It is widely accepted that climate change will have deleterious effects on human lives and livelihood. However, are Indian companies ready to tackle it? A report by a multinational insurance company sheds some light on the subject.
Key Highlights
- A survey by Willis Towers Watson found that 82% of the companies surveyed had some form of board discussion on climate change.
- Around 47% of the companies surveyed were not privy to the global TCFD framework for ESG reporting.
- Approximately 64% of the companies surveyed classified climate change under their Sustainability Agenda
With growing consciousness about the ramifications of climate change, governments and businesses are bolstering up their defence to mitigate the potential risks to investments.
Taking stock of the situation, the US Securities and Exchanges Commission had proposed a framework for listed companies to disclose the risks they face from climate change to bring about transparency for investors.
With impending frequent and deadly disasters, climate change has the potential to put business assets worth crores in jeopardy.
In 2021, the Securities Exchange Board of India (SEBI) had formulated a reporting mechanism for ESG parameters implemented by Indian companies to be made mandatory for the top 1000 listed companies by market capitalisation from 2022-23 onwards.
The framework is tantamount to the global framework called ‘Task Force on Climate-Related Financial Disclosures’ (TCFD), wherein companies disclose their performance against sustainability parameters.
Are Indian Companies then well prepared for the effects of Climate Change?
A survey by Willis Towers Watson (WTW), a multinational insurance company evaluated Indian companies based upon their awareness and readiness for the negative effects of climate change.
The survey found that approximately 82% of businesses had board-level discussions on the financial ramifications of climate change. In addition, approximately 53% of companies were discussing disclosure under the TCFD framework while around a quarter of the companies evaluated were ready to report under the TCFD framework.
The report also found that approximately 61% of the companies had processes in place to identify and manage risks arising from Climate change and around half of the companies had set commitments on Carbon emissions.
However, it also mentions that around 47% of the Indian companies surveyed were oblivious to the TCFD framework.
On how the companies classified the topic of climate change, the report found that approximately 64% of companies classified climate change under their Sustainability Agenda, while 43% classified it under Risk Management.
Given the role climate change will play in determining the profitability and growth of businesses, major companies like Hyundai India and Hindustan Unilever Ltd. functioning in the automobile and FMCG sectors now consider climate change as their biggest worry.
With the country projected to become the third-largest economy in the world by 2027, Indian companies must step up and take the lead in turning sustainable.
The MSME sector, which has a share of 36.2% in the manufacturing output of the country is more vulnerable to the threats posed by climate change, and hence must act before negative externalities start affecting businesses.
