KPMG works with TAC leaders on a collective decarbonisation blueprint

24 March 2022: Singapore Budget 2022 has signalled strongly that companies here will need to take decisive steps to grow and expand as economies open and opportunities abound. At the Trade Associations and Chambers (TAC) Symposium held at the Singapore Apex Business Summit today, KPMG in Singapore will be building a collective decarbonisation blueprint with TAC leaders and key industry players for the energy and utilities and real estate sectors to facilitate transformation of their sectors at an integrated, national level. These sectors were identified as they are real economy sectors with the most imminent contribution to Singapore’s decarbonisation roadmap.

KPMG will also partner the Singapore Business Federation (SBF) to drive environmental, social and governance (ESG) conversations among TACs and enterprises. The efforts above are undergirded by KPMG’s over US$1.5 billion commitment that focuses on the ESG change agenda.

“2022 is an opportune time for enterprises to realise their growth ambitions. KPMG welcomes partnering the Singapore Business Federation at the TAC Symposium to drive enterprise transformation efforts at a more integrated, national level. This involves collaborating with TAC leaders to create a collective decarbonisation blueprint that impacts key sectors, like energy and utilities and real estate, for more immediate and effective change to Singapore's carbon footprint. The idea is to drive ESG conversations to influence national policies, while empowering enterprises with insights that enable action to translate conversations into measurable impact for the future economy,” said Mr. Ong Pang Thye, Managing Partner, KPMG in Singapore.

From KPMG’s interactions with enterprises, many are still feeling their way around in relation to ESG topics and approaches to integrate this holistically into their business and operating models. Rather than being prescriptive, KPMG will be working out potential pathways with TAC leaders and key industry players that enterprises can take in their ESG implementation journey.

KPMG will identify the key themes and prioritise the issues raised across various roundtables conducted with TAC leaders and key industry leaders at the TAC Symposium. Some of the issues expected to be deep dived into include:

1. The Real Estate sector

• The key hurdles in greening older buildings, given that a good proportion of the 8,600 buildings in Singapore are not new.
• The role of technology in helping landlords/occupants reduce the whole-of-life carbon in buildings.
• Associated business models which would help drive adoption for the Singapore real estate sector   
• How tax rebates, grants and incentives can be effectively used as tools to drive behaviour change amongst developers, landlords and occupants 

       2.  The Energy & Utilities sector

• Key initiatives for energy transition and its implication on green and low carbon energy procurement as well as infrastructure, regulatory and policy considerations

• Energy efficiency and management as a service and associated business models which will help drive adoption by the business community

To translate conversation into impact, KPMG will synthesise the issues and solutions that TAC leaders and key industry players have engaged with, alongside the lessons learnt. These will then be presented as proposals for the government to consider in policy decisions. KPMG will also work with key industry players to further frame, develop and deploy identified solutions for measurable change to happen. 

This multi-faceted approach recognises that any identified issues will require different parties working in tandem to reach an outcome.

Finally, KPMG will also work with TAC leaders to deepen their subject matter knowledge pertaining to digitalisation and sustainability and in identifying synergies between sectors. As an industry advisor, KPMG will recommend collaboration opportunities between TACs to achieve a multiplier effect in outcomes for enterprises.

From KPMG’s interactions with enterprises, they typically have two key concerns in relation to ESG implementations.

Firstly, they are unsure about the value that can be created for stakeholders by ESG to justify upfront investments needed for transformation and digitalisation, including green technologies and carbon-friendly strategies.

Secondly, they are concerned about filling immediate talent needs to pivot business models, on top of upskilling employees; it hinges as well on the existing skills and knowledge that employees have about going green for business beyond just corporate social responsibility (CSR).

It is thus tempting to be reactive about decarbonisation, where companies focus on doing enough to comply with regulations or to address stakeholder expectations. Taking a blueprint approach encourages long-term thinking of changing the way we think about doing business. For example, can products be manufactured in a more modular manner, so that their parts can be combined into a fresh product with a new lease of life at the end of their life cycle?

Without considering such ideas in detail, enterprise ESG efforts may be touch-and-go, and it will be difficult to achieve decarbonisation targets and keep the company relevant and in business for a future that emphasises ESG goals.

KPMG will work with enterprises to develop a proactive approach to evaluate ESG risks and opportunities, as well as an ESG value creation roadmap with actionable and measurable action steps.

We will then help enterprises translate this roadmap into value preservation and creation measurements, integrated with internationally accepted standards/frameworks such as the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI). In this way, value created and/or preserved can be clearly communicated to an organisation’s stakeholders, thereby creating measurable, true value.

The climate agenda has grown in importance for CEOs worldwide, based on KPMG’s CEO Outlook 2021 survey. This is particularly pronounced in Singapore with 80% of CEOs here saying there is significant demand from stakeholders for increasing reporting and transparency on ESG issues, as compared to 58% globally and 70% in the Asia Pacific region.

The pressure is on for CEOs with 94% of Singapore CEOs expecting to be increasingly held personally responsible for driving progress in addressing social issues, as compared to 71% of CEOs globally.

Sixty-eight per cent of Singapore CEOs and 84% of CEOs globally still do not believe that their pay should be based on performance against ESG goals on top of financial performance goals. However, 63% of Singapore CEOs reported that their pay is already tied to ESG outcomes as compared to just 30% globally who said the same.

Specifically, 80% from Singapore shared that their annual bonus is tied significantly to ESG performance, while 40% said ESG is tied to their base salary and long-term incentives plans. In contrast, 76% globally have their annual bonus linked to ESG performance, and 53% to long-term incentive plans; but only 15% have ESG performance tied to base salary.

The challenges for ESG are not unique. Globally and locally, CEOs struggle with articulating a compelling ESG story (global: 42%; Singapore: 40%), bringing up the rigour of ESG performance reporting to match their current financial reporting quality (global: 19%; Singapore: 32%), and addressing the varying ESG reporting needs of different investors and stakeholders (global: 23%; Singapore: 16%).

Furthermore, 56% of Singapore CEOs said that ESG programmes have reduced their financial performance, compared to 24% of CEOs globally that said so. Majority of CEOs globally (40%) also state that ESG programmes have neutral/negligible impact on their financial performance, as compared to 4% of Singapore CEOs that feel this way.

As such, to meet stakeholder expectations around robust sustainability reporting, 88% of Singapore CEOs expect to increasingly rely more on external assurance of their ESG data, as compared to just 55% of CEOs globally. The pressure for better reporting comes largely from regulators (50%) followed by institutional investors (45%) in Singapore. Globally, this is flipped, with 52% of CEOs pointing at institutional investors and 29% of CEOs saying it is regulators.

That said, 96% of Singapore CEOs (and 74% globally) believe that large corporations, like their own, have the ability and resources, both financial and people, to help governments find solutions to pressing global challenges. But majority of CEOs (52% of Singapore CEOs and 44% globally) are only willing to invest 1% to 5% of their revenue in sustainability-related programmes. Hence, 96% of Singapore CEOs (and 77% globally) are looking towards the government to provide the stimulus to help turbocharge climate change investments they have made.