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Asian Corporates Trail On Climate Aspirations, Can Their Young Staff Be A Force For Change?

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Developing Asia is a laggard in the battle against climate change and Asian companies, from China to India to Indonesia, are trailing their peers in articulating green aspirations. As the world prepares for this November’s Glasgow summit, Asia’s home-grown corporates have an opportunity, but little incentive, to showcase their green credentials, and to disprove the perception that they are placing profits above protecting the planet. However, the journey to a green future for many Asian businesses is not going to be an easy one for three reasons:

Asian companies project their corporate philanthropy and corporate social responsibility (CSR), a much misunderstood phrase, as proof points about their commitment to serve as a good corporate citizens. Every Asian company worth its salt has annual reports detailing their contributions to charity. Many of them are silent about the actual environmental, social, governance (ESG) impact of their operations. When problems occur, be it from a polluting factory or poor working conditions, companies struggle to explain how this squares with their commitment to doing the right thing.

In developing Asia, the state is asleep at the wheel in regulating ESG behavior. Palm oil companies in Indonesia, for example, are required under law to ensure that plantations are managed sustainably. This is mainly followed in the breach, evidenced by the massive forest fires every year in Borneo. Notwithstanding China and India’s stated commitment to invest in renewables, the two Asian giants continue to burn coal for power generation. This must surely be a disincentive for companies wishing to go completely green.

Finally, Asian institutional investors and sovereign wealth funds (SWF) may be hugely influential because of their investing power. Yet they exercise little ESG oversight, compared with their peers in America and Europe. Corporate behaviors do change when the company has to access capital from international banks, many of whom are required by regulators to transparently manage ESG risks. In recent years, pressure exerted by international NGOs has also forced major international banks to withdraw lending into coal and palm oil in Asia. Their exit has not been missed as local and regional banks have stepped in to provide funding with no ESG strings attached.

In the end, no amount of regulation or external pressure is going to force Asian companies to articulate social purpose and commit to implementing ESG standards. However, there is an equally powerful internal constituency which could be a force for change. In demographic-rich countries like India and Indonesia, Asian corporates are eager to recruit and retain top talent. This new generation of millennials are radically different from predecessor generations, not only in education levels but also in their instinctive understanding that climate change is for real and poses a grave, existential threat for Asia, the world’s largest emitter of greenhouse gases. Millennials are sensitive to peer perceptions and pressure about whom they work for and the company’s brand and reputation on ESG issues. If Asian companies want to win the battle for talent, they should be doing a better job in bolstering their ESG credentials. They will eventually be forced by young staff to change. If you have any doubts about their commitment and ability to organize, look no further than last year’s youth-led protests in Hong Kong and Thailand.

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