Are Singapore businesses ready for a low-carbon future?

According to the UOB Business Outlook Study 2023 (SME & Large Enterprises), more businesses in Singapore think sustainability is important, but are discouraged by the increased costs of going green.

In recent years, environmental sustainability has become a top priority for many countries. Governments around the world are seeking to implement policies and strengthen measures aimed at mitigating climate change, while weaning off a dependency on fossil fuels.

This transition is particularly crucial in Southeast Asia, where the effects of climate change are keenly felt – from rising sea levels to retreating shorelines, which threaten to uproot up to 450 million people living along low-lying coastal areas. 

UOB Business Outlook Study 2023 (Regional edition)

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In sunny Singapore, where temperatures have risen twice as fast as the rest of the world, three in four businesses (76 per cent) rated sustainability as important in 2022, according to the UOB Business Outlook Study 2023. This figure is up from 60 per cent in 2021.

Local businesses believe that sustainability practices can enhance a company’s reputation and branding (47 per cent) and make it easier to work with multinationals (43 per cent).

While the top two drivers of sustainability in the boardroom remain unchanged from last year, fewer businesses cite branding as their primary sustainability agenda. This may point to a growing understanding of what sustainability means and entails, as well as an acknowledgement of the need to address environmental issues.

Figure 1: Biggest factors why sustainability is important to businesses.

Businesses are also facing increasing pressure from various stakeholders, such as customers and investors, to adopt sustainable practices and integrate them into their business operations and strategies. According to the Study, more customers are demanding sustainability in 2022 (36 per cent) than in 2021 (30 per cent).

At the national level, the Singapore Government is actively enforcing mitigation measures to address climate change issues while continuing to drive economic development. The onus now falls on industry-level engagement to translate policies into action.

What Singapore’s net zero emissions mean for local businesses

In 2021, the Government launched the Singapore Green Plan 2030 – laying out a national roadmap towards sustainable development and net zero emissions.

Figure 2: Singapore Green Plan’s key pillars and use cases.

The Green Economy pillar focuses on low-carbon and green initiatives to create new jobs, transform industries, and harness sustainability as a competitive advantage. The Government has set up initiatives to help businesses seize opportunities in areas such as green finance, carbon services and trading, and sustainable tourism.

For instance, Enterprise Singapore (ESG) launched the Enterprise Sustainability Programme to support local businesses in building their sustainability initiatives through training workshops, certification and financing. Innovative businesses looking to develop products and services that address climate and sustainability challenges can leverage this.

This ambitious roadmap aims to achieve net zero emissions by 2050 as part of its Long-Term Low-Emissions Development Strategy (LEDS). Singapore also updated its 2030 Nationally Determined Contribution (NDC) to reduce carbon dioxide emissions (MtCO2e) from 65 million tonnes to 60 million tonnes. This reduction is equivalent to taking one million cars off the road per year.

Singapore’s carbon tax is set to see a sharp increase in the coming years. The current carbon tax rate is S$5 per tonne of GHG emissions (tCO2e) from 2019 to 2023; this figure is set to increase to S$25 per tonne in 2024 and 2025.

Singapore’s hybrid carbon tax model allows large emitters to offset emissions by using international carbon credits as per the Paris Agreement. As carbon tax rates go upwards and the carbon market develops, businesses will see a stronger case for implementing a carbon strategy to meet both corporate targets and national goals.

Overcoming the barriers to sustainability

The path to sustainable business remains uncertain – 27 per cent of respondents cite insufficient knowledge and lack of manpower or resources as a key barrier to adopting sustainable practices.

When it comes to net zero goals, two in five businesses are also worried about the costs of implementing net zero goals and feel that net zero has yet to be taken seriously. Larger businesses, specifically, are concerned about the impact to short term revenue due to inadequate financial support from the government or banks.

Figure 3: Reasons why some businesses have yet to adopt sustainable practices or to implement net zero goals.

Having said that, fewer businesses cited inadequate financial and non-financial support for sustainability initiatives compared with the previous year – a 10 per cent and 19 per cent decrease respectively. This shows that the government, banks, and related bodies, are supporting businesses in their sustainability journey.

More can be done as businesses are seeking support through tax incentives and easier access to funding.

Figure 4: Top support measures for sustainable practices.

The UOB Sustainability Compass aids business owners and executives who are unsure as to how sustainable practices may impact their operations or who may already be on the sustainability path but need to keep up with the global pace.

Samwoh, a Singapore-based engineering and construction company, launched Singapore’s first positive-energy industrial building in late 2022. The Samwoh Smart Hub, built using 100 per cent recycled construction materials, relies on smart building management systems to minimise energy consumption with close to 2,600 solar panels generating enough energy to achieve a net energy surplus.

UOB’s holistic approach to sustainable financing solutions was integral in supporting the construction of the Samwoh Smart Hub, namely the Real Estate Sustainable Finance Framework and the U-Solar programme.

Towards resilient, sustainable businesses

Businesses play a key role in finding new solutions to meet the challenges of climate change and in implementing sustainability-affirmative processes. To bridge the financing gap that will enable this green transition to happen, UOB is committed to helping our clients reach their sustainability goals with innovative green financing solutions.

Find out more about our array of sustainable financing products that include options for green building developers and owners, green and sustainable trade finance, transition financing, and solar panels.

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