Tech Mahindra is a US$5.1 billion IT company with 126,200+ professionals spanning 90+ countries. It continuously innovates and challenges conventional thinking to enable its 1,000+ customers, including Fortune 500 companies, to succeed through digital transformation, consulting and business re-engineering services and solutions. When setting emissions reduction targets, Tech Mahindra found value in internal carbon pricing (ICP).
The company delivers integrated experiences across digital, physical, and convergent dimensions. It is focused on leveraging next-gen technologies including 5G, blockchain, cybersecurity and artificial intelligence (AI), to enable end-to-end digital transformation for global customers across a wide range of sectors.
Tech Mahindra has committed to Business Ambition 1.5°C and had their science-based target (SBT) validated by the Science Based Targets initiative (SBTi) in February 2019. Tech Mahindra commits to reduce absolute Scope 1 and 2 GHG emissions by 22% by 2030 and 50% by 2050, from a 2016 base-year. These targets are aligned with the reductions required to limit global warming to 2°C. It plans to achieve this by procuring renewable energy, adopting resource efficiency, encouraging reforestation, and utilizing NextGen technologies. Its carbon pricing mechanism is designed to boost green investments that aid rapid decarbonization, with cost-effective methods and ease of implementation.
Setting an internal carbon price (ICP)
As 2021 CDP research has shown, many companies are seeing the value of ICP, with an 80% increase in the number of companies using, or planning to use, an ICP over just five years. In India, a total of 85 companies are either pricing carbon or planning to do so in the next two years (from 2021), an increase of 46% from 2020.
Tech Mahindra identified ICP as an excellent tool for rapid decarbonization, which would in turn help to manage climate-related business risks, boost low-carbon investments, and realize stakeholder expectations. By pricing emissions, Tech Mahindra also aims to raise awareness among business groups of the risks and cost of climate change.
The company has adopted a hybrid approach, incorporating an implicit and shadow price of US $9 per ton of CO2e with a tax on business units proportional to the resources allocated in the projects. This ICP is the total capital expenditure for green initiatives divided by emissions. Tech Mahindra has built an ICP tool for its facilities, finance and procurement teams, to increase green investments and allocate funds towards activities that build resilience to climate change risks. This includes investment in green initiatives, such as: transitioning to renewable energy; replacing incandescent lamps with LEDs; installing of motion sensors; improving efficiency for HVAC and other equipment; supporting green building initiatives; and adopting zero waste to landfill. This in turn helps to achieve the company’s emission reduction targets. Through renewable energy and resource efficiency alone, Tech Mahindra saved more than 30,000 tCO2e of emissions in 021.
ICP as a means to achieve science-based targets
Tech Mahindra has taken medium-term and long-term targets approved by the SBTi and is a signatory to Business Ambition for 1.5°C. It proposes to do this by increasing its renewable energy consumption to 50% by 2025, ensuring ZWL (Zero Waste to Landfill) at all owned locations, replacing incandescent lamps with LEDs, installing motion sensors and enabling Integrated BMS (Building Management System) with IoT, all of which will help the company to reduce 50% of its emissions by 2030 and be net-zero by 2050. ICP has helped Tech Mahindra to effectively reduce emissions, mitigate environmental risks, source investments towards decarbonization, and drive R&D and innovation.
Challenges faced and pathways to overcome them
For Tech Mahindra, implementing an ICP was a challenge at the initial stage as there were no defined standards or tools like those available for SBTi targets or for TCFD recommendations. It was able to put a price on carbon by taking help from various forums and workshops, and developed and allocated financial models based on the company’s green investments and Scope 1 and 2 emissions. Through a well-defined mechanism and an internally developed tool, the company voluntarily implemented a project-wise ICP.
Key message for peer companies
ICP is an important strategic planning tool with multiple benefits beyond the operation of a company and its stakeholders. ICP drives innovation and helps companies identify organizational inefficiencies that may add to overall costs. Companies will have to include a ICP mechanism directly into its operations and indirectly into the operations of their suppliers and customers. As companies are taking leadership on climate action, it can be combined with other approaches including SBTi, TCFD and SDGs to help advance a low-carbon transition.
Call to action
By identifying potential risks and opportunities, an ICP is a potentially powerful strategic planning tool in the transition to a low-carbon economy. CDP encourages organizations to engage with key internal departments to establish whether an ICP can help their business achieve their strategic goals as their business transitions. Organizations should also consider setting an ICP at a level above any expected, or potential, laws or regulations to help alleviate any sudden shocks. This must also strike the right balance between ambition and business buy-in. To be effective, an ICP needs to be applied across all key business operations and cover all significant sources of emissions across an organization's direct operations and value chain.
For more information, refer to CDP’s 2021 report Putting a Price on Carbon and CDP India’s Handbook for Indian companies for putting a price on carbon and brochure on A case for science-based targets in India.