Standing out with bold sustainable strategies

ROUNDTABLE PANELLISTS:

• Christie Chu, head of emerging business and commercial banking cash, global commercial banking, OCBC;
• Corrado Forcellati, managing director, Paia Consulting;
• Deborah Heng, country manager Singapore, Mastercard;
• Dennis Lee, partner and head of business consulting, RSM Singapore;
• Geoffrey Yeo, assistant managing director (capabilities, urban systems and solutions), Enterprise Singapore;
• Professor Yeoh Lean Weng, chief sustainability officer, Agency for Science, Technology and Research;
• Jonathan Yuen, head of commercial litigation and employment (disputes), Rajah & Tann Singapore.

Moderator: Renald Yeo, journalist, The Business Times

With sustainability becoming mainstream, what sets apart a successful sustainability journey?

Christie Chu: Businesses should ensure that sustainability is integrated into all aspects of the business, from operations and supply chain management, to product development, talent management and more.

This way, sustainability becomes a fundamental tenet of business rather than an afterthought that is “good to have”.

Organisations may find that they can create a bigger impact through collaborating with other stakeholders such as suppliers or even customers.

Corrado Forcellati: A successful sustainability journey must be credible. Credibility is about accountability – accountability in ensuring that companies have the right culture, competencies and resourcing to embed sustainability into their business operations and strategy.

A sustainability journey without accountability lacks direction, control and responsibility.

Deborah Heng: There are two tenets to making that journey a successful one.

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One is that social and environmental strategies need to be flexible and agile as challenges and opportunities evolve.

A good approach is conducting an environmental, social and governance (ESG) materiality test, which helps identify and prioritise the ESG issues most significant to the company and its stakeholders.

Second, businesses can also channel their efforts into uplifting the local communities, such as by promoting financial inclusion and supporting local businesses.

Dennis Lee: With sustainability in the mainstream, the value and premium that come from being an early adopter may dilute as the market settles into a new normal.

Standards may become more challenging to uphold; opportunities derived from being an early adopter may fade as sustainability becomes homogenised.

Under such a scenario, companies need to be honest with themselves and revisit the “why”. Business owners should take stock of their baselines against industry norms.

Geoffrey Yeo: Companies can set themselves apart by going beyond just meeting baseline requirements, and leveraging sustainability as a differentiating factor and competitive advantage.

Every successful sustainability strategy should incorporate a clear vision and long-term goals that are integrated with the company’s core business and operations, and is top-of-mind in every business decision made.

Jonathan Yuen: There are two clear signs.

One, where the business has a clearly articulated ESG strategy that has been successfully integrated into all levels of its strategy and operations.

Two, when there is clear buy-in from staff and employees, such that even in the absence of continued management reminders or supervision, there is organic impetus and enthusiasm driving ESG initiatives and compliance as a natural state of affairs, without the need for external motivations.

Prof Yeoh Lean Weng: Sustainability is not just concerned with the environment; it is cross-cutting and covers social and economic elements too. It goes beyond assessing traditional environmental impacts such as energy and water consumption, or waste and emissions generation.

Sustainability also accounts for topics such as workplace safety and health; diversity; equality and inclusion; and corporate social responsibility.

There are also economic topics such as sustainable procurement; research and development impact; and value creation.

Beyond incremental changes, what bold sustainability moves should companies be making?

Lee: “Bold” is contextual and depends on sector and scale.

For instance, small and medium-sized enterprises (SMEs) face limitations on resources and operate in an inherently smaller market, when compared with multinationals. Being deliberately bold may backfire and trigger negative consequences.

SMEs should be tactful in managing stakeholder communication and ESG disclosures. Aside from avoiding greenwashing risks, this also enables the SME to realistically assess the measurable impact that it can have in contributing to sustainable supply chains.

Yuen: One very bold visible move that companies can make to demonstrate their commitment to sustainability is formally appointing or creating a separate functional role for a chief sustainability officer.

At the same time, they could also implement an ESG governance framework that assigns and embeds ESG key performance indicators to functions throughout the organisation, such as human resources, compliance, legal, business units, finance, operations and procurement.

Chu: For those that are well-positioned to take bigger steps, some bold moves they can consider include setting ambitious emissions reduction targets such as net-zero emissions, and exploring the greening of their supply chains.

Setting net-zero targets will inevitably involve switching over to renewable energy sources and implementing energy-efficient technology.

Greening supply chains requires educating and working with suppliers to ensure ethical sourcing, reducing environmental impact via options such as route optimisation, and promoting fair labour practices.

Prof Yeoh: Companies should explore partnerships and innovate creatively. For example, a power station operator who emits significantly may want to consider reaching out to players doing carbon capture and carbon utilisation. There, they can explore ways to turn waste into resources in the shortest time, with a wider partnership approach.

The company will have to look into innovations that are outside its comfort zone, and venture into these areas either by collaboration or alliances.

Forcellati: The ability to anticipate and react quickly to events is critical; thus, I believe that investing in early warning systems, disaster preparedness, and employee resilience are bold and necessary moves to ensure sustainable businesses.

Heng: Companies need to proactively work towards not only making sustainable choices themselves, but also enabling their customers to do the same. For instance, for an e-commerce company, it is not only about switching to plastic-free packaging, but also how to enable its customers to make more sustainable purchasing decisions.

To do this, these customers could be provided with detailed information about the sustainability of products, such as sourcing, materials, and environmental impact. This transparency helps them make informed choices. Companies could also incentivise purchases that have lower environmental impact, through rewards programmes.

What are some common mistakes that companies make when embarking on sustainability?

Yuen: Companies tend to overfocus on the “environmental” aspects of the sustainability journey and neglect the social factors – such as employee wellbeing and diversity, or equitable employment frameworks and processes – and governance factors such as information security and anti-bribery policies.

It is always easier for businesses to report that straws have been removed from the staff cafeteria, that LED lights have been adopted, or that Earth Hour will be observed, than have management committing to review and update the company’s grievance reporting, investigation and disciplinary processes to ensure that all bullying and harassment complaints are properly investigated.

Yeo: Many tend to overlook their supply chain – more specifically, their procurement practices and the sustainability performance of their suppliers.

Another increasingly important aspect that companies should pay attention to is to avoid overstating their sustainability achievements and impact, or risk being perceived as engaging in greenwashing.

Prof Yeoh: Companies view sustainability solutions as an added cost to their business.

However, in most cases, sustainable solutions will help them save on operating expenditure in the long run.

Companies should not focus only on upfront capital expenditure; instead, they should consider the benefits for the entire life cycle of a green project.

For example, upgrading to a more energy-efficient air-conditioning unit could save more on the electricity costs in the long run, with a typical payback period – the time needed to recoup the investment – of three to four years.

Heng: One common mistake is limiting sustainability initiatives to specific departments or projects, which can significantly limit their overall impact.

This happens due to the absence of a comprehensive sustainability plan, resulting in isolated efforts within departments such as corporate social responsibility or marketing, while neglecting core operations and decision-making processes.

Chu: As regulations and compliance requirements around climate change and sustainability increasingly go mainstream, businesses can no longer afford to put off taking action.

This can result in heavy fines or loss of business opportunities. Staying ahead of regulations and compliance issues can in fact future-proof the business, and open up access to more and new business opportunities.

Another mistake that organisations make is not engaging their employees sufficiently on the necessity of going green.

For instance, if a logistics company requires its drivers to modify their driving habits and switch over to operating electric vehicles, it must convince the drivers why the change is necessary, and how it will benefit the company, the drivers and their customers.

How should companies balance between green concerns and other imperatives?

Prof Yeoh: One common observation is that sustainability elements may be treated as only a nice-to-have in operational and strategic considerations, and come into play at a later stage, often due to resource constraints or simply not being part of the original thinking.

Instead, organisations should aim to have sustainability as the foundation and starting point. This approach allows one to place equal emphasis on sustainability with other aspects of an organisation’s operations and strategies, and perform the necessary trade-offs to balance green concerns with other imperatives.

Heng: The key to maintaining that balance is integrating sustainability and considering environmental responsibility within a company’s overall digitalisation strategy or road map.

Digitalisation and technology have the potential to accelerate the sustainability agenda: from finding new ways of creating a circular economy, to ensuring that organisations at different points of the journey can use technology to identify challenges and trouble-spots.

Lee: Companies must consider environmental trade-offs when undertaking certain ESG activities.

They should clearly communicate potentially conflicting roles and the limitations or challenges faced.

For example, the benefits of digitalisation – such as waste reduction from improvements in real-time data monitoring and better resource planning – should be weighed against potentially higher, more intensive energy consumption.

Chu: By making sustainability a core value of the organisation, companies can more effectively align and balance other business considerations with sustainable practices. They need not be mutually exclusive or at the expense of another.

That said, conducting an impact assessment can help manage potential conflicting business imperatives.

This involves evaluating the various ESG consequences of the different imperatives to identify the potential trade-offs and resources required, before deciding on the most balanced approach.

Yeo: Balancing environmental impact and business priorities does not necessarily need to be competing; in fact, it can be complementary.

Companies that can integrate sustainability with their business strategy, and align their environmental goals with financial and social objectives are better positioned for business success.

Growing expectations from customers, investors and even employees has also meant that companies committed to sustainability can expect to better differentiate themselves from their competitors, attract and retain talent, as well as better access financing in the form of green loans or investments.

Forcellati: Identifying, assessing and dealing with trade-offs and win-wins are an integral part of doing and being in business.

Sustainability to me is like a strategic language, which can assist companies in taking a more holistic approach when assessing the resiliency of their business models and dependency on resources – such as financial resources – and skill sets.

In the case of operational resilience, sustainable practices allow a company to assess costs and benefits by providing guidance, planning and clarity when engaging with relevant stakeholders.