Shaping the Future: Sustainability and Business Transformation

On November 2, 2023, NBS hosted "An Evening at Gaia" to commemorate its move to Gaia, Asia's largest wooden building and the eighth "zero energy" building on the NTU campus. A highlight of the evening was the NBS Knowledge Lab Distinguished Panel, where panellists discussed the pivotal role of business and industry transformations in addressing environmental sustainability challenges.

The panellists were Mr. Tan Chong Meng, Group CEO of PSA; Mr. Damian Chan, Executive Vice-President of Policy, Planning, and Strategy at the Economic Development Board (EDB); and Mr. Dave Sivaprasad, Managing Director & Partner, Southeast Asia Lead for Climate and Sustainability at Boston Consulting Group (BCG). The session was moderated by Professor Boh Wai Fong, Deputy Dean of NBS, NTU.

The following is an edited transcript:

Mr Tan Chong Meng on sustainability at PSA

Professor Boh began the session with a question on how PSA has integrated sustainability into its core strategy. To this, Mr Tan pointed out that most businesses start out not having sustainability as a driver. With PSA’s 50-year history, growth, profitability, and success stemmed from global trade growth, efficiency, and competitiveness. For instance, technology, a key player, rapidly accelerated transportation options. Over the past 20 years since China’s entry into the WTO, container trade grew at two to three times the GDP growth rate, albeit at the expense of consuming more energy. However, this multiplier has decreased close to one in the last five to 10 years. PSA observes a gradual shift towards optimisation and responds to demands for sustainable solutions through a better understanding of customers’ processes to change their carbon footprint, adopting low-carbon transport, and ensuring a green molecule for all their transportation requirements.

Mr Damian Chan on the Singapore economy’s shift to a low carbon future

Professor Boh further invited Mr Chan to share what Singapore is doing to transition its economy to a low carbon future. Climate change and decarbonisation, said Mr Chan, are Singapore’s national priorities. Manufacturing accounts for about 60 percent of Singapore’s carbon emissions, with energy and chemicals industry as key movers. EDB works closely with both sectors to provide decarbonising solutions, which would further extend cleaner fuel options to other industries. However, policy levers are not so straightforward; a delicate balance between maintaining competitiveness and incentivising decarbonisation is required. Singapore’s green plan, including the Sustainable Jurong Island initiative, aims to develop solutions for increased carbon-capture utilisation and storage capacity by 2050.

Mr Dave Sivaprasad on the evolution of sustainability

Considering BCG’s exposure to many industries, Professor Boh pose a question on the evolution of sustainability. Mr Sivaprasad stresses that one challenge in sustainability is the unpredictability of the future. The critical question is how we adapt and build resilience. Fortunately, there is growing acknowledgment of the systemic impacts in play.  Preserving nature, for example, plays a big role in reaching the 1.5 °C benchmark. The Taskforce on Nature-related Financial Disclosures (TNFD), released in September 2023, illustrates the global understanding of these interconnected challenges. Nature-related risks can impact us physically. It can also affect our water supply, fresh air, food systems, etc. These interconnected factors will gain increasing importance, and businesses must pay attention. As disclosures and investor expectations rise, and governments take action, businesses need to be proactive.

On firms reneging on climate commitments

While it is clear that sustainability is a business imperative for some companies, Professor Boh wonders about firms that renege on their commitments. The latest UN report revealed that of the many Sustainable Development Goals set up for achievement by 2030, 85% have regressed over the 15-year span, with only 15% maintaining progress. Mr Tan highlights worrisome trends and stresses the need for firms to be held accountable with science-based knowledge and well-verified reporting which is currently lacking. While the Task Force on Climate-related Financial Disclosures (TCFD) serves as a reference, it lacks precision and cannot support day-to-day transactions. Also, while carbon tax is beneficial, it is still not a point of reference for everybody to make investment judgments on a global scale. Mr Tan believes it is not possible to unify the world on sustainability goals without a commercially referenced solution.

Mr Chan suggests that, in an ideal world, the entire world is unified towards an objective of global carbon pricing but we are very far from that. On the public sector side, right policies need to be in place. In Singapore, a carrot and stick approach is implemented, with a carbon tax supporting companies’ decarbonisation investments. Singapore is also working to mandate climate-related disclosures for listed companies, with plans to expand to larger private companies. On the private sector side, governing bodies and global associations aim to set standards, starting with ESG reporting standards. As these become more accepted by corporations and governments, they will hopefully drive more movement.

According to Mr. Sivaprasad, in our current free market context and considering the way our capital markets work, we will not achieve the necessary scale without commercial incentives. But this does not have to be a hopeless situation. Before COP26, the world was on a pathway of easily reaching 4⁰C, but the curve bent with the commitment of corporations and governments. On one hand, reporting and targets may be complex distractions from actually getting things done, but on the other hand, they are signals in the market of directional travel. We need to have appropriate pricing and commercial incentives, and governments taking multilateral action play a large role in this.

Q&A session

Many questions were posed during the Q&A session and Professor Boh raised several to the panellists, on behalf of the audience.

Implementing COP targets

Mr Tan revealed that PSA faces two challenges in implementing COP targets. First, PSA operates in multiple countries, and the available transportation choices are currently limited to electrification. However, carbon emissions vary for coal-based and clean, utility-based countries. Hence, PSA needs to assess what is feasible in each country and where the return value lies. Second, PSA’s future requirements are very dependent on having substantial primary renewable fuel. PSA has taken it upon itself to become a primary power producer in countries where regulations permit, and is learning how to solve the problem by setting up advanced battery centres to deal with future technologies. Mr Sivaprasad also shared that BCG has seen COP targets gain traction when incentives change within a company. For example, when a management team has 10% of their compensation linked to carbon emission intensity reductions.

Is sustainability only for the rich?

From EDB’s perspective, Mr Chan agreed that the focus should not be excessively placed on smaller companies reducing emissions, because they generally do not contribute much to emissions. Smaller companies also have fewer resources to address this. What EDB is putting more effort into is developing policies, pathways, and platforms for major emitters.

Economic opportunities for sustainability

Mr Sivaprasad pointed out that one economic opportunity revolves around innovation. There has been a lot of innovation in different business models, from operational innovation down to entirely new businesses. This is expected to increase since people often find solutions and new ways of doing things when constraints are placed on them.

Mr Chan added that there is ample room for economic carbon reduction projects, especially within the region. The cost of renewables, such as solar, has decreased. Unfortunately, electricity prices are still heavily subsidised in the region, making them less economical unless there is government support. However, Mr Chan believes that this is gradually changing. Numerous project development and project financing opportunities for renewables and nature-based solution projects are emerging in Southeast Asia. Companies are also establishing regional hubs in Singapore to facilitate such opportunities.

Mr Tan reiterated that companies are keen on finding ways to reduce their carbon footprint while complying with upcoming regulations. Currently, there are economically viable projects without any imputed carbon tax. However, scaling can only occur if future economics also support similar ideas with the amount of energy available at a future point in time.

Student dialogue

The session also provided opportunities for undergraduate students from NBS to pose questions to the panellists. Kenneth, a third-year Banking and Finance student, wondered if the current bifurcated geopolitical situation in the world is a roadblock to pursuing sustainability, whilst Max, an Accounting and Business student, was interested to know about the most promising opportunities for graduating students who are keen to make an impact in sustainability.

The bifurcated geopolitical situation as roadblock to sustainability

Mr Chan pointed out that the bifurcated geopolitical situation has led indirectly to the breaking of supply chains, inflation, and more. This poses a pressing concern for developing nations focused on maintaining low living costs rather than shutting down coal plants. Notably, much of this geopolitical bifurcation involves sectors less connected to sustainability, offering some hope. Mr Tan agreed that the effect is indirect in terms of policy discussions and leadership. However, to transition to New Energy, minerals are crucial, emphasising the importance of identifying who possesses these minerals. Mr Chan added that efforts have been made to diversify the sources of such minerals, contributing to increased resilience against climate change.

Sustainability opportunities for graduates

With the need for economies to retool and the significant transformation required across sectors and in the way we work, opportunities are enormous for young professionals entering the workforce. Mr Sivaprasad recommended that graduates be curious to learn, apply, and collaborate across different disciplines.

While graduates are not expected to be full-fledged engineers, Mr Chan suggested that they deepen their understanding of electrons and molecules, which are important components of the energy transition journey. Ultimately, all opportunities need to be based on science and technology. Mr Tan added that digital and data are other critical aspects since computing power is increasing. In five to 10 years’ time, the way we perform our jobs will be different. Some of the differences in the tools and abilities will be applied to these existential issues.

Professor Boh ended the session by adding that NTU trains all students in the area of sustainability. Students take interdisciplinary courses, some taught by faculty members from the Asian School of Environment, with students from other majors. NBS believes in such interdisciplinarity and the panel session has also made it apparent that there are possible sustainability opportunities across sectors and job types.

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