What does climate change mean for business?

Businesses ignore climate change at their own peril, as it will affect their supply chains and profit margins, among other things. Taking the effort to mitigate climate change and prepare for potential risks will pay off in the long run, said experts at the 2015 International CSR Summit.

The upcoming United Nations climate conference in Paris this December will see governments across the world try to ink a legal treaty to curb climate change, but no progress will be made if business is not involved.

Companies must cut their fair share of emissions – not only because they bear much responsibility for causing climate change, but their profits, brand image, and the stability of their supply chains could also be threatened if their inaction allows global temperature rise to reach dangerous extents.

This was the consensus among government and business leaders at the 2015 International CSR Summit, held on August 26 at the Suntec Singapore Convention & Exhibition Centre.

Tang Tuck Weng, senior director of the National Climate Change Secretariat (NCCS) - the agency in charge of Singapore’s efforts to tackle climate change – cited the 2011 floods in Thailand – which destroyed factories owned by multinational giants such as Seagate and Honda – as a reminder that even if extreme weather events do not happen in Singapore, they can have an impact on businesses and operations here”.

“It isn’t enough to plan for what happens just in Singapore,” he said. “Instead, we must look at the global value chain”.

David Vincent, head of the United Kingdom’s Southeast East Asia Regional Climate Change Network, British High Commission Singapore, added that the private sector is also a significant contributor to greenhouse gas emissions and therefore must “help deliver the emissions reductions we need to see”.

For example, he shared that in 2013, just 50 of the world’s largest companies were responsible for about 10 percent of total global emissions - or 3.6 billion metric tonnes of emissions - according to non-profit CDP, formerly the Carbon Disclosure Project.

Investing in energy saving equipment, developing resource-efficient manufacturing methods, and offering repair services to extend the lifespan of products are some ways that businesses can reduce their environmental impact, Vincent told an audience of about 200 guests at a panel discussion on business and climate change.

The annual conference was organised by the Global Compact Network Singapore - the local branch of the United Nations Global Compact - and convened business leaders, government officials, corporate social responsibility practitioners, and civil society leaders over two days to exchange ideas on corporate social responsibility.

Tang added that such measures are bound to be a “no-regrets strategy” for most companies, due to their positive impact on long-term profit margins, stakeholder satisfaction and public reputation, among other benefits.

Sustainability pays off 

One company that can attest to this is American carpet tile makers Interface. The outfit has invested much effort and resources into sustainability, and as a result, “absolutely seen profits and resilience go up” said Rob Coombs, president and chief executive officer of Interface Asia Pacific.

He explained that traditionally, carpet tiles are a very resource-intensive products, but Interface in 1994 promised to “eliminate any negative impact our company may have on the environment” by 2020. Under an initiative known as Mission Zero, the company set targets on reducing the use of energy, raw materials, water, and cutting down waste generation and carbon emissions.  

With five years to go before the 2020 deadline, Interface is “about 65 percent of the way there”, said Coombs. Strategies such as incorporating biomimicry - which copies natural processes into product design to make it more sustainable - have helped it be more environmentally and socially responsible.

Including marginalised communities into the company’s supply chain has also boosted the business’s sustainability efforts, Coombs added. An example of this is an initiative known as Net-Works, which Interface runs with the conservation charity Zoological Society of London. 

Interface buys discarded fishing nets from fishing communities in the Philippines and turns them into carpet tiles, which simultaneously provides an additional income to villagers, prevents discarded nets from contributing to marine pollution, and helps Interface meet its goal of sourcing 100 percent recycled material. 

The firm is also experimenting with a business model which leases, rather than sells, carpets to clients, so that it can eventually take them back and recycle or dispose the tiles responsibly, shared Coombs. 

“This is the only smart way to run a business,” he said, adding that these measures have reduced costs for the company, made manufacturing processes more efficient, and helped design a better product. They have also won Interface business from sustainability-conscious customers and boosted employee engagement, he added.

Meanwhile, Japanese electronics multinational Ricoh is trying to reduce its environmental impact by shifting away from a business model where customers must buy new products when they break to one where products are designed to be easily repaired, or refurbished and re-sold to price-conscious buyers. 

Adrian Lim, head of Ricoh Singapore’s managing director’s office, added that the company also offers consultancy services to encourage behaviours such as reducing printing, energy conservation, and recycling in offices. Through these efforts, Ricoh hopes to engage its vendors and clients on sustainability, he noted.

Ahead of the carbon market curve

NCCS’s Tang noted that sustainability in the private sector could be greatly accelerated with the introduction of carbon pricing, a policy where companies must pay for the right to emit carbon dioxide into the atmosphere, either in the form of a tax or by purchasing permits for emissions. 

The current price of many goods and services does not include the negative externality – that is, the hidden cost on the environment - explained Tang. But he said he hopes that the global agreement in Paris will set in motion the process for a global carbon pricing scheme. 

Companies can pre-empt a global price on carbon by reducing their carbon emissions now, said the panel members. Many solutions already exist, such as switching to cleaner energy, improving energy efficiency, and cutting down on energy use, they noted.

As for companies which continue to ignore climate pressures, they “will find life difficult under an effective carbon market”, said Vincent. 

Wayne Visser, director of British advisory firm Kaleidoscope Futures Lab, who also spoke at the event, noted in a separate keynote address that “it is very easy to create short term value in a business, but that quickly comes crashing down when we hit resource limits”.

Only when companies focus on creating long-term economic, social, and environmental value do they become “truly sustainable”, he added.

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