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    Why Account Carbon

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    Kedar Deshpande
    Carbon accounting and disclosure, though growing in India - needs to go much further and become mainstream practice. There are many reasons for that. Here are a few.

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    Why Account Carbon

    Uploaded by

    Kedar Deshpande
    50 views3 pages
    Carbon accounting and disclosure, though growing in India - needs to go much further and become mainstream practice. There are many reasons for that. Here are a few.

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    Carbon accounting and disclosure, though growing in India - needs to go much further and become mainstream practice. There are many reasons for that. Here are a few.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    50 views3 pages

    Why Account Carbon

    Uploaded by

    Kedar Deshpande
    Carbon accounting and disclosure, though growing in India - needs to go much further and become mainstream practice. There are many reasons for that. Here are a few.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    At a glance
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    The key takeaways are that carbon accounting measures greenhouse gas emissions, both direct and indirect, of organizations, events or products. It helps companies adopt strategies to reduce emissions and combat climate change. While some sectors in India have started carbon accounting and reporting, participation remains low overall.

    Some of the main drivers for companies in India to undertake carbon accounting and reporting include potential future carbon regulations for export-dependent industries, increasing pressure from investors and developed countries to monitor and report emissions, and the Carbon Disclosure Project which seeks climate-related information from top Indian companies.

    Carbon accounting can help companies identify energy-intensive processes and reduce energy consumption and costs. It can also help companies understand their competitiveness compared to international competitors. Reducing the carbon footprint leads to cost savings and improved bottom line performance.

    Carbon accounting and disclosure in India

    A carbon footprint measures the total greenhouse gas emissions caused directly and
    indirectly by an individual, event, organization or product. Carbon accounting (also
    called GHG accounting) does assess the carbon footprint to help organizations adopt
    strategies aimed at fighting climate change. As with financial accounting and
    reporting, generally accepted carbon accounting principles are intended to underpin
    and guide carbon accounting 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


    accounting and reporting it in public forums. Such forums include Carbon Disclosure
    Project (CDP) and company’s Sustainable Development Reports. The number of
    companies which responded the CDP’s information request on climate change
    strategy, risk and opportunities 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, partially explained by the global financial crisis.

    There is still long way to go for Indian businesses on the path of carbon accounting
    and disclosures. Even in the top 200 firms in India (by market capitalization), the
    response rate in last few years has steadily increased and reached 20%, a rather
    dismal performance compared to developed markets.

    There are a few sectors like the software and services which are clear leaders in being
    carbon-aware, accounting carbon emissions from their emissions, taking efforts in
    reducing it and communicating it to the stakeholders. Part of this can be explained
    given the fact that these companies are most export dependent and draw majority of
    their clientele and revenues from markets of US and EU. Clear laggards in efforts in
    this direction are companies in the field of banking & diversified financials, capital
    goods, real estate and retail. Very few companies in these sectors have responded to
    the CDP information request and have accounted for their carbon emissions. Part of
    the lack of drive can be explained by significant domestic base, relative inelasticity of
    demand to seemingly peripheral factors and relative less thought given to corporate
    social responsibility.

    In the following discussion, we summarize the key issues that would become
    increasing relevant to Indian organizations and drive thorough and wide spread
    carbon accounting, reduction and disclosure efforts.

    Upcoming regulations
    Industries such as steel and textiles could soon face a carbon entry barrier, one way
    or the other, while exporting goods to markets where the country has enacted
    regulations stipulating guidelines for the domestic industry. The domestic industry, to
    maintain its competitiveness 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 makes
    business sense for companies in select sectors to be prepared with a clear
    understanding of where they stand with respect to competition from developed
    countries and other developing countries such as China, Brazil or Vietnam.

    Developing countries such as India, Brazil, China and South Africa (BASIC) are facing
    increasing pressure from the developed world to monitor and report their GHG
    emissions. This is due to the fact that the growth in GHG emissions worldwide in
    foreseeable future will come from these economies, thanks to their contribution to
    world economy and increasingly so. In order to make sure that the developed
    countries continue to finance emission reduction projects, energy efficiency and other
    technology development, the BASIC countries may have to undertake monitoring,
    reporting and verification of their national GHG inventories. When such an
    mechanism becomes a part of internationally negotiated agreement, carbon
    accounting and reporting would become statutory requirement like the annual
    financial reporting and auditing.

    Investor requirements
    Having realized the crucial importance of good disclosure and corporate governance
    practices, investors across the globe are demanding companies to disclose their
    climate change 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 and vice-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 to more than 3500 organizations across sectors and scales around
    the globe. In India, the information is sought from top 200 companies by market
    capitalization. The responses from companies in relation to their climate change
    strategies, perceived risks and opportunities and carbon footprint of their operations
    will be analyzed, compiled in a report and sent to more than 530 investors across
    globe. Investors also become aware if the organization chooses not to respond to such
    an information request or decline to participate. The list of investors who get seek
    such information from corporations through CDP includes Goldman Sachs, Bank of
    America, JP Morgan Asset Management among others.

    Such investor-facing communication should be taken seriously taken by companies


    and pursued pro-actively even if organization does not receive information request.

    Basis for Energy efficiency


    Carbon 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/energy consumption per unit product/service produced/delivered. This can
    directly lead to cost savings and thus addition to bottom-line, the ultimate test for
    evaluating success or failure of an activity/intervention.

    Impact the national policy


    Though the carbon accounting and disclosure efforts of an individual company may
    not have a direct bearing on the climate policy decisions taken by the Indian
    government, a wide participation by India Inc. in activities in the area of carbon
    accounting, emission reductions and reporting can send a strong signal that Indian
    industry is proactively engaging in the climate change dialogue and response process.
    Such activities will contribute towards political process through analysis and
    reporting. For example – the release of CDP India 2009 report coincided with landmark
    session in parliament where the environmental Minister Mr. Jairam Ramesh
    announced that India will reduce its carbon intensity levels by 20-25% on its 2005
    over the next 11 years. The Economic Times carried an article quoting the CDP India
    report and saying that India Inc. is well positioned to achieve the 20-25% emission
    intensity reduction targets given that companies are already voluntarily disclosing
    their carbon footprints and undertaking measures to reduce them.

    It is evident that voluntary initiatives such as the CDP or company’s sustainability


    reports highlighting their carbon emissions, reduction measures and targets are
    influencing policy decisions and in future will play a significant role in India’s climate
    change strategy and policy.

    EcoLogic Consultancy 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

    enquiry@ecologicconsultancy.in

    www.ecologicconsultancy.in

    Indrajeet - +91-90287 88430

    Kedar - +91-90007 72462

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