The carbon choreographer: Mahindra Group’s Anirban Ghosh on building a carbon neutral business empire

The Mahindra Group prides itself on giving its subsidiaries space to grow and innovate. The $20bn company styles itself as a federation, a structure it says is less restrictive than a traditional conglomerate. While best known for the tractors and rugged 4&4s sold by its automotive arm, the group in fact incorporates more than 150 companies, with firms operating in nearly two dozen disparate sectors, from steelmaking and farm equipment to real estate, electric mobility, hospitality, renewable energy, and ICT.

However, one of the few areas that is coordinated centrally is sustainability. For decades, Mahindra’s myriad companies have been bound by a shared mantra to “drive positive change”. This mission became somewhat more pointed in February 2019, when company chairman Anand Mahindra announced at the World Economic Forum that collectively the companies in his business empire would achieve carbon neutrality by 2040.Chief sustainability officer Anirban Ghosh is responsible for orchestrating this high profile push. His job is to corral the patchwork of companies operating under the Mahindra umbrella behind the broad decarbonisation agenda, and ensure each company is willing, primed, and able to pull its weight to meet the parent company’s carbon neutrality target. With Mahindra companies engaged in hugely energy-intensive sectors, such as steel making and heavy-duty vehicles, it is no small undertaking.

But Ghosh claims the task is less complicated than it sounds. In an interview this month with BusinessGreen, he explained there is a universal decarbonisation framework that applies to all Mahindra companies, no matter what sector they are in or their emissions profile.

“Initially, we thought this would be a very complicated thing, and that different businesses would have different things to do,” he recalls. But the more his team studied the problem, he explains, the more apparent it became that the same four drivers would propel decarbonisation at all Mahindra companies: energy efficiency, renewable energy, electric mobility, and offsetting. As such, the team has now drawn up dedicated plans for each company based on action on these four fronts.

“These essentially are the four big levers,” Ghosh says. “They are relevant to every business. Of course, what a business does for energy efficiency depends on the technology it requires. A small steelmaking unit’s plan will have similarities with that of a regular manufacturing factory, but they will also have other things to do.”

Ghosh emphasises repeatedly that companies need to acknowledge decarbonisation as a business opportunity, as well as a planetary issue. As such, he says deliberately puts the business case for sustainability at the heart of each Mahindra subsidiary sustainability roadmap, noting the attractive returns from renewable energy and energy efficiency projects work as a hook to entice management to embrace the broader sustainability vision. “Step one is to get the businesses going on the programmes which are great for business anyway, where there isn’t much convincing required,” he explains. “Once you get started, people within the business start understanding the issues related to climate change, understanding our contribution towards it, and the cookie crumbles, my programme gets bigger and commitments are made.”

In order to address the largest buckets of emissions produced by the group and achieve carbon neutrality, all of Mahindra’s most carbon-intensive businesses are to establish science-based decarbonisation targets, Ghosh continues. The conglomerate’s flagship automaker Mahindra & Mahindra, steelmaker Mahindra Sanyo Special Steel, steel processor Mahindra Accelo, and several real estate companies are among 16 Mahindra businesses to have already had their targets officially validated and approved by the Science-Based Targets initiative (SBTi).

With the various goals in place the firm’s decarbonisation agenda is now set to be facilitated by Mahindra’s growing portfolio of green technologies, products, and solutions, which includes electric vehicles (EVs), solar energy, waste-to-energy, biogas fuels, green buildings, and micro-irrigation systems. The company is already the largest producer of EVs in India and plans to ramp up its range of zero-emission two, three, and four-wheelers over the coming decade. While reticent to predict a date when the company will phase out fossil fuel vehicles altogether, Ghosh anticipates the tipping point when EVs will become dominant will come “very soon” as battery costs decline and bans on sales of fossil fuel vehicles multiply across different regions.

Ghosh strongly believes the private sector’s embrace of green technologies and solutions over the coming decades will crack the climate crisis. “The reason why we will win this climate game is because the things that you need to do are great for business,” he says. “They are economically the right things to do, and that is why they will gather scale. If they were not economically feasible, we would have to break our heads to get them done, and the only way we would be able to do it is through public money – and that as we all know is limited. The moment it becomes a viable business, it acquires scale on its own.”

The fact that business is largely responsible for much of the climate emergency is largely a reflection of how business priorities have shifted over recent years, he adds. “When Rudolf Diesel discovered diesel, and when Karl Benz invented the motor vehicle, they were solving problems of that time,” he argues. “So the role of business hasn’t really changed, but what has changed is what business needs to do is to enable a better planet.”

Ghosh estimates all Mahindra subsidiaries will collectively have to deliver carbon emissions in the range of 60 to 70 per cent by 2040 on a 2008 baseline, if the Mahindra Group is to achieve its overarching goal of becoming carbon neutral by 2040. Any residual emissions will be offset, he says, but emphasises the company’s policy is to encourage firms to tap offsets as sparingly as possible, given they are, in his view, a less economical way to reach carbon goals.

“The greater the amount of offsetting, the lesser the business benefit,” he argues. “Offsetting is always a cost. It does not reduce costs or improve the balance sheet in any way. However, the more energy efficiency you do and the more renewable energy and planet-friendly technologies you adopt, you reduce your carbon footprint and modify your processes. Those are all great for business.”

That said those carbon credits that are deemed necessary will be generated by a forest in the hills of Andhra Pradesh in eastern India which has been planted gradually by the Mahindra Group over the last 14 years. The plantation, which has flourished from a 2007 corporate social responsibility pledge to plant one million trees a year to help fight escalating deforestation in India, now boasts more than 17 million trees, and Ghosh predicts its carbon sequestration potential could ultimately exceed the amount of carbon required for the group to secure carbon neutral status.

The home-grown forest allows the company to sidestep a number of the thornier questions about the quality and validity of offsets many other corporates face. “I have been a part of many offsetting conversations now,” he says. “When people ask questions about additionality, etc – those are not issues we have in our project, because all those trees are planted by us. They are planted in tribal territories on the lands of tribal farmers, they are fruit trees, getting the [farmers] additional income.”

Another initiative that has given the Group a head start with its decarbonisation agenda, Ghosh says, is the introduction of a carbon price more than five years ago at its largest business, Mahindra & Mahindra (M&M). The $10 levy on all emitted carbon at the car and tractor giant has led to a 10-fold increase in budgets for low-carbon projects and streamlined internal decision-making, he explains.

Ghosh says he came up with the concept in 2016 in his previous role as sustainability lead at M&M, after realising time-consuming approval procedures were a major barrier to sustainability work. “I would see my colleagues spending most of their time trying to convince our asset managers and our cap-ex people to sanction sustainability projects,” he remembers. “For the numbers we were presenting, which had a payback period of two years or less on capital employed, or 24 per cent or more, I thought we shouldn’t need so much time to get these projects cleared.” The carbon pricing scheme was renewed after it soared past its target of driving a 25 per cent reduction in the firm’s operational carbon footprint in three years, he explains.

And in the many other Mahindra businesses that do not have a carbon pricing mechanism in place, Ghosh says the economic case for energy efficiency and renewables is increasingly hard to argue with. “As of now, projects give us payback within two years, max three – which means it keeps the return on capital employed somewhere between 18 and 24 per cent, which is a super rate of return,” he says.

Besides, he adds, the Group’s green credentials are increasingly playing a role in attracting investment to its subsidiaries, Ghosh notes, highlighting how several Mahindra firms have secured funding expressly because of their sustainability ambitions and progress, most notably from the World Bank’s International Finance Corporation. “In the last year, I have been on more environmental, social and governance (ESG) investing platforms than I’ve been on in the last five years,” he says.

Indeed, with demand for ESG stocks growing in response to the increased focus on resilience during the pandemic, Ghosh says Mahindra Group would welcome a more regulated and fine tuned sustainable investment landscape. “It would help if the investors started narrowing the areas of focus, and figuring out what makes most sense for them,” he reflects. “Because the moment that happens, the businesses themselves can get their delivery areas more focused.”

Despite the huge challenges ahead for both the Mahindra Group and the global economy as they seek to deliver the sharp carbon reductions necessary to deliver a net zero economy, Ghosh says he is optimistic about the future, heralding the election of US President Joe Biden as a major win for climate action. A growing acceptance of clean energy and emergency efficiency measures in countries around the world is a sign net zero targets are set to become far more mainstream, he says, adding that many expect India to announce its own 2050 net zero goal before the COP26 climate conference in the autumn.

“You will notice a pattern whenever countries do energy efficiency and renewable energy at scale, they will start talking about net neutrality,” he says. “Because the moment you do the numbers, you realise it is possible.” This is exactly what happened at Mahindra Group, he reflects, noting that the managing director of the company was sold on the carbon neutral target only once he had witnessed first hand the carbon and financial savings energy efficiency and renewable energy projects could deliver to the Group. “Whether it’s a company, whether it’s a country, whether it’s an individual, that journey seems to be common,” he says. “So I am bullish.”

Source: Business Green