The new business imperative: connecting economic growth to environmental sustainability in ASEAN
The economic future of the Association of Southeast Asian Nations (ASEAN) region looks bright. In recent years, ASEAN has been growing by around 5 per cent a year and the Asian Development Bank estimates that by 2030 nearly half a billion of ASEAN’s population will be considered middle class. New International Monetary Fund (IMF) projections put the region on track to becoming the fourth largest economy in the world by 2050.
It would be difficult to find a business today that doesn’t keep track of these projections and trends in economic health and not be excited about the region’s prospects. From New York and Frankfurt to London and Singapore, the rise and fall of each trend is closely scrutinised to capitalise on opportunities and mitigate risks. Yet, few businesses take note of another critical trend that can impact their operations and profits just as much, if not more. The failing health of the planet.
We cannot have a prosperous society in a degraded planet and all signs are pointing to human activity driving the planet to the edge, as business and people consume more natural resources than the Earth can regenerate. We cut more trees than can regrow, we catch more fish than can reproduce, we emit more greenhouse gasses than natural systems can absorb. We create materials like plastic that last forever and throw it away after a single use.
The UN Office for Disaster Risk Reduction estimates that in the last 10 years, climate-related disasters have caused USD 1.4 trillion worth of damage worldwide, with the Philippines, Indonesia and Vietnam among those countries most frequently impacted. Going forward, floods alone could cost Southeast Asia as much as USD 215 billion each year by 2030, according to the World Resources Institute. The latest World Economic Forum’s Global Risks report lists climate instability, extreme weather events and water scarcity as major risks faced by business today. The economic contribution of nature is at present largely invisible and unaccounted for, but the cost of a degraded planet is beginning to hit the economy.
In the case of ASEAN today, the region already faces a multitude of transboundary environmental issues such as extreme weather events, haze, freshwater scarcity and overfishing, along with dwindling forest cover and loss of biodiversity. As intangible as it may seem, loss of biodiversity, is one of the major threats to the health of crucial ecosystems like oceans and forests on whose services our economy, social stability and individual well being depend.
As the effects of climate change worsen and our planet’s resources and natural systems come under increasing strain, sustainability issues will increasingly hit companies’ bottom lines. Businesses that depend on water and commodities are particularly vulnerable. For instance, when asked about supply chain snags with sugarcane, sugar beets and citrus for its fruit juices, Coca-Cola admits that increased droughts, more unpredictable variability, and 100-year floods every two years are major threats.
It’s clear that companies not only have a responsibility to ensure that the natural resources and ecosystems that underpin their business are used sustainably, but must do so for their own bottom lines and long term viability. Protecting land, oceans, rivers, forests as well as their biodiversity and communities will mitigate risks in the supply chain and also provide enormous opportunities for businesses willing to invest in the future.
This is particularly true in ASEAN. Favourable economic outlooks are a great opportunity for businesses in the region to lead the way toward a long-term approach, rather than obsessing over short-term profits.
Now that we are increasingly understanding the finite nature of our planet and the fragility of its natural systems, protecting the environment makes perfect business sense. A study published in the Business Harvard Review last year shows how sustainability benefits the bottom line by driving competitive advantage through stakeholder engagement, improving risk management, fostering innovation, improving financial performance and building customer loyalty. Increasingly, employees, customers and investors are demanding that business promotes environmental, social and governance practices — for the bottom line and for the ‘greater good’. Yet, despite the benefits of sustainability, many companies are still dragging their feet and taking a short-sighted, short-term approach.
A new WWF report published with the National University of Singapore (NUS), found that banks in ASEAN are failing to redirect financial flows away from environmentally and socially destructive business practices, and importantly, not yet tapping into growth opportunities also needed to finance the transition to a sustainable economy. A huge opportunity lies in tackling the worsening global water crisis. Key will be redirecting financial flows towards more sustainable water projects. We currently work with financial institutions on innovative approaches such as blue bonds and water stewardship funds to help bridge the gap between the world’s water needs and funds waiting to be invested in sustainable and bankable water projects.
Opportunities also lie in the energy sector. Just last month, ADB approved two loans totaling USD 1.1 billion to strengthen and diversify Indonesia’s energy sector, including renewables. Climate change isn’t just causing the ice caps to melt; it’s costing corporations big bucks. Companies that ignore climate-related risks will feel the consequences.
Shining a spotlight on the world’s greatest issues, the UN Sustainable Development Goals offer another opportunity to fundamentally shift the way to do business. For the first time we have an integrated approach that connects the economy, society and the environment. To my mind, this represents a catalyst for innovation and new market opportunities for executives to embrace and drive growth while at the same time being a force for good. We have been partnering for decades with leading companies worldwide on transforming their business practices for the good of profits, people and the planet, and sustainability is playing an increasingly significant role in business strategy.
The key to a bright future for businesses, and of course the planet, lies in establishing resilient markets that produce more sustainably, consume more wisely and safeguard our natural wealth. Healthy economies depend on a healthy environment — that is the bottom line.
Marco Lambertini is Director General, WWF International