India’s tech sector switches on to renewable electricity
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The growth of the IT sector has helped to revolutionise India’s economy, transforming it from a largely closed-off Soviet-inspired system in the 1980s to the world’s back office since the 1990s.
Now, India’s IT sector, which has annual revenues of more than $200bn and employs 5mn people, is a provider of digital services to corporations around the world, tapping the country’s deep pool of engineering and language skills.
And the sector also contributes a large proportion of the Indian companies on the FT’s 2022 Asia-Pacific Climate Leaders list. Highest among these is Bangalore-based Mindtree, which is followed by others such as Mumbai’s Tata Consultancy Services and Tech Mahindra in Pune.
The Climate Leaders list — compiled in partnership with Nikkei Asia and data provider Statista — identifies companies that have significantly reduced their Scope 1 and 2 carbon emissions relative to revenue. These are the emissions that arise, respectively, from a business’s own operations and from generating the energy it purchases.
Digital companies feature strongly as they tend to have relatively low Scope 1 emissions. Unlike heavy industry, they do not run CO₂-emitting furnaces, for example.
However, India’s IT sector shows both the opportunities and the challenges facing a booming white-collar industry that plays an integral role in the global services economy.
These companies are often massive employers, with hundreds of thousands of workers across India and the world. They operate in some of the hottest regions, such as India’s capital New Delhi, where temperatures recently hit 49C, making them big consumers of air conditioning. In addition, they run vast energy-guzzling data centres to support clients’ businesses globally.
Nilanjan Roy, chief financial officer of IT giant Infosys, says the company takes what it has learnt about reducing its own emissions and sells that knowledge to clients. Cutting emissions “gives you business opportunities”, he says, adding that Infosys has set up a business unit that offers consulting on decarbonisation and other areas. “We are a tech firm. Why don’t we help our clients on their sustainability? . . . It’s good business for us.”
The immediate challenge for India’s IT companies is their Scope 2 emissions, which are generated indirectly through energy they consume.
India’s electricity system remains dependent on coal, which accounts for 70 per cent of power generation. While the country is investing in building renewable capacity, absolute consumption of coal is expected to increase as the economy and population grow.
So, for Indian companies trying to cut emissions, an obvious first step is making their buildings more energy-efficient by upgrading air conditioners or using alternatives, such as water cooling. A more significant step, however, is sourcing renewable electricity, either generated by themselves or a suitable power provider.
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Some have set up their own solar farms. Mindtree operates one for a training campus in the city of Bhubaneswar, while Infosys has a power plant near its Bangalore headquarters.
Santhosh Jayaram, head of sustainability at HCL Technologies, says that, while there is a cost to setting up a renewable energy facility, a company can recoup its investment in less than two years. “It makes business sense for us to move into renewable energy,” he says.
But trickier yet is cutting Scope 3 emissions, which are generated by corporate activities outside companies’ direct control, such as commuting or business travel. Measuring these has become more complicated since the coronavirus pandemic began in 2020.
Many of India’s IT companies have championed working from home, for example, with TCS introducing a policy that no more than 25 per cent of its workforce needs to be in the office at any given time. But, while fewer staff in the office has led to drops in Scope 1 and Scope 2 emissions, workers are now powering air conditioners, lights and computers for longer periods at home.
Executives acknowledge this is a new challenge. “The pandemic has brought in a new set of emissions which for the first time we have quantified: ‘Work from home emissions’,” says HCL’s Jayaram.
Many companies have not reported these separately but Infosys’s environmental, social and governance report gives a sense. Its work from home emissions jumped 10 per cent in the year ending March 2022 to 71,503 tonnes of CO₂-equivalent — greater than its Scope 1 and 2 emissions combined.
India’s IT companies will need to find ways to address these emissions if they are to adapt, executives say.
PS Narayan, head of sustainability at Wipro, argues that being able to show progress on emissions has become vital to attract staff at a time of fierce competition for talent.
“Climate change [and] ecological sustainability is of growing interest to young people,” he says, adding that they will want to know “what the companies they’re joining are doing about sustainability”.
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