In the last decade, green was the buzzword for corporates looking to show off their environmental awareness.
But these days, amid the Covid-19 pandemic and increasingly urgent calls to stem global warming, failing to deliver on climate change metrics could spell financial disaster for firms.
Such is how strong the business case for environmental sustainability has grown, two leaders in the space say.
Though some see it as an extra cost, companies can no longer ignore sustainability obligations, argues Federico Donato, a council member at Global Compact Network Singapore. The organisation is the local chapter of United Nations Global Compact, the world’s largest corporate sustainability initiative.
Citing research on the correlation between ESG rating and default rate, Donato – who is also president of the European Chamber of Commerce in Singapore – says a firm’s sustainability performance has become an indicator of how forward-thinking its management is.
“If a company is putting so much effort into ESG, it means the board and leadership team has enough foresight,” he adds. “A lot of bankruptcy cases, such as Wirecard’s, have been led by gross governance issues, and governance is part of sustainability.”
Strong selling point
Beyond avoiding a bust, there are other push factors to go green. More consumers – particularly the young – are keen to shop only from responsible producers, says chief executive officer at WWF-Singapore, R. Raghunathan.
Customers today don’t easily trust sustainability claims or eco credentials. Therefore, leaders must create a culture of climate change, and move towards a circular economy model. “When carried out sincerely, sustainability can lead to more cost and resource-efficient production, and the ability to market as a premium brand,” he adds.
(Related: Greening the fintech world)
Donato, meanwhile, brings up a swimming pool contractor he met at a recent panel, whose efforts to offer eco-friendly pools with lower construction-related emissions helped it land huge hotel clients pressed by investors to slash carbon use.
When multinationals commit to sustainability, this pushes small and medium enterprises to comply as well, in order to continue supplying the big boys, he says. “For the pool maker, to be sustainable was a clear advantage and a good selling point.”
Donato adds that with tech advancements, sustainable solutions are within reach for most firms.
“Today, technology allows us to have more resources at lower cost. Everybody should look into his own chain to see how to save money by embracing more sustainable avenues. Treat sustainability as a form of innovation, not a cost,” he says.
Attracting talent, inviting funds
Another benefit of being sustainable? More investment. According to a WWF-Singapore report, the ESG wave has seen Asian asset managers increasingly commit to responsible investing on demand from institutional and private clients, particularly the young.
This is no surprise, says Raghunathan.
“The younger generation is acutely aware of the risks that the climate crisis is posing in different areas, including company profitability and valuations. More asset managers and financial institutions are preparing for the day when not just financial performance, but environmental performance will equally matter.”
Then there’s the people aspect, with talent flocking to – and staying at – environmentally-conscious firms.
“Every CEO in the world will tell you that their number one problem is to secure the best talent,” Donato says. And a big portion of job applicants, especially millennials, Gen Z and younger, are evaluating potential employers’ sustainability policies. You cannot greenwash your efforts, because people now are very proficient at determining what is real.”
So how can leaders get serious about sustainability? Both Raghunathan and Donato suggest education for executives and the rank and file, via programmes at their organisations or various universities.
And with Asian companies lagging behind in climate change commitments – for one, just 14 Singapore-headquartered firms have committed to the Science Based Targets initiative, which drives ambitious climate action in the private sector – Raghunathan is exhorting more leaders to step up to the plate.
“Singapore is pushing ahead relentlessly on the sustainability journey,” he says. “It is important that businesses recognise that change is on its way, and work with consumers, civil society and policymakers to transform their business models.”
This will not be easy, he acknowledges. Yet Singapore is racing onward, championing a Green Plan that includes ambitious goals for decarbonising local industries, advancing net zero goals, and increasing carbon taxes in the coming years.
This decisive shift is precisely why firms must embrace sustainability or risk being left behind, Donato concludes.
“Let’s say I’m a CEO that doesn’t care about the environment,” he says. “But the moment I cannot secure capital, I will care. The moment I cannot hire talent, I will care. The moment people don’t buy my product, I will care.”
Business leaders can pledge their companies towards a net-zero future at earthhour.sg.