By Marcus Bartley Johns, Asia Regional Director, Government Affairs and Public Policy at Microsoft
Last year’s COP-26 UN Climate Change Conference gave clear momentum to efforts by many governments in Asia to review their policy and regulatory frameworks on environmental sustainability. Action in Asia is especially important – the region is a major contributor to global carbon emissions and is highly vulnerable to the impacts of climate change.
Climate change is predicted to shave 11% off the region’s gross domestic product (GDP) by the end of the century as it takes a toll on key sectors such as agriculture, tourism and fishing—along with human health and labor productivity. No single organization can tackle this challenge alone, yet actions of each one will contribute to ensuring more sustainable future for all in Asia. The path to achieve collective environmental sustainability goals is a journey we need to take forward together. Here are the three learnings shaping Asia’s sustainability landscape and actions.
1. Regulatory requirements are shifting, both globally and in Asia
Organizations in Asia need to prepare for greater sustainability-related regulation in the future. There is the real possibility that there will be a “race to the top” to meet high global standards. This could be similar to developments in the privacy realm, where the European Union’s (EU’s) introduction of the General Data Protection Regulation (GDPR) provided inspiration for companies and countries around the world to update their practices and regulations.
There are signs this process is already underway, with the EU moving early to introduce new environmental sustainability requirements, with implications for companies in Asia. The European financial industry has been mandated to publish detailed disclosures on the sustainability of their activities and products and integrate sustainability risks effectively into risk management. This regulatory momentum is being felt in Asia: for example, through Asian financial institutions with an EU regulated presence; or through sustainability reporting requirements that are passed on to suppliers in the region.
These changes in regulatory expectations aren’t only coming from outside the region. For example, several Australian regulators, as well as the Australian Stock Exchange, have endorsed expectations that company directors will understand, disclose and act on climate-related risks. The Singapore Exchange has announced that companies must provide climate reporting on a ‘comply or explain’ basis. Listed entities will continue to be subject to enhanced transparency expectations, including climate risk-related targets and enhanced reporting.
The increasing number of Asian governments with formal net zero targets is going to be a key driver of action. New Zealand was an early mover with its 2019 climate law, setting a 2050 net zero target and establishing an independent Climate Change Commission. Korea and Japan have both committed to achieving net-zero emissions by 2050, and China by 2060. Likewise, the private sector is increasingly putting its own emission targets in place, as well as emission reduction initiatives of allocating a dedicated budget for energy efficiency, low carbon product and research and development (R&D) or setting an internal price on carbon.
2. Data is essential for taking action – we can’t manage what we can’t measure.
Better data is essential for governments and organizations in Asia preparing for this new regulatory landscape. Even though data availability for the United Nations Sustainable Development Goals indicators has increased over the past few years in Asia and the Pacific – from 25% in 2017 to 42% in 2020 – data is still lacking on over half of the Sustainable Development Goals indicators, especially those goals with slow progress. Governments need better data to track and meet their national commitments, such as for net zero targets. Organisations will also need greater visibility of their existing ESG (Environmental, Social, Governance) context to determine what changes are needed to be compliant with regulations.
A particular focus of organizations has been to increase visibility of carbon emissions along their value chain (“Scope 3 emissions”). Scope 3 activities are often the largest sources of emissions, but it can be difficult to collect transparent and accurate supplier data. Currently, multinationals are using secondary sources of data to plug the gap left by supplier emissions surveys, and unreliable data from suppliers is a barrier to reducing emissions. Through our own work at Microsoft, we see the key role that technology will have in addressing issues like these. An example is the Microsoft Emissions Impact Dashboard that allows customers to quantify and reduce the carbon impact associated with their cloud usage.
Individual actions by organizations to collect better ESG data is essential. To address the challenges societies face, there will be a need to share and collaborate more using this data. A clear example of the power of a data collaboration in addressing sustainability issues can be seen in New Zealand, where government agencies, Air New Zealand and NASA have collaborated to use domestic aircrafts to collect a new set of environmental science data over the country’s terrain. This will increase the tracking and monitoring of progress toward emission reduction targets and facilitates evidence-based policy making by highlighting the effectiveness of certain policy measures.
3. Positive impact requires a combination of long-term vision, with action today
Many of the goals associated with environmental sustainability can seem long-term, creating a risk that the process of organizational change is gradual. This is even more so for regulatory change, which often unfolds over many years. Yet there is no room for complacency, as the clear shifts happening in the regulatory landscape within and outside Asia underline. This may involve putting processes in place, and ways to collect measurable data to ensure these ambitious net zero targets are achieved.
Recognizing this need for a reliable and interoperable carbon emissions accounting, just last week, another collective step forward was made with the announcement of the Carbon Call. This initiative, formed by Microsoft, ClimateWorks Foundation and 20-plus leading organizations across private sector, scientific, philanthropic, non-governmental organizations (NGOs) and intergovernmental organizations, is aimed to address carbon emissions and removal accounting challenges that companies face. Microsoft is both a participating organization and signatory to the Carbon Call.
By 2030, Asia must be well on its way to mitigating against the environmental sustainability threats that are especially prevalent in this region – including adapting to changing climates, ensuring resilient water supplies, reducing the amount of waste we generate and reversing the ongoing and catastrophic degradation of ecosystems while halting the extinction of species. That is why this must be a decade of ambition and action – and companies in Asia must prepare for increased regulation, to harness the insights from data to track and manage environmental sustainability goals, and to have a long-term plan in place while acting now, together, stride by stride.