The road to net zero for corporate Singapore

WHILE net-zero commitments hold a solid spot on many corporate board and C-suite agendas today, many companies in Singapore and Asia are still trying to figure out what net zero entails.

A recent study by Engie Impact, a sustainability solutions company, found 90 per cent of companies in the Asia-Pacific lack confidence that their business units and individuals are incentivised to decarbonise. Half of these companies also say they do not have mechanisms to integrate carbon in investment and business decisions.

"Even as there is active interest among many Singapore corporates towards environmental, social and governance (ESG) initiatives, many are still at the stage of gaining a deeper understanding of what net zero entails, its implications on business growth, and considering strategies on how to facilitate a mindset change within their organisations," said Cherine Fok, director for sustainability services at professional services firm KPMG.

Companies that set net-zero goals aim to balance their amount of greenhouse gas emissions by absorbing an equivalent amount from the atmosphere. Some companies do this, at least partially, by buying carbon offsets to fund projects that reduce atmospheric carbon.

KPMG ranked Singapore 15th out of 25 countries it surveyed for net zero readiness. In its Net Zero Readiness Index 2021 report, the firm highlighted challenges the city-state faces in its road to net zero. Among these: having both little space for renewable energy generation as well as a significant manufacturing sector.

At a national level, Singapore has not set a formal target date for achieving net-zero emissions. But it aims to halve emissions from an expected 2030 peak by 2050, with net zero following "as soon as viable".

At the corporate level, Singapore's companies, much like their global peers, lack a playbook that will set them up for decarbonisation success.

The Engie Impact study, which surveyed 400 business leaders representing companies with over US$1 billion in revenue or more than 10,000 employees, suggests a disconnect between ambitious net-zero targets set by C-suite leaders and what is being done to deliver net zero.

Clear roadmap and goals

A bold decarbonisation plan must be supported by a detailed roadmap marking out the sequence of how decarbonisation levers are to be rolled out and integrating these with the company's strategy, said the Engie Impact study's authors.

Agreeing, KPMG's Fok said: "Where corporates have chosen to make their commitments public, they have found it beneficial to identify both short and medium-term goals to facilitate timely tracking and reporting of progress.

"A tiered approach to sustainability outcomes is a sensible approach, given the significant investments and opportunity costs involved."

For instance, Sembcorp Industries, which is targeting net-zero emissions by 2050, has laid out several targets toward that end.

By 2025, the energy and urban development player plans to quadruple its gross installed renewable energy capacity to 10 GW, treble urban land sales to 500 hectares, and reduce greenhouse gas emissions intensity by 25 per cent. It is also targeting to reduce its 2030 emissions to 10 per cent of 2020 levels.

Performance incentives for senior executives at the company are also tied to ESG performance and key ESG indicators.

Real estate company City Developments (CDL) has also established stronger links between employee and executive remuneration, and the company's ESG performance since 2015.

Performance indicators that are aligned with global sustainability standards, such as ISO 26000 and the United Nations' Sustainable Development Goals, have been incorporated into the individual goal-setting of all employees, including CDL's senior management.

How corporates perform on these targets must also be tracked, assessed and communicated.

"We firmly believe that 'what gets measured gets managed'," said CDL's chief sustainability officer Esther An, quoting management consultant Peter Drucker. "Target setting, tracking and reporting performance have helped us identify gaps, take strategic action to improve and future-proof our business, and raise operational performance."

CDL has been ranked 5th most sustainable corporation in the world and top in the real estate sector globally in a recent survey of 6,900 companies by Toronto-based media and investment research firm Corporate Knights.

To really move the needle, companies must invest in plugging critical gaps in skills and capabilities.

KPMG, for instance, has committed US$1.5 billion over the next three years as part of the firm's global push for ESG. This investment includes providing ESG training to all its 227,000 staff worldwide.

Meanwhile, CDL has set up a green building and technology application team that is in charge of leveraging cutting-edge technology to reduce the company's carbon footprint in the way it designs, builds and manages its assets.

Collaboration among corporates, government, community

Besides setting sustainability goals and timelines with a set of action plans to involve stakeholders in the entire ecosystem, companies can work with governments, corporations, non-profit organisations and the community to exchange insights and best practices on achieving net-zero, said Frasers Property's group chief corporate officer Chia Khong Shoong. The company has committed to achieving net-zero across its value chain by 2050.

"Companies and the government can also explore potential collaboration to test innovative solutions, establish standards and scale up adoption of technology to improve sustainability targets," Chia said.

"Innovation and learning are both key to unlocking sustainable progress for any company. We invite like-minded organisations to join us by sharing openly."

Some industry players, among them Assaad Razzouk, chief executive of renewable energy company Gurin Energy, are of the view that a national net-zero commitment can spur more corporates into action.

"Personally, I think a net-zero pledge by Singapore is long overdue. Many countries have even enshrined these goals into law. Once you legislate, industry will have to follow suit. If there are no goals, we are operating in the void," Razzouk said.

UOB's chief sustainability officer Eric Lim said banks, too, have a responsibility to support the national sustainability agenda.

"By ensuring that financing is tied to sustainable outcomes, for example, we can help businesses advance responsibly by capturing the growing opportunities related to sustainable development. We are also well-positioned to channel investments and capital flows that contribute to the sustainability of the wider economy," Lim said.

Finally, with more consumers voting with their wallets for a more sustainable lifestyle, governments and companies will also be motivated to do more in climate action.

UOB's Asean Consumer Sentiment Study last year showed 2 in 5 consumers in Singapore will stop supporting brands that do not act responsibly, while 1 in 3 said they are willing to pay more for sustainable products. Nine in 10 consumers also want financial institutions to offer more information and sustainable financial solutions.

This is the 19th in a 20-part Green Business series, in collaboration with UOB, exploring sustainability trends across businesses and industries.