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September 2023

Whether Provision Is Required For Net Zero Commitment

By Dolphy D’souza, Chartered Accountant
Reading Time 6 mins
Many Companies have publicly committed to become net zero on carbon emissions by a certain future date. They have also expressed that commitment on their web-site or regulatory filings. The question is whether a provision is required for the expected cost to be incurred to become a net zero company by a certain future date.

QUERY

Clean Company Limited (CCL) has publicly committed to become net zero on carbon emissions by 2030. CCL has expressed that commitment on their web-site as well as certain regulatory filings. CCL has outlined several initiatives, three of them are as follows:

a)    CCL operates in Odisha, where rice covers about 65 per cent of the cultivated area. CCL has committed to adopt biomass co-firing using rice husk for its Odisha power plant. The initiative would result in 20 per cent of its power requirement being produced with biomass by 2030, a sustainable alternative to coal. Additional costs would be incurred in the future for the said project.

b)    By 2030, CCL has committed that it would stop manufacturing petrol vehicles and will only manufacture electric vehicles. CCL will scrap its factory manufacturing petrol vehicles in 2030 and will also incur significant expenditure in building a new plant to manufacture electric vehicles.

c)    By 2030, CCL will enforce net zero requirements on all its sub-contractors; as a result,
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