Purpose and sustainability, and the Why of it all

UOB's Chief Sustainability Officer Eric Lim admits that he sometimes frets over how fashionable the sustainability "megatrend" has become. In a world where companies are engaged in an escalating arms race of "green, greener, greenest", he believes we need to go back to the basics of "why".

Enterprises that are clear on how sustainability contributes to their "North Star" or purpose for existence are more likely to have an authentic and impactful approach.

And with sustainability now at the fore, it is a valuable opportunity for enterprises to redefine the positive value they create, not only for the economy but also for society, to satisfy an increasing demand from stakeholders to justify the profits they make.

The alignment between corporate purpose and sustainability will enable decision makers to prioritise sustainability as a core part of their business strategy, and respond with consideration of their economic output as well as their impact on people and the planet.

This can involve setting ambitious sustainability targets, integrating sustainability considerations into decision-making processes, serving customer needs with sustainable offerings and engaging with stakeholders to understand their perspectives on sustainability issues.

Delivering positive impact

For UOB, sustainability is intrinsically linked to its corporate purpose of building a better future for ASEAN. This is evident in the commitment the bank made towards net zero in October last year. It set targets to reduce emissions intensity for five sectors including power, automotive, real estate, construction and steel, as well as committed to stop financing new upstream oil and gas projects from 2023.

Together, these six sectors make up 60 per cent of the bank's corporate lending portfolio.

But this was just the beginning of the bank's net zero ambitions. UOB is determined to support its clients along the net zero journey so that there is a positive impact in the real economy. "Our philosophy is simple: if our clients make a successful transition to a low carbon economy, then we would have been successful in our efforts", says Lim.

Integral to this belief is an even bigger goal - helping the small- and medium-sized enterprises (SMEs) make the shift to more sustainable business models and practices. This begins by changing mindsets, a process which the chief sustainability officer recognises is not easy.

"With SMEs, first and foremost, their focus is on staying commercially viable," Lim says, adding that most SMEs, in his observation, have to focus on daily existential challenges of managing costs, dealing with workforce constraints and winning market share. They do not have the budget nor capacity to build dedicated sustainability teams.

They also may not see the point in making the switch, especially when there is a lack of clear sustainability standards. These standards may also vary widely for different industries. What SMEs need are manageable next steps that will deliver meaningful value to their business.

To tackle this, UOB came up with an online tool - the UOB Sustainability Compass - to help SMEs assess the maturity of their sustainability journey. SME owners can do this by filling out a free 10-minute questionnaire about their business. At the end of it, they receive a report detailing their progress and next steps for improvement.

"We've found that once SMEs get the basic structures in place, for example, by identifying how sustainability relates to their business, product, or growth opportunities, they would be able to see the relevance more clearly," says Lim.

"SMEs can then direct those limited capacities - be it time, effort or money - towards building what matters most to them."

"And this is a virtuous cycle. When they can see the impact of their efforts, they will be motivated to do more and to do better, in fulfilment of their purpose."

Mature conversations on transition

"We cannot jump from red to green - there is a need to have mature conversations about how we transition to a low carbon economy," Lim explains, on why UOB is advocating a just transition. Decarbonisation must be achieved alongside continued socioeconomic growth.

The hard truth is that the sectors that contribute the most greenhouse gas emissions are also the ones that are most critical to the economy. These include power generation, and oil, gas and coal - the supply of fossil fuels.

Lim is fully cognisant of the fact that companies in these sectors cannot simply go from being in the red zone to become green companies in an instant. Especially when energy security, access and affordability are required to ensure the continued well-being of lives and livelihoods in Asia, particularly ASEAN.

"The transition - that's the difficult in-between," he says.

"There is tremendous risk involved when companies reinvent their business models and they need the financial means to pursue green investments and initiatives."

That is where UOB steps in as a financial institution to help these companies on their transformation, instead of cutting them off entirely.

"Walking away is easy but that would be of no help to the decarbonisation of the real economy," says the chief sustainability officer.

To this end, the bank also seeks to provide transition finance to companies in the hard-to-abate sectors, referencing quality transition pathways.

"It is UOB's privilege to hold a banking licence in the markets in which we operate. Our reason for being is to contribute to economic development through our support of industry and enterprise in a sustainable way," Lim adds.

Doing right by customers

He reiterated that sustainability is but another manifestation of UOB's corporate purpose.

This includes creating sustainable value for stakeholders, including customers, over the short, medium and long term, a philosophy that the bank has abided by since 1935. In the words of UOB's chief executive officer Wee Ee Cheong: "We want to foster social inclusiveness and environmental well-being. By doing these things well and keeping our eye on the future, we can be a catalyst for impactful and lasting change."

"And this," says Lim, "is why we do what we do."

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