At a forum last week, Singapore’s Minister for the Environment and Water Resources Vivian Balakrishnan delivered a reality check to business and government leaders about the United Nations climate talks that recently concluded in Warsaw.
Lack of political will and the issue of fairness continue to plague the talks, he said. “I’m not sure at what point that disasters at a global level will be so severe that public and political opinion will change fundamentally.”
His comments at the Responsible Business Forum on Sustainable Development set a sobering but urgent tone, because it made clear that it is up to individual governments and companies to collaborate as drivers of economic change in the coming decades.
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The new language of CSR
Listening to the discussions, what struck me was how much the language of corporate social responsibility (CSR) has evolved in recent years in Singapore. Not so long ago, the discussion at similar events was stuck at the “CSR 101” level, where CSR efforts mostly revolved around writing cheques to charities, tree-planting or beach clean-ups.
While these activities are important, it is clear that the corporate responsibility discourse in Singapore has matured into something so much more.
The narrative is now clear: The world faces an uncertain future with a burgeoning global population fuelling the growth of cities, demanding even more goods and services, while natural resources are dwindling and climate change effects are adding to operational risks.
The United Nations has, in response, pushed the green economy and sustainable development as new models for businesses and governments to adopt. It defines a green economy as one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities.
The “green economy”, however, can be a misnomer. Some hear it and dismiss it as belonging in a tree-hugger’s domain.
Even though it suggests a focus on the environment, it is so much more. It is about creating a socially inclusive, equitable, low-carbon and resource-efficient global economy – one that seeks to improve every aspect of life on earth. The green economy should simply become status quo.
It also presents ample opportunities. As the global economy moves away from the inefficient ways of the past, innovative and responsible businesses that offer solutions for this new landscape will be the dominant companies of tomorrow.
Even though ‘green economy’ suggests a focus on the environment, it is so much more. It is about creating a socially inclusive, equitable, low-carbon and resource-efficient global economy – one that seeks to improve every aspect of life on earth. The green economy should simply become status quo.
This is why it is important that companies move beyond simply setting up a CSR unit to coordinate community events.
Corporate responsibility must move into the boardroom, where top executives take a hard look at how they can minimise externalities and create community benefits, and how they can manage these resource risks so their company is sustainable – financially, as well as socially and environmentally.
The chief executive officers who do not speak the new language will soon find themselves out of jobs.
Natural capital accounting
One key theme that emerged is that of natural capital accounting – that is, putting a monetary value on the services that nature provides so that profit and loss statements reflect the cost of externalities of consuming such resources.
It is a relatively new concept but one that is set to grow in importance. Earlier in August, 43 financial institutions, including the World Bank, signed a declaration to put a value on the food, water, energy and other essential services provided by natural capital worth trillions of dollars.
At the forum, Teeb (The Economics of Ecosystems and Biodiversity) for Business Coalition and the International Finance Corporation launched a landmark project called the Natural Capital Protocol and invited Asian companies and governments to work with them to develop a methodology on how to determine this value and set the ground for what will likely become a global standard.
Natural capital accounting might be a concept too “out there” for the majority of firms now, but the benefit of being involved in this process early is that these companies will be able to influence the methodologies being developed, have a say and prepare for regulations to come.
This is particularly relevant for companies that consume or manage a large amount of natural resources, such as in the palm oil, water, forestry and energy sectors – all major industries in Asia.
The way forward
Some other recommendations worth highlighting include the crucial role of efficient capital markets, as highlighted by Singapore Exchange CEO Magnus Bocker in his keynote speech on the second day.
Hinting that tougher regulations are to come for Singapore-listed firms, he said SGX as the regulator will be the “custodian of corporate responsibility”, but efficient capital markets, where investors put their money in responsible companies and divest from those that are not, are also important.
Financial institutions need to develop a way to recognise performance on corporate responsibility and reward such companies with higher valuations and easy access to capital for growth. Governments and sovereign wealth funds should also lead by example by including sustainability standards into their asset allocation policies.
For the building and infrastructure sector, which will play a huge role in sustainable development, delegates recommended an international “builder’s code of conduct” for all construction and property development firms to consider the full life cycle of materials in any project and ensure that any waste is recycled back into the system.
Even as companies agreed that they can be agents of change, there was wide consensus that the public sector needs to take a strong leadership role in creating policy frameworks and regulations which are consistent so that businesses have certainty and the motivation to operate to higher, more sustainable standards.
These actions can all be taken today, irrespective of any global deal.
This op-ed first appeared in The Straits Times.
The writer is the editor of Eco-Business.com, one of the organisers of the Responsible Business Forum on Sustainable Development. The Straits Times is a media partner of the forum.