While companies are increasingly eager to become more sustainable, doing so is still proving difficult for many. We spend all day everyday thinking about and talking to these commitments. In this article, we draw on our extensive experience to share three of the key challenges currently affecting businesses looking to operate in a more sustainable way.
1. The Great Knowledge Gap
When our Hong Kong team recently delivered a workshop on carbon reduction issues for senior corporate sustainability professionals, attendees self-identified their biggest problem: there just aren’t yet enough people with the knowledge and skills to engage senior management and gain the buy-in required.
This is a critical issue that we see many corporates facing right now, particularly in Asia. In-house sustainability teams struggle to communicate “Why?” and “How?” in a compelling way.
This affects conversations with senior management to secure the commitment and budgets they need for implementing decarbonization initiatives. It also affects the actual implementation of this work internally with employees and stakeholders.
The corporate sustainability movement is still relatively immature in Asia. There are relatively few mature sustainability teams in market as historically, only a small number of corporates in Asia had skilled, in-house, sustainability teams.
Traditionally, sustainability issues have often been handled by legal or marketing teams within corporate structures. They tended to focus on making sure organisations complied with regulation (legal) or could demonstrate to stakeholders that they were taking these issues seriously (marketing). The shift towards using standards such as the Science Based Targets initiative (SBTi) demands a skillset focus on performance excellence rather than minimum standards.
Today, the demand for expertise in sustainability is outpacing the availability of technical capacity. Although corporate management is now starting to recognize the need to address this gap it is a struggle to build teams in such a competitive market for talent. While more mature Asian markets such as Hong Kong and Singapore are closer to resolving the knowledge gap and the subsequent challenge of internal buy-in, geographies such as Southeast Asia still have a long way to go.
The knowledge gap is a complex issue to address, and education alone will not resolve it. Evolving one’s approach to recruitment, in-house training and the carbon culture of an organisation will all play a role. Moreover, governance structures also bare some of the responsibility in influencing this change. Sometimes it simply has to start from the top.
2. A Standards Tsunami, a Framework Fracas, a Glut of Guidelines
It’s a jungle out there. There’s a distinct irony to the fact that the sheer volume and complexity of environmental standards can make it tougher for companies to improve their environmental performance. Yet it is one of the biggest challenges we see companies dealing with. Businesses are confronted by a growing number of standards from various organisations and struggle to get a clear sense of which is the “right” one to follow. Many can get distracted reporting to standards that are not aligned with their needs, wasting valuable time and resources.
Many of these standards have also evolved in the west and don’t necessarily consider the Asian markets and current corporate reality. For example, they might be based upon the assumption that companies are under regulatory pressure, or that they already have strong internal sustainability teams in place.
In our view, the industry is now moving towards a standards shake-out, where dominant standards evolve and others have to align or vanish. This is a positive development as it will give greater clarity to corporates.
We try to take an early view on which standards are going to be most successful. For example moving our clients early on Higg Facility Environmental Module (Higg FEM) and the SBTi, both of which are now leading in their respective spaces.
3. Trust but Verify
A third challenge that we see corporates wrestling with relates to Scope 3 emissions. Scope 3 emissions focus on the value chain itself rather than the direct operations of the organization and a great deal of the current conversation is about how we act in the value chain. Questions around how to drive reductions within third party suppliers and inputs/raw materials through to how the product is used by the end-consumer are addressed under Scope 3.
A central illustration of this issue is the apparel industry. In the apparel and footwear supply chain, more than 75% of GHG emissions are created by material production and wet processes, such as dyeing and finishing and yarn preparation. Looking into a clothing brand’s supply chain involves working with manufacturing suppliers to reduce factory emissions, and with raw materials suppliers on low impact yarns and fibres.
Being dependent on these third parties for data and access makes it very challenging for organisations to drive innovations and scale. This coupled with the high level of ambition that standards such as SBTi call for, and a demanding timetable, is really putting pressure on brand teams.
Brands are incessantly pushing for the best price whilst also asking for suppliers to do more on the sustainability front, and increasingly asking for access to data when looking at scope 3 emissions.
Organisations have an opportunity to partner with their supply chains to make meaningful change. It does require authentic conversations, reasonable timeframes and well-defined goals.
From Obstacle to Opportunity
While the challenges seem daunting, our experience has shown us that once companies start engaging with these problems, we are soon able to find a pathway forward and make an impact.
Many organizations in Asia are increasingly confident about delivering on scope 1 and 2 carbon targets as their understanding of energy efficiency and renewable energy potentials within their businesses improves. And those looking into their supply chain are increasingly finding that their suppliers are setting their own SBTs, aligning interests along the value chain.
RESET’s role is to provide our partners with the in-depth support they need to build and execute these programmes. We are exclusively focused on setting and delivering corporate sustainability goals and our teams have the technical and market experience to deliver these services across Asia.
We live and breathe this, so if you are wondering where to start or have a question, we would love to hear from you.