More than 60% of the world’s electricity is currently generated using fossil fuels. However, the International Energy Agency (IEA) predicts that by 2026, low-carbon electricity sources, including renewable energy (RE), will make up nearly half of global electricity production.
RE has emerged as a game-changer in combating climate change. But beyond its environmental benefits, the transition to RE presents an often-overlooked opportunity for responsible procurement. By adopting consciously responsible procurement practices, the RE sector can lead the way in the global shift towards clean energy.
Responsible procurement in the RE sector means not only sourcing RE, but also accounting for social and environmental externalities and costs. For example, while the fossil fuel industry has provided jobs and incomes, it has put adverse pressure on land, air, and water. Similarly, the use of RE promises to mitigate carbon emissions, secure energy needs, and provide other benefits, but it also faces environmental and social challenges.
The recently concluded global climate negotiation event, COP28, set an ambition to triple RE capacity by 2030. India, for instance, plans to add 320 GW to its electricity grid by the end of the decade. However, increasing RE capacity will require greater access to natural resources and human capital, potentially leading to social conflict. Conflicts with communities on land use and benefit-sharing have already emerged as challenges in many countries.
The RE value chain involves multiple stakeholders, including manufacturers, project developers, financiers, buyers, regulators, governments, communities, and civil society. Each of these stakeholders plays a role in accelerating RE growth, optimizing positive outcomes, and minimizing undesirable consequences. Companies that are environmentally and socially responsible have the power to influence RE markets. Over 400 companies globally have pledged to purchase 100% RE by 2050, including several Indian companies. Together, these companies are driving RE demand and shaping policies in favor of RE adoption.
Currently, however, the global RE regime does not incentivize responsible procurement explicitly. The focus is on competitive, low-cost RE auctions. This means that responsible practices in the RE sector, such as involving local communities in decision-making, preserving ecology, and complying with laws, need to be demanded by RE buyers. Companies can lead the way by transitioning their own supply chains and collaborating with developers to ensure a people- and planet-centric energy transition.
The shift towards responsibility-oriented and sustainability-centric reporting for businesses is gaining momentum. The Business Responsibility and Sustainability Report by the Securities and Exchange Board of India promotes transparency in disclosing non-financial parameters and sustainability goals. This indirectly paves the way for responsible RE by encouraging accountability and transparency. However, voluntary actions by a group of companies can aggregate significant demand for responsible RE procurement and catalyze its adoption globally.
In conclusion, the IEA’s prediction regarding the increasing share of RE in global electricity production highlights the need for responsible procurement practices in the RE sector. Transitioning to cleaner forms of energy presents an opportunity to address social and environmental challenges. Big consumers, such as businesses, have the power to demand and drive responsible procurement. By leading the way in responsible RE practices, corporate buyers can become champions of sustainability.
