Introduction: What's the real value of ESG?

Full transcript

Ivy Kuo: Hello, I'm Ivy Kuo, Asia Pacific ESG leader at PwC, and you're listening to PwC Podcast: ESG in Asia Pacific, the podcast for bite size updates on the latest ESG trends. In this podcast series, we take a close look at Asia Pacific perspectives on ESG trends, what is new, what the future looks like and why we have to change. We will be joined by business leaders and community leaders, along with our ESG experts to share stories and discuss how organisations in the region are responding to various complex ESG challenges from climate change to social and labour rights due diligence. The aim is to bring together ESG practitioners at the forefront of their fields to discuss and solve today and tomorrow's sustainability challenges, which will reflect PwC's The New Equation strategy of building trust and making lasting difference.

In this first podcast, we will touch on some basic and fundamental questions about ESG, like why it matters, what it means to organisations, what they're doing about ESG, and what to expect in the future. It can take a while to wrap your hair around ESG, which cuts a broad range of sustainability issues, covering ecological, social, economical, and technological aspects. This includes issues such as climate change, biodiversity, circular economy, diversity and inclusion, sustainable supply chain, climate tech, and energy transition just to name a few. There is a lot of things going on in sustainability and to help us make sense of various ESG issues, we have with us today two experts from our community of solvers, Jeremy Prepscius, Asia Pacific ESG, Sustainable Supply Chains Managing Director, and Lit Ping Low, Asia Pacific ESG, Climate Change Partner. Jeremy, can you tell us more about your background?

Jeremy Prepscius: Thank you, Ivy. It'd be my pleasure. So as you mentioned, my name is Jeremy Prepscius. I sit in Hong Kong and I am the sustainable supply chain lead. My introduction to this convergence of supply chains and sustainability and ESG comes almost 25 years ago when I was sitting in Vietnam working for Nike and working on the first issues of Nike and labour practises and the questions on working conditions. I spent about 10 years at Nike working on those issues primarily here in Asia, and then I started doing sustainability consulting all across Asia on the issues of the externalities, the things that happen outside of, but caused by supply chains. So that's what I bring into this conversation, Ivy.

Ivy Kuo: And our second expert Lit Ping, you've been helping various organisations in their sustainability journey. Can you tell us more about yourself?

Lit Ping Low: Thank you very much Ivy for inviting me to the podcast. Yes, sure. So a little bit about myself. So I started as a policy economist working with governments in their development of economic policy. As I work with the government on their economic policy, I started to realise that a lot of these issues touch upon the broader context of environmental issues, it touches upon the social agenda.

So about close to 15 years ago, I joined PwC's sustainability and climate change team. We were one of the first professional services organisation in the world to set up such a dedicated team, just on sustainability and climate change issues, and I was very fortunate to join that team. Fast forward 15 years on, I've worked with many organisations and governments on how they address, particularly around the climate change issue and am very happy to be here in this podcast to share a little bit more on some of those stories.

Ivy Kuo: One of the fundamental ESG challenges that we face is climate change. Raymund Chao, PwC Asia Pacific and China Chairman once said: "Climate change is a real and urgent threat that has to be tackled now. The global pandemic has only just served to heighten the awareness of our relationship with nature. We all have a role to play in safeguarding our planet. Doing nothing is not an option." From what Raymund had just said, why is ESG a must have for business to create sustained outcomes? Jeremy?

Jeremy Prepscius: The simple answer is for us to be around for business to create sustained outcomes means business and society is going to need to work through the issues ahead of us. Avoiding a climate disaster, keeping the world at 1.5 degrees and the other environmental impacts that will come from that affecting people and our nature and biosystems is fundamentally important to our future, both as citizens of the world and as businesses they're in.

Ivy Kuo: Fantastic. Thank you, Jeremy. Lit Ping, would you like to share some of your insights as well?

Lit Ping Low: Thanks Ivy. Well, I think ESG is also about the issues that we face today for businesses and therefore, businesses respond to it is about catching the next wave of transformation. It's about creating jobs. It's about being innovative in how we solve these problems, and it's about how do we look forward to the next revolution? In past revolutions, we have the industrial revolutions, we have the digital revolutions. And I think, I believe that ESG drivers will lead to the next wave of innovation and transformation.

Ivy Kuo: Well, that's very good Lit Ping. So how is sustainability, including ESG, drives the next wave of transformation? Both of you like to share some of your thoughts around this?

Jeremy Prepscius: I'll throw a couple of ideas on the hat. And I think as Lit Ping just mentioned, the world is changing. The world is changing in many different ways, and the real question is how is business going to do what it can and should do, which is innovate to create and distribute solutions and help our citizens meet their needs around the world, and specifically, well, what does that mean? Well, that means we're facing massive challenges in climate change. How are we going to define, create, apply, fund, distribute, climate technology? How do we set goals and targets for energy efficiency, energy reduction, renewable energy, greenhouse gas emissions reductions? How are we going to ensure that as we make these changes, we create the jobs that are necessary? We have the skills and training to meet the needs and those skills, training, and jobs create good living for our consumers, for our employees, and in the economies in which we operate.

In terms of climate commitments, PwC's 25th Global Annual CEO survey, focusing on Asia Pacific show that Asia Pacific CEOs are actually ahead of their global peers in net zero and carbon neutral commitments. 60% of responding companies have made or are progressing towards a net zero commitment versus 51% globally, and 77% have had their target setting approach independently assessed and validated versus 66% globally.

Ivy Kuo: Lit Ping, and what are your thoughts about transformation on the how?

Lit Ping Low: So I think on looking at how businesses can drive transformation, I think we can look to the sustainable development goals. It does provide a good framing. So the sustainable development goals are a set of 17 global goals that we are also seeking to achieve in our society for the next 10 years or so. And by understanding for each organisation, which of those 17 goals are most applicable to your business, to your sector, to your geographies will help you frame your role and your contribution to sustainability.

Jeremy Prepscius: It's actually really interesting when we look at this combination of we have the goals, we have the Paris Climate Agreement and we have emerging technology and changes in the world. I mean, one way of looking at it is that the world has actually defined what it wants to see. That's what the SDGs really are. These are the aspirations of nations, and then how do we, as business on enterprises, entrepreneurs enable that and ensure that we operate in the changing rules that are necessary, whether it's on greenhouse gas emissions or social inclusion that allows us to achieve that. That's our opportunity and that's how business really is going to think about this in really exciting ways.

Ivy Kuo: So the next up question is Lit Ping you mentioned, and Jeremy both mentioned SDG goals, but there's a lot of different sort of frameworks around ESG. So can you share a little bit more on how we look at the different standards, how it compares to the SDGs and et cetera? What should the organisation be doing or prioritising which frameworks and why?

Jeremy Prepscius: So it's a really complicated world and there are all these goals, all these targets, all these issues, and the question becomes, where does a company start? One of the things that's been interesting to watch has been this focus on materiality, which is actually required by the stock exchange, is this part of a GRI disclosure process, which basically is the simple question of where should you focus and why? And there are two key ideas and one is where should you focus? Well, where do you, where does your company have the biggest actual or potential external impact on the world? And by understanding those, you can work to mitigate the risks, for example, of significant greenhouse gas emissions, or risks of labour practices issues, or risks of occupational health and safety accidents and injuries or risks to children in terms of you as a digital platform. So those are how your company is going to affect the world around you.

The other one that's really interesting, when you put these two together, what brings sustainability or ESG into business strategy, is you take that same lens and look, which of those issues are going to create or destroy value for your company? And sometimes that's the question of, this is part of our enterprise risk management process, of this is a primary risk that we need to manage and here are the issues that go with that. But the other side of it is does that open up a different lens, a different way of looking at your business to allow you to invest, maybe not to offset a risk, but to seek that opportunity? And that will vary by every company that exists.

Lit Ping Low: Yeah. I think to build on, as well, on Jeremy's points. It's also about organisations looking at these SDGs as well as their own business imperatives and how they intersect and collide in terms of the different mega trends. So we don't talk about, for example, climate action, just on climate action. We talk about climate action in the context of business growth, in the context of creating job opportunities, in the context of social issues as well. So I very much see the intersection and interlinkages between all of the different goals to a business purpose and a business mission statement.

The difference there as Jeremy said is about how material and how much and how do they interact? So understanding that scale of materiality and that scale of interaction, I think that's the important complex part of this exercise. As an example of interactions between the sustainable development goals in PwC, this year's International Women's Day, we published a PwC Women in Work Index. And what we looked at was the energy sector's transition to net zero and across the OECD, new green jobs will be created but concentrated in only a few sectors, utilities, construction, manufacturing, and these sectors employ 31% of the male workforce across the OECD compared to only 11% of the female workforce.

So with new jobs being concentrated in sectors that are male dominated, men might be better placed to take advantage of the new opportunities now. So those are OECD numbers, but the same results resonate here in Asia. And what I was trying to say is that while looking at some of these climate action issues, we need to think about gender and we need to think about social development and many other considerations as well.

Ivy Kuo: So basically in summary, this is something that a company must do, but must prioritise and linking it to corporate strategy and be able to identify the core strategy, and how is that is in alignment with your ESG strategy. Essentially, it's not a different strategy. It should go hand-in-hand in your company's future strategy. So on that note, on the road ahead, what does it look like?

Jeremy Prepscius: I think it's a winding road, it's a bumpy road, but it's a really interesting road ahead. The changes we've been living with for the last 25 years, the changes of technology, of transparency, the ability to count and measure and see the world, the people in the world in ways that we've never been before is fundamentally transformative.

I think the other big thing is look, the investments that are needed to make to focus on greenhouse gas emissions and keep the world at 1.5 degrees are massive and they're going to shift where and how economies are creating and distributing energy, and that means a lot of money is flowing. And that means that finance is also going to be impacting jobs and people. Put those three things together, massive technological change, the significant flow and necessity of transforming our economies into low carbon economies, and the financial and social impacts on people and jobs and cultures, that's going to make the world look forward to a really interesting pathway.

Lit Ping Low: The next 10 years or so has been called the decade of action. Isn't it? I think it's more than a decade of action. It's also a decade of transformation. I think many businesses need to be aware that the way their business would look like in 10 years would be very different from what it is today. In fact, if you look back at how your business was 10 years ago, I think you would not have expected the change as well. So I believe that there is a lot that businesses can do against each of the 17 global goals or even a specific thematic area, but it is very much around looking at that long-term strategic transformation that needs to happen and planning ahead rather than waiting for the change to overwhelm you.

Ivy Kuo: Looking into the future, I think one of the key points is about understanding the increasingly regulated or the landscape that would be much more regulated than what it is now. And how does that actually prevent us or allow us to think about our strategy and think about what we need to do to make sure that we stay not just in the marketplace, the license to operate, but how to grow and capture the wave?

I think this concludes our episode today, and I would like to thank our two guests Jeremy Prepscius and Lit Ping Low. Thank you again for joining us. And in our next podcast, we'll be exploring the imperatives of driving sustainable supply chain. Please join me as we continue to explore the evolution of ESG and sustainability as they drive the way we work and live.