G Ananthapadmanabhan: The carbon intensity of profit

Instead of preaching the virtues of not being greedy to industry, it would be more meaningful to get industry to focus on how to limit the damage to the planet.

It's under 800 days to the next general election and faint ripples of the 'India Shining' rout may have resurfaced on the Prime Ministerial desk prompting Manmohan Singh to make his now controversial 'curtail-your-loud-profits' speech to industry captains. CII chief Sunil Mittal hit the nail on the head and rightly asserted that industry works for profit. It certainly seemed that the architect of Indian reforms did need some reminding of the basics.

Business can best serve society by conducting its affairs honourably and in accordance with the law both in letter and spirit. If business were to conduct successfully both its stated profit driven value-added offering and carry along its stakeholders, why should the good doctor grudge them their profits? Among them, the PM, industry barons and a section of the media that went hysterical delivered yet another blow to the already blundering world of Corporate Social Responsibility (CSR), a tool they all purport to uphold and promote.

By framing the dialogue between industry and government in simplistic terms of profit and not responsibility and to continue to look at CSR merely as corporate charity or as the PM seemed to suggest, a mild rearrangement of profits, both sides failed to seize the opportunity of the day. Consider, for instance, that both the PM and industry captains now make their respective annual pilgrimage to the G8 and Davos to discuss climate change, yet there has been no meaningful exchange between them at home. Their silence does not absolve both these key players in society of their true responsibilities.

Citizens in 21st-century India face the accumulated burdens of the last century which are further amplified by the threats of climate change and global warming. Simply put, if malaria and cholera and other epidemics were problems which were earlier fought with uneven success, then the scale of its onslaught on humanity has exacerbated manifold. Add intense and more frequent floods, drought and water stress, loss of biodiversity and species' extinction all of which impact the nation's GDP, and it begins to dawn why the PM talking profit while presiding over the CII annual bash is a colossal wasted opportunity.

The PM should have focused industry attention to climate change, the big challenge of this millennium and set the tone for responsible engagement. It is firmly established now that fossil fuel burning led by industry is the chief cause of climate change. Therefore shouldn't it be necessary for each responsible company in every sector to map its carbon footprint? The IPCC report screamed that we have an eight-year window for proactive action. Apparently, neither party at the forum got the memo.

Consider the fact that it is agreed that a global temperature rise of 1.2-1.3°C is inevitable. Already society has thrown up its collective hand and accepted that millions will be seriously affected. The new challenge is to keep it below 2°C.

Facts and grim reality stare at us. In the 11th plan, the government proposes to add approximately 70,000 MW of coal-fired super thermal plants, but that would result in CO2 emissions of 350 million tonnes. Given that our current total emissions are around 1,100 million tonnes, with this addition our total emissions would go up to 1,500 million tonnes. Essentially, we have agreed that we shall address the crisis by adding at least 25 per cent more to the problem!

On the other hand, Greenpeace estimates that India can opt for a combination of energy efficiency to generate 30,000 MW of power, with the balance coming from a combination of wind- and solar-photovoltaic systems and bio-mass for rural electrification. The total cost of meeting the requirement through alternate power sources would be only $77,500 million, as against the cost of $92,000 million for 70,000 MW of coal-fired power plants. The cost to humanity of doing business is already too high. It is no secret that by promoting energy efficiency we will be able to curb the rising impact of climate change to some extent. Yet, while voluntarism has been proven not to work, a discussion to legislate a top runner model for energy efficiency that will lead to mandatory standards is not even on the table. Such insouciance almost borders on the criminal.

It's far easier to play ping-pong on nonissues because to exchange notes on how industry could help government make coherent low carbon policies and create adequate regulatory drivers so that companies are motivated to report on their environmental impacts would require coming out of comfort zones. Taking climate risks into account is now becoming part of smart financial management. Failure to do so may well be tantamount to an abdication of fiduciary responsibility and indication of poor management but it doesn't matter "" yet.

If the PM felt compelled to talk about profits, he should have goaded industry captains to examine the carbon intensity of their profits. How does CSR sit with it? Or maybe we need newer definitions? Maybe something like Corporate Sustainability Reporting? How does an Indian corporate propose to manage its carbon footprint if they don't intend to measure and monitor it? So can anyone on the high table really claim to be responsible?

According to the World Resources Institute, India's CO2 emission growth rate was among the highest at 70 per cent between 1990 and 2002. It points to a continuing high 70 per cent growth emission scenario upto 2025. Clearly, carbon management is likely to become a strategic issue, but it didn't moot a discussion. Given that there would appear to be no targeted legislation either proposed or discussed to reduce carbon intensity, even voluntary disclosure of a company's footprint is too much to expect. Despite climate change's emergence as a global issue and its dominant role in strategy, Indian companies appear confident in the status quo.

But business in the future will mean that companies move quickly to provide a choice for low carbon goods to meet the aspirations of consumers. The onus will be on business to showcase its carbon credentials on a product-by-product basis, rather than offering a blanket statement on neutrality. CSR will shift from charity to accountability.

When the Carbon Trust polled senior executives and public figures, most signalled out climate change than any other performance indicator as the issue that should be of concern in the coming year. According to a survey conducted by the Seattle-based Global Market Insite which polled opinions from 14,000 people in 14 countries, Indians are far more concerned about global warming than any other nationality with 55 per cent describing themselves as "very concerned" about the issue.

While emerging economies like India and China are often accused of resisting the need to tackle climate change, the survey suggested that people of these two countries are more worried about climate change. This April in China, the National Development Reform Commission officially launched the 'Top-1000 Program' which targets energy efficiency improvements in the 1,000 largest enterprises that together consume one-third of all China's primary energy. Premier Wen Jiabao chaired the national conference.

The race for building a low carbon economy has kicked off. Soon, the profits of a corporation will be determined by its carbon intensity. And unfortunately for India, the Prime Minister and his august audience who have been quibbling over nothing will be playing catch up.

The author is Executive Director, Greenpeace India