By Richard Lancaster
COVID-19 has brought unprecedented challenges to businesses around the world. However, a break in the clouds amid the gloom is that as the pandemic exposes the fragility of our economy, companies are starting to put the need to be prepared for long-term sustainability issues such as climate change and resource scarcity at the top of their minds.
Recognising that resilience is crucial for the long-term success of any business, many companies are re-assessing their priorities and strategies. At the Business Environment Council (BEC) flagship EnviroSeries Conference in June 2021, the organisation engaged member companies and the wider business community in evaluating and redefining business leadership to see how the business community can achieve Green growth in the post-pandemic era. The sessions covered a variety of topics ranging from biodiversity to circularity and innovation to climate resilience. As I listened to my fellow industry colleagues share their insights and experiences, a few common themes emerged.
Stakeholder expectations are changing, business must keep up
Be it consumers, governments, communities or investors, sustainability is an increasingly topical issue and companies need to take note of that. According to the most recent Edelman Trust Barometer survey, 65 per cent of respondents agreed that CEOs should hold themselves accountable to the public alongside their board and stockholders, while 68 per cent of consumers and 62 per cent of employees believed they have the power to force corporations to change. To ensure success, business leaders must keep up with, and respond to, these shifting expectations by carefully observing emerging trends and proactively addressing risks and challenges.
To ensure success, business leaders must keep up with, and respond to, these shifting stakeholder expectations by carefully observing emerging trends and proactively addressing risks and challenges.
Where there are risks, there are opportunities
In 2018, the Global Commission on the Economy and Climate found that bold climate actions could deliver at least USD26 trillion in economic benefits by 2030 if decisive leadership, collaboration and capital were to align on this common vision. Progressive business leaders already understand that addressing the climate crisis, adopting circularity, and shifting to regenerative business models lead to innovative approaches that generate sustainable value from new jobs, restored ecosystems and stronger communities.
Value creation is no longer predicated on the extraction or consumption of resources. Innovative circular business models now draw value from waste and favour a shared economy paradigm popular with consumers. A nature positive approach delivers opportunities that benefit the community and the environment beyond economic value through, for example, improved air and water quality.
Sustainability is core to business strategy
Reconsidering the relevance of sustainability to core business strategy is long overdue. Sustainability risks and challenges cut across all aspects of a business. To adequately address these issues and embrace emerging opportunities, business leaders must adopt a strategic and cross-functional understanding of sustainability that combines both financial and non-financial risks.
This approach provides a long-term solution for companies that incorporate environmental, social and governance (ESG) elements in their strategies in an ever-changing world. Factoring in and aligning sustainability with the enterprise risk management process clarifies the link between ESG risks and traditional enterprise risks. Introducing ESG factors into the responsibilities of business units across the organisation encourages a deeper involvement of all functions in the identification of such risks and the development of mitigation plans. This serves to enhance ownership over these issues and internalise a culture of sustainability.
Collaboration and partnerships are key drivers for Green growth. Sustainability challenges are beyond the scope of a single company and require a rethinking of current business models, policies and regulatory regimes.
Partnership is key
Collaboration and partnerships are key drivers for Green growth. Sustainability challenges are beyond the scope of a single company and require a rethinking of current business models, policies and regulatory regimes. The systemic change necessary to achieve a zero-carbon economy depends on having the right infrastructure, building the knowledge base of the future and developing policies and regulations that enable and support sustainable behaviour. BEC has been at the forefront of these partnerships for almost 30 years, working with member companies to actively shape and drive environmental sustainability through research, policy recommendations and building communities of practice.
Last November 2020, Chief Executive Carrie Lam announced a target for Hong Kong to achieve carbon neutrality by 2050. We expect to see an updated decarbonisation roadmap to reach this target soon. Meanwhile, financial regulators have announced steps for more robust climate stress testing and climate-related disclosures by 2025. The pressure faced by financial institutions, investors, banks and insurance companies is bound to trickle into board rooms and C-suites in the real economy. These clear signals of upcoming regulatory and policy shifts, combined with market forces, will help drive a zero-carbon transition. The business community in Hong Kong continues to embrace these changes and it is concrete and proactive responses from the business sector that will deliver on these ambitious carbon pledges.
Complementing all the initiatives and activities to date, BEC established the Low Carbon Charter in 2019 to further support the business community’s decarbonisation efforts. Charter signatories commit to setting and achieving carbon reduction targets, reporting on their progress on an annual basis, and joining knowledge sharing events and workshops to learn from their peers and enhance their performance. At the Charter’s 2nd anniversary, BEC launched the Power Up Coalition to encourage the electrification of non-public works construction sites in Hong Kong in line with the government’s Technical Circular on the temporary application of electricity and water supply in public works projects. With 99 and 20 members respectively, the Low Carbon Charter and the Power Up Coalition are prime examples of how BEC engages the business sector in positive, proactive and practical initiatives to support the zero-carbon transition.
Now is the time for business leaders to take the lead in implementing bold, holistic and strategic approaches to sustainability.
The way business views its role is constantly changing. What was considered acceptable three decades ago may not be viable today. Going into the pandemic era, the business community was already engaged in a mindset shift towards more holistic and inclusive models. The ripple effects of the pandemic have accelerated this shift. While profits for shareholders remain central, resilient companies also adopt a broader perspective taking into account the needs of, and impacts on, other stakeholders, the environment and the wider community.
Business leaders must recognise that ESG issues are as important as financial performance to a company’s value. To safeguard, generate and enhance value, business leaders have to look ahead and discern emerging risks and challenges, think through strategic mitigating actions, and communicate the company’s approach to addressing them in line with core corporate values. Now is the time for business leaders to take the lead in implementing bold, holistic and strategic approaches to sustainability. This requires a mindset shift and system transformation. BEC will continue to engage and mobilise member companies, the wider business community and the Hong Kong government to accelerate this transformation.
Chairman of Business Environment Council (BEC)
Richard Lancaster is the Chairman of the Business Environment Council and a founding member of the Advisory Council of The Australian Chamber of Commerce Hong Kong & Macau. He is a Fellow of the Hong Kong Management Association and a council member of the World Business Council for Sustainable Development and a member of its Climate and Energy Cluster Board. He is also chairman of the Hong Kong Membership Committee of the UN-accredited World Energy Council.
Originally from Australia, Mr Lancaster is an electrical engineering graduate of UNSW Sydney. With more than 35 years of experience in the power industry and in other industrial operations in Asia, Australia and the United Kingdom; he serves as Chief Executive Officer of CLP Holdings, the parent company of the CLP Group which is one of the largest investor operators in the electricity industry throughout the Asia-Pacific region.
BUSINESS ENVIRONMENT COUNCIL (BEC)
Business Environment Council Limited is an independent, charitable membership organisation, established by the business sector in Hong Kong. Since its establishment in 1992, BEC has been at the forefront of promoting environmental excellence by advocating the uptake of clean technologies and practices which reduce waste, conserve resources, prevent pollution and improve corporate environmental and social responsibility. BEC offers sustainable solutions and professional services covering advisory, research, assessment, training and award programmes for government, business and the community, thus enabling environmental protection and contributing to the transition to a low carbon economy.