The substitution of coal and diesel with eco-friendly biofuels reduces the emission of harmful gases that are detrimental to the environment and contribute to global warming
In a world grappling with the challenges of global warming and climate change, the recent warning by the World Meteorological Organization (WMO) of potentially record-high global temperatures between 2023 and 2027 underscores the urgency of addressing these issues. July 2023 was one of the globally wettest July’s on record while August witnessed most countries including India experiencing its driest and hottest month ever recorded, intensifying concerns about climate impacts.
As our weather patterns become increasingly unpredictable, we face uncertainties in food production, heightened health issues, and an overall diminished quality of life. While every individual bears the responsibility of mitigating climate change through eco-friendly choices and sustainable living, India's corporate sector also plays a pivotal role in setting an example through the adoption of environmental, social, and governance (ESG) practices.
On a global scale, companies embracing ESG principles are witnessing increased investment inflows as investors seek to support environmentally-conscious and sustainable businesses in alignment with future goals. In India, the transition toward ESG practices has been gradual and primarily driven by regulatory guidelines. SEBI, India's regulatory authority, introduced the Business Responsibility and Sustainability Reporting (BRSR) initiative, initially on a voluntary basis for the top 1,000 listed companies starting from the financial year 2020-21, subsequently making it mandatory from 2022-23. This initiative encourages companies to report on their ESG performance, transcending conventional financial disclosures to align with responsible and sustainable business practices.
Companies Act, 2013 also mandates the disclosure of information related to energy conservation in board of directors' reports, reinforcing the importance of sustainability and transparency in corporate operations. SEBI's initiatives have had a notable impact on ESG reporting in India, with the number of companies reporting their ESG performance increasing from 127 in FY20 to 330 in FY22. This surge reflects a heightened awareness and commitment to sustainable and responsible business practices within India's corporate landscape, mirroring the global push to integrate ESG considerations into business operations and disclosures.
In July 2023, SEBI further emphasised the importance of responsible and sustainable business practices, by introducing new ESG metrics and making it mandatory for the top 1,000 listed companies to file their BRSR reports. These steps aim to enhance transparency, accountability and investor confidence in ESG investing by ensuring that funds genuinely adhere to ESG principles and provide clear information to investors.
For companies, incorporating ESG into business operations can take several forms. Of the three facets, environmental criteria (the 'E' in ESG) assume paramount importance in their efforts to reduce its carbon footprint, greenhouse gas emissions and overall sustainability initiatives hold implications not only for the enterprise but also for the environment and future generations. Consequently, businesses can contribute to reducing GHG emissions and carbon footprints by embracing renewable energy sources, with biofuels emerging as a significant player in the journey towards low carbon and sustainable business operations.
Biofuels, particularly solid biofuels made from organic materials like agricultural waste, hold great promise as an environmentally friendly energy solution. They are created by compacting these waste materials without the use of binding agents or chemicals and without consuming water. This process produces clean and efficient pellets or briquettes that can be used by manufacturing companies to power their industrial boilers, reducing reliance on fossil fuels and minimising environmental impact.
Firstly, the use of biofuels helps address the issue of abundant agricultural waste in countries like India, notably paddy stubble, which is often burned by farmers, causing environmental harm. India generates approximately 500 million tonnes of agricultural residue annually, with nearly 200 million tonnes being burned without any productive use. Converting this waste into biofuels not only reduces pollution but also lessens the reliance on non-renewable energy sources such as diesel and petrol.
Secondly, the utilisation of biofuels indirectly supports employment opportunities in rural areas. The entire process, from transporting biomass to factories to producing biofuels and supplying them to end-users, generates livelihoods for many individuals. This includes farmers, biofuel manufacturers, their staff and laborers, thereby fostering micro-entrepreneurship in rural regions where employment options are often limited to agriculture.
Thirdly, the substitution of coal and diesel with eco-friendly biofuels contributes to the conservation of fossil fuels and reduces the emission of harmful gases that are detrimental to the environment and contribute to global warming. Additionally, replacing fossil fuels with relatively less expensive biofuels can lower production costs by at least 25%. The advantages extend beyond cost reductions to encompass investor preferences for sustainability and ESG compliance. Companies that utilise biofuels are viewed more favourably by investors, reflecting positively on company culture and positioning the business for future opportunities, as sustainability aligns well with customer expectations.
Lastly, biofuels reduce the nation's dependence on imported petroleum. This is especially crucial in light of global geopolitical shifts, such as Russia's actions in Ukraine, which have permanently impacted the world's oil markets. Biofuels provide a degree of insulation from geopolitical risks by decreasing reliance on imported petroleum and coal. To sum up, for India Incorporation to meet its ESG commitments, biofuels can speed up the transition and seem almost inevitable in the journey to a greener and more sustainable future.
(Ashvin Patil is the Founder and Director, Biofuels Junction Pvt Ltd.)