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Everyone Knows About Carbon Dioxide, Methane, Nitrous Oxide And Fluorinated Gases When It Comes To Environmental, Social and Governance (ESG) But What About Water Vapour?

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Photo by Guilherme Rossi

Written by Zeng Han Jun

 

I hesitated to write this… for about three weeks or so. In fact, there are always a lot of issues throughout the week for me to write about, but I usually let those issues seep in my brain for a while before I carefully pick one topic to write.  I almost dropped this topic but after weighing it, I decided to go ahead and write briefly about Greenhouse Gases (GHG) emission. I believe that we can bring about greater awareness on this topic if more people decides to step forward and share more information with one’s sphere of influence. 

 

So, you might think that it’s not a big deal to write about GHG emission. You know, the usual stuff like carbon emission that is covered under Scope 1, 2 and 3, other GHG emissions and ozone depleting substances. That is what most of the people have been harping on for quite some time but I want to go just a little bit further.

 

As you might already be aware, the race towards securing the next big idea of reducing carbon emission or extracting carbon content from the atmosphere, is very real. Big personalities are starting to showcase or have already showcased themselves, their organisations, their visions, their network in an attempt to attract the most pioneering ideas and the best talents. 

 

I imagine that some are howling at their staff over the phone or across the table and sending them to all corners of the globe to search for the next big idea or maybe also expecting them to squeeze their network dry. Like really dry, but somehow the same few ideas keep surfacing… from the same few groups of networks. Nah, it’s just my imagination. No one howls at anybody for such things right?

 

Right?

 

Anyway, a lot of companies have dead-locked their firing sights on carbon emission. I noted that a few companies have ventured to explore other ideas such as capturing methane and using the captured methane as fertilisers or fuel. 

 

Ok, before you yell at your staff over the phone to look for investments in methane capture technology. Please place your hand over your heart, take a few deep breaths, calm down and read about what I have to say further. 

 

There are many types of Greenhouse Gases (GHG) and the typically known ones are: 

  1. Carbon Dioxide; 
  2. Methane; 
  3. Nitrous Oxide; and 
  4. Fluorinated Gases.

The first one and also the one that most industries are interested in reducing, is carbon dioxide. This gas accounted for roughly 80% of all human-caused GHG emissions in the United States in 2019. Some of the excess carbon dioxide will be quickly absorbed (for example, by the ocean surface), but some will remain in the atmosphere for thousands of years, owing to the very slow process by which carbon is transferred to ocean sediments (Climate change, 2007). 

 

Next is methane, which has a much shorter lifetime in the atmosphere than carbon dioxide, but methane is more efficient at trapping radiation than carbon dioxide. Over a hundred year period, the comparative impact of methane is 25 times greater than that of carbon dioxide and this is why some companies have departed from the red ocean of carbon capture market and ventured into the blue ocean of methane capture market (Climate change, 2007). 

 

The third one is nitrous oxide, which accounted for approximately 7% of all human-caused GHG emissions in the United States in 2019. Nitrous oxide molecules linger in the atmosphere for an average of 114 years before being removed by a sink or destroyed chemically. One pound of Nitrous oxide has nearly 300 times the warming effect of one pound of carbon dioxide (Climate change, 2007). 

 

Finally, last but definitely not the least, fluorinated gases. Unlike many other greenhouse gases, this group of gases have no natural sources and are only produced by human activity. They are emitted as a result of their use as ozone-depleting substitutes (e.g., refrigerants) and a variety of industrial processes such as aluminum and semiconductor manufacturing. Because many fluorinated gases have extremely high global warming potentials (GWPs) in comparison to other greenhouse gases, small atmospheric concentrations can have disproportionately large effects on global temperatures. They can also have long atmospheric lifetimes, lasting thousands of years in some cases. Fluorinated gases, in general, are the most potent and long-lasting type of greenhouse gas emitted.

 

Precisely because these gases are emitted by the industrial sectors, it actually makes emission control much easier. We can track the emissions to its industrial sources, monitor the outputs, from there we would be able to understand what contributes to the outputs and then devise various methods to reduce or capture GHG. Additionally, regulators could make companies pay for the pollutive emissions and this encourages companies to invest and install emission control mechanisms to treat any industrial waste or air pollution before releasing these by-products into the ecosystem.

 

Companies should be willing to invest in these technologies as long as the total investment for the emission control mechanisms is less than what they need to fork out for any penalties or for as long as it makes financial sense. 

 

Ok, so that is all for carbon dioxide, methane, nitrous oxide and fluorinated gases. 

 

Now, I am going to talk about water. To be more precise, I am going to talk about water vapour. 

 

Water vapour is the most important gaseous source of infrared opacity in the atmosphere and an increasing number of works are showing that it is the dominant greenhouse gas. 

 

Water vapour concentrations are not directly influenced by human activities and vary regionally. However, human activities could increase global temperatures and water vapour formation indirectly, amplifying the warming in a process known as water vapour feedback (Soden, Jackson, Ramaswamy, Schwarzkopf, Huang, 2005).

 

Water vapour feedback can in turn amplify the warming effect of other greenhouse gases, such that the warming brought about by increased carbon dioxide allows more water vapour to enter the atmosphere. As the concentrations of other greenhouse gases, particularly carbon dioxide, rise due to human activity, it is critical to forecast how the water vapour distribution will change. 

 

The contribution of water vapour to the greenhouse effect in the Earth’s atmosphere far exceeds that from other gases, such as carbon dioxide, methane, etc. Calculations estimate that water vapour and clouds are responsible for 49% and 25%, respectively, for heat absorption (longwave absorption to be more precise but I will elaborate on this later). Carbon dioxide is responsible for about 20% of the heat absorption. Please note that the percentages of the greenhouse gases in our environment is not fixed and varies daily, seasonally, and annually (Schmidt, Ruedy, Miller, Lacis, 2010).

 

It is important to note that the difference between tropical and polar latitudes, for example, is determined not only by the difference in air temperature, but also by the difference in atmospheric water vapour (Chesnokova, Firsov, Razmolov, 2019). This goes to highlight the impact that water vapour has on the entire Earth’s atmospheric condition. 

 

Let me just briefly explain about the scientific model that is generally accepted by most of the scientific community at the moment.  

 

Electromagnetic radiation is emitted by everything that has a temperature. Shortwave radiation contains more energy, while longwave radiation contains less. For example, the sun emits shortwave radiation because it is extremely hot and has a lot of energy to give. The radiation that is emitted by Earth, on the other hand, is longwave because it is much cooler, but it still emits radiation.

 

FIGURE 1

Simplified scheme showing greenhouse gasses (GHG) and their effects on plants. GHG (H2O vapour, clouds, CO2, CH4, N2O, and NO) have both natural and human origin, contributing to the greenhouse effect. Short-term effects of GHG increase is mainly CO2 rise, which activates photosynthesis (PS) and inhibits stomatal opening (SO). Long-term effects of GHG increase are extreme climate changes such as floods, droughts, and heat. All of them induce the generation of reactive oxygen species (ROS) and oxidative stress in plants. Nitric oxide (NO) could alleviate oxidative stress by scavenging ROS and/or regulating the antioxidant system (AS). GHG and volatile organic compounds (VOC) react in presence of sunlight (E#) to give tropospheric O3. Although tropospheric O3 is prejudicial for life, stratospheric O3 is beneficial, because it filters harmful UV-B radiation. The size of arrows are representative of the GHG concentration.

 

Clouds and the Earth’s surface absorb solar energy once it enters the atmosphere. The ground heats up and re-emits energy in the form of infrared rays and this is known as longwave radiation. Simply put, the Earth is cooler than the sun and has less energy to give off, it emits longwave radiation.

 

The radiation balance and atmospheric circulation are determined by the fluxes and inflows of shortwave and longwave radiation within the Earth’s atmosphere. Radiative processes, such as cooling or heating of the Earth’s atmosphere and surface, are actually heavily influenced by cloud parameters. 

 

A growing body of studies are pointing to the link between the formation of cirrus clouds and its potential impact on climate change. Cirrus clouds condense and nucleate on very specific mineral and metal particles high in the atmosphere. Although it is known that only a small percentage of atmospheric aerosols are efficient ice nuclei, the critical ingredients that make those aerosols so effective have yet to be established (Cziczo, Froyd, Hoose, Jensen, Diao, Zondlo, Murphy, 2013).

 

For us, we just have to note that several observations are showing that these clouds can roughly cover up to about 20% to 30% of the Earth’s atmosphere at any given time. Depending on their location in the atmosphere, they can either help cool the Earth or warm it up. Unlike liquid water clouds, which generally cool the Earth by reflecting sunlight, ice clouds might help warm it up by absorbing reflected heat (LiveScience, 2009). The contribution of cirrus clouds to the downward flux at the surface level is small, and the flux is determined by the emission of the gas components of the atmosphere, whereas the contribution of cirrus clouds is decisive at the top of the atmosphere. 

 

Cirrus clouds with small optical thickness enhance the greenhouse effect. Current research showed that the crystal particles within the cirrus clouds can emit more energy than water vapour, in that they cool the atmosphere by absorbing and scattering shortwave solar radiation while increasing longwave radiation. Water vapour, carbon dioxide, and other greenhouse gases absorb and trap this longwave radiation, causing the Earth’s surface and lower atmosphere to warm naturally. It is critical to understand that greenhouse gases do not trap incoming shortwave radiation, but rather longwave radiation emitted by the Earth’s surface and other mediums (Pacific Islander Council on Climate Change). 

 

Water vapour will increasingly play a significant role in the coming centuries. Climate models, backed up by satellite data, predict that as temperatures rise, the amount of water vapour in the upper troposphere (about 5 to 10 kilometres up) will double by the end of the century (Soden, Jackson, Ramaswamy, Schwarzkopf, Huang, 2005).

 

This will produce roughly twice the amount of warming as if water vapour remained constant. Cloud changes could amplify or reduce warming but there is a lot of uncertainty about this. Currently, we still cannot directly control the amount of water vapour in the atmosphere because water is found everywhere on our planet. It covers roughly about 70% of the Earth’s surface. To control the amount of water vapour in the atmosphere and the temperature of the Earth, we can only limit the greenhouse gases that we can actually control at the moment.

 

Anyway, when things become more stable, I would like to go back to Dubai again and try those new water dispensing machines that are placed outside their shopping malls. These new water dispending machines distill water directly from air and is safe to drink on the spot!

 

References

(n.d.). Retrieved from Account, S. (2013, June 03). The origins of cirrus: Earth’s highest clouds have dusty core. Retrieved from Cassia, R., Nocioni, M., Correa-Aragunde, N., & Lamattina, L. (2018, March 01). Climate Change and the Impact of Greenhouse Gasses: CO2 and NO, Friends and Foes of Plant Oxidative Stress. Retrieved from Climate and Water Resource Case Study. (n.d.). Retrieved from http://www.soest.hawaii.edu/mguidry/Unna… 2/Chapter2B2.html

Climate change 2007: The physical science basis. (2007). Cambridge University Press.

Contribution of the water vapor continuum absorption to radiative balance of the atmosphere with cirrus clouds. (2018). Оптика атмосферы и океана, (9). doi:10.15372/aoo20180908

Cziczo, D. J., Froyd, K. D., Hoose, C., Jensen, E. J., Diao, M., Zondlo, M. A., . . . Murphy, D. M. (2013). Clarifying the Dominant Sources and Mechanisms of Cirrus Cloud Formation. Science, 340(6138), 1320-1324. doi:10.1126/science.1234145

Ingram, W. J. (2012). Water vapor feedback in a small ensemble of GCMs: Two approaches. Journal of Geophysical Research: Atmospheres, 117(D12). doi:10.1029/2011jd017221

Main, D. (2013, May 09). How Cirrus Clouds Form – And Why It Matters. Retrieved from Schmidt, G. A., Ruedy, R. A., Miller, R. L., & Lacis, A. A. (2010). Attribution of the present-day total greenhouse effect. Journal of Geophysical Research, 115(D20). doi:10.1029/2010jd014287

Soden, B. J., Jackson, D. L., Ramaswamy, V., Schwarzkopf, M. D., & Huang, X. (2005). The Radiative Signature of Upper Tropospheric Moistening. Science, 310(5749), 841-844. doi:10.1126/science.1115602

Soden, B. J., Jackson, D. L., Ramaswamy, V., Schwarzkopf, M. D., & Huang, X. (2005). The Radiative Signature of Upper Tropospheric Moistening. Science, 310(5749), 841-844. doi:10.1126/science.1115602

 

Social issues caused by loan sharks and how it could be combated by cooperatives supported by technology, in addition to an Environmental, Social and Governance (ESG)-focused supplier management programme

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Photo by Tima Miroshnichenko

 

Written by Zeng Han Jun

The pandemic has left many people without proper means of survival in many countries. Several countries have turned to borrowings so that they could extend handouts to businesses and people. Some countries have begun to study the possibility of tendering out large construction projects to create new infrastructures and jobs. Massive reorganisations are taking place at the international and domestic levels. 

 

A few cities are focussing their efforts on international trade through online platforms and repositioning with a blue and green economy because their traditional means of livelihoods might be disrupted in the near future. A small number are readying some of their industries as if preparing to pounce on new opportunities. In short, it is dizzying to see so much action within such a short period, more so when the pandemic has exposed weaknesses of many personal decisions, sectors and governance systems. 

 

One particular issue stood out glaringly for me during the pandemic, i.e. Loan Sharks.  Loan sharks usually provide financing services to those from the lower-income group. These people usually do not have stable income and also do not have proper documentation to obtain loan from a traditional bank. This is where loan sharks will step in to value-add. 

 

Just to share a little about my undergrad experience; I worked as a part-time credit officer at Standard Chartered Bank throughout my university days and my work involved performing credit analysis for the consumer branch and later I helped out with the administrative work for the credit risk covering the industries. At the end of that stint, I found out that money lending is not really that easy because it is a challenge for the money lender to ensure that the borrower is able to pay up. 

 

To this, the credit officers might have to ensure that they have liens over some form of assets that are held by the business or individual. In case the business or individual is unable to cover the loan payments over a certain period (usually three months – we used to refer to it as three buckets), the bank will be able to exercise their rights to claim these assets and recover at least a part of the debt. Additionally, we were also instructed to pore over the cash flow records of the businesses or individuals and ensure that only borrowers with healthy cash flows are eligible for loans. Naturally, loan applicants who are working in certain stable professions, were the safe ones to endorse for lending. 

 

I used to think that credit officers are at the short end of the stick. Later I found out that somehow or rather everyone is at the short end of the stick because ultimately, private enterprises are not charities and every department has bottom lines to meet and positions to secure. Even charities have KPIs, returns and positions to secure! Some loan applications seem like “there’s more than meets the eyes” so we need to call up the frontline sales officer to explain about the situation and maybe get them to obtain more documents from the customers. 

 

We often get back an earful from those front-office lots, about how they are bringing in the business to the bank and sustaining the salaries of those like us.  And that we are just sitting by the phone, mouthing no to everything without a single idea of how the real world works. At the other end of the table, my supervisor will warn that if we let a bad apple in, our head will be on the chopping boards, not her fault and also not the front-line sales officer’s fault. I was just an undergrad part-timer! Luckily back in those days, we had vending machines that provided free drinks to cool us off from these ordeals. 

 

So the lesson from this experience (for myself) is that; getting a loan from a bank is not as easy as one might have expected, and this is even when the loan applicant already has the full set of proper records. A lot of effort is spent on verifying the sources of income, assets and existing debts, all of which depends first on having proper documents. 

 

So what about those without proper records or from lower-income groups?

 

Well, they mostly turn to loan sharks. 

 

When I was serving my national conscription as a law enforcement officer, I spent about one year as a uniformed patrol officer and later had to be transferred away to assist with the plainclothes operations for another year. We supported very deep operations against anti-vice activities, illegal immigrants, gambling activities and also, loan sharks activities. At that time, I already thought that loan sharks are a very troublesome group of people. 

 

Loan sharks.  

 

The fact is; these loan sharks provide financing service to those without proper cash flow records and usually to those who belong to the lower income group or maybe even illegal immigrants. They charge interest rates beyond what the banks offer because the risk that they undertake is very high. In some instances, borrowers often have nothing else to their names except their lives. Sometimes, the borrowers have to borrow even more money to pay off the interest incurred from the earlier debts and this might trap the borrower in the debt cycle forever. 

 

Depending on the situation, some borrowers might end up becoming labour for the loan sharks, as a means to pay off the debt. In others, a few borrowers end up committing suicide. For example, in some societies, farmers borrow money to buy seeds in hope that they can sell the produce for a profit later. However, the resulting crops might be paltry because of poor weather conditions, poor farming techniques, poor soil condition or maybe a mixture of these conditions. Unable to pay their debts and stuck in an infinite debt cycle, some hang themselves and sadly, a few turn to selling their children to finance a little of their debts in order to survive. 

 

It’s heart-breaking. 

 

Companies could unknowingly tap onto this pool of workforce or exacerbate this problem in some ways when they procure products and services, which is why it is very important to include responsible sourcing as part of a Environmental, Social and Governance (ESG) – focused supplier management programme. Responsible sourcing is a method of approaching sourcing and supply chains. It occurs when a company actively and consciously sources and procures products and services for its operations in an ethical, sustainable, and socially-conscious manner. This means that an organisation must ensure that its business practices – both within its own corporate walls and throughout its supply chain – have no negative impact on the environment AND the people. 

 

Working through the supplier management programme is one way to lessen the social effects from loan shark lending. 

 

Other than that, I am suggesting another approach, a more hands-on and albeit more difficult one. It’s more like a long-term Corporate Social Responsibility (CSR) project that underpins its approach with support from right-sized technology and the idea of setting up a cooperative ecosystem. 

 

As written on Wikipedia, it stated that cooperatives are:

A cooperative (also known as co-operative, co-op, or coop) is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise”. Cooperatives are democratically owned by their members, with each member having one vote in electing the board of directors. Cooperatives may include:

1. businesses owned and managed by the people who use their services (a consumer cooperative)

2. organizations managed by the people who work there (worker cooperatives)

3. multi-stakeholder or hybrid cooperatives that share ownership between different stakeholder groups. For example, care cooperatives where ownership is shared between both care-givers and receivers. Stakeholders might also include non-profits or investors.

4. second- and third-tier cooperatives whose members are other cooperatives

5. platform cooperatives that use a cooperatively owned and governed website, mobile app or a protocol to facilitate the sale of goods and services.

 

In the case of farming, a farming cooperative manages a number of interconnected activities such as production planning, growing and harvesting, grading, packing, transport, storage, food processing, distribution, and sale. This type of cooperative can also be formed to promote specific commodities such as various types of spices, vegetables or shrimps, etc. It is better to structure cooperatives according to the range of commodities that are being farmed within a region. This so that the farmers who are better at producing certain products, could share their best practices with the rest who may not be performing as well. 

 

When farmers band together like this, they also enjoy synergies such as having the ability to promote their product together which in turn improves their bargaining power and hopefully leads to better profits. Farming cooperatives can also be formed by small businesses to pool their savings and gain access to capital, acquire supplies and services, or market their products and services.

 

Members could contribute to the cooperative’s operations and growth by:

  1. Membership fees that are paid once or on an annual basis; 
  2. Service fees, for example, are member contributions with no individual ownership attached; 
  3. Capital contributed by members; 
  4. Individual members make deposits with the cooperative that can be used for business purposes; and
  5. Members can receive deferred payment for a portion or all of their produce delivered to the cooperative.

 

Cooperatives also frequently use external sources of funds to run their operations or finance investments, in addition to institutional and member capital. Non-member sources of funds could include other cooperatives or commercial banks, suppliers, government or donor agencies, and so on. External funding can be provided in a variety of ways, including grants, short-term loans, long-term loans or trade credit provided by a supplier. In fact, forming a cooperative and then using the pooled money to buy some assets, can improve its gearing ratio. This means that the cooperative might be able to borrow money at a lower interest than if one were to borrow directly from a bank.  

 

Once the cooperative is set up, they are in the best position to lend money because they understand the issues within the farming community. The members who are better at farming, could help to share best practices and also determine if a farming idea is viable for financing. Surely one would listen to those who have had more experience or performed better than oneself right?

 

Right?

 

On the technology front, I am not suggesting for even more advanced technology. On the contrary, I wished that technology companies could take a step back and cater to the rest who may not be able to catch up. I had the good fortune to visit a rural farming community in India before the pandemic started. From this experience, I learnt that the people who are living in the rural areas need simple 3G enabled phones, 3G internet network, software or online marketplaces that can be supported by 3G internet and a logistic ecosystem that would work with all these components. They need these systems in place so that they could communicate with the potential buyers who may be located out of town and receive payments for the service rendered. The technologies could be introduced through the cooperatives. 

 

Once they are able to receive money from new sources of buyers, they could again pool the money into the cooperatives. Cooperatives are also good training places to nurture the local people into administrative positions such as investment, finance, corporate development, marketing, and encourage the community to work together. All these work together to make the community a better supplier for most buyers. Also, buyers can also nurture new sources of supply through cooperative arrangements and mitigate any supply-side risks. 

 

With these options in place, people from the lower-income groups will have financing alternatives other than turning to loan sharks. To be honest, cooperatives are not new and have been used to extract lower-income communities and even public officials from the grasp of loan sharks in some societies. Together with technology, it could even uplift the lives of the vulnerable and help them to secure better livelihoods.   

 

References

Malay Mail. (2020, November 15). ‘Strangled by debt’: Coronavirus deepens Cambodia’s loan crisis: Malay Mail. Retrieved from Naheed Ataulla & Anand J / TNN / Updated: Jul 27, 2. (n.d.). How loan sharks pull poor farmers into a debt trap: India News – Times of India. Retrieved from Yasmina Hatem, L. D. (2021, January 07). India has a farmer suicide epidemic – and farmers are protesting new laws they fear will make things worse. Retrieved from  -->

Paying more attention to the governance aspect of the Environmental, Social and Governance (ESG) equation

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Photo by Alexander Suhorucov from Pexels

By Zeng Han Jun

Through market dynamism and awareness, some companies have already restructured their business operations with the aim to align with Environmental, Social and Governance (ESG) values. Other than that, some are doing it because they are concerned about their business sustainability in the next 5 to 10 years. 

Then again, I must acknowledge that charting a new direction can be very challenging to some and not all companies can stomach it. That is because true transformation goes beyond reporting and involves securing buy-ins, setting aside time, allocating sufficient resources, exerting strategic effort and importantly, instilling the discipline to stay on course and not drift. One cannot simply believe and hope for the best. 

By discipline, I mean to foster a system that is motivated to sustain itself, keeps itself in check and continually driven to value-add. That is why companies have to ensure that proper governance is in place to ensure that ESG policies, processes and procedures are continually updated at the strategic level and implemented at the operational level. It is easy to say this but difficult to achieve. 

First, strategy must be sufficiently rooted to the larger ecosystem in order for the ideas to be practical, yet it should not be overly-burdened with operations such that no real changes can take place. 

Second, operations are fundamentally the manifestation of policies. It involves processes and procedures that comprise multiple classes of assets, systems at different stages of growth and people with varying levels of training. Ideally, operations should be designed to be nimble and flexible enough to adapt to changes. In reality, action plans can deviate a fair bit from the plans and not easy to change once implemented. 

Clearly, there is a gap between the two domains and the challenge is to ensure that sufficient and fairly accurate insights flow seamlessly between the two domains, in order to facilitate  informed decisions and timely actions. 

You might already know that ESG is quite different from other traditional corporate functions like finance, technology, human resource, etc. Most traditional corporate functions can be organised under a single department. For example, the recruiting function will most definitely be a subset of the Human Resource (HR) department and not under any other departments.

ESG is a little bit different. It is pretty strategic in that its principals influence policies that impact the processes and procedures of other traditional corporate functions. It is not wrong to say that the ESG function has a stake in almost every other corporate function. 

It changes the way a company does its recruiting, investing, auditing, procuring, marketing, administrating, engineering, managing, etc.  On top of this, encouragement by international organisations, governments and exchanges seem to suggest that it is going to be very important in the future. It is important to be aware of these developments because it will affect organisational development. 

Recently, I also discovered that there are broadly five ways companies go about implementing ESG policies internally. 

First scenario – Company ensures that all work processes eventually go through the ESG office for endorsement. 

Second scenario – The ESG office supports every other function in the company. 

Third scenario – Company outsources the work to an external vendor. 

Fourth scenario – Every department will have an ESG champion to ensure ESG policies are implemented within the department. Depending on the seniority of the chosen ESG champions, they could be a part of the executive committee or part of a working level group. 

Fifth scenario – a hybrid of two or more of the above scenarios. 

Personally, I feel that the first scenario signals the strongest commitment to ESG values. If the board is really committed to business sustainability, they must ensure that their staff are sufficiently empowered to perform their duties, otherwise their legitimacy could be undermined by other departments that have more political clout. Without sufficient support, business focus will start to drift away from ESG values. The negative effects could also extend to staff retention and become an impediment to attracting the right talent.  

Attracting the right talent for ESG work is very tricky. The ESG umbrella concerns itself with many topics. It can include science, finance, engineering, research, politics, human rights, fair work practices, equal hiring opportunities and the list goes on. Putting out a job description for an ESG specialist and expecting the staff to handle such a wide range of domains, is fundamentally against the principles of ESG.   

Also, drifting could happen if companies do not have the right talents. They are the ones who are overseeing the governance of the ESG policies, processes and procedures. Apart from staff having useful attributes like qualifications, skills and experiences, most ESG standards additionally recommend for companies to include diversity and inclusivity as part of hiring practices and board composition. 

Companies can show commitment by kickstarting diversity hiring with the ESG office. In fact, many companies are already doing it. Workforce diversity is not a new topic. Numerous studies on the aging population, the trade economy, advanced technology and how these will impact the future of work started very long ago. Workforce diversity was then suggested as one of the many tools to improve productivity, reduce blindspots and gain competitive edge.  

Over the decades, the diversity concept has expanded to include BIPOC and extended to people of other sexual orientations too. Other companies are going further, venturing into the return-to-work concept and helping individuals who have been away from corporate life, to return to the workforce. In a good way, diversity promotes new perspectives and reduces blindspots during discussions, sparks new insights and solutions that could be essential to companies’ long-term survivability (Kirchmeyer & Mclellan, 2009). 

What are blind spots?

Blind spots are mental habits that our brains use to process information quickly and studies have shown that people with the same background tend to think alike/ have the same types of blind spots.   This is why removing these blind spots is extremely important for effective strategic decision making and governance of ESG policies. 

Policies, processes and procedures can change over time, depending on the environment and to a certain extent, the people who are overseeing and managing it. That is why, in addition to ESG policies, processes and procedures, companies also need to have the diversity to keep itself in check, oversee the execution, monitor variances and see if there is a need to tweak the policies. If that is not possible, at least have a mechanism to allow a diverse group of people to review the policies periodically. 

Honestly, diversity might cause some people to be uncomfortable. Issues that were once considered taboo, are now being discussed frankly. People of different backgrounds, who seldom interact much in daily lives, are interacting much more in a diversified work environment. Then again, differences in perspectives supported by open-minded communication, really can help teams to overcome blind spots and are integral to developing a risk-aware approach to business decisions.

Commitment to ESG values without proper strategy can result in a lot of inefficiencies and miscommunication with departments. It is expensive and becomes increasingly difficult to rectify when informal work processes entrench in traditional work functions. The complexity of reengineering multiplies manifold when exchanges start to regulate ESG reporting. 

The key is to first create a proper governance structure that is supported by the right talents. It may not be perfect the first time but we can always improve on the system along the way. 

Maybe there will be an increase in operational cost due to more hiring or increased workload due to extra duties imposed on staff. Can we benchmark the increased operational cost to the long-term benefits/ returns? Maybe the cost/ benefit ratio does work out? Can we streamline the outdated work processes and explore redesigning existing staff work. Maybe there are opportunities to improve efficiencies within pockets in the organisation? 

Apart from these options, companies can also consider organising periodic focus groups for a diverse audience and use the findings to refine their ESG corporate roadmap. Or appoint independent directors to shake things up a little bit? 

Anyway, many companies are just beginning to jump on the bandwagon and are still trying to figure things out along the way too.

The question is; how are you going to do it?

References

Kirchmeyer, C., & Mclellan, J. (2009). Capitalizing on Ethnic Diversity: An Approach to Managing the Diverse Workgroups of the 1990s. Canadian Journal of Administrative Sciences / Revue Canadienne Des Sciences De L’Administration, 8(2), 72-79. doi:10.1111/j.1936-4490.1991.tb00546.x

The Development of Environment, Social and Governance (ESG) Criteria and What This Means for Businesses in the Future?

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By Zeng Han Jun

 

Development of ESG criteria

Governments are increasingly incorporating Environment, Social and Governance (ESG) criteria into mandatory financial disclosures as part of their efforts to achieve net zero carbon and contribute to the United Nations’ Sustainable Development Goals (SDGs). What does this mean for businesses, though?

Over 20 years ago, ESG principles were established, primarily to support selective investment and as criteria for reporting sustainability credentials. ESG disclosures were previously voluntary. Companies used them to differentiate themselves and add value to their businesses for investors and the general public.

Following the Paris Agreement (2015), governments have implemented policies to reduce carbon emissions and contribute to the SDGs. Among these regulations is the requirement for companies to make ESG disclosures.

ESG policy to drive the nett zero transition

For example, the European Commission has published or revised regulations aimed at incorporating sustainability into its financial policy framework. Regulation 2019/2088 on sustainability related disclosures requires banks and its financial advisers to disclose ESG information to their customers, and Regulation 2019/2089 (also known as the Low Carbon Benchmarks Regulation) aims to improve transparency and consistency in low carbon indicators.

The EU Taxonomy Regulation, enacted in 2020, contributed to the establishment of an EU classification system for sustainable activities. Furthermore, Directive 2014/95 requires large public interest companies to publish reports on their environmental protection, social responsibility and employee treatment, respect for human rights, poor corporate governance and diversity on company boards.

In 2017, the Task Force on Climate-related Financial Disclosures (TCFD) issued its final recommendations on reporting on climate impacts and action. It established a framework for businesses to create more effective climate-related financial disclosures using existing reporting processes, allowing for more reliable cross-market comparison.

New Zealand was one of the first countries in 2020, to commit to mandatory climate risk disclosures that are aligned with the TCFD recommendations for publicly traded companies, large insurers, banks, and investment managers.

The 2019 Streamlined Energy and Carbon Reporting Regulation (SECR) in the United Kingdom also introduced mandatory disclosures related to energy consumption, greenhouse gas (GHG) emissions, and energy efficiency actions for selected companies as part of their annual reporting.

Singapore also published its sustainability reporting framework in 2021, with climate disclosures playing an important role in transforming finance for a greener future. Singapore has been building the green bond market for years, including under a “Sustainable Bond Grant Scheme” from 2017 that has propelled the issuance of almost USD$8.3 billion in green, social, and sustainability bonds. That included a $1.1 billion set of green bonds issued in 2020 by Star Energy Geothermal Group, used in part to finance geothermal energy generation facilities in West Java, Indonesia.

The impact of mandatory ESG disclosures on businesses

Companies will face increased scrutiny regarding the sustainability of their activities in the future, as well as due diligence, with ESG criteria serving as a key requirement for investment decisions. Companies must measure and manage their environmental and social impacts, as well as have in place a governance structure to support this, in order to comply with mandatory ESG disclosures.

Although this may be overwhelming for some businesses that have not yet embarked on the sustainability journey, focusing on these aspects now can help businesses mitigate future compliance and climate risks. Companies should view incorporating ESG criteria as an opportunity to improve their businesses, create positive impacts in their value chains, and improve investor relations, not just any desktop exercise.

Companies should evaluate their businesses and create a roadmap for incorporating ESG criteria into their operations. While this will almost certainly necessitate short-term investments, it would almost certainly provide long-term value. Some research have showed that companies that have incorporated ESG into their operations consistently outperform their peers and may even benefit from lower-cost financing. Investors, for example, are becoming more aware of the risks that climate change can impose on traditional financial assets, and they may be willing to accept a lower return on investments linked to more sustainable activities.

What comes next?

Businesses should begin to think how they should embark on their ESG journey and gradually adapt and prepare for the more stringent disclosure regulations. They must also anticipate the higher level of rigor that investors and financiers will emphasis during due diligence. Integrating sustainability into corporate practices and reporting today would ultimately increase business value and allow businesses to contribute to a more sustainable future.

Environmental, Social and Governance (ESG) Advisory as Value-Added Service for Banks and Financiers

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By: Zeng Han Jun

A study was conducted in 2021, on the mission statements of 122 publicly listed companies from countries including Estonia, Poland, Hungary and others. It tried to show how these companies’ mission statements changed from 2012 to 2021 and it clearly showed that there is a inclination towards/ away from using certain terms. I reformatted it in a table format for easy reference:

Higher Usage (Weightage) Lower Usage (Weightage)
Responsible (+7) Shareholder (-10)
People (+7) Position (-9)
Innovation (+5) Profit (-8)
Community (+4) Lead (-6) 
Society (+3) Consumer (-6)

 

Other interesting terms that are becoming increasingly popular are: Sustainability (+1), Long-Term (+2) and Environment (+2) (Zumente, Bistrova, 2021). 

Broadly speaking, it seems like there’s a growing shift in that part of the world towards the Environmental, Social and Governance (ESG) branding, especially the part on Social. The study did not touch on the operational aspects therefore it is impossible for us to form any opinions on the operations.

I also noted that in 2018, the Governance & Accountability Institute revealed that 86% of S&P 500 firms released sustainability or corporate responsibility reports, compared with just under 20% in 2011 (GA Institute, n.d.). The gradual change in branding and reporting is somewhat evident. Well at least to me, it indicated that there is a growing awareness of ESG issues and challenges. It is good enough for me to learn that corporations have started to shore up their images. By right, it should be natural for these companies as the next step, to re-engineer its operations to meet ESG standards. A lot of people talk about “Green Washing”. “Green Washing” is like keeping a good, nice and green façade while the same toxic culture and pollutive operations persist. Based on the study, I am unable to derive more information about this therefore I cannot comment on this. 

Anyway, I have another thought to share; The younger generation are brought up differently. Technology is an essential part of their lives. Communication is instant and information sharing is… happens at quantum speed. Remember, these same people will be part of the future workforce and they are a group that do not suffer injustice easily. A bit of wrong doing here and some covering up there, usually end up becoming viral in the most popular social media platforms. This usually does not end well for the corporations’ stock prices and earnings. 

Additionally, many of these younger people live in clouds of digital tribes. People from all corners of the globe gather digitally in these tribes, for their hobbies such as photography, certain computer games, food, etc. Races, languages and religions might not matter that much when it comes to such associations. More important is the shared interests and hobbies that eventually lead to forging increasing empathy among geographically far-flung communities. I am certain that gamers from around the world are still gathering digitally for their latest runs/ practices of DOTA 2, League of Legends, Starcraft or whatever computer games that they have been playing prior to the pandemic, even when countries are closing their borders to prevent the spread of the Covid-19 viruses. 

The thing is, ESG isn’t exactly new. Similar concepts have been floating around for the past two decades or so but in recent years, growing awareness of environmental and human management issues have been quite instrumental in enveloping various terms like Responsible, Sustainable, etc under the broader umbrella of ESG. In a way, this new incarnation might help the industry to focus on what truly matters, in order to steer our ecosystem onto the sustainable development pathway. 

Then again, I need to remind myself time and again that ESG standards assess businesses and investments from an environmental, social, and governance perspective. No matter the scenario, there will always be the early adopters who are usually few in numbers. A large number of the remaining pack will adopt a wait-and-see approach. Some will not even know what is happening. When the wave comes, many will again be playing the catching-up game and initially get a low ESG score. 

Now, a low ESG score does not mean that the lenders, financiers and investors need to drop that business from the balance sheet. In lieu of that, this group of commercial entities are in the best positions to act as chaperones, advisers or consultants to improve the firms’ ESG scores and mitigate ESG-related risks. 

Mainstream banks are in a good position to assume this front. Their exposure to the entire market segment stretches from the micro to large caps and across all industries. This can mean two things to me at this point of writing: a risk or an opportunity. If you are the risk manager type of personality, you might perceive that banks are now exposed to the full range of risks from ESG challenges. Flip it around and it could be an opportunity to further value-add to the customers’ businesses by providing ESG advisory services. This line of business could even lend itself as an additional anchor to diversify value-added services, mitigating risks during times of digital upheaval.   

Advisory has always been about delivering values. ESG advisory even more so during these times, helping customers to deliver better long-term sustainable profits.  It is a win (Bank) – win (Customer) – win (Environment and Social) situation. Certain groups of bank employees could be identified and retrained in ESG advisory. They must be encouraged to understand the greater purpose behind the ESG drive. It is not just about the increasing number of investors and financiers who want to align their money with these ESG values, but more about the greater benefits to the larger ecosystem. The idea of contributing to the greater good could sometimes even be invigorating for some people. Well, ESG standards ultimately are about earning the money without causing negative impacts, right? 

Some food for thought. 

References

Navigating the Way to Sustainability. (n.d.). Retrieved from Zumente, I., & Bistrova, J. (2021). ESG Importance for Long-Term Shareholder Value Creation: Literature vs. Practice. Journal of Open Innovation: Technology, Market, and Complexity, 7(2), 127. doi:10.3390/joitmc7020127

 

Environment, Sustainability and Governance (ESG)-certified Business Hubs to Support Continual Innovations within the Small Business Community in the Post Covid-19 Era

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By: Zeng Han Jun

Key Takeaways

  • Growing interest in Environmental, Social and Governance (ESG) issues and the opportunity to shape corporate behaviour as evidenced by the increasing number of ESG frameworks; 
  • Businesses are also progressively aware of the importance of ESG standards because of how it could affect investments and cost of financing; 
  • Private sector does not operate in silo because many business processes are highly dependent on the larger ecosystem;  
  • Studies have shown that new business regulations might reduce the number of smaller businesses. Smaller businesses have advantages in innovating;
  • Creation of an ESG-certified business hub that already meets most of the ESG criteria. Bankers and financiers work with hub councils to allow pre-approvals for loans to businesses that have decided to set up operations in these ESG-certified business hubs;
  • Pre-approvals could also be worked out for other types of debts or capital that require adherence to ESG standards; and
  • This concept could help to drive up rental occupancy.

Overview

There is no denying that the Arctic ice cover has reduced drastically over the past 20 years (Johannessen, Miles, Olsen, Bengtsson & Myrmehl, 2003) and research has shown that there are strong correlations between the changing ice cover, global weather ecosystem and environmental impacts (Vihma, 2014). Given the potential environmental impacts, international organisations and governments around the world are stepping up to improve the awareness of sustainability and actively engaging the business community to include ESG criterias as integral parts of their business operations. Regretfully, many consumers are still having short-term focus on self-related benefits (Tasci, 2017) therefore more effort certainly is needed moving forward to improve awareness. 

Multitudes of ESG Frameworks

While international organisations and governments are busy at organising awareness programmes, many are also busy at developing new ESG frameworks in the hope of guiding companies along the sustainability path. According to an interview that was given by PWC Malaysia, their team had counted over 300 different frameworks, guidelines and standards on sustainability, and over 700 indicators (Ng, 2020). The explosion in the development of ESG frameworks can certainly dazzle even the most experienced buffet consumer. 

The competition among the ESG frameworks are intense, each vying for market share and trying to extend coverage beyond existing markets. It is almost impossible to predict if there will be a single ESG standard or several dominant ones, but it is clear that market sentiments are changing and ESG issues are increasingly relevant to businesses. In a recent survey that was conducted by Mckinsey, it showed that almost 75% of institutional investors wanted a single sustainability standard, with 85% saying this is needed to be able to allocate capital more effectively (Bernow, Godsall, Klempner, & Merten, 2019). This is why ESG issues are increasingly becoming more relevant to businesses. Businesses are increasingly being judged by how they handle ESG issues and this affects their ability to attract investments and their cost of financing (Raimo, Caragnano, Zito,Vitolla & Mariani, 2021).

New Business Reporting Standards Affect How Firms Organise Themselves

Businesses do not work in silo by themselves. Instead, their business decisions and operations depend to a large extent on the larger ecosystem where they have chosen to site in. Many studies have increasingly concluded that businesses and governments are closely linked therefore, close collaboration between the two parties could help to accelerate growth (Schneider, Evans, Silva, Chandler, Amatori, & Hikino, 1998). Strict adherence to ESG standards requirements is a matter of time and as with all types of regulations, it increases the cost of doing business. Some studies have suggested that regulations are fixed costs therefore businesses that are employing more than five to nine employees, tend to expand their businesses with the level of regulation. The number of businesses that are employing one to four employees, are likely to decrease with the level of regulation ( Calcagno & Sobel, 2013).

Different countries have different metrics to determine the size of businesses but most define a business size of one to four employees as that of small or micro businesses. Whether small businesses play an important part in innovation has been a subject of debate for many years and I am not going into that. However, it is clear that smaller businesses have the advantages in innovating. Smaller firms do not necessarily have the bureaucracy and silos challenges usually faced by larger firms, however; employees’ resistance to change and the mentality of “not invented here” would still be an issue regardless of firm’s size (Barham, Dabic, Daim, & Shifrer, 2020).

From this, we could deduce that there is the probability that the number of smaller firms would reduce when business reporting standards become more stringent. On the other hand, there is also the chance that the larger firms become even larger as they absorb more employees to tackle the new work that is generated by the new business reporting standards. Eventually, sources of innovations would spring more from the larger firms and this scenario does have some implications on the dynamics within the business environment. 

ESG-certified Business Hubs 

Clearly, a smaller firm would have less resources on hand and could face more challenges when trying to adhere to the new business reporting standards. This might affect their cost of doing business, raise the bar in attracting investments and increase their cost of financing/ debts. Investors, bankers and financiers will scrutinise these businesses, subjecting them to higher standards before releasing the much-needed funds. 

One idea is to create an ESG-certified business hub with high environmental and society standards already in place, for example:

  1. Substantial percentage of the electricity sources within the ESG-certified business hubs are derived from renewable energy; 
  2. Waste management systems within the ESG-certified business hubs encourage whole-of-system recycling efforts. Employees just have to follow disposal instructions to take part in recycling efforts; 
  3. High employment regulations that adheres closely to the society part of the ESG equation; 
  4. Low carbon emission and/ or carbon neutral technology housed within the ESG-certified business hubs that can be easily leverage by the businesses for their research and development (R&D) and business operations; 
  5. Electric charging stations that are evenly distributed within the ESG-certified business hub to facilitate the usage of private and public Electric Vehicles; 
  6. Risks mitigation measures are put in place within the ESG-certified business hub to reduce risks from climate risks and other types of foreseeable crisis; and
  7. Others

Businesses that choose to set up their operations in such ESG-certified business hubs, should automatically fulfil some criteria of the E and the S parts of the ESG standards. In fact, banks and financiers should also consider working with the business hub council to develop pre-approvals for loans to the businesses that had decided to set up their operations in the hub. Or at least fulfil some parts of the ESG checks that are required for the commercial loan so that businesses have less paperwork to deal with. This reduces the need for lengthy and complicated ESG checks. Pre-approvals or partial pre-approvals could also be adapted for other types of debt or capital that require compliance to some form of ESG standards. 

Such arrangements have several advantages. Firstly, businesses can focus more on their products and services, and on improving their management/ governance. Secondly, environmental and sustainability initiatives could enjoy economies of scales and hub councils might be able to charge a premium for top-of-the-line facility management. Thirdly, the hub council could make the environmental and sustainability data transparent, which could serve as a good information source for external auditors, bankers and financiers to continually allow for the pre-approved loan arrangements and also makes for good marketing as well, if the district is managed well. Lastly, this concept could help to drive up rental occupancy. Businesses that want to secure pre-approvals/ partial pre-approvals for their debts and capital, and be automatically certified for certain parts of ESG standards, will want to take up occupancy in this type of ESG-certified business hubs. 

Such arrangement does not only benefit the small and micro businesses. Larger companies understand how bureaucracy can stifle innovations and have resorted to creating smaller business entities to spearhead innovation initiatives. Such ESG-certified business hubs can also house the newly spinoff corporate entities so that they could benefit from the loan pre-approvals amongst other business benefits, and also entrench itself in the cradle of innovation and sustainability.

The concept can be adapted for use beyond a hub. It can also be adapted for use in a village, town, district, province, state or even the entire country. The idea is to create small achievable wins that edge the community or society towards bigger victories in the future.  

 

References

Barham, H., Dabic, M., Daim, T., & Shifrer, D. (2020). The role of management support for the implementation of open innovation practices in firms. Technology in Society, 63, 101282. doi:10.1016/j.techsoc.2020.101282

Bernow, S., Godsall, J., Klempner, B., & Merten, C. (2019, August 08). More than values: The value-based sustainability reporting that investors want. Retrieved from Calcagno, P. T., & Sobel, R. S. (2013). Regulatory costs on entrepreneurship and establishment employment size. Small Business Economics, 42(3), 541-559. doi:10.1007/s11187-013-9493-9

Innovation And Size Of Firm. (2012). The Economics of Industrial Innovation, 237-251. doi:10.4324/9780203357637-20

Johannessen, O. M., Miles, M. W., Olsen, A., Bengtsson, L., & Myrmehl, C. (2003). Arctic climate change—will the ice disappear this century? Elsevier Oceanography Series Building the European Capacity in Operational Oceanography, Proceedings of the Third International Conference on EuroGOOS, 490-496. doi:10.1016/s0422-9894(03)80077-6

Liberto, D. (2020, December 14). Small and Mid-size Enterprise (SME) Definition. Retrieved from Murray, S. (2021, May 14). Measuring what matters: The scramble to set standards for sustainable business. Retrieved from Ng, J. (2020, December 17). Cover Story: An alphabet soup of ESG standards. Retrieved from Raimo, N., Caragnano, A., Zito, M., Vitolla, F., & Mariani, M. (2021). Extending the benefits of ESG disclosure: The effect on the cost of debt financing. Corporate Social Responsibility and Environmental Management. doi:10.1002/csr.2134

Schneider, B. R., Evans, P., Silva, E., Chandler, A., Amatori, F., & Hikino, T. (1998). Elusive Synergy: Business-Government Relations and Development. Comparative Politics, 31(1), 101. doi:10.2307/422108

Tasci, A. D. (2017). Consumer demand for sustainability benchmarks in tourism and hospitality. Tourism Review, 72(4), 375-391. doi:10.1108/tr-05-2017-0087

Vihma, T. (2014). Effects of Arctic Sea Ice Decline on Weather and Climate: A Review. Surveys in Geophysics, 35(5), 1175-1214. doi:10.1007/s10712-014-9284-0

Sustainable Urban Development is the Key to the Continual Success of Southeast Asia Region

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By Zeng Han Jun (hjzeng@alumni.harvard.edu)

The sudden emergence of the Covid-19 pandemic has transformed the way that many of us perceived issues like working arrangements, commute options, housing needs amongst others. Still, the fundamental needs for affordable housing, environmental, social and governance (ESG) awareness and actions remain part and parcel of modern life in and beyond the cities. Governments, together with the Non-Government Organisations (NGOs) and private sector must embrace an open and collaborative approach to tackle some of the most challenging issues of our times, for example, the provision of a sustainable urban environment that allows for healthy socio-economics dynamics. 

From what I have seen, learnt and discussed with various organisations, I firmly believe that two important foundations were put into action during the Covid-19 period that could empower collaborative actions towards sustainable urban development and growth in the Southeast Asia region.  

First, the Southeast Asian countries came together and signed the Regional Comprehensive Economic Partnership (RCEP), which is a free trade agreement between the ten member states of the Association of Southeast Asian Nations (ASEAN) and its six Free Trade Agreement partners i.e. Australia, China, India, Japan, New Zealand and Republic of Korea . ASEAN comprises countries like Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The RCEP marks ASEAN’s biggest free trade pact to date, covering a market of 2.2 billion people with a combined size of US$26.2 trillion or 30% of the world’s GDP. While it is largely being perceived as an economic partnership, studies have shown that the economy does affect the environment to a certain extent, which is why there are growing interests in promoting and activating the circular economy model to enable more sustainable and environmentally-friendly growth. 

With the RCEP, quotas and tariffs would be eliminated in over 65% of goods traded and this might improve market access. Business dealings would be made predictable with common rules of origin and transparent regulations which is always one of the top concerns for any potential investors. Apart from this, it also presents an opportunity to shape business policies to be more in line with environmentally-friendly practices and equitable social growth. A more holistic approach would encourage more firms to invest more in the region, including building resilient supply chains and services that could mitigate ESG-related risks and generating jobs that are grounded on strong meritocratic principles. 

Second, city mayors are stepping up with their experiences in working with international organisations on ESG-related projects. For example, Pasig City Mayor Vico Sotto from the Philippines, stepped up to initiate the ‘mobile market’ where city residents could purchase fresh goods right from their vicinity. This initiative encouraged people to stay home as the ‘mobile market’ is accessible. This reduced logistics transportation thereby reducing carbon emission and also helped in activating the local market. These upcoming mayors are well-positioned to understand the benefits of responding to global trends and commitments such as climate change, changing human behaviors and other ESG-related issues. 

Some of the more progressive countries within the Southeast Asia region, have emphasised on underpinning their forward policies with the sustainable development pillars. Cities must continually keep up and work towards creating a place to live, work and play and this has clearly become an even more important concept during the Covid-19 pandemic. During the pandemic, many already observed that global talents can continue to contribute productively from anywhere in the world therefore, do not really have the need to seek out places for work. To attract global talents, the main differentiator would be to create an environment that has high quality of life and also be climate-risks resilient. 

Apart from this, the attention is also once more again on urban areas and the mixed-use planning of these locations. Studies have also shown that people’s travelling behavior has changed under the lockdowns that were imposed during the Covid-19 pandemic. Demand for travel has reduced and that people will travel less by public transport. Walking and cycling can be important ways to maintain satisfactory levels of health and well-being. This will change the way urban planning is traditionally planned and unfolded. This entails a discussion with urban planning professionals and other stakeholders on urban density, open spaces and the demand for affordable housing.

My work with planners and finance firms from the region and beyond, revealed that there is a growing interest in the terms “Resilience” and “Climate Risk” and it is mainly driven by issues stemming from climate change. One common topic is to develop strategies to sustain the functioning of urban communities, business operations, supply chain operations amid stresses and disruptions that might occur due to climate change. A good number of cities around the globe are improving in this area and more Southeast Asian cities should certainly do more in this area too.  

Sustainable urban development is no easy task. Execution requires coordinating and communicating with stakeholders who sometimes do not see eye-to-eye on certain issues and it calls for a lot of skill and persistence to pull projects through. This is especially so for places where the administration has to take into consideration the rural areas and smaller communities, and how these communities seamlessly integrate with the changes of the urban and major cities.  

Keeping sustainable urban development on track entails setting out clear guidelines with hawkish monitoring. The mantra is to adopt a Whole-of-system approach whereby all arms of urban development work hand-in-hand and not against one another, while keeping the big picture in mind. Uninterrupted lateral and vertical communication is one of the key enablers to actualising the Whole-of-system approach, with proper mechanisms in place to review and adapt to new information. New information may sometimes require novel adaptation and is absolutely critical to fostering a city that flourishes.  

Sustainable urban development is not the only option moving forward but with many environmental indicators trending south at the moment, it could be the only logical pathway to Southeast Asia region’s future. 

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References

(n.d.). Retrieved from ASEAN hits historic milestone with signing of RCEP. (2020, November 26). Retrieved from Morais, L. H., Pinto, D. C., & Cruz-Jesus, F. (2021). Circular economy engagement: Altruism, status, and cultural orientation as drivers for sustainable consumption. Sustainable Production and Consumption, 27, 523-533. doi:10.1016/j.spc.2021.01.019

UNUniversity. (n.d.). How Cities in South-East Asia Are Acting on the SDGs Ahead of Their National Governments. Retrieved from Vos, J. D. (2020). The effect of COVID-19 and subsequent social distancing on travel behavior. Transportation Research Interdisciplinary Perspectives, 5, 100121. doi:10.1016/j.trip.2020.100121