Key Takeaways
➢ A sample of 35 companies from the top 200 companies shows that most companies set 2030 as their target year for Renewable Energy/Electricity Goals and most of them show positive movements in the direction of the goal.
➢ Most companies from the sample that have achieved 80-100% of their target belong to Industrials followed by Consumer Staples.
➢ In the energy intensive sectors, Industrials have set pragmatic goals as they align themselves well with their goals meanwhile, Materials may have set overly ambitious goals. Energy and Utilities make inadequate disclosures.
➢ Easy to electrify sectors such as Information Technology, Real Estate and Consumer Discretionary are holding back from taking leaps in energy transition as they struggle to stay on track with their commitments.
➢ The percentage of target achieved in the low energy intensive sector displays a negative correlation with Market Capitalization as opposed to a positive correlation in the high energy intensive sector.
24 out of 35 companies that set Renewable Energy goals show movement towards them.
35 out of top 200 companies that have disclosed their renewable energy or electricity goals were examined. Few companies are members of climate initiatives like RE100, EV100 and EP100 that makes 2030 an important year for Renewable Energy goals. The average share of Renewable Energy (RE) in total energy consumption in FY23 for high energy intensive sectors is 6.7% and 45% for low energy intensive sectors.
24 out of 35 companies have disclosed the status of target and display movement towards their goals as measured by percentage of target achieved. 7 out of these 24 companies have covered 80-100% of their target and maximum belong to the industrials followed by consumer staples. 11 companies make inadequate disclosures for measuring the progress.
Companies with FY22 or FY23 goals may have been over-ambitious
Companies with FY25 as their target year have crossed 50% of their goals, presumably as they rush to meet them. However, companies with target year of FY23 (like Macrotech Developers Ltd. and Shree Cement Ltd.) are further away from their commitment. Also, companies with a target year of FY22 or before, have shown progress but the pace was inadequate to meet the target on time. This may also indicate that companies with very near-term goals set overly ambitious goals.
Low Energy Intensive sectors show an inverse relationship between market capitalization and target achieved as opposed to High Energy Intensive sectors.
On observing the percentage of target achieved vis-à-vis market capitalization (as on 31st March 2022), high energy intensive and low energy intensive show opposite trends. Companies with greater than INR 10 million market capitalization (like Tech Mahindra Ltd. and Tata Motors Ltd.) in low energy intensive have achieved less than 30% of their target. Conversely, in the energy intensive sector, companies with less than INR 10 million market capitalization have attained up to 60% of the target. The line of best fit displays a positive relationship in the high energy intensive sector and an inverse relation in low energy intensive sector between percentage of target attained and market capitalization.
Industrials set pragmatic energy goals and fare well in their goals
15 out of 24 companies that disclose the status of progress are not aligned with the expected trajectory. 9 companies are faring well towards their goals. Industrials have set pragmatic goals for themselves as most companies that are on track belong to this sector. In contrast, companies in Materials and Information Technology may have set overly ambitious targets. It is interesting to note that less energy intensive sectors like IT, Consumer Discretionary and Real Estate are holding back from their potential to take leaps in energy transition. Moreover, companies in the Utilities and Energy sectors either are not on track or make insufficient disclosures.
RE Goal achievement scorecard of 35 companies from India’s top 200 listed companies
For this analysis, companies that shared energy related commitments from the top 200 listed companies in India (as per market capitalization in 2022) were selected. These commitments can be related to RE capacity for operations, specific energy consumption reduction, energy mix or efficiency. To study the progress towards the goals data for energy related commitments were was collected from companies’ publicly available reports from FY21 to FY23.
The methodology measures percentage target achieved as change till reporting period from value in base year relative to change in value targeted from value in base. Linear interpolation of target value over the relevant period for each company is done to find an ideal expected estimate in the reporting period. If the actual value in the reporting period is greater than or equal to the ideal estimate, then a company is said to be on track.
