Budget 2022: Leading the shift towards a green economy
We are living in a remarkable era-defining moment in history. COVID-19 has not only redefined the way we live and work, but it has also put our priorities and approach towards holistic development under a scanner. As organisations and governments across the world have paused to reflect and realign strategies, they are acknowledging the importance of sustainability for equitable growth and a resilient society. What’s needed now is a well-designed and pragmatic budget that will help shape the new normal for us. With decisive policies in the upcoming budget, India Inc. can play a significant role in the country’s sustainable growth narrative.
Finance Minister Nirmala Sitharaman will present the budget three months after the Honorable Prime Minister Narendra Modi declared India’s commitment to become net-zero by 2070. We believe that budget 2022 would lead to the much-required shift towards green economy. It would help make sustainability an integral part of every organisation that extends beyond economic, legal or regulatory motives.
It’s Time to Add more Weight on Actions to Offset the Climate Imbalance
Globally, the concentration of carbon dioxide (CO2), the most important greenhouse gas, reached 413.2 parts per million in 2020, at nearly 149 percent of the pre-industrial levels. The results have been catastrophic: wildfires, extreme heat, moisture loss, devastating floods, and tropical cyclones.
As India continues to be committed to tackle climate change responsibly, we expect the budget 2022 to outline decarbonisation objectives clearly. At COP26, the Prime Minister said that India would reduce its carbon intensity — carbon dioxide emission per unit of GDP — by 45 percent by 2030, more than the previous goal of 35 percent reduction. We think that clearly outlined goals like these will help sustain the signs of recovery and will increase India’s resilience to future shocks.
Renewable Energy – The Powerful Engine That Can Achieve Net-Zero Emissions
The first step in creating a more sustainable planet is to achieve net-zero carbon emissions. Burning fossil fuels, after all, is not inherently bad – not as long as there is a method of recapturing the harmful greenhouse gas by-products before they are able to contribute to the further alteration of our atmosphere.
According to the United Nations, the world’s fossil fuel use is dangerously out of sync with global climate goals. The world draws around 80 percent of its primary energy supply from fossil fuels, while only about 3 percent of energy is sourced from renewable energy. This is because currently, it is cheaper to continue the consumption of fossil fuels rather than developing costly renewable energy infrastructure elements, like wind or solar farms.
However, it is imperative for the leaders of the nation to understand and acknowledge that in order to move towards net-zero carbon emissions, we must rally together and invest in environment-friendly ecosystems for the greater good. Some of the most promising solutions to reach net-zero emissions include moving towards solar and wind power. To reach the target of net-zero emissions by 2070, the development of solar and wind farms will need to increase substantially. We expect the upcoming budget to take this into cognizance. We anticipate it to take forward the Hydrogen Mission to help decarbonize the economy and energy systems. Currently, 40 percent of worldwide CO2 emissions come from carbon-based power plants.
Policies for the Planet
Organisations have long understood the need to weave in the larger purpose, especially sustainability and social impact, along with financial targets. Currently, India is well ahead of its targets in achieving ambitious commitments such as making renewables 40 per cent of its energy mix by 2030 and managing the sequestration of 2.5 billion tonnes of carbon. Moving ahead, to cap global warming at 1.5 degrees Celsius, policy should take the long view, expand access to digital connectivity, foster global interoperability and comparability of ESG approaches, and invest in green infrastructure and green technologies to bolster growth along a resilient and inclusive path.
The recent COP-26 spurred private players to take the lead in investing in a better future and means of surviving nature’s vagaries. The World Economic Forum’s Davos Agenda ’22 will further the launch of fresh initiatives to accelerate the mission to net-zero emissions. Currently, more than half the world’s total GDP, $44 trillion of economic value, is moderately or highly exposed to risks from floods, cyclones, and heatwaves. Along these lines, it is imperative for us to recognize that societies and economies around the world rely on nature, and we are all at risk if we do not act promptly.
Company crusaders to ‘green-wash’ the world walls
It is heartening to see many organisations navigating with caution in the post-COVID world. Visionary ideas are being explored to rein in the carbon footprint, encourage green technology, diversity and social inclusion, skilling, business ethics, welfare benefits, gender parity, occupational health and safety, compliance, and risk and crisis management.
Nearly 95 percent of S&P 500 companies now have an ESG strategy. A new study has pointed out that Indian technology and services firms will witness business growth from the increasing investments by global firms in improving their ESG goals. The report, “The Next Big Leap” towards ESG maturity in tech sector mentioned that over time, ESG could emerge as a key differentiator in large tech deals. Already, India is witnessing an increasing focus on ESG. Assets under management (AUM) for ESG themed funds rose to $650 million in FY21 from $275 million in FY20, a 2.5X increase.
ESG – an opportunity, not just morality!
ESG is an opportunity, and should be approached holistically, and not with a tick-box mentality. Today, several global enterprises are ensuring that their vendors, including start-ups, adopt ESG goals if they want to pitch for their business.
The upcoming Budget 2022 should further encourage ESG implementation in India. It must also focus on facilitating an ecosystem for green technology by incentivising technology adoption in renewable energy sector. Many countries, such as Taiwan, Malaysia, and Vietnam, have emerged as hubs of solar modules and components as a result of huge government subsidies.
Additionally, the government should focus on putting India on the global EV map by taking necessary measures to encompass EV charging infrastructure. Increased infrastructure spending along with subsidized tax rate on charging stations would encourage EV adoption across the country.
With millennials and gen-z pushing brands to do more for the communities they serve, business leaders must truly strive to build brands with a purpose. Organizations that are ecological and socially conscientious are rewarded with happier employees and more engaged customers. Beyond doubt, well managed ESG enables more opportunities and better brand value and with the government, investors, and organizations increasingly becoming ESG-conscious, we foresee India emerging as a key cog in the global economic wheel of sustainable growth.