The Task Force on Climate-related Financial Disclosures (TCFD) has a robust framework for climate-related risks and opportunities and its financial impact on business. The framework is structured across four pillars – governance, strategy, risk management, and metrics and targets.
In line with the TCFD framework, we are disclosing climate change-related information on our climate governance, processes we used to identify, assess, and manage climate change risks and opportunities, our strategies to safeguard our business performance, climate change scenario analysis as a forward looking business strategy, and lastly, our metrics and the targets.
The Managing Director and CEO approves climate-related strategies and reviews the sustainability performance through key performance indicators on a quarterly basis. Further, a mid-year review of our Annual Operating Plans is organised at all levels. We have a Board-level ESG Committee headed by the Chair of the Board to oversee the sustainability performance and provide strategic inputs on climate change-related matters.
We integrate the oversight of climate-related risks and opportunities into our operations at the plant or facility level. The operations team at each facility works towards achieving annual sustainability targets that contributes to long-term climate action goals. For example in India, production facilities based in four regional manufacturing clusters: North, South, Central, and North Eastern clusters. Each cluster has a Green Champion to coordinate with the respective plant teams that involve members from production, maintenance, and electrical departments. These teams lead implementation of climate-related measures, such as implementation of energy efficiency in operations and renewable energy projects. We have a cloud-based monitoring platform to capture and monitor sustainability-related data to furnish performance reports on a monthly basis.
All employees who have a role to play in ESG performance have climate-related goals integrated into their KPIs.
Our Sustainability and CSR head, the highest c-suite level management executive, is responsible climate targets of achieving scope 1 & 2 net-zero emissions by 2035. Each of our manufacturing clusters have plant cluster heads and green champions (sustainability officers) to look after performance of the plants on climate change front along with the operations. Their KPIs include doubling energy efficiency by 2030 in with our EP100 commitment (w.r.t baseline of 2012), increasing renewable energy share of total energy to 80% by 2030 and energy and emission intensity year-on-year in line with net-zero by 2035 targets.
Scenario analysis is a process to examine likely future events and assess risks and opportunities, arising from climate change. It is a hypothetical situation which describes a pathway to a particular future outcome and climate-related scenario analysis is used by businesses to inform their strategy and for stress testing.
As per TCFD recommendations, we have consider a set of scenarios aligned with the 2015 Paris Agreement (1.5 C future). We have also consider a business as usual (BAU) scenario to assess the future with minimum efforts towards climate change mitigation. Our scenarios are consistent with the scenarios based on the Intergovernmental Panel on Climate Change’s (IPCC) Representative Concentration Pathways (RCPs) and the Shared Socioeconomic Pathways (SSPs).
| Physical scenario considered | Transition scenario considered | |
|---|---|---|
| Below 2 °C |
SSP-1 - aligned to RCP 2.6 | IEA B2DS |
| Above 2 °C |
SSP-5 - aligned to RCP 8.5 |
Our TCFD assessment covered all our operations including new manufacturing sites that are coming up. As defined by the framework, we consolidated a repository of risks through site-level surveys, peer review and stakeholder consultation. Moreover we identified opportunities in transitioning to a low-carbon economy.
We sored each risk/opportunity using a 4-factor analysis by taking product of ‘Likelihood’, ‘Impact’, ‘Vulnerability’ and ‘Speed of Onset’. 4-factor risk which involves vulnerability and speed of onset, in addition to likelihood and impact, is more practical for climate change, owing to the nature of adaptability and time dependence of the realized effects. All the risks were then ranked to evaluate prioritised or material climate risks. We examined key parameters such as temperature, water scarcity, and precipitation, all of which will have a crucial role in shaping the impact of climate change on our business.
Our businesses are particularly vulnerable to climate-related risks, such as supply chain disruptions, increased cost of upstream and downstream operations, and regulatory penalties. Our largest pool of consumers are in tropical countries such as India, Indonesia, and Africa, and all of these countries are witnessing significant impacts of climate change—unpredictable weather and scanty or excessive rainfall.
From our assessment, we have determined that the potential ramifications of climate change will be particularly pronounced in our operational location in India at Karaikal, Katha, and Guwahati manufacturing sites and have a plan in the next 3 years to address these risks. We have already started taking necessary steps to address the potential risks. For example, for water availability, we have incorporated rainwater harvesting system at all our manufacturing facilities to improve groundwater table. In these water stress areas, we have developed required infrastructure so that the communities don’t suffer due to lack of water. Besides, we are working with farming communities in four villages covering an area of 3300 Ha in implementing integrated watershed management programme.
Following the climate risk assessment we have integrated climate change risks into our Enterprise Risk Management (ERM) system. Priority climate-related risks for us such as decreased efficiency of workforce, and suppliers unable to meet requirements that align with low-carbon transition among others are now included in our risk registers.