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Corporate Asia gearing up for the green economy

Asian organizations, from accounting firms to NGOs, are adopting new business models to pave the way for a greener economy.

Investors, accountants, corporate executives and NGOs on Tuesday highlighted this emerging trend at a roundtable discussion in Singapore, as they compared notes on corporate Asia’s readiness for a United Nations vision of a green economy.

They found that Asia’s history of rapid growth, fuelled by unchecked natural resource exploitation, has led to ample opportunities – and risks - for businesses.

Co-hosted by WWF and the Association of Chartered Certified Accountants (ACCA), the discussion at the Mandarin Orchard Hotel was the first of a series of four roundtables on corporate preparedness for a green economy within the region. The next roundtables will take place in Jakarta, Beijing, China and Hong Kong within the next few months, and will provide feedback for a research report to be published later this year.

The UN, which last year published the results of a three year green economy study, defines a green economy as one that produces low-carbon emissions, uses resources efficiently and promotes social equality.

The UN study found that the international community could achieve this with an investment of two per cent of global gross domestic product (GDP) by focusing on four areas: good governance; developing better finance tools; valuing natural capital; and reducing the environmental impacts of key sectors such as energy production.

Director of regional consulting firm CSR Asia Holly Lindsay said that the private sector would have to provide most of the financial investment to achieve this vision, which would require “dramatic change - nothing short of a resource revolution”.

She noted that a future with more volatile natural resource prices, increased government regulation and higher consumer expectations meant that many businesses would fail and jobs would be lost. But companies can avoid this by preparing for change through innovation, she added.

In one example, Singapore energy company PowerSeraya, a subsidiary of Malaysia-based YTL Power International that supplies about 30 per cent of Singapore’s electricity, has been adapting its business model to prepare for water constraints and increased regulation of energy consumption and carbon emissions.

The firm has lowered its carbon intensity – carbon emitted per dollar of revenue – by 31 per cent from ten years ago by switching its power plant fuel source from oil to natural gas.

More recently, the company installed desalination plants to provide 90 per cent of the water used for its Jurong Island power plant, which sells waste steam to a neighbouring chemical plant for added efficiency.

PowerSeraya sustainability manager Kevin Lee, who also spoke at the roundtable, said that the firm is constantly on the look out for opportunities to achieve higher energy efficiency.

He said the benefits of pursuing a greener economy include finding new growth areas which lead to the creation of new partnerships and jobs.

PowerSeraya also gains an advantage by branding itself as “employer of choice”, because new graduates seek out forward-looking companies, he added.

While experts continue to debate what form a green economy might take, WWF has already established one such model.

WWF’s Heart of Borneo (HOB) project, located in Asia’s largest remaining tropical forest, is a joint programme that pulls together government, businesses and NGOs to develop the region in an environmentally and economically sustainable way.

The project spans the three countries of Brunei, Indonesia and Malaysia, all of which are heavily dependent on revenues from forestry industries such as mining, timber and palm oil production.

Some environmentalists have criticised the NGO for its tolerance of the business activities in the area, but project leader Adam Tomasek told Eco-Business on the sidelines of the discussion that HOB is a clear example of why cooperation between businesses and conservationists is necessary.

Businesses control about 40 per cent of the area through concessions and licenses, and governments do not have the resources to monitor all of their activities.

Indonesia’s Ministry of Energy and Mineral Resources has admitted that up to 80 per cent of businesses operating in the region are not complying with regulations, said Mr Tomasek, who added that the rapid pace of development combined with decentralised government has led to a “frontier mentality” in which companies exploit resources with little or no oversight.

The area’s economic development clearly depends on its natural resources, and their rapid depletion is causing the governments to worry about what happens when the resources are gone, he said.

As a result, Asia is poised to lead other regions such as Latin America and Africa, where slower growth rates mean governments face less pressure for immediate action, in what Mr Tomasek called “real-time decision-making”.

This new type of decision-making for natural resource management involves giving the business sector a spot at the table.

Mr Tomasek said that WWF has taken a non-traditional approach by sitting down with businesses operating in the area and listening to their needs. Together, they are seeking middle ground and acceptable compromises.

“There is no way to achieve long term environmental targets without the business sector; they have to be part of the solution,” he added.

Several players in the investment sector are also taking a non-traditional approach.

Panellist Durreen Shahnaz, founder of a social enterprise investment platform called Impact Investment Exchange Asia (Asia IIX), told the 80 professionals at the roundtable that in Asia the rise of social enterprises and the investors which support them are changing the way the global communities address social inequalities.

She added that thousands of social enterprises have sprung up in Asia. Social enterprises may be either for-profit or not-for-profit organisations, and they have a mission of addressing problems such as poverty and gender inequality.

Asia is home to two-thirds of the world’s hungry populations, but also to a rapidly growing segment of high net-worth individuals who seek investments that bring both financial and social returns, she noted.

Globally, traditional philanthropy is estimated at US$310 billion annually, but it can provide only a “drop in the bucket” of the funding necessary to remedy problems of poverty and environmental degradation, said Ms Shahnaz. Investment in social enterprises has the potential to reach US$1 trillion within five years, she added.

This summer, Asia IIX, which is backed by the Rockefeller Foundation, is planning on launching Asia’s first stock exchange purely for social enterprises.

Experts at the roundtable also noted that one of the difficulties of investing for non-financial returns is measuring the results.

Panellist Rob Daniel, a Jakarta-based technical advisor for global accounting firm PwC, said that accountants had a duty to help clients measure their performance in all areas that affect their value - not just their financial results.

PwC has identified eight factors such as energy security, pressure to reduce carbon emissions, natural resource depletion and changing demographics that will affect the success of businesses.

Companies that stick their head in sand by ignoring these factors will eventually miss out because a green economy will provide the highest value in the future, he said.

The accounting profession in general is “no better than anyone else,” he said, adding that the staffing at most accounting firms reflects a tendency for the industry to “stick to what it does in the past”. For example, his office has 500 auditors working on financial data and compliance, and only five people working on sustainability.

However, the way firms do business is changing “slowly but surely”, he said.

Accountants are not expected to be “just accountants” anymore: They have to understand new ways of measuring non-financial values through methods such as carbon footprinting and evaluating supply chain security, noted Mr Daniel.

Singapore property developer City Developments Limited (CDL), is one firm who has had to change its business model to address the building industry’s ‘destructive’ image.

Esther An, who is head of CSR for the firm, said that CDL began its journey in the 1990s when it adopted the motto to “conserve as we construct”.

CDL implemented CSR policies company-wide well ahead of government regulations. The firm has translated their vision into practical guidelines for staff, suppliers and even tenants through green leases and an eco-office certification programme.

Ms An said the firm has achieved not only significant cost savings, but also intangible benefits such as international recognition for its CSR efforts, better brand value and high staff retention.

Some of those benefits are trickling into Singapore’s building industry. Ms An told Eco-Business after the event that CDL’s sustainability auditing system for its suppliers and contractors has been achieving good results since it began over ten years ago.

Progress was slow at the start, but once contractors saw the benefits – which include reduced risk of accidents and better productivity – they realised it was to their advantage to go beyond compliance, she said.

Contractors are using their improved sustainability practices in projects with other developers. More than half of CDL’s suppliers and contractors have sought an international certification for good environmental management called ISO 14000, and all of the builders hired by CDL are certified, added Ms An.

CSR Asia’s Ms Lindsay said that the region’s corporate sector needed to find ways to continue to grow economically without continuing its current pace of resource consumption. Businesses needed to move from “doing no harm” to “doing good” – a goal she said is entirely feasible.

“The biggest risk is that it doesn’t happen at all,” she said.

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