Delayed Decarbonisation doesn’t mean Emissions Cuts have Stopped

Decarbonisation with a Different Name

The story indeed sounds dire. “Driven by immediate margin pressures,” a survey by Singapore’s Business Times of some companies in 6 ASEAN markets found, “53 percent of ASEAN businesses have delayed or deprioritised decarbonisation plans.”

A key reason companies say they are delaying some decarbonisation is rising energy expenses. Costs for electricity to power air conditioning and lights as well as for fuel for trucks or cars at many companies have increased significantly this year.

Given the rising cost of energy, businesses need to do something to reduce costs. And it turns out that they are taking action. 61 percent are investing in energy efficiency.

While the companies may not call energy efficiency “decarbonisation”, what they are doing actually can reduce emissions. Energy, whether from electricity or gas or oil, is one of the largest sources of carbon emissions. Direct usage of gasoline or diesel for fuel results in carbon emissions. So does generating electricity with gas or coal to produce electricity. Energy efficiency means the companies are using less energy, which usually means lower emissions.

As one example of how reducing energy usage can cut emissions, Micron in Singapore used advanced chillers and optimisation of its chiller plant to improve energy efficiency by 20 percent and cut 50,000 tonnes of carbon emissions. It has also installed solar panels on rooftops and car parks, which generate about 24 million kilowatt-hours of electricity annually and reduce its reliance on energy produced using gas.

And even though companies say they are delaying decarbonisation, it also doesn’t mean it has gone away. 76 percent of ASEAN businesses say ESG remains firmly embedded in their strategy.

Less Talk about Sustainability

Talking less openly about environmental sustainability and focusing more on financial pressures fits with a broader trend.

Only one-third of companies in a global survey reported whether they are on track to meet their sustainability targets, the World Business Council for Sustainable Development found, despite 97 percent have set those goals.

In Singapore, only one-third of companies in Singapore now publicly disclose their sustainability targets, according to the Schneider Green Impact Gap Survey, a significant drop from 58 percent in 2023. Even so, 91 percent of them said sustainability is still a priority.

Communicating about Action

Reducing emissions through energy efficiency is a positive story. Saying they are delaying decarbonisation when they are actually moving forward with it through a different method than usual may be a missed opportunity for companies. Explaining how they are continuing to reduce carbon emissions can offer strategic opportunities to explain how a company is moving forward on an issue customers care about even amidst cost pressures.

Many customers are still concerned about climate change, so showing the company is taking action about it can improve its image. Moreover, increasing energy efficiency usually means they are using less energy and consequently reducing their costs, which may help them contain prices.

Shareholders may benefit too. While some efficiency initiatives take time, others such as using software to optimise electricity usage or analysing processes to reduce waste can have a fast payback. Lower expenses for energy with relatively low capital costs may mean companies’ earnings won’t take as much of a hit from higher energy prices.

Letting others know that they are decarbonising can also lead others to follow in their footsteps and continue progress towards lower emissions.

Companies do want to avoid “greenwashing”, of course, and need to be careful to tell their decarbonisation story carefully.

Sending the Right Message

Some companies may indeed be delaying part of their decarbonisation programme. They may push back high-cost programmes such as installing new equipment with lower carbon emissions or replacing older equipment with newer models. Those delays don’t necessarily mean delaying decarbonisation across the board. Actions to reduce energy usage can have significant impacts on reducing emissions.

Despite the survey results, then, the situation may not be as dire as it might sound.

Companies can benefit by telling the story of how their actions benefit the environment. They can explain that they decarbonise in a way that may be different than what they originally planned and that may be unexpected. Those gains from energy efficiency and the reductions in emissions deserve to be acknowledged more openly.