ESG in Singapore: Issues, opportunities, and key takeaways
As regulators across jurisdictions seek to increase scrutiny and standardise ESG disclosure requirements, companies are increasingly prioritising environmental and social risks. In Singapore, the government has embarked on firm actions to advance the national agenda on sustainable development through the Green Plan 2030. The transition to a low-carbon economy will present both challenges and opportunities for businesses who will need to harness sustainability as a competitive advantage. As Singapore accelerates towards becoming a green growth hub, the imperative for businesses to embrace sustainability is clear.
The current ESG landscape in Singapore
The past five years have been transformational. The Singapore government and people sector have made significant strides in our sustainable development goals, and we are seeing ESG, as a concept, filter into business plans and boardrooms.
While Singapore accounts for around 0.11 percent of global carbon emissions, Singapore has made significant efforts to reduce emissions domestically. In 2019, Singapore implemented a carbon tax which has provided an impetus for businesses and individuals to reduce their carbon footprint in line with our national climate goals. In the last four financial budgets, the Government has rolled out concrete sustainability policies and action plans. The Government has a strong focus on strengthening Singapore’s resource and climate resilience.
In 2021, the Singapore Green Plan 2030 was rolled out to strengthen commitments under the UN 2030 Sustainable Development Agenda and the Paris Agreement, as well as to achieve our net zero emissions target by 2050. We now have a better understanding of the need to decarbonise and invest heavily in the infrastructure to support cleaner energy. We have also made a significant push on initiatives to transform Singapore into a ‘City in Nature’ by further restoring nature into our urban environment.
We have also seen regulators in our financial markets emphasise the importance of ESG reporting and mandatory ESG reporting for certain sectors that are more emissions intensive. Moreover, our local large banks and financial institutions are driving subscriptions towards sustainable finance and green bonds. The Government is also lending support to Singapore businesses through targeted grants which support sustainability capability development projects and sustainability standards adoption.
There are still challenges to overcome
In a recent business survey, almost 65% of businesses believed that ESG will impact their resilience and survival. It is thus safe to say that most acknowledge ESG will ultimately define what ‘good business’ looks like as we move into the future. Whilst Singapore has made significant strides in our ESG performance, there are still challenges within the ‘sustainability trinity,’ with issues to be found in the E, S, and G.
A key environmental issue is the challenges that energy infrastructure can bring, and our limited options to diversify energy sources away from natural gas. In Singapore, we have made some progress by way of adopting solar energy, however there are constraints in scalability.
Another critical challenge is the decarbonisation of our largest business sector (i.e., enterprise businesses). Whilst many businesses recognise the risk of not decarbonising, they still lack the urgency to take action, make viable changes to their business models, and adopt more sustainable practices.
In recent years, social issues around gender diversity, inclusiveness, regulatory health and safety challenges, as well as capability building have all gained prominence in Singapore, as with the rest of the world. However, our unique challenge is a lack of natural resources, and, therefore, the need to strengthen our human capital.
Singapore embarked on a skills transformation programme, spanning many industries, more than half a decade ago. There was a consensus that many traditional sectors needed to innovate, and with that the supporting workforce would need to be up-skilled accordingly. Employers would therefore need to have better clarity on the training landscape and what would be needed to close the skills gap.
While regulators have offered listed companies in Singapore a phased approach towards ESG reporting, two key concerns stand out. These concerns were similarly published in a notable 2023 business survey over the governance of ESG.
The first is aligning governance to performance and ensuring that those responsible for driving transformation in their businesses, and their ESG plans, are recognised and remunerated appropriately.
The second concern has to do with accountability. As companies scramble to identify professionals and competent executives to helm ESG transformation, how much authority and responsibility should be accorded to these individuals? What capabilities do board representatives have in steering their ESG agenda? And what is expected of a business’ internal resources, in terms of ESG progress within a realistic time frame? These are all questions that businesses should be asking themselves in the ramp-up to value-added transformation.
Where do we go from here?
The role of ESG will only become more tightly involved with businesses as time moves on. For Singapore and the rest of the global business world, ESG is no longer a question of ‘if we start,’ but ‘when we start’. The sooner businesses become accustomed to and familiar with ESG-related strategies, the more adept they will be at tackling the challenges of the future. For any business wanting to start out on their ESG journey, we offer these three key takeaways:
1. Be clear about what ESG means to you. Does it afflict the continuity of your business? Or does it accelerate and support cost and resource-saving measures you are looking to achieve?
2. Be self-reflective. Where do you stand in your ESG journey? What are your competitors doing? Where do your industry’s ESG aspirations lie?
3. Prioritise and set realistic targets to show tangible and measurable improvements. Nothing creates momentum and trust better than business leaders who deliver on commitments and celebrate victories.
Want to learn more about what RSM can do to help your business? Contact our specialist:
T: +65 6594 7627
Partner & Head of ESG Practice
T: +65 6594 7876