Sustainability Transition: Execution Eats Strategy for Breakfast

28 Apr 2023
By GJ van der Zanden, Sr Advisor and Visiting Professor Transformational Sustainability Leadership, Sasin School of Management, Bangkok. At KasikornBank’s Earth Jump conference this week, there was no lack of big plans. Thailand’s Minister of Natural Resources and Environment, Khun Varawut Silpa-archa, energetically presented Thailand’s strategy to move towards net zero by 2065, while top leaders from SET, BOT and KasikornBank promoted ESG and Carbon Credits as crucial vehicles to drive the sustainability transition. Inspired by the Earth Jump conference, I would like to share some thoughts on the opportunities and road ahead for Thailand:
  • There is a clear imperative for the finance sector to lead the transition in Thailand. Thailand is among the world’s 10 countries most vulnerable to climate change. The risks of climate change have become material, from extreme weather events impacting operations up and down critical supply chains to export companies failing to meet requirements related to future carbon border adjustment mechanisms (CBAM) in EU and USA. According to Swiss Re, the world’s biggest insurance company, the impacts of climate change could shave up to 29% off Southeast Asian GDP by 2050. Sustainability risks, such as the impacts of climate change or resource scarcity need to be managed and mitigated, and innovative funding needs to be created to help companies and households adapt and transition. But the transition to more sustainable models of production and consumption should not only be considered as a threat. The transition also presents the biggest commercial opportunity of our times for companies that take the forefront in developing solutions to address their own and – more importantly – their customers’ sustainability challenges.
  • History has shown us that big plans or intentions often do not deliver the intended results. Despite big commitments by governments and the corporate sector, the world is collectively increasingly running behind on delivering the SDGs. This is because implementation is often hampered by conflicting political ideologies, legacy industry interests and a lack of essential societal support. The most obvious and sobering example are the NetZero commitments by the world’s governments. To limit global warming to 1.5C and avoid the chance of catastrophic impacts, CO2-eq (CO2 equivalent) emissions need to be reduced by 45% from 2010 levels by 2030. But based on all available national commitments, CO2-eq emissions are expected to rise by 10% by 2030 (UN, 2022) and implementation of even these commitments is seriously running behind plan (IPCCC, 2023). Thailand’s net zero commitment for 2065 is one of the latest target delivery dates of any government in the world. ‘Buying time’ might be beneficial as some clean technologies will mature further and become cheaper to implementation later in time. However, the size of the ‘mess’ to clean up will also be bigger the longer we wait. More importantly, a target this far out in time runs the risk of failing to communicate the urgency of the need, but also the opportunity, to transition. This lack of incentive might imply Thai industry missing the opportunity to develop green champions. Thailand’s net zero strategy moreover seems to depend quite heavily on Carbon Capture, Usage and Storage (CCUS), a technology favoured by the fossil fuel industry that is still much less cost efficient than many mitigation alternatives today. Circularity also plays an important role in Thailand’s plans, but despite the attention received around the world, circularity has not delivered convincing results yet. The global economy extracted and used more resources in the past 6 years than in the entire 20th century combined, and levels of recycling have steadily declined from 9.1% in 2018 to only 7.2% in 2023 (CGRI).
  • Measuring ESG factors to better manage them is crucial, but the nascent ESG space is still facing many teething challenges. ESG data acquisition is costly and plagued by quality issues, while interpretation is too ambiguous (divergent rating by different rating agencies) and too complex for investors, encouraging greenwashing. ESG taxonomy, as being introduced by EU and being developed also in Asia, will solve some of these problems. But successful widespread adoption of the ESG system will require simplification and help in implementation of ESG measurement for SMEs, something that SET is trying to address through its ESG Academy.
  • Most importantly, however, the ESG rating system focuses more on risk management of the legacy business model than on the opportunity for impact and new growth through innovative new solutions. Focusing too narrowly on ESG implementation will run the risk of “companies hitting the target, but missing the point”. To capture the opportunities that will emerge from the sustainability transition, companies will need to build and anchor a sustainability culture and mindset throughout their organisations, as sustainability will become the new driver of growth. This will require a higher number of ‘green’ employees, skilled in sustainability issues, not in the least at the top of the organisation, to pull together initiatives throughout the organisation into a coherent sustainability strategy. According to LinkedIn figures, growth in green jobs (+30% in APAC between 2016 and 2021, compared to 70% in Europe and 40% in USA), is outstripping growth in supply and shortages of green talent are predicted by 2026. To safeguard execution of the transition, it would therefore be a smart move of Thailand to accelerate the development of additional green talent as soon as possible. Sasin School of Management is addressing this by integrating sustainability throughout its core curriculum as well as developing a professional certificate for Practical Sustainability Leadership. And Sasin’s Sustainability & Entrepreneurship Centre (SEC) offers ‘Value Discovery’ workshops to help corporate clients explore the commercial opportunities and develop roadmaps to capture new value emerging from this strategic sustainability trend.
The big plans have been laid out. Let us focus now on resourcing and driving a successful execution.  
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