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Making a business case for sustainability

Last year was a turning point for sustainability in business for two main reasons.

In October last year, Typhoon Koppu swept across the northern Philippines killing at least nine people as trees, power lines and walls were toppled and flood waters spread far from riverbeds. Time magazine called the Philippines ‘Ground Zero’ for climate disaster, having suffered four of its 10 most devastating storms in the past decade. Photo: Reuters

In October last year, Typhoon Koppu swept across the northern Philippines killing at least nine people as trees, power lines and walls were toppled and flood waters spread far from riverbeds. Time magazine called the Philippines ‘Ground Zero’ for climate disaster, having suffered four of its 10 most devastating storms in the past decade. Photo: Reuters

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Last year was a turning point for sustainability in business for two main reasons.

First, the United Nations adopted the Sustainable Development Goals, giving businesses around the world long-term existential guidance.

Second, almost 200 nations reached a deal, which led to the adoption of the “Paris Agreement” that will, for the first time, engage them to lower greenhouse gas emissions to help fight climate change.

The Paris deal was a landmark agreement for more reasons than one; it was the first time that business was finally seen as a solution and not just the cause of the problems.

Thousands of CEOs showed up and made active commitments for their company or sector. Science is sending an undisputable message, and business leaders cannot hide behind doubts anymore.

Climate change is mostly caused by human activities, and the threat is not to the earth as we often hear, but to our civilisation. Business has a responsibility and unique capacity to have a large-scale impact, and needs to lead this essential transformation.

The size, urgency and complexity of the task could look so far out of reach that we could be cynical, or feel paralysed.

We need to choose clear targets, to be communicated and deployed at all levels. This is why the target of net zero emissions, part of the Paris Agreement, should be chosen as the overarching way forward for business to change its model.

For example, on a recent panel discussion at the Green Growth Business Forum in Singapore, I sat alongside Shell, discussing its pathways to net zero emissions, and City Developments Limited (CDL), which has created a sea-change in South-east Asian real estate because of its commitment to sustainability.

Shell is showing that a world with net zero emissions — challenging though it might be — is one the world has to achieve and companies have to be prepared for. CDL has adopted green and low carbon strategies with a carbon neutral corporate head office, solar panels in commercial and residential developments and vertical greening.

These companies are not doing this simply because they are altruistic but because they believe this is the right business model and that the business-as-usual practice of disregarding the world’s stocks of natural assets is dead.

There are four main reasons why the business model that considers nature as free and unlimited will no longer work.

First, sustainability regulations are increasing; governments are giving direction and changing the rules of the game, as consumers — who are also voters — become more eco-conscious.

The double-digit growth of organic products both in Europe and the United States has been accompanied by stronger regulations on farming there.

Secondly, risks are increasing. In South-east Asia, extreme weather events are threatening the business supply chain and water scarcity is becoming a serious matter, with Time magazine calling the Philippines “Ground Zero” for climate disaster, having suffered four of its 10 most devastating storms in the past decade .

During the same trip to Singapore, I heard a lot about coal in the region, which seemed to be presented as an ongoing opportunity because of its low cost.

This is simply not true. Coal is seen as cheap because we are not considering its full cost.

The environmental impact of coal on land use, waste management, water and air pollution has long been established, with the World Health Organisation and other sources attributing one million deaths per year to air pollution due to coal. For this and for climate change, we are simply passing the bill to the next generation.

Perspectives will have to change; the Carbon Pricing Leadership Coalition, under the World Bank’s leadership, has an ambitious target of increasing coverage carbon pricing tools to reach 50 per cent of global greenhouse gas emissions by 2030.

Third, there are very real opportunities as business behaviour is changing; an example is the RE100 initiative where companies such as Unilever, Microsoft, Philips, Ikea, DSM, and Google and other big users of electricity are committing to use 100 per cent renewable energy by 2020 and beyond.

This is changing the electricity market through changes in their supply chain.

Finally, the financial world is changing. Rules and decision-making processes are being adapted to this new reality and this will be a huge accelerator for change.

Again financial organisations are not being altruistic, but know that nobody can be successful in a chaotic world. The global banking sector is moving away from fossil fuels to avoid stranded assets, and this should not be any different in the region.

Looking at these developments through the lens of South-east Asia, sustainable business offers vast opportunity.

Moving to alternative energy and energy efficiency is a key way that businesses in Singapore can make an impact locally. With Singapore’s position as a shipping, aviation, business and finance hub, it can be a fundamental trigger for transformation in the region.

Two important sectors, aviation and maritime, were not discussed in the Paris Agreement because of extraterritorial considerations.

This will change, as the world cannot accept that about 4 to 5 per cent of global emissions will remain outside the agreement. In these two domains, Singapore will be a strong, strategic player.

Singapore’s leadership and entrepreneurship has taken it from a Third World country to a First World nation in 50 short years. With this backdrop of success, Singaporean business leaders must simply cut through the rhetoric and go for it.

Green growth, net zero emissions and adopting a sustainable business model is not a cost, it is common sense to be ahead of the pack and secure a license to operate in the future.

ABOUT THE AUTHOR:

Philippe Joubert is chair of the Prince of Wales’s Corporate Leaders Group. Follow him on Twitter @JoubertPhilippe

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