As net-zero pressure mounts, Singapore corporates grapple with setting 2050 targets without visibility

Tech and regulatory uncertainty, along with buyers unwilling to pay the green premium, means mid-century targets often appear more aspirational than realistic. Frequent updates to interim targets and strategies will be crucial, experts say.

Singapore at night
Singapore's financial district at night. The city-state intends to reach net-zero emissions by 2050, and an increasing number of large corporates are making similar pledges. Image: Flickr/ Tristan Schmurr.

It is common refrain within management circles in Singapore to underpromise and overdeliver.

But that spirit appears to be cast aside in corporate target setting towards net-zero emissions, with a rising number of companies setting mid-century carbon neutrality targets despite limited visibility on feasible decarbonisation pathways.

The issue is especially pertinent in Singapore, where businesses face challenges such as procuring enough clean power on the densely populated city-state, and cleaning up supply chains scattered across the world. Sustainability executives are trying to understand exactly what kinds of green premiums customers are willing to pay for, and how much carbon offsetting – a contentious strategy – should feature in their plans.

It means few, if any, firms can confidently say they know how they will be completely negating their greenhouse gas output by 2050 – a feat scientists regard as the best bet to keep global temperatures from rising past 1.5 degrees Celsius and causing extreme climate risks.

Experts say it is necessary for firms to stomach some uncertainty and gun for net-zero targets, given the urgency of tackling climate change, though there must be preparation work in resourcing and talent development.

“I don’t think any industries today have the visibility of the kinds of [decarbonisation] technologies in 2040 that will make commercial sense,” said Vinamra Srivastava, chief sustainability officer of Singapore real estate manager CapitaLand Investment.

“There will be that 50 per cent that you can control now, and 50 per cent that you absolutely have no clue [about how to control], he said, pointing to the uncertainty in how the energy market will develop in the coming years.

While renewables are on the rise, coal and gas are still very much part of Asia’s power mix. Nascent efforts such as carbon capture and clean hydrogen fuels have not taken off, and are not guaranteed to. In the buildings sector, low-carbon cement and steel are being developed but they carry a steep cost premium.

CapitaLand Investment committed last year to net-zero by 2050 from its own operations and power use, but not in its indirect “Scope 3” emissions, most of which comes from its tenants’ electricity use. Scope 3 emissions made up over half of the greenhouse gas output by CapitaLand Investment globally last year, according to its latest sustainability report. The firm has US$99 billion of real estate assets under management, mostly in Asian countries like China and Singapore.

Singapore’s electricity grid runs on 4 per cent renewables today, possibly rising to above 30 per cent by 2035 if the city-state’s low-carbon power import plans materialise. Corporates can install rooftop solar panels as a top-up, but their power output would hardly be enough for power-hungry sectors such as the telecommunications industry, which deals in large amounts of data and computing.

SingTel, the country’s largest mobile network operator, had installed solar panels on its telephony exchange buildings islandwide, but the electricity output only amounted to 0.5 per cent of total power needs, said its chief people and sustainability officer Aileen Tan.

So SingTel is buying renewable energy certificates and studying the use of carbon offsets, as part of its strategy towards net-zero emissions by 2050. Renewable energy certificates provide revenue top-ups for off-site clean energy producers, while carbon offsets pay for projects to slash emissions – for instance by protecting forests or building new clean energy infrastructure.

The situation in Australia, where SingTel also runs mobile services under subsidiary Optus, is “very different”, Tan said. Australia has a target to generate 82 per cent of its electricity from renewables by 2030. The strategy there is “very simple” – to track renewable energy development and plan for long-term power purchase agreements, Tan said.

SingTel had said last year that it intends to have its Australia operations fully “backed by renewable energy sources” by the end of 2025.

For some firms, the challenges of sourcing clean power in Singapore mean not making firm commitments for now. The country’s largest taxi operator ComfortDelGro said in its 2022 sustainability report that it has an “aim of reaching net zero emissions reduction targets by 2050”, though the firm has not laid out a detailed pledge or plan.

“We have not made the kind of bold claim that our peers have made, partly because we have not seen the technology available, partly because we cannot see the options for [addressing] Scope 2 emissions,” said Jonathan Jong, ComfortDelGro’s group chief sustainability officer. Jong was speaking along with Tan and Srivastava at a dialogue hosted by consultancy Engie Impact.

Scope 2 emissions arise from the electricity that firms buy and use. Last year, 13.4 per cent of ComfortDelGro’s 1.4 million tonnes of CO2 emissions were filed in this category. Jong said the firm has limited control over the source of electricity – predominantly generated from natural gas in Singapore – that powers some of the metro rail and electric vehicle assets it owns. He expects Scope 2 emissions to increase as the firm rolls out more electric taxis.

Jong added he would rather set realistic targets, rather than an ambitious one that requires heavier use of carbon offsets. As it stands, the carbon market is rife with allegations of redundant or counterproductive projects due to mismanagement.

In the meantime…

ComfortDelGro has an interim target for 2031, to slash its own emissions by 54.6 per cent, and its fuel and energy supply chain emissions by 61.2 per cent from 2019 levels. The target has been approved by the Science Based Targets initiative (SBTi), which certifies corporate decarbonisation plans that follow a trajectory to limit global warming to either below 2 or 1.5°C.

It is about doing what the firm can control in areas such as reducing tailpipe emissions, Jong said, by meeting stringent emissions standards and acquiring clean-energy vehicles. As it stands, ComfortDelGro’s Singapore fleet is 3 per cent electric and 44 per cent hybrid.

SingTel and CapitaLand group both also have 2030 targets certified by SBTi, along with 14 other firms in Singapore. Singtel pledged an overall 40 per cent cut in emissions from 2015. CapitaLand would slash internal emissions by 28 per cent from 2019 levels, and indirect capital goods emissions by 22 per cent per square metre of real estate.

Professor Lawrence Loh, director at the National University of Singapore’s Centre for Governance and Sustainability, said interim targets – like the 2030 goals – are important to assure stakeholders of the sincerity of corporates’ later net-zero commitments.

“Just do something concrete. [Tell us] how many per cent of carbon emissions [you are reducing],” Loh said, adding that he would like to see companies disclose “schedules of commitments” in their decarbonisation journey.

Loh added it would also help if companies go into “overdrive” between now and 2030, to set the momentum that would carry through to mid-century carbon neutrality goals. Early sourcing and investment into novel clean technologies would help companies more easily adopt them later, he said.

John Leung, Southeast Asia and Oceania director at sustainability reporting non-profit CDP, said companies’ climate transition plans should include the actions they need to take in the next five years, including capital allocation and governance strategy.

“Climate transition plans can be a critical tool in tackling greenwashing, ensuring that companies haven’t just set net-zero targets with the hope of kicking the can down the road,” he said.

Leung added that the Singapore government is also highly aware of sustainability issues, and hopes this will translate into corporate environmental action. The city-state itself has a 2050 net-zero target.

Still, the road beyond 2030 could be much harder than the immediate next seven years. In a global survey of over 500 corporate leaders Engie Impact conducted late last year, 75 per cent of respondents said they have achieved most of the “quick wins” in their sustainability plans.

The tougher issues ahead include addressing a lack of government green incentives, tackling the demands of short-term investment cycles, building up enough talent and making sure separate departments work together on decarbonisation projects, the study said.

The challenges also reflect the dearth of detailed pathways leading up to 2050. Globally, 2,800 firms have set 2030 targets towards limiting global warming to under 2°C, according to SBTi’s database. The figure drops to 259 companies that have science-based targets up to 2050. The only firm in Singapore with an SBTi-approved net-zero target is Space Matrix Design Consultants, a small interior design business. Nineteen other business have committed to setting targets but have not yet done so.

Last week, a report by climate data group Net Zero Tracker found that most corporate net-zero pledges globally lacked integrity measures such as having detailed plans and regular reporting, as well as setting clear conditions on the use of carbon offsetting.

Loh added that he sees Singapore firms moving with “delicate caution” towards mid-century net-zero targets, pointing to declarations that exclude, for instance, indirect Scope 3 emissions that are hard to track and manage.

In CapitaLand’s case, its net-zero target applies specifically to its investment arm, and excludes its construction arm CapitaLand Development, which has to deal more directly with hard-to-abate sectors such as steel and cement production.

Loh said such nuances come across as “a bit more genuine”, since it shows the companies navigating uncertainties and communicating them in a more deliberate way.

Do green customers exist?

Another barrier Singapore businesses say they face is the lack of customers who are willing to pay the premium for environmentally sustainable products and services.

SingTel’s over 700 million mobile customers are agreeable to environmental initiatives that do not come with a price tag, such as electronic bills instead of paper ones, but will not stomach price penalties, such as carbon offsetting, said Singtel’s Tan.

Tan said enterprise customers are more open to procuring greener services that come with a steeper price tag, since more of them are themselves facing pressure to decarbonise.

Such customers may still be in the minority. CapitaLand Investment’s Srivastava says he has not seen clients willing to pay more for sustainable products in his experience, despite public surveys suggesting the existence of such buyers. But some investors and customers now do set minimum green standards, he added.

ComfortDelGro has clinched deals for more expensive electric bus services from two major universities in Singapore, but Jong said demand for green products will grow too slowly without government regulations.

He pointed to the regulatory landscape in China, where several regions have introduced electric vehicle mandates for taxi businesses over the past few years. Singapore, in contrast, will only stop registering new diesel cars come 2025, and gasoline cars by 2030. All vehicles are targeted to be running on cleaner fuel in the city-state by 2040, though the category still includes hybrid vehicles.

Corporate education can also play a role, such as by encouraging customers to opt for electric taxis. Such efforts do not necessarily entail a green premium for anyone, Jong said.

Making 2050 net-zero work

Given the inherent uncertainties of negating carbon emissions by mid-century, businesses are relying on extensive modelling to lay out future scenarios and strategies.

Tan said that setting SingTel’s net-zero targets required months of work on multiple decarbonisation options, and figuring out the financial implications of each of them.

Setting such pathways is the “most critical discussion” boards need to have now, Srivastava said, instead of pinpointing an exact net-zero year.

Interim targets should also be regularly revised to incorporate the latest green opportunities, he said, pointing to CapitaLand Investment shifting its 2030 renewables target to 45 per cent this year, up from 35 per cent last year.

“We don’t have an answer for every country [we operate in] on how we get there, but we do have a broad idea and just have to push harder,” Srivastava said. 

Meanwhile, some companies are also using internal carbon pricing to estimate the financial penalties of polluting investments in the later years, to justify alternative moves which come with short-term disadvantages. SingTel uses a US$37 per tonne shadow price, similar to what Singapore is expected to tax big polluters by 2030. CapitaLand also uses an undisclosed internal carbon price.

Loh said that while companies can stomach some uncertainty on their 2050 net-zero journey, they should also ensure that they are able to mobilise enough resources, and that employees have the requisite skillsets, before making their decarbonisation targets public.

CDP’s Leung added that companies should also familiarise themselves with creating and managing greenhouse gas inventories, which specifies where emissions come from across a company’s activities and helps to track its decarbonisation progress.

Singapore will always have certain inherent disadvantages, such as a limited renewables buildout, a hot and humid weather that obliges the use of air conditioning, and an open economy which makes monitoring global supply chains challenging, Loh said – though Leung noted that Singapore firms’ overseas footprint also creates the potential for decarbonisation opportunities.

Loh believes it is unlikely that decarbonisation pathways will all end in a “cliff” – where no viable options are available – after 2030, given technological advances today in green materials and power. There is also good reason to put the cart before the horse in setting a 2050 target without perfect visibility of how to get there, he said.

“When you articulate [the target], you get the ball rolling…ambitious targets will wake everyone up, they will know that something is cooking for real,” Loh added.

Correction Note: Paragraph 38 has been edited for clarity.

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