The 2020s: The Decade for Asian Business Leadership in ESG
By Pat Dwyer
Businesses in Asia increasingly recognise the value of sustainability, yet the race to future-proof the planet has never been more crucial, and we need to set our collective sights on bigger, better and faster impact – and to do this we need leaders.
2020 is here. While the world could not be under more uncertainty, there is much opportunity and this is the key to unlocking growth in the region.
Halfway through 2019, the McKinsey Global Institute released a discussion paper entitled ‘Asia’s future is now‘ which headlined the fact that Asia is on track to top 50% of global GDP by 2040 and drive 40% of the world’s consumption. It called out the one thing we may all be wondering about; “the question is no longer how quickly Asia will rise; it is how Asia will lead.”
Let’s be honest. We have been saying that “Asia’s time is now” for as long as the world can remember starting to look east. The real question is, how can we make this the decade for Asian leadership? How can we find more responsible businesses from Taiwan to Thailand to lead the change in sustainable development?
No better time than the present
Leadership only comes after managing what you have measured. At the very least, we know that Asia has been the fastest-growing region for more environmental, social and governance (ESG) reporting. In the GRI Summit held in the Philippines in September 2019, it was noted that there had been a 500% increase in the number of reports issued by the region because exchanges such as Hong Kong, Singapore and Kuala Lumpur have required ESG disclosure for listed companies. They will be joined by the Philippines in 2020. Most of them take the frameworks we are familiar with – GRI, CDP, IR and even TCFD. China references international standards and applies them to a local context. For example, the GB 36000 Guidance on Social Responsibility is an adapted version of ISO26000 that better aligns with local laws and regulations. As well, they launch specific rules for certain issues, such as the recent the Shanghai Domestic Waste Regulations.
There is no doubt that Asia has started mining critical ESG data. The critical next step is to understand what this means for the larger business context. This requires mapping operations so that companies better understand where efficiencies and opportunities lie. For example, for real waste management to happen, property developers and owners should know where waste hauliers go. It is the property developer’s responsibility to not only aim on-site waste reduction and segregation. If it truly wants to divert waste from the landfills of Asia, including dumping into the sea, it has to work with its waste contractors to demand transparency and accountability.
Asian businesses love pilots and case studies, but how do we go from one-off successful pilots to scale and impact?
Leadership also comes with practice. Asian businesses love pilots and case studies, but how do we go from one-off successful pilots to scale and impact? The secret is in engaging a wider base of ecosystem players. This means businesses need to play its role in engaging a wider set of stakeholders so that best practices can be scaled and replicated tenfold.
Take Thai Union’s traceability programme in that launched in 2017, which explored “platforms for electronic Catch Data and Traceability (eCDT) systems that utilize mobile applications and satellite connectivity to combat Illegal, unreported and unregulated (IUU) fishing from the point of catch, promote worker voice at sea and demonstrate fair labour compliance in Thai fisheries.” Today, one of the oldest fishing companies is at the forefront of using technology to engage the industry in combatting IUU, working with data capture companies such as Eachmile, small fisheries as well the Thai government. Earlier this year, during the International Labour Organization’s P29 convention, which “promises protection to the victims of forced labor and sanctions for the perpetrators, Thailand became the first country to ratify the ILO’s Work in Fishing Convention (C188), which sets basic standards of work in the fishing industry.” This move was welcomed globally, and as a result, the European Commission has removed Thailand from a list of countries on warning about their lack of progress in tackling illegal, unreported, and unregulated fishing (IUU).
In shopping capital Hong Kong, discarded clothes, garments and textiles become part of more than 300 tonnes of textile waste that are dumped in the city’s landfills daily, according to Redress, one of the most successful NGOs based in the city, working to reduce textile waste.
There now exists an alternative, brought by local textiles firm Novetex with the Hong Kong Research Institute of Textiles & Apparel (HKRITA) as its R&D partner. The Billie System is an innovative waterless mechanical textile upcycling system that will process up to three tonnes of textile waste daily. The recycled yarn quality is controlled by blending the recycled fibres with virgin fibres to produce new yarns for a variety of garments and products. Today, Novetex has launched linen take-back programme from pilot partners such as fashion brands and groups like Hongkong Shanghai Hotels, operators of the Peninsula hotels.
It would be ideal to see more of these types of collaborations but more importantly, aim to reduce textile waste in the first place.
Focus on the ‘how‘
Materiality tells us the ‘what‘. Purpose, as well as the business case, tell us the ‘why‘. The decade ahead should really force businesses to focus on the ‘how‘ of delivering on commitments to the environment, people and society.
Companies put much effort into creating a 2030 sustainability strategies and 3, 5, 10-year action plans. However, very few disclose the details – either to the wider staff and especially not to the general public. A power company commits to decarbonisation but says very little about where it starts and how it does so other than a few renewable projects here and there. Another food and beverage company commits to reducing single-use packaging, perhaps is even one of the 400 signatories to the New Plastics Economy Global Commitment brought to us by the Ellen MacArthur Foundation, but makes very little known as to what execution will look like.
The hesitation is perhaps understandable. Some of these new initiatives have barely been crafted, other initiatives are too untested to be disclosed so early. The truth is, companies spent many years ‘keeping cards close to their chest’ when it comes to disclosing anything to stakeholders, especially competitors. To ask them to undo this will take time.
However, what is even more shocking is the failure to engage internal staff. The many years of the siloed hierarchies used to organise departments, functions and business units have kept us from effectively communicating both internally and externally. This has to change. In this increasingly volatile, uncertain, complex and ambiguous context that we all operate in, we really need to be communicating better if we are to influence change and lead responsible businesses.
There are three resolutions in the new decade that perhaps we can start with:
- Board accountability: What good is a strategy if no one but a sustainability taskforce owns it? It may be in the Chief Sustainability Officer’s KPIs, but who is accountable at a higher level? More and more regulation is coming out requiring Boards of Directors to own the ESG agenda. In Hong Kong, board accountability for ESG has been part of the Companies Ordinance and in the recent HKEX ESG disclosures consultation, it was recommended that boards build this into their capabilities and accountabilities. Put ESG on the board meeting main agenda, move discussions out from “Any Other Business” (“AOB”); get the board members trained on ESG, better yet include someone with experience on key environmental or social issues of the business. If in doubt, seek expert advice, at least to get started. After all, we don’t want any board oversight or crisis to hit, before it is too late.
- Use frameworks and form KPIs: Sustainability has brought on frameworks after frameworks, but do we really know which one to use meaningfully? It is not enough to say that your sustainability strategy “maps to the UN Sustainable Development Goals” (SDGs, or Global Goals), but no one can see how you deliver on the targets and KPIs. In fact, there are frameworks that have been developed so you can develop purposeful metrics according to your operations. It could be sector-specific metrics such as the Global Sustainable Tourism Criteria which outlines measures for the travel and tourism industry to account for Sustainable management, Socioeconomic impacts, Cultural impacts and Environmental impacts (including consumption of resources, reducing pollution, and conserving biodiversity and landscapes). It could also be industry-agreed measures to manage impact such as that agreed on by the International Airlines Group (IAG) including managing climate and noise reduction targets, promoting carbon disclosures and investing in future fuels, aircraft and carbon technologies. For companies working across a portfolio of businesses or desire something closer to the reporting requirements, GRI worked with the UN Global Compact and World Business Council for Sustainable Development to develop the SDG Compass, now in 13 languages to help companies understand and align their strategies with the SDGs.
- Be honest: Materiality requires companies to look at the most business-critical environmental and social issues, but it does not assume that we can address everything at the same time. It helps to prioritise, isolate focus areas and really work on delivering and tracking their impacts. Equally, it is important to just be transparent as to what has not yet been achieved. Scope 3 greenhouse gas (GHG) emissions is one such issue that many businesses in Asia have not yet matured in reporting, because not many have completed a full GHG inventory. This is understandable, but state that you haven’t, rather than claiming climate change mitigation, when you simply are just reducing energy consumption and equivalent carbon emissions. Similarly, a global bank presenting diversity and inclusion (D&I) successes just because of the diverse ethnicity of their employees or because they have named their first D&I officer does not recognise the risk of pipeline management and succession planning. Engage staff to help find creative solutions and initiatives that you can implement operationally. Air Asia’s Allstars programme, for example, unites all the global staff under one brand free from discrimination by job titles, ranks or backgrounds. The programme houses the 20,000++ employees of AirAsia with multiple opportunities for career development.
As we all look to the new year, I ask Asia to look to the new decade ahead. If we are to write our resolutions, let them be as specific on the how. We’ve taken so many small steps to create awareness and influence habit change; companies have all said we have to walk before we run, and actually we’re past that. In the new decade, let’s heed the call to not only doing enough but leading more. After all, the wider stakeholders expect it and we know that customers, investors, and the next generation all turn to businesses to lead. Let’s get ahead, and take others along the journey. Inspire others to do the same.
Go big – be bold, be inspiring, have grit. The future of Asia – and the future of your business – need it NOW.
Pat Dwyer is the founder and director of The Purpose Business, which helps business leaders set their companies on the path to responsible growth. This piece originally appeared on The Purpose Business.