TCS, Infosys and Tech Mahindra - Jefferies looking at Indian IT companies through an ESG Lens, Computer Services & IT Consulting

Over the past five years, TCS, Infosys and Tech Mahindra have reduced per capita electricity consumption by 11-28% by converting their campuses to green buildings and actively using smart buildings systems with high degree of automation. IT firms are also shifting their energy mix towards renewable sources by either installing captive solar units or procuring them from renewable sources. Renewable energy use for Infosys is particularly high at over 40% of its total electricity use.

Sustainable electricity sourcing lowering emissions:

While direct emissions from operations are a very small part (6-11% for TCS / Infosys) of IT firms' carbon footprint, indirect emissions associated with purchased electricity form a larger part. IT firms have lowered their per capita Scope 1+1 emission by 24-58% over the past five years through better energy mix and improved energy efficiency.

Championing water conservation:

Over the past five years, top IT firms have lowered their per capita water consumption by 10-40%. This has been driven by a combination of conservation, smart metering, recycling and rainwater harvesting. While TCS and Wipro have the lowest per-capita water usage, Infosys has utilised rainwater well with 5% of its water consumption coming from rainwater harvesting vs 1-2% for others.

Developing human capital and promoting diversity:

Developing human capital, promoting diversity and driving social initiatives are some key aspects when looking at the social aspect of ESG. Within the comparable disclosures, Infosys has reported the highest per capita training hours and also has the highest share of women in its employee base at 38%. Employment of people with disabilities remains limited at 0.2-0.3% of the employee base, with Wipro having the highest share. Most IT firms spent the mandated 2% of their profits in CSR initiatives in FY20.

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Governance:

The governance aspect is the most difficult part of ESG to objectively compare. We have largely listed board composition, its comparison to the overall shareholding structure and board diversity. All IT firms have largely independent boards with independent directors forming more than 50% of the board. Tech Mahindra and HCL Tech have the highest number of women representation on its board with 3 women directors.