Melting glaciers and rising sea levels are not just bad news for the inhabitants of Greenland or Tuvalu. They have direct and indirect global implications, particularly in today’s interconnected world.
Southeast Asia, for instance, is increasingly exposed to climate change. The Asian Development Bank forecasts that if left unaddressed, climate change could reduce the region’s GDP by 11 per cent by the end of the century.1 Meanwhile, a recent United Nations report points to rapidly rising sea levels in Southeast Asia, driven by manmade greenhouse gas emissions, climate change and warming waters.2
With governments and multilateral organisations making long-term plans to combat global emissions and pollution, it is in companies’ own interests to step up efforts to help fight our planet’s climate emergency. However, many companies in Asia still find it hard to recognise the magnitude and urgency of the problem, let alone act on it.
One survey found just 24 per cent of Asian respondents have an environmental, social and governance (ESG) strategy compared to 48 per cent of corporates globally, and 87 per cent of European and UK companies.3 Yet a growing number of businesses are recognising that the opportunity to do good isn’t reserved for green companies. What’s more, non-action comes with risks, which is why many are increasingly looking to shore up their resilience.
Here’s why firms of all sizes should make sustainability a key part of their plans.
A growing number of businesses are recognising that the opportunity to do good isn’t reserved for green companies.
Regulatory expectations are shifting
Adopting ESG practices is strategically and financially prudent for businesses as jurisdictions from China to the European Union increase their focus on sustainability. Some nations are currently discussing the introduction of taxes on meat and plastic packaging. Such measures would have been inconceivable just a few years ago.4
Lack of awareness of changes in the regulatory landscape when it comes to sustainability can pose legal, policy and reputational risks to companies. Seen through this lens, sustainability needs to be embedded into the operations and risk management framework of any business.
Customers’ eco-expectations are growing
The rise in popularity of everything from vegan foods and ocean-friendly sunscreens to electric vehicles shows that consumers increasingly care about the environmental and social credentials of what they buy.5
Today’s consumers – especially millennials – don’t base buying decisions solely on product selection or price. Increasingly, they’re assessing what a brand says, what it does and what it stands for. They’re supporting companies whose brand purpose aligns with their beliefs.
Businesses that clearly stand for something bigger than what they sell and take decisive action on ESG issues are more likely to be able to strengthen customer relationships and better connect with consumers. In short, moving sustainability up the corporate agenda can help SMEs access new customers and unlock new green market opportunities.
More investors are seeking to boost sustainable companies
Meanwhile, analysts at pension funds and asset managers are calculating the long-term risks to industries that fail to move away from high-carbon, high-polluting activities – anticipating that changing laws and attitudes may make it expensive to raise capital or access new markets, if not put them out of business altogether.
A recent HSBC report ⁶ substantiates this view. It found that not having a strong ESG approach is simultaneously impacting firms’ financing opportunities and presenting supply chain risks.
Just 24 per cent of Asian respondents have an environmental, social and governance (ESG) strategy compared to 48 per cent of corporates globally.
Three steps to sustainability success
Of course, business strategies and product line-ups can’t be shifted overnight. It takes time to climate-proof a factory or office building, switch a fleet of delivery trucks to electric, source more sustainably developed goods or change consumption habits. But we can all at least start the process now – not next week or next year.
So, where should companies start?
- Think short term and long term. Decisions made today impact the future. Climate change impacts are systemic, all-encompassing and here to stay.
- Be holistic. Review everything from electricity usage and property portfolios, to where you source materials and how you package and ship products, to operational preparedness. This means engaging with all layers of your organisation and embedding green and social issues into your business and investment decision making.
- Stay up to date. Technological changes and green innovations could put more low-carbon alternatives within your reach. Stay abreast of the regulatory environment, sustainable financing options and evolving investor and customer expectations. You may find that climate-friendly action will lift – not drag down – your profits and reputation.
1 Asian Development Bank: Climate Change Losses for Southeast Asia Well Above Previous Estimate, December 2015 https://www.adb.org/news/climate-change-losses-southeast-asia-well-above-previous-estimate-adb
2 United Nations Intergovernmental Panel on Climate Change (IPCC): Climate Change and Land, August 2019 https://www.ipcc.ch/srccl
3 Sustainable Financing and ESG Reporting, East and Partners, September 2018.
4 See https://www.theguardian.com/environment/2018/oct/29/uk-to-consult-on-plastic-packaging-tax-chancellor-says and https://www.forbes.com/sites/michaelpellmanrowland/2017/12/15/meat-tax/#664d69ba4743. See also https://www.ft.com/content/d5fbeae4-869c-11e9-97ea-05ac2431f453 re legal challenges, and https://www.ft.com/content/7cfe2c70-ff41-30c9-bb32-512dbe216f48 and https://time.com/5679965/university-of-california-fossil-fuel-investments
5 HSBC Global Research: Navigator: Now, Next and How for Business, January 2019. https://www.about.hsbc.com.sg/news-and-media/more-to-do-for-singapore-businesses-on-sustainability-adoption-hsbc-survey
6 HSBC Global Research: Who Cares Wins: The Future Consumer and the Rise of ESG Themes, February 2019