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A case for buyer-led responsible renewable procurement

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The International Energy Agency forecasts that by 2026, low-carbon electricity sources, including renewable energy, will account for almost 50% of the total global electricity production. 

The International Energy Agency forecasts that by 2026, low-carbon electricity sources, including renewable energy, will account for almost 50% of the total global electricity production. 
| Photo Credit: AP

More than 60% of the world’s electricity demand is presently being met by fossil fuels. The International Energy Agency forecasts that by 2026, low-carbon electricity sources, including renewable energy (RE), will account for almost 50% of the total global electricity production.

Renewable energy (RE) has been a game changer in our options to mitigate climate change. However, transitioning to cleaner forms of energy such as with RE, presents another overlooked golden opportunity. By being consciously responsible towards the environment and communities in its procurement policies, the RE sector can lead by example in the global clean energy shift.

Responsible RE would mean not only procuring RE, but also account for social and environmental externalities and costs as well. To give an example of positive and negative externality, the fossil fuel-powered energy industry has provided the world with jobs and incomes for years, but it has also put adverse pressures on land, air, and water.

Similarly, the use of RE promises to mitigate the release of carbon into the atmosphere, secure energy needs of countries, provide livelihood opportunities, cleaner air and other benefits. On the other hand, the RE value chain is also being exposed to environmental and social challenges just like any other sector. Responsible RE procurement policies can set future standards.

Social conflict

The recently concluded global climate negotiation at COP28 in Dubai, set an ambition to triple RE capacity by 2030. India is planning to add another 320 GW to its electricity grid to reach 500 GW by the end of this decade. Greater RE capacity will demand greater access to natural resources and human capital, which can induce social conflict. These are emerging challenges that we must consider.

These challenges could manifest in hyperlocal ways such as conflicts with communities on issues of land use and co-benefit sharing. RE projects can simultaneously exert a burden on precious resources, including new minerals, land, water and in managing them sustainably at their end-of-life (such as disposing of solar panels and batteries used for storage of RE).

Role of big consumers

The RE value chain is a multi-stakeholder mesh of manufacturers, project developers, financiers, buyers, electricity regulators, government, communities, civil society and others. Each one of them has a role to play in growing RE exponentially, optimising positive externalities, and minimising undesirable outcomes.

In our experience, a growing number of businesses that are environmentally and socially responsive are proving that they have the power to influence RE markets. More than 400 companies globally have pledged to buy 100% RE by 2050 to meet their electricity needs. This network includes 10 Indian companies and more than 120 global counterparts with India-based operations. Collectively, these companies with a demand of 430 TWh/year are driving RE demand and shaping policies in favour of RE adoption across regions and markets.

RE buyers, either small or big, together can also play a key role in demanding responsible procurement of RE. Currently though, the global RE regime is not incentivised enough for the RE buyer companies explicitly to do so. The focus is on a competitive, clean energy auction market for low-cost RE.

Responsible RE

RE has an intrinsic advantage of being cleaner compared with its rivals, but it is being evaluated for its externalities by its consumers and shareholders. The RE sector can be responsible, value-driven and flourish at the same time.

Responsible RE could constitute several things. For example, it may well be the inclusion of local communities through participation in decision-making and being a beneficiary themselves throughout the life cycle of the RE project. It could mean preserving ecology through avoidance and mitigating measures in project siting, design and implementation.

Responsible RE may possibly also mean that RE buyers collaborate with the developers to safeguard a people- and planet-centric energy transition, and that rights are protected and compliant with Indian laws. RE buyers could also transition their own supply chains. Take for instance Apple, a RE100 company, through their Supplier Clean Energy Program, they review their suppliers’ clean-energy projects by verifying and upholding accountability standards.

The shift to responsibility-oriented and sustainability-centric reporting for businesses is now in focus. Business Responsibility and Sustainability Report by Securities and Exchange Board of India aims at promoting transparency in disclosing non-financial parameters (these include disclosures about sustainability and safety, employee wellbeing, promoting human rights, among other disclosures) and sustainability goals. Indirectly, this will pave the way for responsible RE through accountability and transparency. However, RE buyer companies can lead by demanding responsible practices that percolate down their supply chains.

In the absence of a universal rulebook, voluntary actions by a group of companies can aggregate huge demand for responsible RE procurement and catalyse it globally. By doing so, corporate RE buyers could become champions of sustainability.

(Bhakti G. is Programme Officer and Atul Mudaliar Director of Systems Change at Climate Group India)

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