Corporate India must focus on sustainability

Extreme climatic events are impacting businesses around the world by damaging infrastructure and disrupting supply chains. Ironically, this complex challenge gets incorrectly classified as a long-term threat and is often excluded from contemporary corporate decision-making.

The Paris climate accord requires action to reduce dependency on fossil fuel. By postponing action, corporations are exposing themselves to a variety of risks. Corporate India, at a minimum, has to urgently familiarise itself with the significant amount of work that has been done by governments and the scientific community to understand and explain climate change impacts.

The growing risks of climate change make it incumbent upon corporations to enhance their strategic focus on the traditional three “R”s — Reduce, Reuse, and Recycle. This is integral to the increasingly popular concept of the circular economy, where resources are circulated within the system releasing minimal waste, and which emphasises sustainable supply chain management. To help in the migration to more climate-friendly processes, corporations can consider adopting measurement frameworks and tools such as an internal carbon price for business planning. A shadow carbon price is useful in evaluating different scenarios while taking decisions, and highlights the regulatory and asset obsolescence risks of future investments.

Corporations must also embrace the business opportunities associated with the adoption of new climate friendly technologies. With sharp declines in cost, these present corporations an unprecedented opportunity to leapfrog to a more sustainable future; this is not dissimilar to the manner in which corporate India has embraced mobile communications technology. In the future, corporations will be obliged to disclose the risks they face from climate change impacts. Indeed, regulators around the world are evaluating the extent to which corporations must forecast and disclose to their investors and other stakeholders the vulnerability of their businesses to climate change. Indeed, the sustainability agenda is now a part of mainstream corporate strategy development. This year is likely to see Indian CEOS, particularly from companies that have an international footprint, tested for their ability to offer visionary leadership in responding to climate change.