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| Deloitte Asia Pacific Sustainability & Climate Leader Will Symons speaks during an interview with The Korea Times at the headquarters of Deloitte Korea on Yeouido, Seoul, earlier this month. Korea Times photo by Choi Won-suk |
Deloitte's ESG leader talks about Asia's opportunities and challenges in sustainability agenda
By Anna J. Park
One of the most noticeable changes in the global business scene in recent years is that the so-called environmental, social and corporate governance (ESG) principles have evolved from a rhetoric put forth by mostly non-profit organizations into a core business strategic consideration by competitive companies around the world. The tide of the change has been accelerating, as it's now essential that ESG factors constitute an integral key part of a firm's strategic planning as well as investment criteria by major global asset managers.
In a recent interview with The Korea Times, Deloitte Asia Pacific Sustainability & Climate Leader Will Symons, who has been in the international sustainability consulting business for more than two decades, said he has witnessed this fundamental shift in corporations' approaches towards climate change and sustainability, particularly over the past couple of years.
"In the past two years, the level of interest from businesses we work with, including the sophistication of their approach and degree of C-suite attention has fundamentally shifted," Symons said during the interview. "What's shifted is how the senior level of most businesses, up to the chair of the board, have realized that climate and ESG are fundamental issues for their organizations, that they present huge risks if they're not addressed properly, and they also present huge opportunities to those who move first and move smartest. It's fascinating."
With the climate and sustainability agenda elevated to become a strategic issue for C-level management and boards, Deloitte released its "2022 Deloitte CxO Sustainability Report" earlier this year, which polled more than 2,000 business executives across 21 countries to examine their concerns and action plans over the matter.
The report showed that 89 percent agree that there is a global climate emergency, and as many as eight in 10 said they've been personally impacted by climate events over the past year. Despite the perceived gravity of the situation, the surveyed business leaders who showed optimism that immediate action can make a difference to limit the worst effects of climate change has increased to 88 percent, compared to 63 percent surveyed only eight months prior.
"We wanted to know how CXOs [chief experience officers] were transforming their businesses to meet the moment. As this agenda evolves within an organization, the strategy can be shaped by varying or even multiple C-suite executives. We have seen the creation of the chief sustainability officer role in some organizations and have also seen organizations include sustainability responsibilities under those of the chief financial officer or chief strategy officer," he said.
"However, our survey revealed that only 19 percent of organizations have adopted the actions that are moving the needle when it comes to climate change, showing the disconnect between ambition and action."
The Deloitte Asia Pacific Sustainability & Climate Leader also further elaborated on why the global consulting firm places a particular focus on the climate change issue in its report as well as the company's advisory services, stressing that global climate change is more than just an E (environmental) factor of the total ESG consideration.
"Climate isn't an E, an S or a G issue; it cuts across everything. If we don't address the climate crisis, then all bets are off. The societal impacts are already being felt around the world, and it is the most vulnerable people who are impacted the most. So, climate is fundamentally a social issue, a governance issue, an economic issue, a commercial and financial issue for businesses, and also an environmental issue. The way I would say businesses consider climate is not framed in terms of the environment, but in terms of increasing transformation, business risk and business opportunity," Symons pointed out.
He backs up his remarks with specific numbers, citing another recent Deloitte report titled "Asia Pacific's turning point," which offers an estimate of possible economic impacts under different future climate scenarios.
"Without this accelerated action (of rapid decarbonization in the next decade), climate change would cost Asia-Pacific's economy $96 trillion cumulatively by 2070," Symons said. "That's a mind-bogglingly large number. It comes from a whole range of different factors. It comes from direct losses through damages. We know that typhoons, for example, are getting more powerful and more frequent and that causes damages which causes economic loss. But the biggest numbers are actually related to declines of productivity as a result of things like, and in particular, increase in heat. (…) It causes health impacts as well ― really significant health impacts. More people die from extreme heat than any other natural disaster in the world. There are also physical losses such as sea-level rise, physical damage on the buildings in cities and seashores and workforce losses," he explained.
Yet, the sustainability consulting expert also highlighted that the Asia-Pacific region could find major growth opportunities in the green sector.
"Our analysis shows Asia-Pacific has a leading role to play economically in limiting global average warming and that acting on climate change is not a narrative of cost but one of extraordinary opportunity and economic growth ― specifically, adding $47 trillion to the region's GDP by 2070," Symons said, adding the economies of Asia-Pacific are at the frontier of a new economic era and the development of a new system of production.
"They are well-suited to the challenge and already leaders in key technologies. The region has the economic fundamentals to increase its green export trade ratio," he said. "As the economies of Asia-Pacific decarbonize, they have an opportunity to share the key technologies, approaches and expertise more broadly, accelerating the global shift to a low-carbon future and opening up new economic opportunities for businesses in the region."
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| Deloitte Korea ESG Center Leader Baek In-kyoo, left, speaks during an interview with The Korea Times earlier in the month, as he sits next to Deloitte Asia Pacific Sustainability & Climate Leader Will Symons at the headquarters of Deloitte Korea on Yeouido, Seoul. Korea Times photo by Choi Won-suk |
Korean corporations' opportunities and challenges in ESG activities
Regarding questions about Korean companies' unique features in their ESG practices compared to global peers, Deloitte Korea ESG Center Leader Baek In-kyoo explained that while local business sectors also show agile responses to global climate change initiatives by reducing greenhouse gas emissions, they're more keen on the innovative side of the ESG element.
"There appeared to be a specific focus on 'business innovation,' which deals with the transition of business portfolio based on ESG elements," Baek said. "However, local companies seem to continuously put a large focus on corporate social responsibility (CSR) activities, which have already existed, while they place a relatively low focus on ESG-based goal-setting or disclosure and evaluation process, which are integral to ESG performance management." He added that these could be seen as characteristics of an early transition stage towards full-blown ESG management practices.
Baek also pointed out that the need for corporate governance improvement is another feature of Korean companies' ESG practices differing from global trends.
"Despite ongoing efforts, Korea's corporate governance is still being considered weak in comparison to other developed and emerging countries. Although Korea has shown effort toward improving the regulatory environment, progress is still considered insufficient," the Deloitte Korea ESG Center Leader said.
"Specifically, as ESG committee establishments are increasing, it is important to guarantee that these committees will be able to fulfil their roles through independence and internal control. Further, the transparency of governance in terms of decision-making and disclosure is also necessary."
Symons warns that unchecked climate change could threaten Korea's position as an advanced manufacturing and services-based economy, saying innovative decarbonization technologies would lower the Korean economy's carbon footprint.
"Innovation in technologies for carbon capture and storage would be crucial in mitigating Korea's remaining use of fossil fuels to support the need for constant load-generating capacity," Symons said.
"Korea's strengths in technology and manufacturing position it perfectly placed to be a key demand originator for zero carbon energy, hydrogen etc., and a key enabler of global decarbonization through electric vehicles, technology, innovation and so forth." He also highlighted that the energy transition ― from an energy mix that was essentially made up of coal, oil and gas, to a multipolar system of energy provision ― will be the central topic of the ESG trend in the coming decades.
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