen by nearly 5 degrees in Bengaluru, approaching 40 C. Gurugram has seen a peak summer temperature of over 48C, in 2022 and Mumbai has seen temperatures around 41C consistently over the last 10-12 years across multiple instances. All three cities have seen frequent heatwave warnings in the recent past. Challenges during monsoon and winter w.r.t. temperatures are also well known in the recent years. (Temperature Source: IMD)

Are Governments doing anything about this?

Climate Summits since the 1980s have tried to throw light on the matter and in 2015 (the Paris COP Summit) the summit had successfully helped in committing to achieving targets for emissions reduction from each country. 

To mitigate some of the challenges posed by Climate Change, countries have committed to INDCs (a.k.a Climate Targets) to achieve within a fixed timeframe with sub targets for achieving in 2025, 2030 upto 2050. These commitments have further been refined in the Glasgow summit 2021 (COP 26) recently.  In India, the INDCs committed to are as follows: 

• To put forward and further propagate a healthy and sustainable way of living based on traditions and values of conservation and moderation. 
• To adopt a climate-friendly and a cleaner path than the one followed hitherto by others at corresponding level of economic development.
• To reduce the emissions intensity of its GDP by 33 to 35 per cent by 2030 from 2005 level.
• To achieve about 40 per cent cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030, with the help of transfer of technology and low cost international finance, including from Green Climate Fund.
• To create an additional carbon sink of 2.5 to 3 billion tonnes of CO₂ equivalent through additional forest and tree cover by 2030.
• To better adapt to climate change by enhancing investments in development programmes in sectors vulnerable to climate change, particularly agriculture, water resources, Himalayan region, coastal regions, health and disaster management.
• To mobilize domestic and new and additional funds from developed countries to implement the above mitigation and adaptation actions in view of the resource required and the resource gap.
• To build capacities, create domestic framework and international architecture for quick diffusion of cutting edge climate technology in India and for joint collaborative R&D for such future technologies.

But despite all countries providing their NDCs, the net outcome as a result of implementation of these NDCs stands as below: 

Image Source: Climate Action Tracker

Additional action is required to limit the temperature increase to 1.5C or lower by the turn of the century. 

So, what should Industry be doing? – Climate Change ESG Link

It’s not just countries that are committing to climate impact reduction goals, but corporates are doing so as well. Action by corporate will not only support country goals but also help in reducing the exposure to climate risk. It is imperative to note that inaction is not an option as that will lead to negative effects for all. 

Many organisations have recognised the need for being ESG ready as one of the action points in dealing with the negative impacts of Climate Change (A Starting point on What is ESG? can be found here). In brief, ESG is a comprehensive collaborative stakeholder approach that helps in managing sustainability and improving an organisation’s capability in handling and managing climate risk for themselves and their stakeholders. Companies redefining sustainability strategy are today looking at ESG frameworks for evaluating the risk and impact of their business

A starting point has been created. Policies are being implemented by the Government to initiate and spur everyone into action. The INDCs can be interpreted to require the following aspects from organisations – increased Renewable Energy, Energy utilization optimization and Climate friendly process of economic activity, Requirement of Carbon Sink, Support Vulnerable areas from impacts of Climate Change and Drive Innovation. In addition, India has passed the Electricity Amendment Bill 2022. This law allows for some significant actions in our journey against Climate Impact: 

1. The Bill allows for competition among energy suppliers and cross – usage of existing infrastructure. This will improve quality, transparency and efficiency of grid electricity and performance
2. It mandates distribution companies to purchase a percentage of their energy from renewable sources
3. Proposes to create a carbon market for domestic trading of carbon emissions and reductions on a voluntary and compliance basis leading to cap and trade scheme for corporates with incentives for those who go above and beyond
4. A ban on exporting carbon credits generated within the country to overseas markets until Indian targets are met. Surplus can be exported for higher realization of economic and environmental benefits

In addition, one of the regulatory bodies, SEBI has prescribed the top 1000 listed companies to report against their ESG parameters in a comprehensive BRSR document over the next few years and the top 250 listed companies to report ESG for their organisation and supply chain. (To know more about how organisations have reported in the first year of disclosures, please do check out our article here). The requirements to comply with regulations will only increase but with a robust ESG strategy organisations can be ahead by being Climate Action Champions.  

A few organisations have taken the lead to voluntarily disclose and mitigate their climate risk. These organisations have also gained benefits with increased economic performance, rising investor and stakeholder confidence. While there is a certain effort in the direction to mitigate Climate change risk, it is not even close to what is required to secure our futures.

What can you do? 

Corporates can 

• Familiarize themselves with the requirements of the BRSR and the INDCs. 
• Create an ESG strategy and roadmap to help achieve compliance, improve operational performance and contribute towards nation building
• Implement the ESG strategy and roadmap with third party assessment on performance annually with board oversight
• Integrate various organisational activities to the ESG strategy including activities on marketing and CSR
• Disclose and improve performance every year
• Realise the tangible benefits of implementation and improvement in overall organisational performance while improving stakeholder confidence in the brand. 

Ready to start your organisation’s journey to Climate positivity? Get in touch with our Corporate Sustainability and ESG Solutions unit at esg@sattva.co.in