The twenty-sixth session of the Conference of the Parties (COP26) to the UNFCCC, that is, The 2021 United Nations Climate Change Conference has sent a clear message to global corporates and executives—to direct their investments in innovative projects and new technologies, reassess their business models and carbon footprint in order to make a rapid and necessary transition to sustainability and guarantee a cleaner, safer, and healthier planet.
The final COP26 outcome recognized the importance of both reducing emissions and building resilience for the impacts of climate change in addition to energizing a raft of initiatives announced on the sidelines. The Glasgow platform observed launch and emergence of innovative sectoral partnerships, global collaborations, and new opportunities with the focus on the specific solutions needed to decarbonize key sectors and build resilience. Globally, for businesses, these announcements and collaborations will create a plethora of opportunities to innovate and invest, design low-carbon business models, and play a leadership role through its industry peers, value-chain partners, investors and capital providers, and policymakers.
At COP26, India announced its net zero pledge by 2070. With the announcement of India's new and bold climate targets, Indian businesses would require considering sustainability not as a value-addition but as a core requirement in their business strategies. Indian corporates can now look forward to take decisive steps in accelerating climate action both by decarbonizing their own portfolios and value chains as well as supporting and implementing the next generation of technologies that would lead to lower carbon emissions. The following are some implications for Indian businesses and industries from COP26 for championing the climate change effort as well as defining their decarbonization agenda. In addition, they will allow the unlocking of green investments while supporting India's renewed ambitious climate targets.
Glasgow Clean Energy Breakthroughs
The Glasgow Breakthroughs are a commitment to work together globally this decade to accelerate the development and deployment of clean technologies and sustainable solutions needed to meet Paris Agreement goals. The Glasgow breakthroughs aim to catalyse the growth of markets, jobs, and economic development for clean technologies and sustainable solutions in each emitting sector globally before 2030. India has set new targets of renewables to 500 GW by 2030.
In the past, Indian industry has achieved remarkable milestones and made the country the fourth largest wind installed capacity through private sector investments backed by fiscal and non-fiscal incentives. India has recently surpassed 100 GW of installed renewable energy capacity. The corporate procurement of renewables has a large potential in India, which needs to be further promoted. With the support of state agencies, commercial and industrial sector can become significant contributors for achieving renewable energy targets, thus catalysing financial requirements for the growth of the sector and contributing to the ecosystem development of new and emerging technologies for grid integration. The International Energy Agency (IEA) in its India Energy Outlook 2021 highlighted that the nation has the potential to become a “world leader” in battery storage, projecting that it could add 140–200 GW of battery capacity by 2040. India has also set a target for reducing carbon intensity to 45 per cent by 2030. This would mean India would need to drive clean industrial process and Indian businesses would need to take a leadership role in driving low-carbon industry transitions by leveraging opportunities of technologies and innovation.
Decisions on Article 6
The provisions and decisions on carbon markets provide impetus to Indian businesses to invest in low-carbon projects and also bring transparency and rigor to voluntary market carbon markets. The Article 6 market mechanisms will play a crucial role in driving investments from private and public enterprises into India and help us in achieving our mitigation and adaptation targets. With India's robust and bold climate commitments, it is anticipated that many businesses would come forward to invest in projects and participate in voluntary carbon markets. Since 2017, there has been an increasingly upward trend of the participation of Indian businesses in voluntary carbon markets (VCM). A total of 918 Indian projects are registered under various mechanisms/certification schemes in VCM. It is projected, that there is a mitigation potential of 200 million tCO2 in the decade from 2021–2030 across all carbon market mechanisms.
Establishment of International Sustainability Standards Board
The establishment of International Sustainability Standards Board (ISSB) would provide accountability on adopted measures and serve as a means for designing consistent, reliable, and comprehensive global sustainability standards to create purposeful, resilient organizations. In India, the growing eminence of sustainability disclosures through SEBI establishing Business Responsibility and Sustainability Report (BRSR) guidelines would motivate many businesses to mainstream ESG and climate action efforts while strategizing their action plans and aid financial institutions such as banks, credit rating agencies in investment decisions. The near-term actions by Indian industries would facilitate institutional capacities for both private and financial sectors. This includes integrating a green lens to long-term investment decisions and climate risks assessments.
The European Union has also proposed a Climate Border Adjustment Mechanism, which would tax imported goods produced which are emission intensive. Going forward, similar approaches would have huge implications on goods and services from developing countries. It is crucial for Indian businesses to start integrating sustainability within their operations and portfolios in order to gain a competitive edge in global supply chains and help India in becoming a manufacturing hub.
Glasgow–Sharm-el-Sheikh and Focus on Adaptation Initiatives
The prioritization of public private partnerships to support and enhance climate adaptations efforts supported by international partners could provide a strong incentive to the private sector for financing adaptation and resiliency.
A significant commitment from the business sector can be leveraged as an opportunity to accelerate India's sustainable aspirations for building a low-carbon economy. Technology will play a critical role to achieve global emissions targets. If the public and private sectors can collaboratively work together to deliver the targets and commitments on climate change at COP26, Glasgow would be remembered as an important moment to transform the Paris agreement from aspiration to action.