Deloitte Private Southeast Asia leader: Singapore businesses expected to increase ESG adoption amidst attractive economic incentives
Richard Loi noted that Singapore companies should rethink their business strategy to wholly adopt Environment, Social, and Governance (ESG) attitudes with long-term ESG performance in mind.
Richard Loi is the Southeast Asia Leader for Deloitte Private, dedicated to serving the needs of private clients in the region. He has over 30 years of public accounting experience and has been working for public and private clients from various industries.
He has extensive experience in complex global engagements as an audit partner. Aside from providing audit and advisory services, he has also advised companies on their initial public offerings on the Singapore Exchange and has led special investigations and system audits.
Moreover, Richard leads the Family Enterprise Consulting practice in Singapore that helps business families to flourish across generations, both from a business and family perspective.
He works closely with Southeast Asian families to help them articulate their vision and values, facilitate family meetings, and bring alignment through the creation of the family constitution amongst family members for the future. He also advises them on the family governance structure as well as on succession planning.
Richard highlighted supply chain instability and talent shortage as amongst the issues faced by Singapore-owned companies brought on in the previous year. He noted, however, that these issues are dynamic and more likely than not temporary. He advised businesses to stay resilient amidst these issues.
In an interview with Singapore Business Review, Richard discusses how companies can recover from the economic challenges from the previous years, the importance of Environment, Social and Governance (ESG) programmes and compliance, as well as cultivating a thriving workforce.
In your role as Deloitte Private Leader in Southeast Asia, what do you think are some of the main issues that troubled Singapore-owned companies in the previous year? How have they adapted to these challenges?
In 2021, the COVID-19 pandemic continued to impact the world with the emergence of new variants which led to repeated waves of infection that forced many countries to delay the relaxation of measures or further tighten measures. This affected Singapore companies in two main areas – supply chain and workforce.
Companies continued to face supply chain instability. There were slower expansion rates in key sub-indexes for new orders, new exports, factory output, inventory and employment. Paired with disruptions from China – the world’s largest exporter - due to their strict lockdowns, there was a lot at risk, particularly in terms of timeliness and reliability.
In this instance, whilst it is difficult to predict “Black Swan” events like the COVID-19 pandemic, it is essential to be proactive, rather than just reactive. To this end, Singapore companies have mitigated the supply chain instability reasonably well through preventative measures, for example establishing flexible networks, ensuring multiple suppliers and considering local suppliers and adopting technology to help with foresight.
Ultimately, the key is to be resilient. The issues are dynamic and more likely than not, they are temporary. The supply chain instability will recover in due course.
The talent shortage brought on by the pandemic not only affected Singapore; it was and still is, a global issue. In fact, Singapore companies are still having difficulty hiring talent in part due to the shortage worldwide.
A way to mitigate this challenge is for companies to embrace a digitally-enabled future of work which can be in the form of putting in place a hybrid work model that provides flexibility to employees to work wherever and whenever. It is also important to promote employee well-being to create a workplace experience that allows for collaboration and co-creation, and to foster strong intra-organisational relationships through mentorship programmes and buddy systems as examples. The key is to meet the needs of the current and future workforce.
In the long run, it is essential to reimagine talent in a way that optimises the human potential for thinking, ideation, collaboration, and productivity—all whilst fostering purpose in the work that people do. Having a clear, compelling and differentiated talent strategy will go a long way in attracting and retaining the right talent for a sustainable future for the company.
Most countries and organisations are now committing to a more sustainable future and implementing their respective ESG programmes. How do you think this evolving landscape affects Singapore-owned companies?
In Singapore, sustainable development is on the government’s agenda, anchored by the Singapore Green Plan 2030.
There are other developments, programmes and initiatives that support this, such as the new Sustainable and Green Finance Institute by the National University of Singapore, which aims to help equip companies with the multi-disciplinary knowledge necessary to integrate sustainability considerations into their business strategies and investment decisions; the establishing of Climate Governance Singapore, the local chapter of the Climate Governance Initiative that aims to mobilise boards worldwide to accelerate the net-zero transition; and the recent Monetary Authority of Singapore guidelines that are designed to reduce greenwashing risks and enable retail investors to better understand the ESG funds they invest in.
Globally, across jurisdictions, regulators are finalising new rules that will require companies to disclose information on their ESG footprint in their annual reports and mainstream regulatory filings. In Singapore, the Singapore Exchange announced in July 2022 that it is setting up the ESGenome disclosure portal, which will make listed companies’ climate disclosures available to investors. This portal can also be used by companies to improve their ESG reporting to meet the requirements. Unlike other regulatory changes, the introduction of ESG data into financial reports will likely make a lasting impact on how business gets done because these signals from regulators respond to a deeper truth about what matters to the world today.
These efforts push Singapore companies, and the country as a whole, to adopt a global mindset when it comes to sustainability, understanding that it is of global concern, with ESG factors being considered by governments and businesses. This mindset allows Singapore companies to interact and form relationships with like-minded regional and international companies and ecosystem stakeholders.
What are the steps that these business owners can take to ensure ESG compliance and create a competitive advantage in the market?
Singapore companies should rethink their business strategy to wholly adopt ESG attitudes with long-term ESG performance in mind, rather than simply comply with ESG regulations. ESG integration is an opportunity for companies to refine, protect, and create business value.
From an investor perspective, as organisations start nurturing new value-creation opportunities to address ESG issues, investors are likewise looking for data to help them identify companies that are managing these issues and seizing opportunities. Board members are now expected to explain how their decisions reflect the interests of their stakeholders, including the environment, and the long-term sustainability of the organisation. Setting commitments that are grounded in business strategy and are authentic to its purpose demonstrates to stakeholders that the organisation’s leaders have integrated ESG into the way they think about the business. This authenticity builds trust, and trust is the bedrock of business value.
From a consumer perspective, customers and end-users are becoming more ESG-conscious. The need to satisfy customer demands will drive companies to implement ESG initiatives to maintain their competitiveness in the marketplace.
From a risk perspective, boards and C-suites that can get ahead of the ESG disclosure regulations can build a business that meaningfully integrates ESG into its strategic planning and is better poised to manage risks, whilst also delivering shareholder value and increasing the organisation’s resiliency in today’s rapidly changing world.
It is common knowledge that digitalisation is becoming an integral part of the operations of many industries. How do you think Singapore-owned companies can leverage the latest technologies in ensuring operational efficiency and keeping up with the times?
Technology can play a key role to jumpstart recovery from COVID-19 and ensure scalability. Given the complexity of the pandemic, there is reason to believe that the recovery phase for COVID-19 will require unprecedented levels of orchestration, communication, and changing of existing configurations during what promises to be a challenging and potentially protracted period – all of which technology can help make more seamless.
The pandemic has also caused customer demand and expectations to change. Technology can help companies thrive in the longer term by shaping the “next normal” - through reimagining customer experience by focusing on human-centred design, bridging the physical and digital worlds to deliver new value, and establishing trust as a key business value.
Another way to get closer to consumers is to utilise Buy Now Pay Later (BNPL) technology, which increases customer attraction and retention. Visa, for example, has extended its offerings so that merchants can have access to global markets, stimulating local and global economies. Furthermore, BNPL has given access for businesses to digitising and, as a result, simplifying their payment options. Investment opportunities in fintech and cashless payment methods are easily accessible as there is an abundance in Singapore. Additionally, Singapore has launched, under the Singapore FinTech association, a group to develop a code of conduct for BNPL providers. This allows more access and comfort for both users and vendors.
Furthermore, digital acceleration culminating in the use of technology to embrace the future of work, for example, hybrid work, and reskilling and upskilling, can address challenges arising from talent and skills shortage, together with other global supply chain issues. What is important though, with the rapid adoption of digitalisation, is for companies to ensure cyber security as rigorously as they implement physical security.
Where the sustainability agenda is concerned, blockchain can promote ESG through trust and transparency of sustainable business practices – factors that are essential to maintain competitive advantage.
Where do you see Singapore-owned and grown businesses in the near future? Are there any key trends to watch out for in the coming years?
The sustainability/ESG agenda is one of the most prevalent trends that will continue to dominate as Singapore strives to be a frontrunner in Asia in this area. With the Singapore government providing attractive economic incentives, it is expected that Singapore businesses will increase their adoption of ESG practices.
Singapore has an ageing population, and there are business opportunities in sectors such as healthcare, technology and insurance. Companies should also take advantage of the increasingly mature workforce and capitalise on their experience and capabilities that can add value to the business.
Additionally, it is important for companies to focus on training and mentorship. A higher-skilled workforce is always beneficial to maintain competitiveness. These efforts can also empower employees, which in turn increases work satisfaction and decreases staff turnover which can affect the momentum of the business.
What were your main considerations in selecting the winners of this year’s Made in Singapore Awards and Designed in Singapore Awards?
Innovation and digital transformation remain key for survival and success in today’s ever-changing business environment. Apart from these, placing attention to ESG and sustainability is an increasingly important aspect, and it is imperative for companies to address them in their business strategy as it will go a long way to help the business thrive and grow towards a sustainable future.