May 2014www.ethicalcorp.comClimate change mitigationThere’s still a chance, says UNGeneral MotorsAnother moral crisis?Ethical business salariesDoes yours measure up?Going for growthSE Asia’s sustainable business opportunities
Ethical Corporation • May 2014 Contents 3Contents5 From the editorEthicsWatch6 Energy utilitiesMore meters7 Supply chainsTraceability trends8 ReportingConsistent rules9 Pension fundsNo to tobaccop28 GM's next moral crisisp37 Can we still save ourselves?Strategy and management10 Mallen BakerCan we do more good than harm?Briefing: south-east Asia12 Singapore’s sustainability hub26 Cheat sheetWe’ve read the reports so you don’t have to28 General MotorsThe next ethical crisis?32 The GlobalEthicistWhy stakeholder trust is vital34 The CEO viewWith Interface’s Rob Boogaard37 IPCC reportClimate mitigation strategy15 Big brand suppliers20 Dash for Burma22 Indonesia’s expensive growth30 BrandWatchLinkedIn joins the Global Network Initiative40 NGOwatchIkea FSC fracas averted25 Peter KnightToo much jargon41 Paul FrenchThe rise and fall of shark fin soupReview42 New books43 Academic news44 Report: Bacardi45 Report: Anglo AmericanPeople46 Salaries surveyed47 People on the moveCOVER IMAGE: THEKOALAp11 Economic boom, sustainability catching upp34 Sustainability roll-out from Interface50 Toby WebbCollaboration that works
Ethical Corporation • May 2014 Contents 5Welcome to the May 2014 issueThis month we have the next in our series of in-depth regionalbriefings, this time examining the state of sustainable businessin south-east Asia. It’s a part of the world where many of the thingswe wear, use and eat come from, at least partly, and a region thathas been an area of focus for NGOs and activists for some time.As our analysis demonstrates, the overwhelming characteristicof the region’s economies is one of growth. And this growth, averagingas much as 6% a year over the past decade, has undoubtedlylifted millions of people out of poverty, created a new middle classand attracted investment from around the world. A big questionthough, is how sustainable the growth can be, and what environmentaland social costs are being sacrificed along the way.We have some contrasting case studies. Singapore, for example,is world-leading in terms of its innovative water use and conservationtechniques. The city-state doesn’t perhaps have a great deal ofchoice in the matter of course, being without significant waterresources, but it remains an example of what can be done.Indonesia’s economic boom has been impressive in somerespects, but it has certainly been at the cost of significant environmentaldamage. Green activists have targeted Indonesiancompanies, and big international brands sourcing from Indonesia,of course. Perhaps the most notorious of these was Greenpeace’svideo showing an office worker biting into a chocolate biscuit,which turned into an orang-utan’s finger. The target of thecampaign was Nestlé, who initially tried to ban the video, butquickly accepted a more sensible course of action was to work withcampaigners to improve the sustainability of its supply chain. Thisbehavioural change is evident in other companies in Indonesia aswell – so perhaps there is a chance that the natural ecosystems thathave survived will now remain.Also on an environmental theme, the UN’s IntergovernmentalPanel on Climate Change have had a busy couple of months,releasing two new reports, first on climate change impacts andsecond on mitigation. The latter contains some good news, in thatthe IPCC scientists agree there is an opportunity to quickly drasticallyde-carbonise while not hittingthe potential for economic growth byany significant amount. So there is stilltime! The rub is that this will requirereal international cooperation, at agovernment and business level. Somecountries are leading the way –China’s coal regulations will takeemissions equivalent to all those ofFrance and Poland combined out ofthe atmosphere by 2017. But everyoneelse needs to follow, and discard theoutdated notion that low-emissionsequals economic slow-down.Among the other highlights are reviews of the latest reportingfrom Bacardi and Anglo American, alongside all the usual reportingand roundups. In his column, Peter Knight picks up on somethingthat we all need to be aware of: the rise and rise of business-speakclichés that are now ubiquitous in the corporate sustainabilityworld. They’ve become embedded in the DNA. Ouch. nIan WelshEditorMay 2014www.ethicalcorp.comClimate change mitigationThere's still a chance, says UNGeneral MotorsAnother moral crisis?Ethical business salariesDoes yours measure up?Going for growthSE Asia's sustainable business opportunitiesBusiness Intelligence for SustainabilityPublisher: Toby Webbtoby.email@example.comEditor: Ian Welshian.firstname.lastname@example.orgContributing editor: Mallen BakerSub editors: Sarah Burton, Gareth OvertonContributors: Mallen Baker, Oliver Balch,Andrea Bonime-Blanc, Paul Burke, Elaine Cohen,Giles Crosse, Stephanie Drilon, Jon Entine, Paul French,Stephen Gardner, Peter Knight, Claire Manuel, Eric Marx,Sam Phipps, Pete Statham, April Streeter, Toby Webb,Jeni YaghoubiPeople on the email@example.comAdvertising and sales: Aaron Jacksonaaron.firstname.lastname@example.org | +44 (0) 20 7375 7244Design: Alex Chilton Designinfo@alex-chilton.co.uk | +44 (0) 20 7042 63407-9 Fashion St, London E1 6PX UKSubscriptions: +44 (0) 20 7375 7575Editorial: +44 (0) 20 7375 7213ISSN 1758-1575Subscriptionssubs@ethicalcorp.com | +44 (0) 20 7375 7575Corporate subscriptionpackages from £495Ethical Corporation is printed by Four Way Print Ltd on Green Coat pluspaper, which comprises 80% recycled and 20% Forest StewardshipCouncil certified source material.
6 EthicsWatchEthical Corporation • May 2014EthicsWatchThe rise of home energy management, supply chain transparency, listed company reportingrules and pension funds divesting tobaccoAnalysis: home energy managementHelping yourcustomers buy lessBy Giles CrosseUtility companies have a tricky path totread as consumers are encouraged to useless of their electricityHome energy management devices areincreasingly providing monitoring,advice and automated and adaptive controlsfor domestic use. Global corporations such asDeutsche Telecom and Time Warner aresnapping up nascent HEM firms. Googlebought Nest Labs for $3.2bn in January 2014.But why?Alex Herceg, lead researcher at LuxResearch, based in Boston, says companiessuch as There Corporation have demonstratedenergy cost savings as high as 40% throughtheir HEM products. But big business wants infor other reasons, too.Energy efficiency resource standards areobligatory energy conservation programmesthat have been widely adopted in the US statesSmart home improvementsresponsible for two-thirds of all energy sales inthe US. These standards require utilities toachieve specified customer energy use reductionsagainst predicted business-as-usualincreases.“In order to meet reduction targets, whichmay be as high as 2% of total sales, utilitiesturn to third-party service providers, such asHEM companies, to deliver savings,” saysBRIANAJACKSONHerceg. Burgeoning HEM firms can then turna tidy profit while helping the utilities helptheir customers conserve energy.More metersThere is lots of potential. “In the US there arestates with large populations and utilityenergy efficiency spending to match,” saysHerceg. “However, many states, regardless oftheir electricity prices, climate zones andrenewable energy mixes, are lagging in smartmetering implementation. If utilities can find acreative way to defer the cost of implementinga service, it could very well boost engagement.”Energy provision is of course big business.Lux Research says utility revenues are huge:around $265bn a year in Europe, $370bn in theUS and $1tn in Asia.And regulation is pushing utilities to usesome of their profits to help their consumers.The European Union has set a target for 80% ofconsumers to be equipped with intelligentmetering systems by 2020. One estimate hasvalued the European HEM market at up to$2.4bn in 2014. In Asia, South Korea plans tohave smart metering rolled out to 50% ofcustomers by 2016.Ted Fagenson, chief marketing officer atEcoFactor, a US based HEM provider, says heunderstands another motivation of largecompanies such as Google buying into thesector. “As ‘the internet of things’ spreads,Google captures a more complete picture of aconsumer’s habits and preferences,” he says. Ifhome energy usage is part of this, so much thebetter.Fagenson also believes that by promotingenergy efficiency and searching for technologysolutions that provide savings and conveniencefor the consumer, utilities can become atrusted adviser. Whether they do this in-houseor through external partnerships is up to them.“A metric known as ‘net promoter score’ is ameasure of a consumer’s willingness to recommenda product or service to a friend or familymember,” he says. “This is the standard benchmarkfor a company’s success in themarketplace. Great companies have a score inthe 80s; utilities traditionally have a score inthe teens.”So there is plenty of room for improvement– and opportunity for utilities.EU disclosure ruleThe disclosure by large listed companiesof their environmental, social andhuman rights “policies, risks andresults” will be mandatory in theEuropean Union from 2017. TheEuropean parliament ratified the rule inan April vote, applying it to listedEU transparency pushcompanies with more than 500employees, of which there are between6,000 and 7,000 in Europe. Therequirement was watered down duringthe EU legislative process – when it wasproposed in 2013, it was planned torequire disclosure from all large companies,not only listed ones. An obligationto disclose revenues and profits bycountry was also dropped. UK LabourMEP Richard Howitt noted that the lawhad been adopted shortly before theApril 24 anniversary of the Rana Plazagarment factory collapse in Bangladesh.“I genuinely believe this new law willhelp prevent such tragedies fromhappening again,” Howitt says.Ban the bagEuropean Union countries will beobliged to cut the use of supermarketcarrier bags by 50% by 2017 and by80% by 2019, after an April Europeanparliament vote. Countries can choosehow they do it, but most will probablyopt for a levy on plastic bags – a movethat dramatically cut use of carrier bagswhen introduced in Ireland in 2002.In the UK, there are already smallcharges in Northern Ireland and Wales,and in Scotland a charge will applyfrom October. In England, plans tointroduce a levy in 2015 are underdiscussion. The European parliamentvote would also make it mandatory forlightweight plastic bags used to wrapfruit or vegetables to be biodegradableor compostible by 2019. However, theEU bag ban must be signed off bymember states before it can come intoforce.ADRIANHANCU
Ethical Corporation • May 2014EthicsWatch 7Robot cleanersThe generation of power from solarpanels could be boosted by an armyof robots wielding microfibre cloths,judging from an installation in theIsraeli desert. Solar arrays in desertareas can lose up to 35% of theirefficiency because of dust building upon the panels, leading to shutdownsseveral times a year to allow thepanels to be cleaned. At KibbutzKetura in southern Israel, however, akibbutz known for its environmentalism,robots have been installed thatglide up and down the panels eachnight to brush dust off. It is, says Israelicompany Eccopia, which provides therobots, the “world’s first completelyautonomously cleaned solar energypark”. The robots work without water,another important environmentalaspect in desert areas. The modest site,jointly owned by Siemens and Israelipower company Arava, can generate9m kilowatt hours per year, enough topower about 1,000 households.Factory factsAdidas, one of the six top “partners”for the Fifa World Cup in Brazil, haspublished its list of suppliers for theevent. Adidas is an “official sponsor,licensee and outfitter” for Fifa, andsays it has published the list of factoriesmanufacturing products for theWorld Cup “in a spirit of transparency”.The list also includes a noteabout trade union and worker representationat the factories. Most ofAdidas’s suppliers are in China,Indonesia, Turkey and Vietnam, butAdidas playing a fairer gamefacilities in Argentina, Brazil,Cambodia, Germany and Italy, amongothers, also feature. Worker tradeunions in China and Vietnam are the“single government-mandatedunion”, and are not independent,the list notes.DAGDURRICHPHOTOGRAPHYReporting and disclosureSupply chain clarityBy Oliver BalchTraceability in supply chains looks set tobe increasingly mandated and there aresome easy steps that can help corporatecomplianceNo company wants the image of theirproducts ruined by malpractice in theirsupply chains. Yet that’s what continues tohappen, time and again. In today’s age ofhyper globalisation, the base materials that gointo your iPhone or your T-shirt, say, can comefrom any corner of the globe.In an attempt to pinpoint where those actualcorners are, the United Nations Global Compacthas teamed up with the US-based sustainabilityorganisation BSR to produce a practitionerfocusedGuide to Traceability. The 45-pagedocument advocates a seven-step strategy thatthe authors hope will become a “standardisedapproach” to ensuring supply chain traceability.“At present, only a very small percentage ofcommodities are traceable on sustainabilityattributes,” says Ursula Wynhoven, chief ofgovernance and social sustainability at the UNGlobal Compact. The benefits of correctingthat “cannot be overstated”, she adds, arguingthat full traceability will guarantee “respect forpeople and the environment” throughout theworld’s supply chains.Reassuring consumers is another big benefit.BSR’s director of advisory service, Tara Norton,admits that most shoppers “will be surprised” tolearn that companies “don’t know where thestuff we’re selling comes from”. Plummetingmeat sales following the 2013 horsemeatscandal in the UK highlighted the damage thatsuch knowledge gaps can bring.The commodities questionSo what is the solution? The answer is twofold,according to the Global Compact and BSR.First, focus on where the largest impacts lie. Inglobal procurement terms, that means keycommodities. The Guide to Traceabilitysuggests a list of 10 to start with: beef, biofuel,cocoa, cotton, fish, leather, minerals/diamonds,palm oil, sugar and timber.Norton admits others could have beenadded. Yet, as an initial “sample”, the chosencommodities share dual qualities: all havesignificant sustainability issues attached tothem, and all are the subject of existing traceabilityefforts.It can be hard to keep trackThis second point leads nicely to the othermain hope of Global Compact and BSR,namely that companies will get on board withthe plethora of industry schemes already outthere. “What we don’t want is a whole lot ofdifferent little initiatives focused on all of thesecommodities,” says Norton.The message is clear: determine whichcommodities are material to your business andthen “stick to what we’ve got”. With 25 existingschemes cited in the Guide, from catch-alls likethe IDH Sustainable Trade Initiative toproduct-specific examples such as the ForestStewardship Council, there’s no shortage tochoose from.For the approach to work, however, companieshave to be willing to collaborate. Not onlywill they find themselves better equipped tonavigate complex supply chains, but actingcollectively promises cost savings, too, saysWynhoven. And there’s a “system dimension”to many supply-side sustainability issues, sheadds. Addressing these goes “beyond the influenceof any one company acting alone”.Critics will question whether existing traceabilityschemes pack enough punch. Sure, theymake sense when companies collaborate. Butwhat about the laggards that don’t? “Thereneeds to be mandated accountability and verificationwoven throughout the industryschemes,” argues Patricia Jurewicz, director ofthe non-profit Responsible Sourcing Network,which calls for regulations against buyingunethically sourced materials.Policymakers appear to be listening. Takethe Dodd-Frank Act and Lacey Act in the US,for example. The two laws contain respectivetraceability requirements for companiestrading in minerals from the Congo and intimber products.Corporate buyers would do well to followthe new guide’s advice. Not only is traceabilitythe right thing to do, but it looks set to becomethe mandatory thing to do as well.HRAMOVNICK
8 EthicsWatchEthical Corporation • May 2014Analysis: sustainability reportingEquality in equitiesBy Sam PhippsMomentum is building for consistent ruleson sustainability reporting across internationalstock exchangesAcampaign to create uniform sustainabilityreporting for companies listed on globalstock exchanges has taken a step forwardswith a proposal by the US-based environmentalcoalition Ceres via the WorldFederation of Exchanges.Ceres, with input from more than 100 institutionalinvestors – including BlackRock, theworld’s biggest asset manager – has publisheda series of recommendations for integratingenvironmental, social and governance (ESG)disclosure requirements into listing rules.The goal is both to promote ESG values andto make a more consistent international investmentarena, so that companies are not left at acompetitive disadvantage by having to disclosemore than rivals trading in other jurisdictions.Tracey Rembert, senior manager of investorengagement at Ceres, says publication of thereport reflects how vital most investors nowconsider sustainability reporting to be. “Theywant more comparability and consistency andmany more companies reporting [on sustainability]because at the moment there arenumerous gaps even within sectors betweenthose that are putting out information andthose that aren’t.”One key recommendation is not just disclosureof the main ESG issues that are mostmaterial to a specific business, but a detailedanalysis. “The message was: don’t just tell usclimate change, human rights and communityimpact, for instance, but a lot more informationon how and why,” Rembert says.Data deficitInvestors are under increasing pressure frombeneficiaries and clients to incorporate sustainabilityissues into the investment process andoften they are not able to because of a lack ofdata, Rembert says.The extensive consultation that went intothe report – titled Investor Listing StandardsProposal: Recommendations for StockExchange Requirements on Corporate SustainabilityReporting – also showed a desire forsmall and medium companies to be subject tothe same level of disclosure as bigger ones.The recommendations have now beenformally submitted to WFE members, withconsultation likely to run for several months.Corli Le Roux, head of SRI Index andSustainability at the Johannesburg StockExchange (JSE), welcomes the fact that thisproposal has come from institutional investors.“They are a critical part of the wholesustainability debate and can play a major rolein pushing companies forwards.”The JSE has yet to comment formally on theCeres proposals but Le Roux says she isinitially encouraged by its tone.“Exchanges around the world need to beable to implement sustainability reportingapproaches that are suitable to their own environments.A one-size-fits-all solution wouldnot work. Overall, we expect evolutionarydevelopment on this issue globally in thecoming years rather than a wholesale change.”Le Roux says emerging markets tend to feelsustainability issues far closer to the grassrootslevel and therefore start incorporating theminto their operations sooner. “We’ve shared alot of knowledge and experience with Braziland other exchanges,” she adds.However, she emphasises that sustainabilityis a “very dynamic area” and will varyaccording to jurisdictions. It is vital that anyregulations can be realistically complied with.“A risk is that it becomes tick-box compliance,so the JSE goes to great lengths to ensurethe whole process can be monitored properly.”Le Roux also lauds the United NationsSustainable Stock Exchanges (UNSSE) scheme,Values can be valuablewhich explores how exchanges can worktogether with investors, regulators and companiesto enhance corporate transparency, andultimately performance, on ESG issues andencourage responsible long-term approachesto investment.JSE is one of nine partner exchanges onUNSSE, the others being Bombay,Istanbul, Brazil, Egypt, Nigeria, Warsaw, NYSEEuronext and Nasdaq.SERGEY_PNo to coalCanada’s Ontario province, whereabout 40% of Canadians live, says ithas become the first North Americanjurisdiction to wean itself entirely offcoal as a source of power. DuringApril, its last and oldest coal-firedplant, at Thunder Bay, completed aswitch to biomass as a fuel source.Another power station near ThunderBay, the Atikokan Generating Station,is already North America’s largestbiomass-fuelled power plant,Non-carbon power wins in Ontarioaccording to its owners, OntarioPower Generation. More than halfof Ontario’s electricity comes fromnuclear plants, and hydro suppliesanother quarter. Ontario’s coalphase-out was completed ahead ofthe province’s stated deadline of theend of 2014. Ontario’s governmenthas introduced a bill to ban anyreturn to coal in the future, sayingthe health and climate change costsare just too high.Conflict mineralsconfusionCompanies covered by the conflictminerals provisions in the UnitedStates Dodd-Frank Wall Street Reformand Consumer Protection Act havebeen left uncertain by a US courtruling that found that parts of therule could contravene the firstamendment to the US constitution.Dodd-Frank Section 1502 requirescompanies to disclose their use ofconflict minerals, but a specificrequirement for companies topublicly declare if products cannot beguaranteed free of conflict mineralswas like compelling a company “toconfess blood on its hands”, the USCourt of Appeals said in April. Thecourt upheld other parts of theVICTOR MARTELLO
10Columnist: Mallen BakerEthical Corporation • May 2014HOMEWORKS255Corporate impactCan ‘net positive’be meaningful?The idea that a company can do more good than harm is gainingpopularity, but work is needed before it can gain credence, arguesMallen BakerWhen I first got into corporateresponsibility I was focused onthe environmental impact ofbusiness – and it always seemed selfevidentthat however good abusiness became the simple act ofdoing business would always havesome negative ecological effect. Afterall, just about everything createsemissions of some sort or another.So the best we could hope forwould be that companies wouldreduce the negatives to the absoluteminimum, while aiming tomaximise benefits to produce an“overall positive impact on society”.That, in fact, is the phrase I usedwhen framing my CSR definitionback in 2004 when we were stilltrying to convince some people thatit was about core business, not justabout some community-focusedphilanthropy.I admit, I saw that “overallpositive impact” as a highly aspirationalstate – something that nocompany would explicitly commititself to in a measurable way.Because, like “sustainability”, itwould take a huge shift to achieve it.Now, the idea is moving to themainstream.Companies such as Kingfisher,with its commitment to “netpositive”, have begun to show thatmainstream businesses can, with allseriousness and understanding ofthe scale of the challenge, committhemselves not only to do as littleharm as possible, not only indeed todo no harm at all, but to leave theworld better than they found it.Such ideas have only made it intothe mainstream when someone hascodified what it means, of course.And now a coalition between Forumfor the Future, WWF and the ClimateGroup have done just that. In theirnew report Net Positive: A New Wayof Doing Business they have createdthe “12 principles” of net positive.I was keenly interested when Ifirst saw what had been done –thinking that here might be asubstantive work to really helpcompanies come to grips with theiroverall approach to business. Sadly,it falls short of that outcome – notsurprising given the challengingnature of the endeavour.The right questionsBut it asks some of the right questions.And one of the most interestingones in my eyes is this: at what pointdoes a social or environmentalbenefit become sufficiently desirableto outweigh a totally different socialor environmental cost?Take the example of flying. If abunch of holidaymakers fly to asunny location for a holiday thenegative impact comes in the formof greenhouse gas emissions. Thepositives may be positive economicimpact on the livelihoods of thosewho provide services to holidaymakers in that area – indeed maybesufficient to create additional jobsthat people need.Not enough? OK – suppose thenthat Al Gore flies from the US to theUK, speaks to an audience of businessesand as a result three majorsized businesses commit to makingbig changes in reducing theiremissions far outstripping thecontribution of the original flight.In principle, that’s easier becausethe impacts are far more comparable.The emissions from a singleflight against the subsequent emissionsreduction made by a company.Of course, when the decision todo the speaking engagement istaken there is no guarantee thatanyone will be inspired or that anychange will result.Actions can have obvious consequencesAt what pointdoes a benefitbecomesufficientlydesirable tooutweigh atotally differentcost?COLUMNIST:MALLEN BAKERIn any case, the benefits can bemuch more intangible, and maybemore important, than that. In thecase of world travel – travel broadensthe mind. People understand eachother better. They find education,enlightenment, wonderment, andplain and simple the joy in life whenthey travel. Businesses do betterdeals when they can be face to face.The way a number of the companiestry to achieve the goal is byinfluencing the sustainable behavioursof their customers. So if acompany’s products can help itscustomers reduce their impacts bymore than the company produces interms of its own emissions, then thatis demonstrably a net positive impact.It’s an obvious aim that anycompany committed to net positiveshould have. But it’s still tricky tomeasure since it’s impossible to knowwhat the customer might have beendoing if they had found an alternativeto your great eco-product.As long as two decades ago, somebusinesses would justify their badimpacts with the excuse “but it’s worthit because it creates jobs and economicgrowth”. And that was a “get out ofjail free” card that just about anybusiness in any industry could use.If net positive is not to be simplyan updating of that phenomenon, itneeds robustness in establishing thevalid trade-offs and the contextswithin which they work. We are notthere yet. nMallen Baker is a contributing editor to EthicalCorporation and managing director of DaisyWheel Interactive.
Briefing: south-east Asia12 Promising developments15 Cambodia's cleaner clothing?20 Burmese days22 Costly growth in IndonesiaINGRAM PUBLISHING
12Briefing: south-east AsiaEthical Corporation • May 2014LEUNGCHOPANDevelopment dilemmasSouth-eastern promiseBy April StreeterFrom the cool green towers of Singapore to the new democracy of Timor-Leste, the countriesof south-east Asia hold both peril and promise in the quest for sustainable developmentIf there’s one characteristic that unites the widelydivergent nations that make up south-east Asia –Brunei, Burma, Cambodia, Indonesia, Laos,Malaysia, the Philippines, Singapore, Thailand,Timor-Leste, and Vietnam – it is growth. Thesenations’ growth rate has averaged 3-6% over thepast decade, and is credited with lifting millions outof poverty, creating a new middle class in placessuch as Indonesia, and attracting the world’s attentionand investment.That growth is considered attractive and desirable,yet in the sustainability equation it definitelyhas some downsides. Stephen Groff, an AsianDevelopment Bank vice-president, told a recentsustainable development conference: “It is quiteclear that in many cases, the welfare of future generationsis being sacrificed to support growth.”Groff named food and energy security, inclusivegrowth, and environmental sustainability as the threecritical challenges facing the region of 11 countriesand more than 600 million people. All the nations ofsouth-east Asia face these challenges, and yet they areall at very different stages of development.That makes the concept of “green growth” popularas a way to transform the fledgling economies as wellas the advanced ones. Green growth is a concept thatalso ties to goals and programmes from the WorldBank and USAid, which is important for many of theless-developed countries of the region.Innovation dashIn Singapore, a small, highly urban enclave of just276 square miles and a population of more than fivemillion, it’s easy to see one version of sustainabilityat work. Singapore’s centralised government hasworked very hard over more than two decades tofoster economic growth with a vibrant high-techmanufacturing base – for example, a third of theworld’s hearing aids are made here. Now thisdensely populated city-state is also aiming to lead ininnovation – big data, e-commerce, 3D printing,green building and water management.Singapore is a popular site for Asian corporateheadquarters. Most multinationals have movedmanufacturing to cheaper south-east Asian neighbours,yet 44% of multinationals with Asianoperations have headquarters here, compared withjust 13% in Shanghai. General Motors, for example,recently announced it would shift internationaloperations back to Singapore from Shanghai.Because of Singapore’s urban density, growth,educated populace, and lack of natural resources, itis almost a microcosm of the problems that nationseventually face as they relentlessly advance in amarket economy.Singapore is chasing green growth studiously. Itranks high on green city lists, and has had a“sustainable blueprint” in place since 2009. The citystatehas developed into a leading innovation testground in south-east Asia – companies fromDaimler, the Smart carmaker, to Electrolux withadvanced vacuum cleaners, come to Singapore totry out “smart city” products.Singapore has also had fantastic success insustainable construction, with the highest rate ofgreen building retrofits and renovations in theworld (alongside the UK).Tan Seng Chai, chairman of the sustainabilitySingapore is apopular site forAsian corporateheadquarters
Ethical Corporation • May 2014Briefing: south-east Asia13Singapore – fast facts697 km 2GDPPPP (2013 est)US$339bnUS$62,400 per capitaMALAYSIAHONG KONGCHINAINDONESIAUS12.3%10.9%10.8%10.6%5.5%Electricitygenerationby source5.57m (2014 est)GDPcomposition■ agriculture 0%■ industry 27.3%■ services 72.7%10.6%10.3%10.2%6.8%MALAYSIACHINAUSSOUTH KOREA■ fossil fuels 99.8%■ nuclear 0%■ hydro 0%■ other renewables 0.2%Area:697 sq kmPopulation:5.57m (2014 est)Source: CIA World Factbook (PPP = purchasing power parity)GDP (PPP):US$339bn (2013 est)GDP (PPP) per capita:US$62,400GDP composition:agriculture 0%;industry 27.3%;services 72.7%Export partners (2012):Malaysia 12.3%;Hong Kong 10.9%;China 10.8%;Indonesia 10.6%;US 5.5%Import partners(2012):Malaysia 10.6%;China 10.3%;US 10.2%;South Korea 6.8%Electricity generationby source:fossil fuels 99.8%;nuclear 0%;hydro 0%;other renewables 0.2%committee at Singapore’s largest developer, Capita-Land, says the company has lots of evidence forhow sustainability is bolstering its bottom line.“The group registered cost avoidance in excess ofS$35m (US$28m) for energy and water utilities since2009,” he says.Singapore tries out the new and novel in environmentaltechnology – bamboo-based skyscrapers, forexample, and vertical farming to ensure foodsecurity. Singapore is also generally pushing theenvelope on water security, taking a four-prongedapproach by carefully conserving local catchmentwater, importing water, reclaiming water, andplanning numerous desalination projects. NEWateris the brand name for wastewater that has beentreated by Singapore’s Public Utilities Board so that itis clean enough to be drinking water. By 2060 Singaporehopes 55% of its water capacity will be NEWater.Sustainability hubConstant van Aerschot, director of the Singaporechapter of the World Business Council for SustainableDevelopment, says Singapore is on course to be southeastAsia’s sustainability hub. Corporate sustainabilityreporting increased 77% in 2012; three Singaporeancompanies are on the Dow Jones Sustainability Index.Contrast, however, Singapore’s situation with thatof the spanking-new country of Timor-Leste. Timor-Leste (formerly East Timor) became the region’s firstnew country of the 21st century in 2012, gaining itsindependence from Indonesia. Almost 40% of the 1.1million population of Timor-Leste – the eastern half ofone of the islands in the Indonesian chain – live belowthe World Bank’s $1.25 poverty line. That makes itscitizens’ annual average income less than the averageSingaporean’s monthly income of US$4,900.As in all less developed countries, the UN’sMillennium Development Goals and participatingprogrammes play a huge role in how developmentproceeds in Timor-Leste.The country has only recently transitioned fromthe effects of its violent quest for independence fromIndonesia to steady infrastructure and economicdevelopment. Timor-Leste is lucky that it has oilreserves, and has amassed a $14bn oil fund, whichthe Norwegian government assisted in setting up.The fund is being used for roads, water and electricityinfrastructure development. Of course, oilincome is a two-sided coin, as it is non-renewable –it gives the Timorese significant development fundsbut they must use them to develop away fromdependency on a fossil fuel economy, and quickly.Knut Ostby, the UN resident coordinator inTimor-Leste, says he hopes that governance structuresset up in the country will prove ruggedenough – corruption as in neighbouring Indonesiais an ongoing problem.“Like in many other countries, the fight againstcorruption needs to be continuous and long term,”Ostby says.Timor-Leste’s low-lying coastal geography makesit – in common with much of south-east Asia –highly susceptible to the negative impacts of climatechange. Yet mitigation and adaptation are not easyto dovetail with poverty alleviation. Engineeringand consulting company Tetra Tech in its work withUSAid is one company that has tried to help the localpopulation establish important land rights as well asunderstand low-carbon ways to manage property.Ostby says programmes such as the UN’sReducing Emissions from Deforestation and ForestDestruction (UN-REDD) are also helping the Timoreseembrace sustainable forest management. In addition, aunique partnership between the government, the UNand a private food company Timor Local has tackledhunger and malnutrition via manufacturing a newTimor-Leste'scoastal geographymakes itsusceptible toimpacts ofclimate change
14Briefing: south-east Asia Ethical Corporation • May 2014Timor-Leste – fast facts14,900 km 2GDPPPP (2013 est)US$339bnUS$62,400 per capita1.2m (2014 est)GDPcomposition■ agriculture 2.6 %■ industry 81.6%■ services 15.8%Area:14,900 sq kmPopulation:1.2m (2014 est)GDP (PPP):US$25bn (2013 est)GDP (PPP) per capita:US$21,400 (2013 est)GDP composition:agriculture 2.6%;industry 81.6%;services 15.8%Main exports:oil, coffee, sandalwood,marbleMain imports:food, gasoline, kerosene,machinerySource: CIA World Factbook (PPP = purchasing power parity)food supplement called Timor Vita – a mixture of soy,corn kernels, oil, sugar and micronutrients.Ostby says the government’s determination willbe essential to make growth sustainable. “To avoidmistakes from other developing countries, Timor-Leste needs to insist on strong national ownershipand leadership in the development process –correctly insisting that development be demanddrivenrather than supply-driven.”That is the only way to ensure that growth ismore inclusive, and greener.An Asian EU?The chasm between Singapore and Timor-Leste iswide, and may grow wider in 2015, when 10 othersouth-east Asian nations create the Asean EconomicCommunity, an EU-like structure that allows labourto flow freely and eliminates import taxes.Timor-Leste has applied for entry into this newpolitical and economic entity, yet there are doubtsamong the original 10 about infrastructure, civilsociety participation and human resources capacityin the newer nation.Whether or not Timor-Leste is included in Asean –the Association of Southeast Asian Nations – and itsstructures including the Asean Economic Community,pursuing a common sustainability goal in the disparateAsean nations is daunting. Singapore’s progress is aresult of its natural resources and urban density, butalso to strict command-and-control governance that isnot a hallmark of the other nations. As Asean movesmore to an EU-style open market, international supplychain greening and global consumer pressure will bekey to keeping sustainability top of mind.“The new Asean Economic Community will havea huge impact in our region,” says Nick Pisalyaput,sustainability professor at the Sasin Graduate Institutionof Business Administration in Bangkok,speaking to German broadcaster Deutsch Welle.Pisalyaput sees danger in the newly opened nationBurma being “pillaged” and says he hopes westernconsumers will demand responsible business practicesthrough global supply chains.Nessim Ahmad, director of environmental andsafeguards in the regional and sustainable developmentdepartment of the Asian Development Bank,sees a big role for ADB in sustainability progress.ADB, Ahmad says, helped fund 57 environmentalprojects in 2013, which he says was almosthalf of the projects the bank funded and 40% interms of amount lent.“We also try to practise what we preach,” Ahmadsays. “We installed the rooftop solar project of 571KW at ADB headquarters – the largest rooftop solarsystem in the Philippines. We also switched to 100%renewable energy, allowing us to cut our annualcarbon footprint nearly 50% with an emissionsreduction of 9,500 tonnes of CO 2 equivalent.”Ahmad adds that the biggest stride ADB sees sofar in addressing the region’s development goals ispoverty alleviation. But the bank also sees risinginequality even though ADB has adopted inclusivegrowth in its strategic growth plans.Islamic values and Islamic financing, especiallyin Indonesia, may play an increasing role infurthering sustainability regionally. For example, arecent Islamic fatwa was issued in Indonesia forbiddingcitizens to trade in endangered animals.Singapore may be called upon to play a biggerrole in fostering sustainability among its Aseanneighbours. The WBCSD's Von Aerschot says Singaporeis happy to share successes yet is also careful notto presume that its approach will work elsewhere. Ingreen building, at least, there are signs of successfulproselytising – Singapore’s green building standardforms the model for similar standards taking off fastin both Malaysia and Indonesia.“As one of the first listed companies in Singapore tovoluntarily publish annual sustainability reports in2010,” says Tan Seng Chai of CapitaLand, “we hope ourefforts and achievements will spur other corporationsto begin or accelerate their sustainability efforts.” nIslamic financingmay play anincreasing rolein furtheringsustainabilityregionallyApril Streeter is an associatewith One Stone. A Certified BCorporation, One Stone has aglobal team offering sustainabilityconsultancy and communicationsexpertise, based in Stockholm,Edinburgh, Sydney, Portland andWashington DC.
Ethical Corporation • May 2014Strategy and management35INTERFACERecycling with net benefitsbusiness. When you do that, you end up tappinginto whole new areas of expertise. As a result, weemploy a number of technologies that have neverbeen used in the carpet industry before.Ethical Corporation: How do you manage these innovationrelationships with external partners?Rob Boogaard: It all depends. Sometimes when wehave an innovation need, we might just post it on awebsite. We’ll write, “We’re looking to replace thesevirgin materials with a renewable or recycledmaterial with X and Y properties”, for example. Atother times, we might work with a consultant toidentify technologies or to search for alternativematerials on our behalf.We also create associations with organisationsthat at first glance don’t relate at all to our business.For instance, we have an Experience Centre in Scherpenzeel,in the Netherlands, where we host peoplewho want to see what we are doing. We recentlyopened that up for various companies, governmentagencies and university experts working in what’sknown here as Food Valley [a food research clustercentred around the Dutch city of Wageningen]. Youmay well ask why we’d host a group like this. Fromour perspective, though, we’re looking to replacevirgin material for recycled material, so their wastecould very well become our new materials. Some ofour solutions come from very strange sources.Ethical Corporation: Could you give an example of aninnovation that has really excited you recently?Rob Boogaard: In 2013 we launched a newtechnique, which I think is pretty exciting. We use agas-powered dryer when applying water-basedlatex suspension on the backs of carpet rolls. Thatobviously involves a lot of energy consumption. Ourengineers worked with our existing machinesuppliers on a solution that was going to improveenergy efficiency by 20%. At first glance, that soundsgreat. But we wanted a machine that would havetwice the output, while at the same time delivering50% energy reductions. That is when you need toreach out to other know-how and technologies.We ended up developing a drying machine witha Swiss technology company that uses an innovativeairflow and moisture management system toimprove heat transfer and energy efficiency. It hitsour reduction target, which means we can run itexclusively on biogas now. Had we gone for thatlower 20% reduction level, our remaining gasrequirement would have been too high for us toconsider paying the premium for biogas.Ethical Corporation: Producing only “benign emissions”is one of your 2020 Mission Zero targets. Can youdescribe an innovation that is helping achieve that goal?Rob Boogaard: Our Net-Works programme is agreat example. As a company, our goal is to cut theumbilical cord with oil altogether. The first step wetook was to reduce the amount of oil-based materialin our products without losing quality and so on.The second was to ask if we could start recycling ourproducts. We put millions of square metres of carpetdown all around the world every year. Can we bringthat back? So we’ve invested in an innovative technologythat allows us to separate the yarn from thebacking, so both can be re-used.But of course it is difficult to get 100% [of ourSometimeswhen we have aninnovation need,we might just postit on a website
36Strategy and management Ethical Corporation • May 2014INTERFACERolling out smarter processesproducts] back. And if you’re a growing company,you have to find additional flows of materials.That’s when we struck on the idea of recyclingdiscarded fishing nets from beaches, besides thecommercial fishing nets we were already using fornew yarn, which are made from high-performancenylon also. The idea came from an employee whowas visiting the Philippines and saw that the coastlineof the fishing islands there was totally litteredwith discarded old fishing nets. She asked herself:“Can’t we come up with a programme where thelocal population collect these fishing nets, bundlethem up and receive payment for them?”And that’s exactly what we did. Working withour yarn supplier Aquafil and the Zoological Societyof London, we launched a net recyclingprogramme. That was over a year ago now. The netsare sent to Slovenia where Aquafil recycles them atits plant and produces 100% recycled yarn. It’s aunique business model because we’re effectivelysending supply materials to our own supplier. Theprogramme is already self-funding and we’re nowexpanding it to two or three other areas.Ethical Corporation: What do you think is the biggestbarrier to companies being more innovative when itcomes to sustainability?Rob Boogaard: What most companies are still strugglingwith today, I think, is that they wait for aperfect business case that completely adds up at theend of the day. They are trapped in the mindset of,“What’s the business case? What should ourcompetitive position be?” My experience at Interfaceis that we have a general idea at first, but itdoesn’t always add up perfectly right away.That’s when conviction comes into play. As anexecutive team, sometimes you just have to say,“This is the right thing to do. We ought to be doingthis.” And I say that as the head of a listed companywith shareholders to satisfy. What we have learnedover the years is that once you take these steps, thenthe business case often becomes clear. At Interface,our commitment to sustainability started out as aconviction that it’s the right thing to do: that there isa better way of running a business. nRob BoogaardRob Boogaard is actingpresident and chief executivefor Interface inEurope, Middle East andAfrica. He also serves assenior vice-president ofsales and marketing. Hejoined the company in2011 after three years asglobal strategy andmarketing director atwater technology firmPentair X-Flow (formerlyNorit X-Flow).At Interface,our commitmentto sustainabilitystarted out asa conviction thatit's the right thingto do
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