Sustainable Future. Sustained Advantage.

Transcription

1 Climate change & SUSTAINABILITY SERVICES Sustainable Future. Sustained Advantage. The Time is Now. With increasing intensity, today s enterprises are applying sustainability as a strategic lens to help achieve sustainable growth and business performance improvement.

2 2 Sustainable Future. Sustained Advantage. Sustainable Future Sustained Advantage Business is Engaged The Company is determined to become a multinational energy and chemical corporation with strong competitive edge globally. To achieve this goal, [we] must build a strong foundation for sustainable development. Su Shulin, Chairman of the Board of Directors, China Petroleum & Chemical Corporation (Sinopec Corp.) Source: Sinopec Corp s 2009 Sustainable Development Report Today, climate change and sustainability issues are rising to the top of corporate agendas. Business is engaged; global trends and stakeholder demands have seen to that. Energy pricing and security, natural resource pressures, population growth, lifestyle changes, and consumer preferences are compelling companies to act. Even those who are following the global climate change debate from afar understand that their key stakeholders are already focused on these issues and the need to capitalize on them. As a result, there is a new clarion call for executives: leverage sustainability as a strategic lens on business operations to enhance processes, grow revenue, manage risk, strengthen reporting, optimize costs, and spur innovation. Sustainability A Performance Improvement Lens Leading organizations are re-imagining and re-shaping their long-term competitive business strategies. They re moving away from a now-outmoded view of sustainability as a compliance or reporting risk alone. The result: significant opportunities to achieve both short- and long-term value become apparent. Today, management teams are seeking to realize such potential benefits as: Business performance through sustainability assessment of business operations. Companies can chart out its enterprise sustainability strategy and prioritise the sustainability programmes to adopt for their sustainable development roadmap. Revenue growth & brand enhancement through the introduction of environmentally or socially responsible products and services; penetration of new consumer markets; and a stronger competitive positioning and market differentiation. Cost optimization through increased resource and operational efficiencies; rationalization of assets and suppliers; waste reduction; and the elimination of potential costs of noncompliance with regulatory requirements. Enhanced risk management through improved transparency in identifying and managing operational events and risks; the development of appropriate and effective responses to regulatory changes; and protection of brand value. Across Asia, public and private sector interest in climate change and sustainability issues is increasing. The result is massive investment spending in renewable energy, green business, and more. The Chinese government s green stimulus expenditure for alone was reported at a staggering US$200 billion. The Japan Bank for International Cooperation has committed US$5 billion over the next two years for investment in environmentally-friendly projects.

3 South Korea has announced plans to spend US$36 billion over the next five years to develop renewable energy sources and accelerate the transition to a low-carbon economy1. Within the business sector, our experience shows that leading enterprises are focusing their investments to: Develop a clearer understanding of the complex and evolving regulatory environment Enable a better grasp of the business risks and opportunities relating to climate change and sustainability Attain strategic insight and execution support to help them respond to the threats and capitalize on resulting commercial opportunities Build a capability that enables them to identify and evaluate known and previously unknown risks and opportunities to drive competitive advantage Optimize their cost structures, especially in the supply chain Help secure assurances regarding the integrity of their information flows and the data being used in their sustainability reporting. 1 Sources: Climate Spectator, Environmental Finance, Edenhoper and Stern 2009.

4 4 Sustainable Future. Sustained Advantage. KPMG Sustainability Services The focus of KPMG Sustainability Services practice is to assist enterprises in better understanding the complex and evolving business and regulatory risks relating to climate change and sustainability, while helping them to capitalize on the resultant commercial opportunities. KPMG brings three strategic advantages to our work with organizations: 1. A clear grasp of the issues, risks and opportunities presented by today s climate change and sustainability challenges 2. Deep industry experience 3. A holistic perspective that brings together our Tax, Audit, and Advisory professionals to effectively execute against the business challenges and opportunities. KPMG professionals can help today s enterprises to: Evaluate specific sustainability risks and opportunities to drive competitive advantage Assess and optimize regulatory frameworks, including tax and carbon emission regimes Assess and benchmark sustainability programs, including cost reduction targets Evaluate and assist with the design of critical business information streams with respect to carbon emissions, corporate social responsibility and the rapidly-evolving changes within the commercial supply chain Provide assurance on these business information streams. The growth I want to pursue is not simply expansion to achieve a greater market share. Instead, I envision sustainable growth driven by each employee and based on delivering high quality and safety at an affordable price as demanded by our customers all over the world. Akio Toyoda, President and Representative Director, Toyota Motor Corporation Source: Toyota Motor Corporation, Sustainability Report 2010

5 Sustainable Future. Sustained Advantage. 5 Getting Started A number of critical questions can help to enhance leadership s understanding of sustainability risks and performance improvement opportunities: Do we have a clear understanding and prioritization of the business and regulatory risks we re facing with respect to climate change and sustainability and what are the opportunities to strengthen our risk capability and profile? What are the specific or unique challenges we need to be aware of within our industry and what do they mean for our organization? Can we confidently assess and benchmark our sustainability programs? How can we reduce and/or optimize cost structures and improve efficiencies? How can we take advantage of tax credits and other applicable incentives? Have we fully grasped the strategic opportunities available to us through our sustainability focus and how can we effectively execute to drive performance and achieve competitive advantage? What are the potential costs (e.g. financial, brand equity) of not addressing sustainability issues? Are we adequately reporting on sustainability issues today? And are we confident in the integrity of the information flows underpinning our reporting? What are our competitors doing to address similar sustainability challenges? KPMG: A Record of Success in Sustainability Below are several examples highlighting how clients are seeking to drive enhanced processes and performance, more confident reporting, cost optimization, and revenue growth through effective sustainability strategies and execution. The work referenced was conducted by teams from various KPMG member firms. KPMG worked with an international airline to help the company integrate its sustainability objectives into its business strategy, to review the appropriateness of its sustainability key performance indicators, and to embed sustainability into its decisionmaking processes. KPMG helped a global private equity house assess the sustainability performance of its portfolio businesses. We developed the tools to enable detailed benchmarking, identified the necessary metrics, and crafted a reporting protocol to allow the assessment to become part of business as usual. KPMG assisted a major food and beverage manufacturer to strengthen its knowledge of the emission trading schemes most relevant to its operations. In addition, we drew the company s attention to both the impact of carbon price volatility and the availability of government assistance knowledge it now utilizes for competitive advantage. KPMG helped a large non-food retailer to monitor and assess its suppliers corporate social responsibility performance including labor conditions as compared to the company s own code of conduct. The resulting reports were also used as the basis for defining further improvements in supplier behavior. KPMG s climate change and sustainability professionals are engaged in hundreds of client interactions each day. On that basis we know that more senior executives than ever before are viewing sustainability not as a monolithic challenge that must be avoided, but as a diverse set of opportunities that, properly managed, can deliver significant competitive advantage. Yvo de Boer, Global Advisor to KPMG member firms, Climate Change and Sustainability, and former Executive Secretary, United Nations Framework Convention on Climate Change

6 6 Sustainable Future. Sustained Advantage. Highlights of Corporate Sustainability Reporting and Emission Reporting Requirements in Asia Pacific Australia China Japan India Mandatory Requirements The National Greenhouse and Energy Reporting Act Energy Efficiency Opportunities Act Guidelines on Environmental Information Disclosure by Companies Listed on the Shanghai Stock Exchange Environmental Information Disclosure Act Environmental Reporting under the Environment Protection Act Voluntary Requirements Triple Bottom Line Reporting The Shenzhen Stock Exchange issued guidelines to encourage the listing companies to establish the social responsibility mechanism and prepare social responsibility reports on a regular basis. The guidelines have listed the key points which should be included and disclosed in the social responsibility reports. Environmental Reporting Guidelines (Ministry of the Environment) Ministry of Corporate Affairs Corporate Governance Voluntary Guidelines Indonesia Limited Liability Company Law Number 40/2007 Capital Market Supervisor Agency Bapepam-LK X.K.6 Regulation: Reporting Requirements for Issuers and Public Companies-Annual Reports Malaysia Philippines Bursa Malaysia (Stock Exchange) Listing Rules require a description of the corporate social responsibility activities or practices undertaken by the listed issuer and its subsidiaries or if there are none, a statement to that effect to be provided. The Philippine Securities and Exchange Commission (PSEC) encourages listed companies to make additional statements, such as environmental reports and value-added statements when management believes they will assist users in making economic decisions, particularly in industries where environmental factors are significant and when employees are considered to be an important user group. Singapore Singapore Stock Exchange issued Policy Statement on Sustainability Reporting and proposed Guide for its listed companies to use in formulating their sustainability reporting. Voluntary packaging agreement includes requirement for annual reporting against action plan Tripartite Alliance for Fair Employment Practices (pledge required that is made public) SIIA Anti-corruption and compliance declaration South Korea Sustainability Management (SM) report guidelines Thailand The Stock Exchange of Thailand s (SET) Corporate Governance. Code requires clear policies on environmental and social issues. Environmental Reporting Guidelines Thai Labour Standard (TLS ) includes requirements for Corporate Social Responsibility and reporting.

7 Sustainable Future. Sustained Advantage. 7 Policy and Regulatory Drivers in Asia Pacific Australia China Carbon reporting obligations Carbon price liability Levels of emissions reduction commitment to United Nations 1 The National Greenhouse and Energy Reporting Act (2007) requires reporting on carbon emissions and energy use for over 1000 largest emitters. Mostly voluntary. Some municipal governments have begun to set energy intensity limits that require users to report. Monitoring progress towards national targets will require increased reporting by businesses. Proposed emissions trading scheme has been delayed until Final approval by Parliament is still required. Interim measures are possible. ETS is unlikely and carbon pricing is more likely to be a fixed price cap. 5% up to -15% or -25% from 2000 levels by Reduce emissions per unit of GDP by 40-45% by 2020 compared to the 2005 level. 15% energy from renewables by Increase forests by 40 Mha by 2020 from Japan Emissions reporting is required under the Volunteer Action Plan (VAP) in selected sectors. Japanese companies are required to meet agreed reduction targets under VAP. These can be met by purchasing international credits. ETS also remains possible in the short term 2. 25% reduction from 1990 levels by Indonesia Voluntary. Unlikely. 26% reduction by Baseline is uncertain. Laos Unknown. Unlikely. No submission. Malaysia Voluntary. Unlikely. No submission. New Zealand Papua New Guinea Mandatory reporting has commenced in most sectors to support ETS. Emissions trading scheme commenced on 1 July 2010 initially with a $NZ 12.50/t price cap. Agriculture sector will be included by Between 10% and 20% below 1990 levels by Voluntary. Unlikely. At least 50% before Carbon neutral before Philippines Voluntary. Unlikely. No submission. Singapore Voluntary. Unlikely. 16% reduction from BAU by South Korea Green Act requires reporting of carbon The introduction of a carbon tax has 30% reduction from BAU by and energy in selected sectors from Independent verification will be required. been considered. A pilot ETS is under consideration for Thailand Voluntary. Unlikely. 22.5% reduction in energy emissions by Taiwan The Greenhouse Gas Reduction Act will require reporting and verification of designated sectors. The Greenhouse Gas Reduction Act proposes a Cap and Trade scheme but timing is unclear. Vietnam Voluntary. Unlikely. No submission. 1 The targets were sourced from responses to the Copenhagen Accord. Many are dependant on an effective global agreement being in place. 2 IETA, 2010 Greenhouse Gas Market Report Thailand is not a signatory to the Copenhagen Accord.

8 Contact us Sharad Somani Head of Climate Change & Sustainability Services* T: E: Ho Wah Lee Partner* T: E: Lim Yen Suan Partner* T: E: Irving Low Partner* T: E: Lyon Poh Partner # T: E: lpoh@kpmg.com.sg Satyanarayan R. Partner* T: E: sramamurthy@kpmg.com.sg kpmg.com.sg KPMG Advisory LLP * # KPMG LLP The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation KPMG Services Pte. Ltd. (Registration No: G), a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.