Two-thirds of Singapore firms are not confident of meeting net zero goals: report

As the city-state’s listed companies prepare to kick off mandatory climate reporting in 2025, nine in 10 local firms have yet to fully measure Scope 3 emissions, which make up the bulk of an entity’s carbon footprint, finds a new study.

Singapore central business district on a stormy day
A new study finds that larger Singapore firms are nearly twice as likely to have set targets to reduce their Scope 3 emissions, compared to small businesses. But only 27 per cent of those that have set Scope 3 targets are confident of achieving them. Image: Gabrielle See / Eco-Business

Only six per cent of Singapore firms have fully measured and analysed their Scope 3 emissions, or value chain emissions from suppliers and customers, which make up over 70 per cent of a firm’s carbon footprint.

This is according to a joint report by global energy management firm Schneider Electric and the Institute of Singapore Chartered Accountants (ISCA), the country’s national accountancy body, which surveyed over 500 senior business leaders across 12 industries on their climate reporting readiness.

Even among those who have set targets to reduce their Scope 3 emissions, only 27 per cent are confident of achieving them, compared to 40 per cent and 31 per cent for Scope 1 and 2 emissions, which are from an entity’s own operations and energy use.

Overall, two-thirds of the firms were not confident of achieving their net zero goals, though the report noted that business leaders who have adopted Science Based Targets initiative (SBTi) targets “were more likely to drive meaningful action within their organisations” by “helping define a clear and credible path to sustainability success.”

Larger businesses are nearly twice as likely as small businesses to indicate that they have set targets to reduce their Scope 3 emissions, which listed and large non-listed companies will need to disclose after their first year of mandatory climate reporting in 2025 and 2027, respectively, under the city-state’s new rules.

“The regulatory environment has made sustainability reporting and assurance an essential component of corporate disclosures. It is clear that while profit-making remains important, it is equally, or even more important, to make profits in a sustainable and responsible manner,” said Kang Wai Geat, divisional director of ISCA’s professional standards department.

The study noted a strong correlation between seniority and understanding of Scope 3 emissions. While over half of board members (58 per cent) and C-suite executives (51 per cent) claimed to have good Scope 3 knowledge, only 27 per cent of senior managers reported the same.

However, it is unclear if the greater knowledge among senior executives will translate to more ambitious climate action amid a challenging macroeconomic environment, which has led over half of Singapore chief executives – a much higher figure than the 23 per cent global average – to push sustainability down their to-do list compared to a year ago, found an Ernst & Young (EY) survey earlier this year.

A report by sustainability consultancy South Pole this year also showed that nearly 40 per cent of Singapore firms that felt climate communications has become harder were identified to be greenhushing, or deliberately under-reporting progress on their climate goals, to avoid scrutiny.

ISCA and Schneider Electric report launch

Speakers and panellists at the report launch event. From left: Yoon Young Kim, Schneider Electric’s cluster president of Singapore and Brunei; Kang Wai Geat, Institute of Singapore Chartered Accountants (ISCA)’s divisional director (professional standards); Kelyn Tan, UOB’s head of corporate sustainability; Fang Eu-Lin, PwC Singapore’s sustainability and climate change practice leader; Andrew Buay, Singtel’s vice president of group sustainability. Image: ISCA and Schneider Electric

When asked about the EY survey results, Kelyn Tan, Singapore lender UOB’s head of corporate sustainability, told Eco-Business that “pushing [sustainability] down in the list of concerns may not mean that it’s no longer important for the company.” Tan was speaking on a panel at the launch of the report on Tuesday.

Andrew Buay, vice president of Singapore’s largest telco Singtel’s group corporate sustainability, who was also a panellist, added that greenhushing is a big concern, as he knows some of his peers are now hesitant of using more ambitious global guidances, like SBTi, when setting net zero targets as it puts them under “a lot more pressure” from investors and activists.

“We are very public about using SBTi, which forces very high standards on how we account for emissions,” said Buay. “If I go back to the analogy of earlier in 2017 when we set targets and we didn’t have all the answers, in the environment today, I probably would have thought twice.”

“But again, if we had thought twice in today’s environment, maybe wouldn’t have made the same progress. So I think as the whole industry evolves. there’s this fine balance of allowing ambition to be there and maybe very clearly differentiating ambition from targets,” said Buay.

Buay shared that Singtel did not have a clear roadmap at the point of setting its first SBTi targets seven years ago, where it established its target to cut absolute Scope 1 and 2 emissions by 42 per cent by 2030 by “reverse-engineering” a sectoral target aligned with a scenario below 2°C.

Last December, the group brought forward its net zero target date by five years, followed by an update a month later on increasing the ambition of its interim Scope 1 and 2 emissions reduction targets as well as including a commitment to slash its Scope 3 emissions.

“It’s about starting somewhere, baselining and using global science and references. Over time, the organisation does get a lot more mature,” said Buay. “Paralysis is going to be your greatest problem. If you’re just waiting for the compliance, databases, emissions factors and so forth to be mature, it is going to take a few years to get there.”

‘Start collecting data now’

Beyond a knowledge deficit, a lack of human and financial resources, commercial motivation and acess to technological infrastructure were cited by respondents as the top barriers to making progress in their Scope 3 emissions reduction agenda.

Over the past year, the Singapore government has stepped in to provide support to firms kickstarting their sustainability reporting. In March, it announced that it would offset a third of climate reporting costs for large non-listed companies and 70 per cent for small and medium enterprises (SMEs). 

In April, the Singapore Business Federation launched a new emission factors registry in collaboration with PwC, Singtel and a few other government bodies, to help firms accurately estimate the average rate of greenhouse gas emissions from a specific activity in Singapore’s context. The initiative is set to commence in end-2024.

Yoon Young Kim, cluster president for Singapore and Brunei, Schneider Electric, who presented the report’s findings, urged companies to start their data gathering now, since its takes 1.5 to two years on average to gather credible Scope 3 emissions data from suppliers.

It is also important to include the finance and accountancy teams in sustainability reporting and to consider innovative incentives and financing mechanisms to support supply chain partners in decarbonising. 

On this point, Buay said that Singtel had co-developed its internal carbon price with its finance teams, which are applying the externalised cost of carbon to investment decisions and procurement decisions. Carbon pricing not only serves as a “stick”, or punishment, to drive emissions-intensive vendors to decarbonise, but has also helped to justify a “green budget” for the group’s chief financial officer, allowing business units to get funding and subsidies to support pro-climate initiatives.

Singtel is set to impose a carbon fee of S$50 (US$37) per tonne for new projects exceeding 100 tonnes of carbon dioxide in their lifetime.

In response to Eco-Business’ queries, Kim said that an internal carbon pricing model, while practiced by some, is not something that is currently widely adopted by companies, based on Schneider Electric’s observations. SBTi and climate disclosure non-profit CDP are among the global bodies that have put out guidances on setting an internal carbon price.

At the moment, the measurement of carbon emissions and attaching key performance indicators for the meeting of climate targets are “more important and relevant” for companies compared to carbon pricing, which “will not make a big difference for them to act on whatever they need to do,” he said.

For instance, Schneider Electric does not have an internal carbon pricing model, but instead, sets emissions targets and incentivises employees to take action to meet them. 

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