Ashok Leyland Aligns Sustainability Goals With Business Operations

In an era where global commercial vehicle makers are being pushed to cut emissions and attract capital aligned with sustainability, Ashok Leyland is responding with a strategy that tightly integrates environmental goals with financial and operational priorities.

The flagship company of the Hinduja Group is no longer treating sustainability as a sidecar to its business. Instead, it’s positioning green initiatives as key to cost optimization, capital access, and international expansion. “It’s still early days,” admitted Alok Verma, Head – Corporate Strategy & ESG at Ashok Leyland, “but if we are performing well on the sustainability agenda, then the access to finance will become cheaper to us.”

The Chennai-based commercial vehicle major is actively engaging with multilateral agencies for green financing— part of a broader pivot where return on sustainability is being tied to return on capital. The goal is to benefit from sustainability-linked loans and bonds, which offer more favorable financial terms when tied to environmental milestones. “We have talked to a lot of multilateral agencies towards green financing and it takes time,” Verma told Autocar Professional. “There’s a question of sustainablelinked loans or sustainability-linked bonds. Those will be needed now."

A Financial Case for Green

The company’s latest sustainability report for FY24 lays out a roadmap that not only tracks emissions but also quantifies progress through traditional financial metrics. Sustainability is now embedded in Ashok Leyland’s capital allocation process.

Of the Rs 481 crore in total capital expenditures last year, 26% was funneled toward sustainability-linked initiatives—up from 15% the year before. Meanwhile, 27% of the R&D budget focused on emission reductions, alternative fuels, and vehicle safety technologies. Among the notable initiatives is a Rs 30 lakh grant from the International Institute for Energy Conservation (IIEC) to set up a bio-methanation plant.

The facility, aimed at curbing emissions, is expected to break even within three years. The company is now scouting for more such grantbacked or subsidized initiatives. Crucially, these projects are not just about optics.

Ashok Leyland has established internal KPIs—such as cost savings, energy efficiency, and Return on Capital Employed (ROCE)—to evaluate green investments. ROCE now features in the variable pay formula for senior management, aligning leadership compensation with long-term sustainability outcomes.

EV Strategy

Ashok Leyland is also experimenting with business models designed to ease the financial barriers to electric vehicle adoption. One such move is the exploration of “Battery-as-a-Service,” aimed at shifting battery costs from capital expenditure (capex) to operational expenditure (opex) for customers. This model could potentially accelerate EV adoption, especially in the price-sensitive commercial segment.

The company has also secured initial funding for a bio-CNG project and is working with the Small Industries Development Bank of India (SIDBI) on vehicle scrappage and circularity initiatives. These efforts aim to improve the internal rate of return (IRR) for green projects, making them more viable for Ashok Leyland and its customers alike. Verma believes that the entire ecosystem—including finance, policy, and infrastructure—needs to align to unlock real value.

“That’s where I think the majority needs to come in, from a financial sector standpoint,” he said.

Scope 3 Challenge

Ashok Leyland is targeting net-zero emissions by 2048, the year it turns 100—a milestone internally branded as "Zero at 100.” Its Scope 1 and 2 emissions, which cover direct operations and energy use, are already 69-70% powered by renewables.

The company is also a signatory to the RE100 initiative, committing to source 100% of its electricity from renewable sources. However, the real challenge lies in Scope 3 emissions generated from the use of its vehicles and its supply chain—which constitute more than 99% of the company’s total emissions.

The decarbonization plan includes electrification, use of alternative fuels like bio-CNG, LNG, and hydrogen, and leveraging connected vehicle technologies to improve fuel efficiency. Despite central government support, Verma flagged persistent gaps at the state level. Green open access regulations vary widely, and EV infrastructure charging remains stuck in the planning stage. “There is also a critical need for charging infrastructure to move from the planning to the execution stage,” he noted.

State adoption of scrappage policies is equally uneven, which hinders demand for vehicle scrappage centers—even though India has a large base of end-of-life CVs still in use. The company is actively targeting emerging markets in the SAARC region, Southeast Asia and MENA