Sembcorp on a corporate journey to go from brown to green

BEING sustainable, going green and decarbonising are buzzwords that have grown vastly in popularity of late, not least because of the very real and devastating effects that climate change have wrought on the planet.

Yet, well before it became a badge of honour to wear these phrases on one's corporate logo, energy and urban development heavyweight Sembcorp Industries set about building a sustainable business - a drive which has grown in momentum over time.

"While sustainability has become 'mainstream' in recent years, Sembcorp has long recognised its importance, and how the management of ESG (environmental, social and governance) risks and opportunities is critical to creating and delivering value and growth," says Ng Lay San, who heads Sembcorp's sustainability function as its senior vice president, Group Sustainability.

"Over the last two decades, our centralised utilities solutions on Jurong Island Singapore have been promoting energy resilience, water reuse and optimal land use, while our urban developments have been promoting sustainable industrial development," she adds.

The group also started publishing its annual sustainability report in 2008 - almost a decade ahead of the Singapore Exchange's introduction of its requirement for listed companies to adopt sustainability reporting on a "comply or explain" basis.

"We were also the first energy company in Singapore to have a climate change strategy, launched in 2018, Singapore's Year of Climate Action," Ms Ng points out.

These days, Sembcorp is among the largest renewable energy players based here, with solar, wind and energy storage in markets such as Singapore, China, India, the United Kingdom and Vietnam.

For example, it is a leading provider of solar energy in Singapore - operating the 60MWp (megawatt-peak) Sembcorp Tengeh Floating Solar Farm, which is one of the world's largest inland floating solar farms, with 122,000 solar panels spanning across 45 hectares; it is also building a 400MW (megawatt) solar power project in India to support the nation's clean energy mission, and growing its solar energy footprint in Vietnam.

In terms of wind energy, the group has the largest operational wind capacity under self-operations among independent power producers in the country. And, in the UK, Sembcorp operates one of the country's largest battery storage portfolios.

It has a balanced energy portfolio of over 12,800MW, with more than 3,300MW of renewable energy capacity globally, comprising the aforementioned solar, wind and energy storage.

Ambitions

But the group is continuing to aspire to greater heights, while placing its sustainability goals front and centre - with a bold proclamation of its vision, achievements and aspirations to all that come across it.

For instance, the landing page of the "Strategy" section of its website - which is also labelled with the "Sustainability is our business" motto - says: "Our vision is to be a leading provider of sustainable solutions."

And, before the cynics can downplay the intentionality of its articulated vision, Ms Ng explains: "In Sembcorp, the phrase you will often hear is that 'Sustainability is our business'. And while it may sound like an easy catch phrase, it is actually a genuine reflection of our commitment to make sustainability front and centre of all that we do. It is core to our purpose, our business and strategy, as well as to the way we operate.

"To encapsulate how sustainability is about what we do and the way we do it, we have articulated three ESG ambitions for the future - to enable a low-carbon and circular economy, embed responsible business practices and empower people and communities. In all these ways, sustainability is very much every part and parcel of our business."

In enabling a low-carbon and circular economy, Sembcorp has three key priorities:

1) Climate change, through reducing its GHG (greenhouse gas) emissions intensity and moving towards a balanced portfolio of low-carbon energy assets;

2) Resource management, through growing and innovating its business solutions to support a circular economy, while ensuring more efficient operations to avoid or minimise the unnecessary use of resources; and

3) Local environmental protection, which involves minimising negative environmental impacts and ensuring the highest standards of environmental management.

Its three key priorities for embedding responsible business practices are in the areas of corporate governance, ethical business and compliance, and risk management; while its priorities for empowering people and communities focus on health and safety, its people and the wider community.

Roadmap

In May, led by its board and CEO, the group unveiled its strategic transformation plan to achieve its vision.

"With growth driven by our renewables and integrated urban solutions businesses, we set out our roadmap to transform our portfolio from brown to green. By 2025, we aim for our sustainable solutions portfolio to comprise 70 per cent of the group's net profit (up from around 40 per cent in 2020)," says Ms Ng.

It also articulated targets to quadruple its gross installed renewable energy capacity to 10 gigawatts (GW), triple its urban land sales to 500 hectares, and reduce GHG emissions intensity by 25 per cent by 2025.

And it set targets to significantly reduce its 2030 GHG emissions to just 10 per cent of 2020 levels, as it continues to work towards achieving net-zero emissions by 2050. "Bold targets that speak to the exciting brown to green journey that Sembcorp is now on," says Ms Ng.

Critically, Sembcorp recognises that achieving such goals and aspirations come with the support and contribution of the entire organisation - with its leadership setting the right tone and direction.

Leadership

In its Sustainability Report 2020, Sembcorp says: "The board considers sustainability issues as part of its strategy formulation. It has determined Sembcorp's material ESG factors, and exercises oversight in the management and monitoring of our material ESG factors."

It also has a Sustainability Steering Committee, which provides strategic direction for managing sustainability-related risks and opportunities, chaired by its group chief financial officer; and ESG components are included in the performance scorecard of its leadership team.

"We are very much still on a journey, but I think our success so far can be attributed to our board and senior leadership's focus on making sustainability core to our purpose and strategy," says Ms Ng.

"Firstly, getting to the heart of the company's purpose is critical. The rallying call for the entire global Sembcorp team is really around our purpose of supporting sustainable development and creating value for our stakeholders and communities. This is the passion that drives us.

"Secondly, with our vision to be a leading provider of sustainable solutions, it is central to our strategy and organisation as you can see from our brown to green strategic transformation plan. Our plan is underpinned by clear targets, and to embed sustainability in the organisation and ensure accountability, these and other ESG targets are incorporated in our company balanced scorecard and management incentives. So sustainability is very 'real' indeed to us all in Sembcorp."

Financing

Green financing - a market rapidly growing and evolving to meet the demands of the market - has also played a key role. "To execute our strategic transformation plan, we expect to invest over S$5.5 billion over the next five years, primarily to grow our renewable energy and integrated urban solutions businesses," says Ms Ng.

"Tapping new sources of capital, including green and sustainable financing, is a key thrust for us too as we embed sustainability in our financing strategy."

Sembcorp launched its inaugural S$400 million green bond offering in June, issuing the first certified green bond under the Climate Bonds Standard by a Singapore-based energy company. "The competitive pricing achieved for the issuance has given us confidence that the markets and investors are aligned with us on our vision," Ms Ng says.

The group also recently announced its Sustainable Financing Framework, which it says is Singapore's first for sustainability-linked transactions for the energy sector.

Challenges

Amid all the accolades, it might be easy to forget that the journey of sustainability is a complex one - and one that can be fraught with risks and challenges. Ms Ng shared the issues that any company serious, or intending to get serious, about sustainability must take on board.

"The transition towards a low-carbon economy creates significant disruption and risks, especially for the energy sector. At Sembcorp, we recognise the challenges and are transparent to our stakeholders about them. Decarbonising is not easy and transforming business models and transitioning portfolios will take time.

"But this also means opportunities: the ESG challenges of today are also the value drivers of tomorrow. The key is to not lose focus on value creation for the long term. Increasingly, the world, customers and investors are showing that they are behind this.

"From the demand for clean energy, the 'greenium' being achieved in green financing, to the great talent that purposeful organisations are attracting - I would say that there's lots to be said for how corporates can make a powerful contribution, drive positive change while reaping economic rewards."