ASEAN

ESG Initiatives: ASEAN Conglomerates in the Spotlight

Environmental, Social and Governance (ESG) priorities guided by the United Nations Sustainable Development Goals (UNSDGs) have become a key aspect for resilience and sustainable development in ASEAN in recent years. As long as we reap benefits from the community and the planet Earth, everyone is held responsible for contributing towards a sustainable future. ESG is but a set of yardsticks for enterprises to work towards sustainability goals. Of the various stakeholders involved in sustainability, we put the region’s largest businesses in the spotlight as leaders of their respective industries who are in the right financial and avocational position to effect progress towards robust outcomes for ESG priorities.

ESG Sustainable Development Goals

According to the Implementation Plan of ASEAN Comprehensive Recovery Framework at the 37th ASEAN Summit, key areas of focus for a sustainable and resilient future in ASEAN include:

  • Circular Economy
  • Sustainable Energy
  • Green Infrastructure
  • Sustainable Investments
  • Sustainable Agriculture
  • Sustainable Financing

The role of technology in delivering these goals and making these strategies actionable will be crucial. Generally, technology will greatly improve planning and decision making by leveraging data and analytics, and enable transparent monitoring and reporting with blockchain, AI and ML. Beyond sustainable practices for existing business arms, technology and innovation will also allow for new business models, with sustainability at the core, to emerge.

Studies have increasingly shown that ESG priorities will be the key to long-term, sustainable growth. In today’s uncertain economic circumstances, do these long-term returns outweigh considerations for present and short term goals and needs of businesses in ASEAN? 

The Value of ESG for Investor Relations

Green, Social, sustainability

Green, social, sustainability and sustainability-linked bonds have been forecasted by S&P to increase from US$520 billion in 2020 to US$700 billion in 2021. The economic edge is a key driver of sustainability, and as scrutiny around sustainable practices increases around the world, businesses are committing themselves to ESG goals through various initiatives and ESG reporting. 

Many sustainability and ESG-focused indices and funds have been launched. For ASEAN-focused funds, one example is FTSE4good ASEAN 5 comprising companies with recognised corporate responsibility practices and which are listed on leading ASEAN financial markets Bursa Malaysia, Indonesia Stock Exchange (IDX), The Philippine Exchange, Singapore Exchange (SGX), and The Stock Exchange of Thailand. Companies included are selected and screened in accordance with transparent and defined Environmental, Social and Governance (ESG) criteria. This provides a possible gauge for sustainability performance among the ASEAN-5.

FTSE

Responsibility, Accountability and Transparency

Beyond sustainability investment markers, there has been increasing scrutiny around companies greenwashing their ESG and sustainability efforts from consumers and sustainability advocates. How do we determine if ESG initiatives and outcomes have real impacts on sustainability, or if firms are using it as a mere marketing tool? 

Global reporting frameworks by the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board and the CDP, to name a few, are used in a company’s sustainability reports. In ASEAN, businesses are engaged in ESG initiatives and sustainability reporting in accordance with local sustainability disclosure guidelines. 

These guidelines include Bursa Malaysia’s Sustainability Reporting Guide, Philippines’ Sustainability Reporting Guidelines for Publicly-Listed Companies, Singapore’s Sustainability Reporting Guide, Thailand encouraging the adoption of the GRI, and Vietnam’s Sustainability Reporting Handbook for Vietnamese Companies published together with the IFC. In Indonesia, OJK’s Rule 51/POJK.03/2017: Implementation of Sustainability Finance for Financial Services Institutions, Issuers and Public Companies applies to financial services providers or issuers. 

The responsibility of sustainability reporting falls upon the businesses themselves, and there appears to be room for improvement in ESG definitions, indicators and enforcement.

The Tech Edge for Firm Performance: The ROI of Prioritising ESG

Beyond carbon emissions rates which have been receiving much attention in recent times, ESG priorities encompass the social and governance aspect which will benefit from the adoption of technology. Possible indicators of ROI for technology investments have also come to include meeting ESG goals including employee experience, social responsibility, and corporate governance.

ESG

According to the 2020/21 AIBP ASEAN Enterprise Digitalisation Market Survey on investment priorities for enterprise technology, 73% expect an increase in their spending on digital technologies in 2021. Across various discussions on digital priorities in the past year, ASEAN enterprises have consistently pointed out that digitalisation does more than increase core business outcomes like cost-efficiency and profit maximisation – they enable transparent business practices and social responsibility as well. 

Sime Darby and CP Foods highlighted how different technologies have contributed to their ESG goals in the agriculture sector, while Petronas shared how technology and innovations will contribute to their goal of net-zero carbon emissions. 

At Sime Darby Plantations, technology has assisted them with increasing transparency and awareness of sustainable palm oil production through geo-mapping their plantations and launching Crosscheck 2.0 (a traceability tool to monitor deforestation).

CP Foods has embarked on projects championing food safety, environmental conservation, improving community practices and employee health and safety among others. The company develops new technologies and services to help farmers and small independent restaurants remain competitive. Biosecurity and AI have also been used to monitor employee movement during the COVID-19 pandemic to minimise health risks. 

Malaysian oil and gas company Petronas is optimising production and operations, prioritising technology acceleration and innovation stewardship to develop low and zero-carbon fields, products and solutions, as well as advance emission reduction technologies including carbon capture, utilisation and sequestration (CCUS) in high CO2 fields. 

As ESG priorities become the norm for enterprises in the region, the outcomes of current initiatives remain to be seen. It is exciting to see how technology and innovation will contribute to reconciling the perceived divergence and trade-offs between firm performance and ESG outcomes among ASEAN enterprises, and possibly placing sustainability at the core of businesses, towards a better future for humanity (and business).

We look forward to hearing from the region’s sustainability leaders on current developments in sustainability, ESG and the role of technology at the upcoming AIBP focus discussion on The Tech Edge for ESG in ASEAN on 4 August 2021, Wednesday.

Feel free to drop us a note if you wish to learn more or contribute to the topic of technology and sustainability, or if you’d like to view our report on ESG Initiatives among ASEAN Enterprises.

 

AIBP

8 July 2021

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