Opinion

Industry must combat climate change now

| Updated on October 09, 2021

The need of the hour   -  istock.com/

By transitioning to energy efficient systems, MSMEs can cut costs and improve productivity and competitiveness

The recent Intergovernmental Panel on Climate Change (IPCC) report has reiterated what we have all feared — that human-induced climate change is gathering pace.

Even in the most ambitious emissions reduction scenario, the IPCC report claims that the world will warm by 1.5°C above pre-industrial levels in the 2030s, while based on the current state of global climate commitments, the world is on track to warm by a hellish 2.7°C by end of the century.

A huge part of this will be a direct result of our reliance on fossil fuels for industrial power. Their energy density and cost have so far made them invaluable, but industries around the world must decarbonise rapidly for any hope of containing global warming to 1.5°C by 2100. Not just governments, business leaders too need to step up and commit to slashing emissions as soon as possible.

The situation is immediately relevant to India because of its propensity for heatwaves, drought, cyclones and flash floods. Industry accounts for 23.2 per cent of India’s GDP, but it will be severely affected by the rising temperature in the next 9-10 years. A study of more than 58,000 factories across India by the Energy Policy Institute, University of Chicago, shows that manufacturing plants generate about two per cent less revenue for every one-degree Celsius rise in annual temperature. Thus, by 2030, diminished labour productivity alone could reduce GDP by 2.5-4.5 per cent.

The impacts will be all the more pronounced on industries such as beverages, wineries, fishing, agro-processing, insurance and tourism. The Lancet Countdown report on health and climate change estimates that India lost 118.3 billion work hours and 111.2 work hours per person to extreme heat in 2019, the highest for any country. To ensure business isn’t affected going forward, labour intensive industrial sectors might have to switch to increased automation, or move to cooler parts of the world. That would be a catastrophic blow to India’s industrial jobs, competitiveness and wage inequalities.

An agenda for MSMEs

The Micro Small and Medium Enterprises (MSMEs) are an essential part of India’s industrial ecosystem. In Maharashtra out of 7.34 lakh units, 7.31 lakh (>99 per cent) are categorised as MSMEs. Industry contributes to about one-fourth of the country’s greenhouse gas (GHG) emissions and are an important segment for decarbonisation. Fortunately, a recent survey across large, medium and small businesses in Maharashtra revealed that over 50 per cent believe that climate change impacts their sector, and 45 per cent believe that it impacts their business as well.

Overall, heavy rainfall, floods, cyclones, water shortage and rising temperature are seen as the main threats across industries and sectors, and 37 per cent of businesses claim that climate change is resulting in “capital destruction” and “destruction of flora and fauna, which is leading to loss of business”.

The IPCC report has made it clear that an evolved government policy has to go hand-in-hand with a proactive industry ready to urgently reduce carbon emissions. The first step towards action for Indian industry is to measure and analyse its carbon footprint and prepare a scientific damage control plan. Business leaders must transition their businesses to renewable energy sources, reduce waste and establish recycling as a business model.

An overhaul of product lineups, such as quickly phasing out fuel-inefficient cars is equally important to send the message that climate action is more important than short-term profits. Similarly, investing in industrial energy efficiency measures, switching corporate fleets to electric vehicles and optimising supply chains for energy use and resources will be necessary steps forward.

Energy efficiency is a key area where the Indian MSME sector can improve upon. MSMEs are losing out due to high energy costs, including coal, coke, electricity, diesel, and steam, as well as inefficiencies in the system. Due to the use of conventional technologies, units are forced to spend more for a given output than is needed. In order to reduce these costs, they have to either retrofit or upgrade to newer technologies. Transitioning to energy efficient solutions would reduce their operational costs and enhance their overall competitiveness.

Repeated disasters along the Indian coasts, like cyclones Nisarga, Tauktae and Amphan are signals that the time to course correct was yesterday.

As Mumbai and Maharashtra build city and State action plans respectively, to tackle climate change, it’s imperative that they take along members of industries that form the backbone of the city and State’s economy. As industries recognise the threat of climate change and build back from the impact of the pandemic, it’s high time that the Central and State governments give green recovery a push and promote every incentive that fuels the growth of a sustainable, climate friendly economy.

The writer is the co-chair, MSME committee at the Bombay Chamber of Commerce & Industry

Published on October 08, 2021

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