Dear valued clients, partners, and low carbon champions,
As 2023 draws to a close, I wanted to take the opportunity to reflect on the past 12 months, and to look ahead to 2024 as RESET enters its 15th year.
One big issue this year– which is almost certainly going to be the warmest on record – was a more public conversation amongst the scientific community that climate change is accelerating and that impacts may be felt earlier than previously predicted. It’s unclear to me how much people have actually digested this, and we will need some more time to understand whether this is a blip or a major ramp up. But the idea we may have even less time to shift things is a real concern.
At the beginning of the year, I predicted an increase in Asian government regulation and emphasised the importance of this for driving business behaviour in Asian markets. Despite continued movement in China (ESG standards, corporate renewables procurement, GHG disclosure and reporting), Taiwan (major new climate act) and Malaysia (renewables procurement), this has not materialised on the level I expected – the impact of Asian regulations on corporate priorities remains muted. Ironically the most disruptive regulations in 2023 are coming from the EU, including the Carbon Border Adjustment Mechanism and forthcoming Supply Chain Due Diligence legislation.
It’s critical for governments to understand that without more domestic regulations innovative companies will start to hedge on level of ambition and pace of change. For example, in Hong Kong a significant chunk of the real estate developer market has voluntarily committed to Scope 3 carbon targets, but the government has done nothing to facilitate introduction of lower carbon cement and steel into construction projects.
At the voluntary level however progress in 2023 took some major steps forwards.
The apparel sector continued to scale up corporate engagement of Asian supply chains. Our work with the Apparel Impact Institute via the Carbon Leadership Program is now easily the largest in the sector engaging nearly 300 strategic suppliers with detailed emissions reductions action plans.
The importance of prioritising strategic suppliers was emphasised by research we conducted for the Sustainable Apparel Coalition, which showed that deep engagement of just 1,500 of the largest suppliers could deliver reductions of around 50 MTCO2 per year. There is a clear need for an industry level initiative that focuses on dramatically reducing emissions from a core of large manufacturing facilities that drive a huge share of manufacturing emissions.
In 2023 we also developed an advanced supplier carbon management tool with our partners at TradeBeyond to support brands and suppliers to work together to implement and track all of the action plans they have built. With this we can really get into the weeds and work with buyers and suppliers to remove the barriers to key clean tech projects at the factory level.
In real estate, Hong Kong’s status as a low carbon leader in Asian markets became clear as more and more companies adopt SBTi. In 2023, major developers came together to collaborate on the procurement of low carbon raw materials via a Low Carbon Buyers Group that we helped to set up. There is a real buzz and talent in this sector at the moment, and I believe HK’s pan-Asian companies will drive this innovation into other geographies.
In China we have been spending time talking to local businesses as peer pressure and expected government concerns ramp up. Chinese companies are often ambitious and unafraid to innovate but the level set by standards such as SBTi can be challenging and bringing them in cold is going to be tricky. Building low carbon roadmaps for Chinese business will need to link up both the emerging regulatory dimension with international best practice if we are to achieve a balance between credible business case and ambitious carbon reductions.
Another major issue in 2023 was the continued proliferation of carbon technology platforms offering tracking and analytics for everything from building energy efficiency to deep scope 3 solutions. These tools will help companies to manage the complexity inherent in implementing deep carbon reduction targets. RESET is now tracking over 100 software products and we have started to support customers to navigate this new technology space and make the right procurement choices at the right time via our new Carbon Tech Advisory Service.
Despite the slow pace of regulatory reform, many market segments continue to rapidly evolve their depth and level of ambition on carbon in Asia. What is very clear however is that the pace of change is too slow. Companies are willing to innovate on carbon but without a clearer regulatory signal from Asian governments there will always be concerns about how far emissions can be reduced before costs and loss of competitiveness makes further cuts a problem. Companies are companies – they won’t go to the wall on carbon however much it matters to the planet. In the end governments need to come on board, reward the innovators, and show to those who don’t act that costs and risks will ensue.
With that said we are bullish on what lies ahead in 2024 and I look forward to sharing my thoughts with you in the new year. For now, I want to thank you for your continued support, collaboration and ambition. All of us at RESET Carbon wish you a great festive season and look forward to seeing you in the new year.