[INTERVIEW] Asia expected to be key driver of ESG growth: Deloitte ESG Partner

Nicola Weir, partner in the ESG Center of Deloitte Anjin, speaks during a recent one-on-one interview with The Korea Times in Seoul. Korea Times photo by Choi Won-suk

'Climate tech' essential in bringing forth carbon-free economic prosperity

By Anna J. Park

After decades of wrangling over climate change in the scientific community, overall consensus seems to have been reached globally that climate change poses a real threat to humanity and its continued prosperity.

The latest report by the U.N.'s World Meteorological Organization (WMO) highlights that extreme weather has caused the deaths of 2 two million people across the world from 1970 to 2021, resulting in $4.3 trillion in economic losses over the past-half century.

Fast-forward 50 years, and the future damage to the global economy, if the international community fails to take appropriate measures to stop the rising average temperature of the Earth, is estimated to be even greater, according to an environmental, social and corporate governance (ESG) expert at Deloitte.

"Inaction is a costly choice. Failure to address climate change could cost the world's economy $78 trillion over the next 50 years, disproportionately impacting the most vulnerable, leading to loss of productivity and employment, food and water scarcity, worsening health and well-being and ushering in an overall lower standard of living globally," Nicola Weir, Deloitte Asia Pacific's internal climate and sustainability leader and ESG partner within Deloitte South Korea, said during a recent one-on-one interview with The Korea Times.

Yet, as the saying goes a crisis also presents an opportunity, there still is a window of time to change the future. The ESG expert cited Deloitte's recent research that the global economy could gain $43 trillion over the next half century, if it rapidly accelerates the transition to net zero. For the Korean economy alone, the estimated gain stands at 2,300 trillion won ($1.74 trillion) over the next 50 years, if it successfully addresses the challenges of climate change.

Weir asserted that developing innovative climate technologies is the key to bringing forth the desired carbon-neutral future by transforming the existing carbon-intensive industry paradigm and strengthening the competitiveness of the low-carbon industry. Climate tech refers to cutting-edge technologies that mitigate global greenhouse gas emissions.

"We're past the time for climate tech and climate strategies being new and novel add-ons to a corporate strategy," Weir stressed. "Now the question needs to be, 'How can I move quickly, with the right technology to ensure I'm not left behind?' and 'How can my business benefit and win from the multitude of incredible innovation out there?' Sustainability and climate actions have become economic necessities. Amid the ongoing global crises, companies will not remain competitive without innovation and action for climate change."

As Weir said, climate tech has posted rapid growth in investments over seven years from 2013 to 2019, rising more than 3,750 percent during the period. The exponential growth has been driven by a confluence of factors, including but not limited to growing consumer and corporate demand, a stronger regulatory framework of carbon pricing and other mechanisms, as well as rising investment levels and investor attention.

It is now estimated that about 40 percent of the necessary emissions abatement could come from technologies that are either still in the R&D phase or demonstrated but not yet mature. The remaining 60 percent could be achieved by widely deploying proven, mature technologies.

"Many of the cutting-edge technologies necessary to achieve ambitious decarbonization targets are already technically available. However, scaling them up will require massive investments in research and development. According to current estimates, clean technologies and infrastructure investments will have to rise to around $3 trillion a year in the 2030s," she explained.

Weir pointed out that green hydrogen and carbon capture, utilization and storage (CCUS) as some of the most promising climate technologies for a carbon-neutral economy.

"Green hydrogen has the potential to become a clean enabler of the decarbonization of our energy system. Over 130 countries ― representing 88 percent of global carbon emissions worldwide ― have therefore published national hydrogen strategies. In a net-zero scenario, by 2030, green hydrogen accounts for two-thirds of the market with the remaining covered by blue hydrogen with effective carbon capture and storage (CCS) technology," she said.

Aiming to facilitate these net-zero targets via climate technologies, Deloitte globally launched GreenSpace Tech in January this year. Since then, the new digitally enabled global service has been supporting organizations in various industries across the U.S., Canada, Australia, U.K. and Korea, to identify relevant technologies, ecosystem partners and collaboration opportunities to accelerate the commercialization of carbon-free solutions.

"GreenSpace Tech aspires to be the most globally connected ecosystem of businesses, innovators and technologies working together to accelerate decarbonization," Weir said.

"It takes advantage of Deloitte's global reach, deep knowledge and vast connections across startups, universities and research hubs. In working with organizations that are diverse in scientific and engineering approaches, size and global scale, GreenSpace Tech helps corporations formulate effective strategies that invest in future climate solutions, while simultaneously deploying those that already exist," she explained.

Nicola Weir, partner in the ESG Center of Deloitte Anjin, speaks during a recent one-on-one interview with The Korea Times in Seoul. Korea Times photo by Choi Won-suk

Supply chain sustainability is key to Korea's successful ESG

As Weir has more than 20 years of experience in business transformation, specializing in ESG, working in diverse countries including the U.K., Indonesia, Nepal, Tanzania and Mozambique, she can view the ESG initiatives by the Korean government and Korean companies from a more objective perspective. She said she has witnessed pronounced growth in both ESG investments and sustainable climate policies in Korea over the years.

"Asia is expected to be a key driver of ESG growth. Especially, the successful implementation of the Korean government's Green New Deal will provide an opportunity to accelerate Korea's clean energy transition and place the country at the forefront of some of the energy industries of the future. In 2015, Korea became the first country in Northeast Asia to introduce a nationwide emissions trading system that sets a best practice example for other countries to follow," Weir said.

"Korea's private sector has a high capacity for technology innovation and its population has shown an almost unparalleled openness toward digitalization. This closely links Korea's energy transition to efforts to spur investments in energy storage systems, smart grids and intelligent transport systems."

Yet she added that with the manufacturing sector being Korea's key industry, the country is facing a bigger challenge in drawing up its ESG strategies.

"Global cost positioning will be an important consideration. For example, Korea's CO2 emissions are high ― ninth in the world ― but the push for net-zero emissions would hurt Korea's cost competitiveness far more than, say, the EU's, because Korea's economy relies more heavily on manufacturing. Making the ESG transition without damaging Korea's cost competitiveness will be an important policy challenge," she pointed out.

Particularly, addressing carbon emissions by small and medium-sized suppliers will be a paramount task in achieving Korea's net-zero targets.

"Some larger firms are doing relatively well, while supply chain management remains a key barrier for corporate ESG in Korea. Manufacturing is the mainstay of the Korean economy and there are about 3.5 million small and medium-sized enterprises, which make up about 99.9 percent of the total number of Korean firms. As for the number of employees, Korean SMEs employ approximately 14 million, constituting nearly 88 percent of the workforce," she said.

"Thus, supply chains are the key to fighting against climate change, because they generate around 60 percent of all carbon emissions globally. Addressing supply chain sustainability is therefore an essential step in achieving net zero," she explained.

Lastly, the ESG expert emphasized that achieving the carbon-free target is a collective effort that requires the participation of everyone ― governments, corporations and people.

"Finally, collective action is crucial to successfully unlocking the potential of a decarbonized society because companies cannot do all this on their own. They need to engage in dialogue with governments and policymakers to encourage collective action toward decarbonization. Governments should establish legal frameworks that effectively harness market forces to drive sustainability and decarbonization," Weir said.

"People can do a variety of tasks in their daily life. Think about what you consume from where your food is sourced to whether you can reduce your emissions through circular choices such a buying secondhand clothes. Eating a lot of meat, processed and imported food contributes to emissions. The same is true for your choice of mode of transportation or multi-use plastics."

She continued, "Everyone can make a difference by making environmentally responsible decisions every day. Then we can share your decision with others, and they may change their behaviors, resulting in a chain of thought. But it all starts with our own choices." She also stressed that rapid action on decarbonization is no longer a moral choice, but a matter of an imperative for humankind.