Decarbonizing Asia’s supply chains

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What are the main climate challenges Asia faces?

Thomas Kansy: The COP26 pledges, in particular when it comes to the ending of deforestation, are incredibly important in Asia. There are challenges with this, as peoples’ livelihoods sometimes depend on these forests. So, it’s about ensuring sustainable growth and employment opportunities for people.

That being said, there is a significant benefit to not only preserving that nature but actually restoring it. That is almost unique to Southeast Asia, in terms of the potential to generate nature positive outcomes and to generate carbon credits.

In the region, corporates that are exporting significant amounts are also facing increased scrutiny on their exports when it comes to deforestation-free supply chains, the emissions in their own production, and the emissions from transporting their goods. This includes maritime transport, which Singapore, of course, remains a major hub for. All of these have come under more scrutiny after the COP26 pledges. Governments were doing their best in this, but we also see quite a significant uptake of corporates and investors furthering that agenda and decarbonizing.

So, for corporations it is now about helping the world prepare for net-zero, operationally decarbonizing, transforming their portfolios, and engaging in environmental commodities and developing their strategy around this.

We’ve seen the 2030 commitments being strengthened and accelerated. We’ve seen the launch of the Glasgow Finance Alliance for Net Zero with $130 trillion on finance, so now it’s about channeling that towards sustainability. This is one area where we’re very keen on contributing in in Asia, out of our office here Singapore.

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In light of these challenges, how can the corporate sector effectively decarbonize?

Robin Smale: I’ve seen substantial improvements in energy efficiency by looking at how energy is used in the manufacturing process, and also through reducing waste and recycling materials.

One of the ways in which people do this is through creating a digital twin. It is not always appropriate, but it is one of the methods of the process, and people will be able to pull it apart and work out the different options that can be put into the process.

Another thing people do is to bring in carbon prices into all their investment decision-making. You can do that just as a test to see whether the decision would be different if you face a certain carbon price, or you can build this into a certain decision as a core assumption. But those are two ways one can introduce innovations into manufacturing investment decisions.

Firms are now saying, ‘Well, we need to tackle this because it’s a strategic priority. We want to push this transformation through our entire portfolio.’ And that’s why the digital twin comes in as a way of doing that to scale.

This question of deep transformation has to come from the top, where it’s led. It’s still fairly new for most organizations, so leadership is needed to drive the culture change and understanding throughout the organization, and to set it as a strategic priority.

Whereas three years ago very few firms had it as a strategic priority, I think now—if energy is an important part of your business, either as an input, output, or important for the products you sell—then it is a strategic priority now and will be for the next two decades. So, it’s about getting your capacity ready to deploy on that topic.

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