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CDL, Olam strive to put sustainability at heart of business
FOR City Developments Limited (CDL) and Olam International, putting sustainability at the heart of their business is not easy.
CDL, the Singapore-listed developer giant, began to make sustainability an integrated part of its strategy and operations in the mid-1990s, when going green was not the trendy buzzword it is today.
But being the first mover had its own difficulties, including the lack of awareness and knowledge along the value chain from contractors to investors about the benefits of green products and practices in the early days.
"Even till today, not all consumers may be willing to pay a premium for green homes, office spaces and other sustainable products," says Esther An, CDL's chief sustainability officer.
In Olam's case, while it aims to improve labour and environmental practices, it has 4.7 million farmers in its supply chains, with the majority being smallholders, which makes traceability difficult, says Neelamani Muthukumar, Olam's chief financial officer.
For those that they can reach, they have to also address "very entrenched issues including poverty, poor health and poor literacy" in trying to help them implement better practices - necessitating year-round work with farmers to provide social investment in health and schools.
But the urgency of climate change has pushed the two companies to step up efforts to place sustainability at the heart of their business.
Early this year, CDL embarked on an analysis of how its business would be impacted by a rise in global temperatures. It found that if global temperatures rose by two degree Celsius from now until 2030, the increased pricing on carbon emissions could cause CDL to incur an annual cost of more than S$20 million if this climate-related risk is not managed adequately.
"Companies can no longer ignore the risks posed to their bottom line," Ms An says. "Accounting for about a third of global greenhouse gas emissions, the building and construction sector has a critical role in shaping a sustainable economy."
Public expectation around the world has shifted massively in terms of corporate responsibility, Mr Muthukumar adds.
For Olam, the business case for investing in sustainability is clear. "Agriculture depends on the earth's natural resources and our farmers making enough income to want to stay in farming," he says.
In the past year, both companies have made ambitious commitments towards sustainability.
Under environmental, social and governance (ESG) goals established under The CDL Future Value 2030 sustainability blueprint last year, CDL made a 27.3 per cent reduction in energy use intensity last year, achieving its 25 per cent target for 2030 ahead of time.
In terms of greenhouse gas emissions, it made a 32.8 per cent cut, on track to meet its 2030 target - and this year set a further goal of a 59 per cent reduction by 2030.
For its development projects, it is also committing to use sustainable building materials to reduce embodied carbon by 24 per cent by 2030.
Meanwhile, Olam has expanded its Olam Livelihood Charter to reach 363,000 smallholders from 302,500 in 2016, giving them improved access to finance, training, social investment to improve their yields, quality and income.
It also put together Asia's first sustainability-linked club loan facility of US$500 million with 15 banks that will see reduced interest rates as Olam delivers on pre-agreed ESG targets.
This year, it also launched AtSource, a digital dashboard that gives customers a view of the impact of a product's journey from farming to processing, to meeting demand from customers for sustainably sourced products.
For CDL, its next phase involves focusing on de-carbonising its operations and innovation.
"We will assess our current operations to strive towards achieving 100 per cent renewable energy by 2050," says Ms An, who adds that the company is aiming to join the global initiative RE100 for companies to commit to using 100 per cent renewable electricity by a certain year.
On the innovation front, CDL and the National University of Singapore (NUS) this year launched joint laboratories to focus on innovations in renewable energy, sustainable materials, energy efficiency and the quality of indoor environments.
For Olam, it is underscoring the importance of putting sustainability at the heart of its business by making it one of the six key priorities for the company's new business framework called Olam 2.0.
Another of these priorities is to focus on drivers of long-term value, which include protecting "natural capital" like ecosystems and fresh water, and "social capital" which includes the health and safety of workers.
Making sustainability a key focus of the business is not a walk in the park, Olam's Mr Muthukumar says.
"You are balancing short-term cost efficiencies with long-term investment in sustainability initiatives. What's essential is to always be able to demonstrate the business rationale for every action taken for that particular crop in that particular country."