By Dr. Wilson Chew
Companies and regulators have made considerable progress in
adopting sustainable growth models.
There is an increasing awareness of the need to
adopt more sustainable means of growth.
However, for many SMEs, sustainable growth remains an aspiration,
rather than a necessity, largely due to cost issues.
The answer lies in examining the company’s corporate strategy.
Since 2015, the world has recorded its eight hottest years. Across the globe, temperatures have soared as climate change continues to wreak havoc. From extreme weather events to natural disasters, global warming is a science-based phenomenon that can no longer be ignored.
Global temperatures in 2023 are set to be among hottest on record, and average temperatures will be about 1.2C above what they were before humans started to drive climate change, according to the UK Met Office.
For companies, especially, the uptick in heat is a stark reminder of the urgent need to push ahead with business strategies that incorporate sustainability efforts.
That said, companies and regulators have made considerable progress in adopting sustainable growth models. Climate disclosure rules were announced by SGX in December 2021. All companies must provide these disclosures on a comply or explain basis in their sustainability reports for financial years (FY) starting on or after 1 January 2022. The disclosures will be mandatory for certain sectors from FY 2023.
Small and medium sized enterprises (SMEs) are crucial to the functioning of any economy. After all, they employ the largest number of workers, contribute the bulk of growth, and are the main driving force behind the growth of most countries.
In 2010, the OECD stressed that “the prospects and strategies for a green growth economy cannot be entirely understood without taking fully into account the production, technology and management practices of [SMEs]”. In Singapore, SMEs make up 99 per cent of the country’s enterprises. They employ 70 per cent of the workforce and contribute nearly half the GDP. Imagine the exponential effect if each of these firms were to take an aggressive, proactive approach to sustainable growth.
The answers are found by re-examining the company’s starting point, or its corporate strategy.
The company’s directors who formulate corporate strategy owe a duty of care to the company.
Here, care does not simply mean ensuring that shareholder profits are maximised. It means care for the entire company – from where it procures materials, providing fair benefits to its staff to taking care of the physical environment in which it operates. The point is that when small but growing firms adopt good sustainable practices early, there is a good chance that as they grow, they will continue to have the same outlook.
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Note: This article was written for “Boardroom Matters: The Evolving Role and Expectations of Boards” Volume 5. A Publication by the Singapore Institute of Directors.
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