SINGAPORE – Many firms have set for themselves the target of bringing their emissions of planet-warming gases down to net-zero at a certain point in time, but few actually have concrete plans on how to get there, Mr Sunny Verghese, group chief executive of agroforestry company Olam International, said on Tuesday (Sept 28).
Speaking during a panel discussion on carbon markets during the Ecosperity Week sustainability conference convened by state investor Temasek, Mr Verghese said the focus of discussions among the business community has always been on why change is needed, and what targets and objectives can be set.
“Almost every other day, there is a conference of some kind related to climate and the environment. But in none of these meetings is there a sufficient focus on how and what chief executives and businesses are struggling with in terms of a climate action playbook,” he said.
Over the past two years, there has been a surge in the number of companies making net-zero declarations as nations pursue a “green recovery” from the Covid-19 pandemic in a way that also deals with the threats posed by climate change.
But the road to achieving these targets is plagued with obstacles, Mr Verghese said.
The first is the difficulty in measuring the carbon footprint of a company due to the lack of an internationally recognised measurement system.
This means that two different consultants hired for the job could come up with two totally different estimates about the company’s total emissions.
Having a proper measurement system would allow firms to deal with the second challenge of decarbonisation: identifying where emissions can be reduced.
He said: “By looking at the hotspots emissions are coming from, (businesses can) do a cost-benefit analysis about the abatement levers they can pulland how effective these can be.”
Another obstacle is lack of international agreements about what constitutes a green transition pathway, said chief executive of financial institution DBS Group Piyush Gupta, who was also a panellist at the event.
One of the biggest points of contention playing out internationally, for example, is whether natural gas is a “transition fuel”, especially for developing economies. This is because natural gas is a cleaner fuel than coal and oil but it is still fossil fuel – if burnt, it will contribute to the planetary crisis confronting humanity today.
Lastly, businesses must find ways to work with their supply chain. Each company is but a tiny cog in the wheel, Mr Verghese said, but working with partners will enable the change to be scaled up to system-level.
Other panellists at the discussion included Ms Herry Cho, managing director and head of sustainability and sustainable finance at the Singapore Exchange (SGX), and group chief executive of Standard Chartered Bank Bill Winters.
Ms Cho said it was crucial for companies to develop a credible pathway to achieve their decarbonisation goal in order to avoid havingtheir targets dismissed as “greenwashing”.
Absolute emissions reductions must be pursued first, the panellists agreed. But beyond that, it will be hard to get rid of certain emissions completely. On that front, carbon credits could be used to offset some of those emissions.
When a company buys a carbon credit, they essentially pay others to reduce emissions on their behalf. These credits can be bought from firms that develop projects which remove greenhouse gases from the atmosphere, such as a forest conservation project, for instance.
Earlier this year, Singapore announced it will be setting up a global carbon exchange and marketplace to help firms go greener and boost efforts to establish the Republic as a carbon services and trading hub. Climate Impact X (CIX) is a joint venture funded by DBS Bank, Temasek, Standard Chartered and the Singapore Exchange (SGX).
Other than the decarbonisation challenges faced by firms, another key issue raised by the panellists was financing and channelling capital to sustainable solutions.
Mr Gupta said that the “green push” is opening new business opportunities in areas such as green buildings, alternative proteins, and new low-carbon fuels. But beyond that, financiers such as banks must also bear in mind the risk of continued investments in pollutive industries, such as coal.
Said Mr Gupta: “If I (fund) a thermal coal project today, with a 20- or 25-year loan, there’s a high likelihood that 10 years from now, those assets will be worth nothing. So it’s not sensible for me to take on that kind of stranded asset risk.”
He added that risk analysis will prompt financial institutions to shrink financing in some sectors. This also allows companies to shift their investment portfolio to one characterised bylower carbon intensity, said Mr Gupta.