Postal decline ‘is a structural issue and requires a structural solution’: SingPost chairman

SINGAPORE Post’s (SingPost) chairman Simon Israel expects the decline in its postal business to continue, with the segment projected to remain in the red in the next financial year of 2023/2024.

The postal company had recorded a full-year loss of S$15.9 million for its postal services for the financial year ending Mar 31, 2023, the first time in its history.

In his message to shareholders in SingPost’s annual report that was released on Tuesday (Jun 20), Israel said that the decline in its postal segment “is a structural issue”, which “requires a structural solution”.

SingPost had announced in May when it released its full-year financial results for FY2022/2023 that it had embarked on a strategic review of the company’s portfolio of businesses.

“Our objectives are to improve shareholder returns and ensure the group is appropriately valued. The overarching theme is to move progressively towards becoming a logistics company, divesting non-core businesses and assets, and recycling capital to support further growth and transformation,” said Israel in his message.

The company had identified the need to transform years ago, as its postal business was facing disruption from digital substitution.

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However, it did not foresee the Covid-19 pandemic to cause further disruption. The closure of Changi Airport and lockdowns in its key overseas markets had affected its international postal business, which was very profitable at that time and had absorbed a large share of the company’s overheads.

“Despite success in building an e-commerce logistics business in Singapore by leveraging our postal infrastructure and management’s efforts to rebuild our international postal business, these have not been sufficient to cover the decline in domestic mail and cost inflation,” noted Israel.  

Sustainability metrics

In its sustainability report also released on the same day, SingPost noted that its total Scope 1 emissions – which refer to direct emissions from company-owned and controlled resources – came in at 32,361 tonnes of carbon dioxide equivalent for FY 2022/2023. This is an increase from its previous FY because it had expanded its reporting scope to the cover emissions from its Australian freight subsidiary FMH Group.

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Excluding FMH Group, Scope 1 emissions across the rest of its operations went down by 5.9 per cent to 3,682 tonnes of carbon dioxide equivalent compared to its previous financial year. For Singapore market alone, Scope 1 emissions reduced by 4 per cent over the same time period.

This was mainly due to the company switching its vehicles from those with internal combustion engines to electric ones.

The level of its Scope 2 emissions – which covers indirect emissions generated by purchased energy – hit 17,077 tonnes of carbon dioxide equivalent for the financial year.

Excluding FMH, Scope 2 emissions was at 14,521 tonnes of carbon dioxide equivalent, a 10 per cent decline compared to the year before.

This was partially due to the use of solar power in its e-commerce logistics hub, which was about 24 per cent of the building’s annual electricity consumption.

The company is looking to develop and disclose its inventory of Scope 3 emissions – which refer to its indirect emissions from its value chain – in phases, with an initial focus on its Singapore and Australia markets.

In terms of waste management, 4,558 tonnes of waste were disposed in FY2022/2023, compared to 3,847 tonnes the year before. The increase is due to the inclusion of FMH Group. SingPost did not provide waste data that excluded the effects of FMH Group.

As for gender diversity, SingPost noted that 37 per cent of those in senior management are women, which is just marginally higher than the 36 per cent in its previous financial year. SingPost has not reviewed its target of having at least 30 per cent of women in its senior management by 2025.

In addition to these metrics, SingPost has also identified key physical and transition risks as a result of its first climate scenario analysis, based on recommendations from the Task Force on Climate-related Financial Disclosures.

For physical risks, it found that five of its key assets in Singapore could face high exposure to extreme heat by 2100. Three could have high exposure to surface water flooding and one could have a medium exposure to soil subsidence.

Increased electricity costs, including indirect carbon price implications, as well as the transition to lower emission technologies have been identified as transition risks that would have the greatest impact on SingPost.

To reduce its climate-related risk exposure, SingPost established a carbon pricing projection model to inform stakeholders on potential carbon price implications under various scenarios and has started to pilot internal shadow carbon pricing to support long-term business planning and investment strategies. It has also looked at abatement costs at a preliminary level to assess the feasibility of mitigation measures.

SingPost said that it plans to expand its climate-related risk assessment and scenario analysis to its remaining assets and markets in time to come, as part of its phased approach to sustainability reporting. It will also consider seeking external assurance in the years ahead.