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A strong business case for sustainability
THE question should not be how much City Developments (CDL) has invested in its corporate stewardship and environmental, social and corporate governance (ESG) initiatives, CEO Grant Kelley emphasised to The Business Times in an interview. "But rather, it is whether we can afford not to address ESG issues," he said.
Sustainability issues have risen to the fore following the COP 21 Paris agreement and launch of the UN Sustainable Development Goals in 2015, and their impact on businesses will only increase going forward.
So it is futile to ask how CDL balances between its sustainability efforts and bottom line, because they are no longer opposite sides of a weighing scale, but the same side of a coin.
Mr Kelley said: "I would say that sustainability is becoming mainstream in today's global business environment and investors increasingly assess companies on these. I foresee that in five years' time, businesses will be held accountable for their carbon footprint.
"In the long run, good ESG performance will not only enhance a company's reputation, but also help companies in risk mitigation and cost management.
"This creates greater value for sales, operational performance and share price - ultimately contributing to the bottom line and long-term growth of the business. From CDL's perspective, we see a strong business case for sustainability."
STRONGER BRAND EQUITY
For over two decades, CDL's sustainable development strategy has created stronger brand equity and product differentiation for the group, he added. It has also given CDL a first-mover advantage, as environmental regulations have been progressively mandated for the property sector.
CDL started integrating corporate social responsibility (CSR) and sustainability into its business in 1995, under the visionary leadership of its late deputy chairman Kwek Leng Joo who died last November.
"His conviction was that we must not only do well financially as a company, but also do good for the community and our environment."
At a time when the building and construction industry was widely perceived to be destroying before constructing, CDL made a transformational change in how it managed its operations as well as its supply chain management. "The aim was to strike a balance between financial, social and environmental performance - or the triple bottom line," Mr Kelley said.
For over a decade, CDL has been investing between 2 per cent and 5 per cent of a new development's construction cost into green building design and features. To date, the group has more than 80 Green Mark certified developments and office interiors - the highest among Singapore developers.
It has also enjoyed savings in electricity consumption, energy and water use, and cut its carbon emissions significantly.
At this year's Singapore Corporate Awards, the property group is the Special Recognition Award recipient.
Mr Kelley, who studied Environment Management in the second year of his MBA at Harvard in 1994, said that good corporate governance is the foundation for any corporation that wants to stay relevant for the future.
The importance of corporate governance rose to the fore especially after the 2007-2008 global financial crisis exposed flaws in the internal and external governance of many businesses. The crisis heightened the focus on the need for strong and effective corporate governance.
At the same time, pressing global warming and climate change concerns further intensified calls for sustainable and responsible practices.
Mr Kelley said there is also a growing realisation among the investment community that poor corporate governance and risk management can lead to corporate failure, exemplified by the collapse of some financial institutions in 2008.
Good corporate governance is achieved partly through open communication and feedback from stakeholders. For this reason, CDL has also installed a whistle-blowing procedure where stakeholders can raise, anonymously or otherwise, concerns on possible improprieties or other matters without fear of reprisals.
On the sustainability front, CDL also continues to improve its ESG performance, and also to raise the bar in its target setting and impact reporting.
Mr Kelley said that the Singapore Exchange's (SGX) move to introduce sustainability reporting on a comply-or-explain basis is timely, and its guidelines will be helpful especially for firms that have yet to embark on reporting. So far, only 13 per cent of the largest 100 SGX-listed companies appear to be fully compliant with the guidelines.
Calls for better ESG targets, performance and accountability will only increase for all major corporate actors going forward, so companies should proactively enhance their sustainability efforts and reporting to avoid being left behind, he added.
It will pay off, if CDL is an example to go by. Today, the group is included in many sustainability indices globally.
It is the first Singapore company to be listed on three of the world's leading sustainability benchmarks: FTSE4Good Index Series (since 2002), Global 100 Most Sustainable Corporations (since 2010), and Dow Jones Sustainability Indices (since 2011).
In January this year, CDL was also named the top real estate company in the Global 100 Most Sustainable Corporations in the World 2016 ranking. No other Singapore company has been listed in the Global 100 for seven straight years, making CDL the first.