Why carbon management matters to businesses
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: Why carbon management matters to businesses

Carbon management - the process of measuring and reducing carbon emissions - has now become a key facet in corporate strategy. PHOTO: BT FILE

International efforts to accelerate climate action have intensified as the global transition to net zero continues to gain momentum.

To date, more than 149 countries responsible for over 88 per cent of global greenhouse gas emissions, including Singapore, have committed to net-zero targets.

More corporates are also committing to decarbonisation, with 929 companies from the Forbes 2000 list setting net-zero targets in 2023, up from just 417 three years ago.

Carbon management – the process of measuring and reducing carbon emissions – has now become a key facet in corporate strategy.

How will the transition to net zero affect Singapore enterprises? There are three key pressures – regulatory mandates, client demands and unlocking financial incentives.

Government policies and regulations demand urgent action

Governments and regulators across the world are increasingly requiring businesses to measure and disclose their emissions, and to act on reducing their environmental impact.

The European Union‘s Corporate Sustainability Reporting Directive requires companies operating in the bloc to report emissions. The EU’s Carbon Border Adjustment Mechanism further mandates importers to declare and pay for emissions embedded in their imports. In the United States, the Securities and Exchange Commission has adopted regulations to mandate material climate risk disclosures for public companies.

Similar trends are also seen closer to home. Malaysia, Japan and South Korea have introduced sustainability reporting requirements for listed companies. China is similarly proposing that large, listed companies publish their sustainability reports by 2026, including disclosures on their climate transition plans and decarbonisation targets.

Singapore, too, is moving beyond listed entities to mandate climate reporting for large non-listed enterprises from 2027. Companies that work on public projects will also be impacted by the introduction of environmental sustainability criteria into the government’s tender evaluation process.

Increasing demand from clients to report emissions

With these changes in government policies, large corporations are increasingly requesting emission data from their suppliers, as part of their own carbon footprint assessments and reported emission data. This will impact small and medium-sized enterprises (SMEs) that are part of larger supply chains, where their emissions contribute to their clients’ value chain emissions.

In fact, a survey by Standard Chartered revealed that big corporates are scrutinising their suppliers’ sustainability efforts, with 70 per cent of respondents ready to cut ties with those that fail to align with their net-zero commitments.

Furthermore, the International Sustainability Standards Board (ISSB)‘s proposed standards for large companies to disclose Scope 3 emissions in October 2022 has intensified the pressure on SMEs to not only track and report emissions, but also implement appropriate reduction strategies.

In particular, suppliers in high-emitting sectors such as chemicals, logistics and electronics will be impacted.

For instance, Singtel has set decarbonisation goals and is now collaborating with its suppliers, including some SMEs, to report emissions data and reduction strategies. This has provided Singtel with a clearer understanding of emission hotspots, enabling the telco to work jointly with its suppliers on targeted emission-reduction efforts.

In view of decarbonisation efforts by its corporate clients and the international maritime industry, logistics company Kenoil Marine Services, which provides bunkering and ship management services, is developing a sustainability strategy and building its capabilities in carbon measurement, reduction and reporting.

In doing so, Kenoil Marine will be better able to reduce its carbon emissions while meeting its clients’ net-zero commitments, which helps the company differentiate itself from other logistics companies.

Access to green finance

More financial institutions are offering green finance solutions for projects that confer strong environmental and social benefits. Companies with effective carbon management plans and robust ESG credentials are more likely to unlock these financing options.

For example, UOB offers a loan rate reduction of up to double-digit basis points for logistics companies that can lower emission levels. OCBC and DBS also offer loans which allow clients to secure lower interest rates if they meet sustainability targets.

The verification of carbon emissions is an important step for determining eligibility for green loans, as banks face increasing scrutiny for their green loan portfolios.

The Carbon Trust assisted plastic manufacturing company Dynapack Asia to review their emissions to align with internationally recognised ISO 14064-3 standards, which was a crucial step in helping the company qualify for a sustainability-linked loan.

The way forward: support for companies to embark on carbon management

To begin their carbon management process, companies must first understand and measure what their emissions are. This will be followed by setting reduction targets, implementing initiatives to reduce emissions and finally, disclosing the progress of measurement and decarbonisation efforts.

Companies should also understand how climate-related risks and opportunities can impact their business operations and model.

However, many companies currently lack the necessary knowledge and expertise to measure their emissions and decarbonise. SMEs, in particular, face additional challenges, such as resource constraints and limited access to expertise.

Enterprise Singapore’s (EnterpriseSG) Enterprise Sustainability Programme (ESP) aims to address some of these gaps by providing support for enterprises at different stages of their sustainability journey – from building awareness and knowledge, to improving companies’ carbon management capabilities and performance.

For instance, enterprises can learn about decarbonisation trends and how to determine their emission profile through courses conducted by the Carbon Trust and other ESP partners. Self-help resources, such as a decarbonisation playbook and the logistics sector playbook, offer insights and lay out action steps for companies to adopt.

Beyond awareness and knowledge building, companies can also tap the ESP to strengthen their carbon management capabilities by developing and implementing decarbonisation measures, by engaging consulting firms like the Carbon Trust.

EnterpriseSG also collaborated with industry partners such as CDP, Schneider Electric and Global Compact Network Singapore to run programmes that support companies in environmental disclosure and decarbonising operations.

To ease the process of carbon accounting, EnterpriseSG partnered the Infocomm Media Development Authority to provide pre-scoped carbon accounting solutions under the Advanced Digital Solutions scheme.

While the need to comply with external pressures is a catalyst for companies to prioritise their decarbonisation efforts, good carbon management ultimately translates to good business as well.

Companies that embrace carbon management will not only find themselves aligned with global environmental goals, doing so will also pay off in terms of operational efficiencies, improved brand reputation, better talent retention and attraction, all while meeting customer demands.

The journey towards carbon management is therefore more than an environmental imperative, it is a strategic business decision that positions companies for long-term success.

Geoffrey Yeo is assistant managing director of capabilities, urban systems and solutions at Enterprise Singapore. Tok Xinying is head of South-east Asia at the Carbon Trust.

Source: The Business Times © Singapore Press Holdings Limited. Reproduced with permission.