As net-zero pressure mounts, Singapore corporates grapple with setting 2050 targets without visibility

A commonly heard statement among Singaporean managers is to make conservative commitments and exceed expectations with their performance.

However, the essence of that attitude seems to be ignored in the corporate objective of achieving net-zero emissions. More and more companies are setting targets to achieve carbon neutrality by the middle of this century, even though they have limited knowledge of practical decarbonization methods.

This topic is particularly important in Singapore because companies are struggling to obtain sufficient clean energy within the city-state, which has a high population density, and also grapple with managing their global supply chains to make them more environmentally friendly. Sustainability executives are exploring how much extra cost customers are willing to bear for greener products, as well as the role of carbon offsetting – a strategy that some may dispute – in their sustainability strategies.

This implies that only a handful of companies are able to declare that they have a solid plan in place to eliminate their greenhouse gas emissions entirely by 2050. This is considered by scientists as the most promising strategy for preventing global temperatures from exceeding 1.5 degrees Celsius, which would lead to severe climate-related hazards.

Professionals advise companies to take on some amount of unpredictability and strive towards net-zero goals to address the urgency of combating climate change. However, they must prepare for this by focusing on resources and nurturing talent.

Vinamra Srivastava, who holds the position of chief sustainability officer at the real estate management firm CapitaLand Investment in Singapore, expressed doubt about the likelihood of any industries currently having a clear understanding of decarbonisation technologies that will be economically viable by the year 2040.

He explained that half of the circumstances are manageable at the moment, and the other half are completely unknown. He gestured towards the unpredictability of the energy industry's progress in the upcoming years.

Even though renewable energy is becoming more popular, Asia continues to rely heavily on coal and gas for power generation. Despite attempts to use carbon capture and clean hydrogen fuels, these technologies have yet to gain widespread acceptance and their success is uncertain. To reduce emissions in the construction industry, low-carbon cement and steel are being developed, but they come with a high price tag.

Last year, CapitaLand Investment promised to achieve net-zero emissions by 2050 for its own operations and power consumption, but not for its indirect emissions referred to as "Scope 3," which included electricity usage by its tenants. These Scope 3 emissions accounted for more than 50% of CapitaLand Investment's global greenhouse gas emissions, according to its most recent sustainability report. With real estate assets worth $99 billion under its management, CapitaLand Investment mainly operates in Asian nations like Singapore and China.

Currently, only 4 percent of Singapore's electricity comes from renewable sources. However, there is hope that this will change by 2035, with the possibility of the city importing more low-carbon power, potentially increasing renewable energy use to above 30 percent. While businesses can add rooftop solar panels, the power generated from these panels is insufficient for sectors such as telecommunications, which require significant amounts of energy to maintain their data and computing needs.

SingTel, the biggest mobile network provider in the country, placed solar panels on its telephony exchange buildings across the whole island. However, according to Aileen Tan, the Chief People and Sustainability Officer, the generated electricity from those panels only covers half a percent of their overall power consumption.

SingTel has decided to take action towards achieving net-zero emissions by 2050. They are doing this by purchasing renewable energy certificates and exploring the use of carbon offsets. Renewable energy certificates are a way to add more funds to clean energy producers off-site. Meanwhile, carbon offsets pay for projects that aim to decrease emissions. Examples of these projects include preserving forests or creating new clean energy structures.

According to Tan, the state of affairs in Australia, where SingTel provides mobile services through its subsidiary Optus, is distinct. Australia aims to generate 82% of its electricity through renewable sources by 2030. To accomplish this, the approach is straightforward: keep a close eye on renewable energy advancements and prepare for long-term power purchase deals, Tan explained.

SingTel announced in 2020 that it plans to rely solely on renewable energy sources to power its Australia operations by the completion of 2025.

Some companies in Singapore are facing difficulties in finding environmentally friendly energy sources, causing them to refrain from making concrete commitments at this time. ComfortDelGro, the largest taxi provider in the country, stated in its 2022 sustainability report that it hopes to achieve its target of net zero emissions by 2050. However, the company has not yet presented a comprehensive proposal or strategy.

During a dialogue hosted by Engie Impact, Jonathan Jong, ComfortDelGro's group chief sustainability officer, stated that they have refrained from making bold claims similar to their peers due to the unavailability of proper technology and not being fully aware of the options to tackle Scope 2 emissions.

ComfortDelGro, a transportation company, has reported that 13.4 percent of its total 1.4 million tonnes of CO2 emissions for last year came from the electricity it purchased. These emissions fall under Scope 2 category. However, ComfortDelGro has little control over the source of the electricity used to power their metro rail and electric vehicle assets, as it is mainly generated from natural gas in Singapore. The company plans to roll out more electric taxis, which is expected to increase their Scope 2 emissions in the future.

Jong stated that he prefers to establish practical objectives instead of aiming for an incredibly ambitious one that necessitates a greater reliance on carbon offsets. Presently, many carbon offset projects are accused of being unnecessary or even harmful because they are not managed effectively.

ComfortDelGro has set a goal to decrease its own emissions by 54.6% and reduce its fuel and energy supply chain emissions by 61.2% by the year 2031. This goal has been approved by the Science Based Targets initiative, which recognizes decarbonisation plans that aim to limit global warming to either 2 or 1.5°C.

Jong mentioned that it's all about taking charge of what the company can handle, like lessening the amount of emissions coming from the tailpipes. Achieving this goal means the company has to comply with strict emission rules and acquire eco-friendly automobiles. Currently, ComfortDelGro's Singapore fleet is at 3% electric and 44% hybrid.

SingTel and the CapitaLand group are among 14 other companies in Singapore that have committed to meeting their 2030 targets as certified by SBTi. SingTel has pledged to reduce their overall emissions by 40% from 2015 levels, while CapitaLand has committed to reducing their internal emissions by 28% from 2019 levels, and their indirect capital goods emissions by 22% per square meter of real estate.

According to Professor Lawrence Loh, who serves as the director of the Centre for Governance and Sustainability at the National University of Singapore, setting interim targets such as the 2030 goals is crucial for demonstrating the genuineness of a company's future net-zero commitments to their stakeholders.

Loh recommended taking definite actions and revealing the percentage of carbon emissions reduced. He also urged companies to disclose their planned commitments and timelines for reducing carbon footprint.

Loh suggested that companies should ramp up their efforts between now and 2030 in order to create a strong force that will continue to drive them towards their goal of achieving carbon neutrality by mid-century. He claimed that investing in novel clean technologies and sourcing them early would make it easier for companies to adopt them in the future.

According to John Leung, who works as the director for Southeast Asia and Oceania at a non-profit organization called CDP that focuses on sustainability reporting, it's important for companies to incorporate specific measures in their climate transition plans. These measures should cover aspects such as capital allocation and governance strategy and be executed within the next five years.

According to him, having plans for transitioning to a sustainable climate can help stop companies from misleading people with false claims of environmental friendliness. This way, they cannot simply make promises to reduce their carbon footprint without actually taking action.

According to Leung, the authorities in Singapore are very conscious of the importance of sustainability, and they are eager to inspire companies to take steps towards protecting the environment. The country has committed to becoming a net-zero society by 2050.

Despite this, the journey towards 2030 and beyond may pose greater challenges compared to the upcoming seven years. According to a worldwide study conducted by Engie Impact towards the end of last year, more than three-quarters of corporate executives, out of the 500 interviewed, have already accomplished the majority of their simple and easy-to-attain objectives linked to sustainability.

According to the study, there are some challenging tasks that need to be tackled in order to achieve decarbonisation. These tasks include overcoming the absence of environmental encouragement from the government, handling the requirements of investments that have short durations, increasing the number of skilled individuals in this field, and ensuring that various departments collaborate effectively on projects related to the elimination of carbon emissions.

The difficulties faced reveal a lack of clear roadmaps for reaching 2050. SBTi's database shows that 2,800 companies worldwide have established targets for 2030 with the intention of keeping global warming below 2°C. However, this number drops significantly to 259 companies that have established science-based targets to reach by 2050. Only Space Matrix Design Consultants, a small company that focuses on interior design, has an SBTi-approved net-zero goal in Singapore. Other businesses, a total of nineteen, have made a commitment to establish targets but have not yet taken action.

During the previous week, the Net Zero Tracker, an organization that collects climate data, published a report revealing that the majority of corporate pledges to achieve net-zero emissions did not include measures to ensure their integrity. These measures could include having well-developed plans and regularly reporting progress, as well as establishing conditions for the use of carbon offsetting.

According to Loh, he observed that Singaporean companies are proceeding with caution towards achieving mid-century net-zero goals. He mentioned that such actions involve making declarations that may not include indirect Scope 3 emissions, which are complex to monitor and control.

CapitaLand has set a target of achieving net-zero for its investment arm. However, this target does not include its construction arm, CapitaLand Development. The construction arm deals with sectors like steel and cement production, which are difficult to reduce emissions from.

According to Loh, expressing these subtleties seems more authentic, as it demonstrates the ability of the companies to handle unpredictable situations and convey them with careful consideration.

Many Singaporean businesses feel that a hindrance they encounter is the absence of patrons who are ready to bear the extra expense of eco-friendly commodities and amenities.

SingTel's Tan stated that the company's massive 700 million mobile customers are willing to support environmental initiatives as long as they are provided for free. For example, they are happy to accept electronic bills instead of paper ones. However, such customers are not interested in initiatives that come with a cost penalty, like carbon offsetting.

According to Tan, business clients are inclined towards buying eco-friendly services that have a higher cost because many of them are dealing with their own decarbonization targets.

There are still only a few customers who demand sustainable products. Srivastava, who works at CapitaLand Investment, has not personally witnessed any clients who are willing to spend extra money on eco-friendly items, despite surveys indicating the presence of these types of consumers.

Two prominent universities in Singapore have signed contracts with ComfortDelGro for the provision of costlier electric bus services. However, according to Jong, the expansion of environmentally-friendly goods will be far too gradual in the absence of government rules.

The author mentioned how regulations in China have mandated electric vehicles to be used as taxi options in various regions. Meanwhile, in Singapore, they plan to cease registering new diesel cars in 2025 and gasoline cars in 2030. By the year 2040, all modes of transportation within the city-state should be utilizing cleaner forms of fuel, including hybrids.

Businesses can also contribute by promoting the use of eco-friendly taxi services to their clients. This action does not require additional costs for anyone, as noted by Jong.

Due to the unpredictable nature of reducing carbon emissions by the middle of the century, companies are depending on detailed simulations to plan for possible future situations and tactics.

According to Tan, SingTel's achievement of net-zero targets demanded several months of analyzing various decarbonisation options and determining their corresponding financial consequences.

According to Srivastava, boards should focus on establishing these pathways as the top priority instead of fixing a specific year to achieve net-zero.

He stated that interim objectives must be reviewed frequently to include the newest eco-friendly choices. He highlighted CapitaLand Investment's change to their renewable energy goal of 2030, which has now increased from 35% to 45% this year.

Srivastava mentioned that our team may not have a solution for every country we work with regarding transportation arrangements, but we have a general plan in place that we need to work harder to execute properly.

At the same time, a few businesses are employing an internal carbon price to calculate how much they will be fined for harmful investment decisions in the future. This is helping them make tough choices that might have negative consequences in the short term, but will prove beneficial in the long run. SingTel has adopted a shadow price of US$37 per metric ton, which is in line with Singapore's anticipated tax on significant polluters by 2030. CapitaLand also utilizes an internal carbon price methodology, but the exact amount has not been disclosed.

Loh mentioned that even though corporations may handle a bit of ambiguity when committing to their net-zero plan for 2050, it is vital for them to confirm whether they can gather sufficient resources and have employees with the necessary abilities prior to announcing their decarbonisation objectives.

According to Leung from CDP, it's important for companies to get to know how to construct and oversee an inventory of greenhouse gas. Such an inventory clearly identifies the sources of emissions throughout the company's operations while keeping a record of the progress towards lessening carbon emissions.

Singapore is faced with some unavoidable drawbacks which may pose some difficulties in its pursuit towards sustainability. For instance, there is a limited capacity for renewable energy installation. Additionally, the hot and humid climate necessitates the use of air conditioners, which consume energy. Singapore's economy is also open, making it challenging to keep track of global supply chains. However, it is worth mentioning that Singaporean companies' presence in other countries offers prospects for the reduction of carbon emissions.

Loh thinks that the chances of all decarbonisation pathways leading to a dead end after 2030 are slim, thanks to the advancements in green materials and power. He suggests that it's better to set a 2050 target without having all the answers yet, rather than waiting for complete clarity.

Loh stated that by clearly expressing the objective, one can initiate the process. He further explained that setting ambitious targets will inspire others to take notice and understand that significant progress is underway.