Closing the gap: How collaborations can accelerate decarbonisation for companies

The urgency to reduce carbon emissions has become a top priority for businesses today as pressure mounts from regulators, employees and new hires to address environmental, social and governance (ESG) concerns.

Many companies, especially those in hard-to-abate sectors, continue to face challenges with capital availability as well as with the availability, maturity and costs of technologies. Transforming organisational infrastructure, processes and culture change can also be difficult in an uncertain environment.

The pursuit of net-zero targets, unlike other forms of competition, does not have to be a zero-sum game. By devising a customised, implementable plan, businesses can balance short-term and long-term goals. Plans should focus on incorporating energy efficiency and decarbonisation in operations for a start and can consider leveraging collaborations and partnerships to accelerate decarbonisations efforts.

According to Sharad Somani, Partner, Head of Infrastructure at KPMG Asia Pacific, most companies have already adopted the “low-hanging fruits” in their decarbonisation plans, such as LED lighting and motion sensors. “The next big thing on our minds, at least for the three to five years ahead, would be to look at how ESG can be plugged into industry processes, and how businesses can structurally incorporate energy efficiency and decarbonisation into their operations,” said Sharad, who also heads KPMG’s ESG efforts.

This is where having customised roadmaps becomes critical, as this will enable businesses to continue to build resilience and reach sustainability objectives even amid uncertain economic conditions. The roadmap will offer a holistic view of the costs and considerations across the whole carbon reduction lifecycle.

“Businesses may not see the outcomes of their decarbonisation efforts in two to three years. It could take longer, and this means that they will need to tap various sources of financing, such as green finance, government grants and green incentives,” Sharad added.

He noted that these are some gaps that the KPMG’s ASEAN Decarbonisation Hub is plugging - by tailoring individual roadmaps for businesses and supporting them end-to-end, from project origination and structuring to financing and implementation.

“It's good to have an end goal, but it’s also important to know exactly how you are going to reach it. This is where the question, ‘How do you put together a strategy that is implementable’ becomes most important,” he said.

Executing the roadmap well will require development of resources and capabilities to be developed, including areas such as energy efficiency across value chains, renewable energy integration, smart grids and carbon reporting. Collaboration and partnerships are essential to bridge the gap between ideas and execution. Deven noted that the challenges in technology, costs, and implementation will need to be solved innovatively and collaboratively through joint ideation and partnerships.

For instance, apart from the financial resources required, another challenge that CEOs in Singapore have identified is the lack of necessary technology to measure and track ESG initiatives. “This is particularly pertinent for smaller companies that find themselves more ill-equipped to fulfil their ESG goals,” suggests Deven Chhaya, Partner, Infrastructure Advisory, KPMG in Singapore. At the same time, governments are also finding it increasingly challenging to ramp up capability development support to meet the demands of all businesses.

The hub-and-spoke model of the ASEAN Decarbonisation Hub is one way of accelerating the region’s transition through the co-creation and delivery of innovative services and solutions.

“As organisations work towards addressing these challenges, it is important to learn from the experiences of others, and to collaborate and partner to find the right solutions to address their decarbonisation goals. This eventually aggregates to deliver on both national and global goals,” said Deven.

While it is difficult to project into the future, especially when it comes to understanding emerging energy patterns, businesses should start to plan around known knowns, given the trends of today.

Singapore has been taking meaningful steps towards adopting green hydrogen and the country is well-placed to be a future hub for the fuel. Even as widespread adoption could take years, with the technology still in the early stages of commercialisation, the country – along with businesses – should prepare for the possibility of such a future.

Citing green hydrogen as an example, Sharad said: “What we could do now is to start thinking through all the infrastructure that needs to be created to support the shift towards green hydrogen and to do it right.” He added that in the medium term, there may be a greater mix of renewable energy sources to meet the needs of a fast-growing Asia.

A “big opportunity” for the Asia Pacific region, Deven added, lies in renewable corporate power purchase agreements – where aggregators could create virtual power plants by aggregating power virtually from community or industrial solar roof tops and trade this green power at a premium.

With all these parameters in place, enterprises will need to start thinking harder about how to fit their own operations within a changing energy landscape – one in which the transition will matter as greatly as the eventual destination.

“The climate challenge cannot be dealt with single-handedly by the Government or the private sector. Both parties have to work together to achieve their objectives,” Sharad added. “There is no dearth of technology solutions, management practices, or financing, but it is a question of putting all of these together.”

Deven added: “It’s not just about switching from Fuel A to Fuel B, but it’s really about understanding the ecosystem challenges and crafting a viable decarbonisation pathway ahead.”