A fifth of the world’s largest companies are now committed to net zero targets, according to a report published in March 2021 by the Energy and Climate Intelligence Unit and Oxford Net Zero.1 Of this figure, more than 2,300 companies (as of January 2022) have set targets aligned with the Science-Based Targets initiative (SBTi), including Malaysian companies such as Sunway, FGV Holdings, Bursa Malaysia and Axiata Group.2
How can a company chart its path to reach these ambitious targets? To better understand the motivations and actions underpinning corporate net zero targets, we spoke to Mr Ong Pang Yen, Executive Director of the Chairman’s Office at Sunway Group.
Sunway has announced its aim to achieve net zero carbon emissions by 2050, in line with its aspiration to build a sustainable future. To benchmark against their yearly performance, the Group has established a set of 19 targets in the following five goals:
- Transforming its portfolios to be low carbon sustainable cities
- Advocating a responsible value chain
- Developing a safe, equal and dignified workforce
- Investing in community inclusivity
- Respecting ethical principles
This strategy will guide their actions across their business operations, which include malls, offices, hospitals, quarries, industries and manufacturing.
Sprawling 800 acres, Sunway City Kuala Lumpur is Malaysia’s first fully-integrated low-carbon green township. Built on a tin-mining wasteland, the city is a product of rehabilitation and restoration efforts.
How does Sunway plan to get to Net Zero by 2050?
To drive progress towards net zero by 2050, the company has set an interim target to halve emissions by 2030 (from 2010 as the base year, as per the UN Intergovernmental Panel on Climate Change’s recommendations). Their 2030 target is also divided into 3 phases: 2022-2024, 2025-2027 and 2028-2030. Their emission intensity reduction target averages between 3.5% to 5% per annum.
Halving emissions by 2030
To halve emissions by 2030, they will focus on improving energy efficiency and energy substitution (i.e. using renewable energy):
| Increasing energy efficiency |
| The Group will be focusing on improving its energy efficiency in various areas across its business operations: |
- Optimising chiller technology and adopting other energy-efficient initiatives in shopping malls
- Replacing traditional light bulbs with LEDs in malls and offices
- Installing motion sensors to automate the switching off of electrical appliances when spaces are not used
|
|
| Using renewable energy |
They have also installed solar PV cells at shopping malls and hospitals to substitute energy from the grid, which is more carbon-intensive. |
| |
|
| Solar panels installed at Sunway Monash Residences, accommodation for students at Monash University Malaysia and Sunway University |
|
| Carbon pricing framework |
|
At Sunway, an internal carbon pricing mechanism has been set to meet the challenging decarbonisation targets set for each of its business units. In 2022-2024, the price will be set at RM15/tonne of CO2 above a pre-defined threshold level – similar to the carbon price set by the Singapore government. This carbon price will be recalibrated progressively in subsequent years.
|
| A decarbonisation target has been set for each business unit, and business units that fail to meet their targets will need to pay a price, by having an amount deducted from their bonus pool. This way, the Group hopes to send a clear message to operators and managers that they need to start innovating to find solutions to cut carbon emissions – or pay a carbon price. |
|
| Engaging their suppliers (reducing scope 3 emissions) |
|
The Group has also been promoting its net zero aspirations to upstream suppliers – a source of its scope 3 emissions. To do this, they established a sustainable procurement policy that highlights sustainability commitments and performance as an assessment criterion for suppliers.
|
| The Group also shares its experience in decarbonisation to help its suppliers and tenants (via a Green lease agreement) learn from their journey. |
|
Getting to Net Zero by 2050
Up to 2030, Sunway’s focus is to reduce residual emissions by improving efficiency and using energy substitution. However, to get to net zero by 2050, they plan to focus on using carbon offsets.
| Carbon storage and capture |
Sunway University has formed a partnership with MIT in 2017 to research carbon capture, utilisation and storage technology (CCUS) to make it commercially viable. Currently, while carbon capture technology is readily available, the storage of carbon as a ‘waste product’ is still costly. The researchers are working on ways to turn carbon into a useful product with the potential to be sold. |
| Buying green energy |
The Group is also currently looking at investing directly or indirectly in large-scale solar farms. |
How did the company calculate these targets?
Benchmarked against Malaysia’s Green Building Index and Singapore’s Building and Construction Authority (BCA) Green Mark assessment criteria, Sunway has set building energy intensity targets for its managed properties.
As the Science-Based Targets Initiative (SBTi) currently has not yet provided a benchmark for quarry and manufacturing industries, Sunway is relying on its historical data to chart its carbon reduction journey and will align with SBTi when further guidance for these industries become available.
Why did Sunway announce these ambitious targets?
On the reasons why Sunway announced these ambitious targets, Sunway cited several different factors:
- External initiatives: There are several external pressures faced. For example, while regulators gradually implement stricter ESG standards, investors are also increasingly looking at a company’s sustainability scorecard on various sustainability-related indices and rating tools to guide their investment strategy. Having a net zero strategy in place also shows that Sunway is going beyond its commitment to the sustainability agenda.
- Internal values: Running a purpose-driven business has been part of their DNA from the beginning, with Sunway Group founder and chairman Tan Sri Dato’ Seri Dr Jeffrey Cheah at the helm. Under his leadership, Sunway was one of the first companies to be listed on the FTSE4Good Bursa Malaysia Index. The Group has also developed green and smart sustainable townships like Sunway City Kuala Lumpur, Sunway City Ipoh in Perak and Sunway City Iskandar Puteri in Johor. Furthermore, the Group has also long championed education as a means to address poverty in Malaysia. As an indication of the culture and philosophy of the leadership, Tan Sri Dr Jeffrey Cheah has donated all of his shares and equities (estimated to be worth several billion Ringgit by bankers) in the Sunway Education Group to the not-for-profit Jeffrey Cheah Foundation to support scholarships, in perpetuity.
Sunway South Quay, a rehabilitated tin mining lake in Sunway City Kuala Lumpur (a smart and sustainable city)
How does the company engage its shareholders about climate action?
When engaging shareholders and management about the sustainability agenda, the Group presents the benefits of carbon reduction as a dollar value. For example, a 4% reduction of their carbon emissions translates into approximately RM5 million in energy savings and costs. Another angle that resonates with shareholders and management is the explanation that sustainability is a form of risk mitigation:
“One thing we tell our shareholders is that ESG is an advance warning system – a storm is coming, so we had better be boarded up to prepare. We know that climate change will bring out different risks: physical risks such as flash floods, or transitional risks such as governments putting up a carbon tax. So, we tell management that we need to take this seriously… It’s not just about saving the world, which is true of course, but we have to relate it to the bottom line because that is an important part for a corporation – to continue the business. Then you will have the full buy-in from the board, management, and shareholders. Sustainability and survival are two sides of the same coin”
– Mr Ong Pang Yen
|
|
|
What has their journey in sustainability disclosures been like?
Since 2015, the Group has produced sustainability reports for each of its listed companies.
- Starting: When they first started, they used the GRI standards as it is the most commonly used reference for sustainability reporting. In addition, it provided a clear and straightforward framework to help the company communicate its approach towards different sustainability topics. For example, energy consumption is reported using consistent units such as joules or equivalent instead of cost.
- Maturing: As a commitment to the global agenda in addressing climate change, the company was one of the first public-listed companies in Malaysia to support and report its climate-related disclosures in accordance with the recommendations by the Task Force on Climate-Related Financial Disclosures (TCFD). Locally, Sunway is a constituent of the ESG-themed FTSE4Good Bursa Malaysia index and is rated by numerous research houses to be among the top companies with ESG practices. On the international front, the Group’s recognition is reflected through its listings on several sustainability indices and rating agencies, including MSCI and S&P Global.
- Recent developments: In 2020, Sunway set up a Sustainability Committee at the Board level, representing a dedicated focus on sustainability matters at the highest level of governance. They also set up a Board Sustainability Committee at Sunway REIT in 2021. Both committees comprise independent and non-independent directors. The Jeffrey Sachs Center on Sustainable Development at Sunway University is also commissioned to review the value at risk to some of its properties due to climate-related issues using scenario analysis. The team also automates its data collection system for greater reliability, efficiency and data integrity.
“Our journey started in 2015. We focused on a step-by-step process in our journey. First, we looked at which guidance and frameworks to adopt, before secondly, establishing a data collection system. Instead of just blindly following the frameworks, we looked at what we needed to do. Sustainability should not be driven only externally but also internally. The most important thing is that we don’t do sustainability reports for the sake of it. We collect data to help us improve our performance and our processes. That’s the mindset that people need so that they don’t see reporting as a chore, but as a purpose-driven initiative.”
– Mr Ong Pang Yen
|
|
|
What challenges do they face engaging other stakeholders?
The Group faces challenges when engaging both external stakeholders (such as suppliers) and internal stakeholders (such as employees).
“Cascading the goals and targets to employees is tough. Sustainability can be complex and technical, so how much detail do we need employees to understand? Some may not have the capacity or interest to know – they just want to know what to do. What has a positive reaction to our people is a simple message in layman terms that “Our planet can only absorb 18 billion tonnes of CO2 a year, but the industry is now emitting 40 billion tonnes, and this is what is causing global warming. The IPCC says that the world can only tolerate 400 billion tonnes – which is only 20 years away. This will be the tipping point and point of no return, so there is urgency, code red for humanity.” Some sit up and champion the issue, others are still sceptical. But we still have to try and communicate to win as many as possible”
– Mr Ong Pang Yen |
|
|
What tips do you have for other Malaysian companies on this journey?
Lastly, Sunway has shared their top 3 tips for Malaysian companies who are on this journey:
- Assign a dedicated team to manage sustainability: Sustainability is a complex topic and cannot be a part-time job. Measurement and data collection are crucial because what gets measured gets managed.
- Start small using pilots: Test out initiatives at a smaller scale to examine the feasibility of projects and address potential issues before rolling them out across the company to avoid getting overwhelmed.
- Internalise sustainability: Sustainability should not be looked at as complying with external requirements. Companies need to believe in the value of sustainability and internalise it. The ESG agenda has now gone beyond compliance and merely publishing sustainability reports every year, but has now become a real and true agenda for investors. Investors are now very conscious about a company’s sustainability performance and targets.
For more on Sunway’s sustainability initiatives, visit their webpage on their approach to sustainability and read their sustainability stories.
References
1. University of Oxford, Fifth of World’s Largest Companies Now Have Net Zero Target, New Report Finds, 2021
2. SBTI, Science Based Targets: Companies Taking Action, 2022.