The Business Times

Why 50% of businesses won't survive the sustainability push

Published Thu, Jun 24, 2021 · 05:50 AM

WITH investors', MNCs' and governments' sustainability standards growing ever more stringent, businesses can no longer view climate change initiatives as a "nice to have". Today, effective corporate environmental, social and governance (ESG) policies are imperative - and if companies hope to survive, they have no alternative but to urgently adopt sustainable practices.

Climate change is now a fact of political life. China, the world's largest emitter of carbon dioxide, has promised to become carbon neutral before 2060 and to begin cutting its emissions within the next 10 years. US President Joe Biden has pledged to rejoin the Paris climate agreement, and has announced the ambitious goal of achieving a 100 per cent clean energy economy and net-zero emissions by 2050.

Climate change is widely recognised, including by Singapore's leaders, as an urgent and existential threat, with the need for all countries to build on the Paris Agreement to address the global challenge to humanity. Singapore's Green Plan 2030 includes initiatives to encourage decarbonisation in the maritime, aviation, energy and chemicals sectors, and steps to promote green financing, fostering sustainable development. While no firm date is set, the Green Plan's ultimate goal is for Singapore to achieve net-zero emissions as soon as is viable.

Leading Singaporean bank DBS says that it is committed to delivering "products and services that promote sustainable development" and has recently made some significant steps in demonstrating the validity of this approach. For example, last year, DBS converted Swire Pacific's existing five-year revolving credit facility of HK$2 billion (S$346 million), into a sustainability-linked loan, allowing Swire to improve the interest rate payable by meeting certain sustainability goals.

The Monetary Authority of Singapore (MAS) recently announced that it will be allocating US$1.8 billion of official foreign reserves for climate-related investments. MAS managing director Ravi Menon said: "Finance is key to unlocking a sustainable future. It can support the transition to a less carbon-intensive economy and channel capital to green technologies and infrastructure."

Investors in Asia and beyond are increasingly choosing to fund only companies that show a clear goal and track record of responsible climate change policy. BlackRock, the world's biggest investor, is putting environmental and social priorities at the forefront of its investment approach, while new venture capital fund, 2150, is launching with the first close of a 200 million euro (S$321 million) fund, which will back technologies aimed largely at reducing the carbon footprint of cities.

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So how can a business not only commit to fighting climate change, but actually achieve the goal?

It all comes down to setting a target first, and seeing it through in every facet of your organisation - including external supply chains. The only way of gauging whether targets are being met is to accurately measure performance, ideally in real time.

Moreover, for a business to truly prove to investors, shareholders, employees and even insurers (that's right - shaken by the pandemic, insurance providers are increasingly requiring businesses to report, in real time, their carbon footprint), it needs to keep a record of all its operations and their impact, and update it regularly to show progress.


Efficient tracking and analysis of data is key. Yet this is the area where most companies fall down.

In a 2020 survey conducted by BlackRock of 425 investors across 27 countries (collectively representing some US$25 trillion in assets under management), while a majority of respondents said sustainable investing is already or will become central to their investment strategies, they complained of facing great obstacles in obtaining accurate sustainability and ESG data and analytics.

Organisations ignore this issue at their peril. In many ways, the climate change business revolution mirrors that of the digital revolution, which saw only one in eight Forbes Global 2000 companies get it right, while as many as 50 per cent failed altogether. As Deloitte's partner for energy transition and renewables John O'Brien recently pointed out: "If you want to have a business that's going to be running in 10 years, then you need to be thinking about how you're going to plan that strategy to be in business."

Ikea, which recently announced it will be investing 200 million euros to accelerate its transition into becoming a "climate positive business", has already told its suppliers that those who do not have a plan to reduce carbon will be eliminated from the chain.

This is a momentous decision that will see hundreds of smaller businesses having to prove they care about sustainability, or lose out on a huge business opportunity.

And this is just the beginning. In January, the world's leading financial institutions (including major commercial and investment banks, asset managers and insurers) adopted a common metric to account for the greenhouse gas emissions they finance. The reality is becoming ever clearer: Companies that insist upon treating climate change as a fuzzy public relations matter, rather than a concrete business problem, risk facing dire consequences.

You'll surely have seen numerous documentaries examining the risks that climate change poses to various species - not least, our own. Sir David Attenborough won't mention it, but in the sustainability revolution, countless companies face extinction, too. Only the strong, and the smart, will survive.

  • The writer is founder and CEO of Equilibrium World, a sustainability and ESG data management platform, and co-founder of SparkLabs Ventures.


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