The Confederation of Indian Industry is forming a high-level group comprising 70-80 industry experts and environment experts to develop a green rating system. Under this, companies will be eligible for rating after being 'green certified' by the Central Pollution Control Board and State Pollution Control Board.

The companies will also have to secure a minimum of 400 points out of 1,000 to be able to participate in the rating system.

The committee will be chaired by a senior industrialist.

"Our decision to launch this index was taken last week and is based on our experience with rating of green buildings, in which currently 428 buildings have been rated. While rating green buildings, we only rank their exterior but while rating companies, we will take into account their manufacturing processes," S Raghupathy, senior director and head, CII Godrej [Get Quote] GBC (Green Building Centre), told Business Standard.

The CII ratings follow similar exercises by the likes of the Greenpeace 'Guide to Greener Electronics', which rates leading manufacturers on their global policies and practice on eliminating harmful chemicals. JD Power & Associates has an Automotive Environmental Index -- a top-30 ranking of environment-friendly vehicles.

Closer home, the Green Rating Project from the Centre for Science and Environment attempts to rate industrial units within a specific sector on the basis of their environment friendliness. The project aims at encouraging companies to adopt better environment management policies.

CII, on its part, will cover all sectors of the economy like paper, sugar, chemical, cement, metal industry, power plants, automobiles and engineering, textiles, fertilisers and refineries, the services sector and the transportation sector, and rank them on an index comprising five levels and 1,000 points.

Initially, 20-30 companies will take part in the index on a voluntary basis for a pilot study. The index, to be launched by mid-2010, will rank the companies' manufacturing processes on the basis of 10 criteria -- natural resources consumption, energy efficiency, greenhouse gas emission, water consumption and rain water harvesting, carbon emissions, toxicity, green supply chain, product stewardship, lifecycle analysis and green procurement.

If a company, for instance, has been saving 3-5 per cent energy for the last five years, it will be on the first level but to be a green leader, its energy efficiency should be one of the highest in the world in its respective sector.

Similarly, the company should be water neutral and its water procurement should enable it to qualify to be a green leader. Firms must also have cut their carbon and greenhouse gas emissions by 2-3 per cent per year, besides not having used any toxic material in the manufacturing process, raw material or the finished product.

"Importantly, the company's supply chain should be green and it should also dispose of any non-biodegradable component in the final good. Companies should also indulge in lifecycle analysis of their ecological footprint by analysing the sub-component and sub-processes involved. Lower consumption of natural resources is another factor," said the CII official.

"There will be a green verification annually and a re-rating every two years. The higher the rating, the lower will be the company's liability on environment. Though planning is still in its initial stages, level three of the rating system will be called 'green achievers' and green leaders will be those on the highest level with exemplary performance in all the 10 criteria," he said.

Asked if this new rating system falls in line with the coming climate change talks in Copenhagen in December, Raghupathy said: "The Copenhagen conference will decide what countries should be doing to mitigate their emissions but the rating system will tell the companies what they should be doing to become greener."