Sustainability – a key growth pillar for businesses
SBF members got to hear from thought leaders in the sustainability space at SBF’s flagship economic outlook seminar.
“More than S$295 billion of climatic investments have been recorded in the last eight years and there will be an even steeper climb in the years ahead.” This was shared by Chief Sustainability Officer of CapitaLand Investment Limited, Mr Vinamra Srivastava during the Singapore Business Federation (SBF) Business Seminar Outlook “Navigating the Challenging Global Outlook and Accelerating the Transition to a Green Economy” on 18 January 2023.
A guest speaker at the event, Mr Srivastava noted that greening measures can be costly undertakings for companies, as they require “heavy and chunky capital investments” at times. However, he said companies need to look longer term. When spread over a period of time, investments in sustainability can lower a company’s operational expenses.
More than 150 professionals and business leaders attended the seminar in-person at the DBS Auditorium in the Marina Bay Financial Centre.
A journey towards realising sustainability benefits
Mr Srivastava pointed out that since increasing energy efficiency is one of the main objectives of sustainability drives, businesses have plenty to gain from savings on reduced energy consumption, especially given the high energy costs in today’s climate. For instance, CapitaLand saw improvements in operational return of investments (ROIs) in the range of 8% to 15%.
Looking forward, he expects greening costs to decrease further as acceptance of sustainability grows. He pointed out that producing renewable energy has become more price competitive as the costs of solar modules have fallen by 90% between 2010 and 2020.This has resulted in the massive expansion of solar power plants in many parts of the world, notably in India. In addition, banks have also jumped on the green bandwagon thus increasing access for companies to get financing for their green projects.
On the flip side, companies can expect their ROIs to be weakened if potential tenants and clients choose not to associate themselves with buildings and businesses that do not meet minimum green standards. On this, Mr Srivastava noted that the general environmental, social and governance (ESG) journey of most businesses often starts because of the need for companies to comply with a client’s request for sustainable products or processes. After this first step, the company will then focus on risk management or how to protect and navigate their ESG risk.
As companies become more mature, the emphasis is to achieve operational excellence. This, he said is a “key milestone” when a business realises that its investment in sustainability can improve operational effectiveness and bring about financial benefits.
After which, most companies will start using ESG as a competitive advantage to source for capital as well as customers.
Transition to a green economy
Mr Srivastava shared that the real estate sector contributes 37% of greenhouse emissions around the world and the problem will become more acute. It is predicted that in the next 40 years, the world is going to add new buildings equivalent to the entire New York City every month.
Separately, there are a lot of existing old buildings and these pose greater challenges as it is more difficult to decarbonise these buildings.
There is no silver bullet to deal with these issues and hence, businesses must experiment with multiple decarbonisation solutions and approaches.
Other challenges impeding the sustainability movement is the huge lack of common understanding of what is deemed as ‘green enough’ and this has led to accusations of greenwashing. So much so, there is now green hushing which essentially means to not talk about one’s green efforts at all, because if companies do, they run the risk of being called out for actually not doing enough. Then there is the challenge of being nimble footed to keep pace with the rapid emergence of sustainability technology and regulations.
Speaking at the same seminar, Director, Research and Publishing, Advocacy and Policy Division SBF, Mr Edwin Heng confirmed the greater acceptance of sustainability amongst Singapore businesses. According to SBF’s National Business Survey 2022/2023, 75% of businesses have implemented measures in at least one ESG area in the past year. The ESG areas being ‘Employee health & safety’ (81%), and ‘Fair and equitable employee pay and rewards policies’ (71%). Looking ahead, the survey also showed that companies are planning to do more in ESG areas such as ‘Increasing sustainability in business supply chain’ (45%), ‘Mitigating supply chain risks’ (43%), ‘Inclusion and diversity in business’ (43%), and ‘Contributing to communities’ (40%), amongst others.
According to SBF Vice Chairman, Mr Gan Seow Kee, while businesses face a year of uncertainty amid a broadly weaker global economy, the road ahead is not all doom and gloom. He encouraged companies to be more resilient and exploit new opportunities like the green economy. SBF will help companies better adopt sustainability solutions and tap on sustainability for growth through initiatives such as the Alliance for Action on Sustainable Spaces and the Career Conversion Programme for Sustainability Professionals.