An economic powerhouse with immense potential for growth, ASEAN’s awareness of ESG is still at the stage of infancy. However, as ESG becomes part of a firm’s priorities, projects will be implemented, investments will be made in technologies like big data, AI, IoT, satellite technology to support the ESG (and business) agenda. The role of technology in delivering these goals and making these strategies actionable will be crucial. Beyond sustainable practices for existing business arms, technology and innovation will also allow for new business models, with sustainability at the core, to emerge.
“When our growth seems to be hampered, it is a time to build our roots” -Dr Tan Lai Yong, Fellow, NUS
Setting the stage for today’s feature for the tech edge for ESG, Dr Tan Lai Yong, Fellow, National University of Singapore (NUS), shared about his time Yunnan, China, engaging in healthcare and educational projects around poverty-stricken, rural communities – to him, sustainable is when you care for the poor, care for the community by sharing knowledge and loving them.
To illustrate ASEAN’s future in ESG and sustainability, we bring together some of the region’s largest conglomerates Asia Pulp & Paper (APP), Sinar Mas Group (Indonesia), Ayala Land (Philippines), Charoen Pokphand (CP) Group (Thailand) and Sime Darby Plantation (Malaysia) to share why the topic of ESG is important in the long run, along with Oracle.
Areas covered today were Business Transformations Towards Sustainability, Responsibility, Accountability, Transparency, Technology: The ESG Enabler, and The “Green Premium”.
Business Transformations Towards Sustainability
Chung Heng Han, Senior Vice President, Systems and Alliances & Channels, Oracle Japan & Asia Pacific observes that the net-zero carbon economy is gaining traction, with board members now seeking business models compatible with net-zero carbon emissions, driving the next wave of transformation for businesses today.
At Ayala Land, the main philosophy lies in embedding sustainability in their business – sustainability is not a side project. Likewise at APP, it is increasingly acknowledged that sustainability is something to be integrated into operations and the business itself.
Anna Gonzales, Sustainability Head, Ayala Land, shared that for Ayala the main natural capital is the land, and the main product is the environment. Projects are aimed not just at financial growth, but also at providing environmental services and making livable spaces for the people. Sustainability ideas and programs take on a bottom-up model across the Ayala conglomerate.
In 2015, APP established a community program (Desa Makmur Peduli Api), an integrated forestry and farming system, which provides alternative means of livelihood for communities on the ground through capacity building and developing best practices for agriculture. In addition, the locals are trained to market their products on online marketplaces like Shopee and Tokopedia to provide them with sustainable livelihoods. Elim Sritaba, Chief Sustainability Officer, Asia Pulp & Paper, Sinar Mas Group, believes that Sustainability is about caring for the environment, and caring for the community.
Prioritising sustainability pays off for the business in multiple ways too.
Rashyid Redza Anwarudin, Head of Group Sustainability, Sime Darby Plantation, shared how Sime Darby Plantation, part of the palm oil industry has been subject to heavy scrutiny, is a founding member of the roundtable on sustainable palm oil (RSP), the largest certification body for sustainable palm oil globally, with 100% of their global operations are certified to the RSP principles and criteria. He also posits that pioneers of ESG will set benchmarks for the industry, and be more prepared for new regulations. For example, when the Malaysian Sustainable Palm Oil certification standards were implemented, Sime Darby Plantation was prepared as operations were already in compliance with the requirements.
Responsibility, Accountability, Transparency
CP considers their farmers as their partners, and sustainability efforts have been in place for many years, with 3 key objectives: providing know-how and best practice training, providing support for capital and investments, and providing a market. Viranon Futrakul, Vice President Global Partnership for Sustainability & Communications, Charoen Pokphand Group shared an example for CP’s swine productions, where the company worked with the farmers in producing biogas by turning manure into fertilizers, thereby ensuring that sustainability initiatives contribute to Zero Waste within the process.
Rashyid points out that ESG metrics for reporting boil down to a few key areas that people are interested in, one of them being response to climate change. To that, Sime Darby Plantation’s roadmap looks at 5 key areas of reducing operational emissions through their biogas program, implementing nature-based solutions, eliminating deforestation in their supply chains, adapting operations to mitigate climate risks, and governance and reporting of climate change response. 50% (close to 15,000) of the company’s 3rd-party smallholders in Indonesia have been certified by the RSP as well.
There has been significant shifts in perception of sustainability in the past decade, and companies like Sime Darby Plantation and APP, in the palm oil and wood pulp industry respectively, have also strived towards sustainability goals.
At Sime Darby Plantation where supply chains are highly complex and non-transparent, progress has been made in developing methodologies and implementing tools to identify and manage deforestation. Digitalisation for centralised monitoring has supported transparency and engagement with their stakeholders who are more willing to work together in addressing issues along the supply chain. In fact, Rashyid shared that in the past 5-6 years, there’s been a lot more collaboration opportunities with customers, growers, and civil society organizations to develop workable solutions on the ground.
Also heavily scrutinized by sustainability watchdogs, APP’s Forest Conservation Policy (FCP) was issued in 2013 to commit to eliminating the use of natural forests within their supply chain. However, Elim shared that as much as conservation areas are monitored and deforestation of natural forests have been addressed, APP still faces many challenges in achieving their sustainability goals, which is mitigated with monitoring and AI technology.
Technology: The ESG Enabler
In today’s age of technology and digitalisation, it is widely accepted that sustainability and ESG initiatives and reporting is increasingly attainable with the adoption of both new and mature technologies. The role of technology – drones, satellite imaging, IoT to name a few – was continuously brought up as enablers of businesses across industries to achieve their sustainability goals. Technology serves to transform and support sustainability efforts, as well as mitigate threats.
As the use of data centers increases throughout the world, so does their energy consumption. Han shares that Oracle aims for all their data centers to be using renewable energy by 2025. However, there is an observed disparity between Europe (where all data centers are using 100% renewable energy) and in this part of the world. In addition, the company seeks to ensure that supply chain practices are sustainable, ensuring that most of their key manufacturing suppliers have energy or carbon reduction goals in place.
Within the agrifood industry, CP uses satellite imaging and GPS in their agriculture, aquaculture operations to ensure that their suppliers do not encroach forest land. AI and IoT is used in farming operations to test air and water quality and temperatures for animal welfare. 5G technology and drones map and collect data on farmlands to allow for better analysis of crop quality with big data, contributing to smarter precision farming methods.
Anna shared that in the Philippines, technology initiatives for ESG have not been as widely adopted. However, data platforms have made analysis of data for ESG indicators much more efficient. In addition, Ayala Land is engaging in R&D for property monitoring and management, and Anna believes that adopting technology for ESG is not out of reach since these are technologies that are already available, but the lockdown has pushed some of these projects back.
At APP, one of the difficulties faced in Indonesia arises from illegal deforestation activities. The company has made use of AI and monitoring to get alerts of forest cover change. Elim shares how the accuracy of such a tool helps the firm to prioritise and act swiftly to mitigate any illegal activities.
The “Green Premium”
Today, the issue of paying more, or a “green premium”, is a key area of consideration for decisions on ESG adoption.
To this, Han applies Moore’s Law, where he thinks the “cost premium” of ESG will eventually be incorporated into a product or service. For Sime Darby Plantation which is RSPO-certified, the costs of producing certified sustainable palm oil is embedded into day-to-day operations, and by being the largest sustainable palm oil producer in the world, the company gains access to more markets and customers who require responsible, responsibly produced palm oil. For Rashyid, it boils down to establishing a business case.
Both Rashyid and Viranon believe that such investments serve to future proof the organisation for future regulations, customer requirements, and even investor requirements. Viranon believes that without innovation or technology, a company cannot develop further – “green premiums” may raise costs in the short term, but will be beneficial to everyone in the long run.
At the end of the day, investments and efforts in ESG and sustainability must and will contribute to business gains and outcomes. The fact is, in the region, this awareness around the value, tangible or not, of environment, social and governance is just starting to pick up pace – now is always a good time for ASEAN firms to take action.
This is part of the AIBP Focus series which brings together a focus group of ASEAN stakeholders to discuss topics related to enterprise technology adoption in the region. We hope to continue such conversations. Drop us a note if you’d like to view the full session or a copy of our report on ESG Initiatives among ASEAN Enterprises.
4 August 2021