Is corporate Asia ready for the green economy? - ACCA

24 Pages·2012·0.49 MB·English

ACCOUNTANTS FOR BUSINESS
Is corporate Asia ready for
the green economy?
About ACCA
There is growing consensus that
ACCA (the Association of Chartered Certified solutions to the many environmental
Accountants) is the global body for professional
and social problems facing
accountants. We aim to offer business-relevant, first-
choice qualifications to people of application, ability and humankind today depend on
ambition around the world who seek a rewarding career
reshaping the global economy.
in accountancy, finance and management.
The term ‘green economy’ gained
Founded in 1904, ACCA has consistently held unique
core values: opportunity, diversity, innovation, integrity momentum over the past year, and
and accountability. We believe that accountants bring
describes an economy that results
value to economies in all stages of development. We aim
to develop capacity in the profession and encourage the in improved human well-being and
adoption of consistent global standards. Our values are
social equity, while reducing
aligned to the needs of employers in all sectors and we
ensure that, through our qualifications, we prepare environmental risks and ecological
accountants for business. We work to open up the
scarcity.
profession to people of all backgrounds and remove
artificial barriers to entry, ensuring that our qualifications
and their delivery meet the diverse needs of trainee
professionals and their employers. This report explores the concept
of a ‘green economy’, and its
We support our 154,000 members and 432,000 students
in 170 countries, helping them to develop successful relevance in Asia, as well as
careers in accounting and business, with the skills needed
exploring the roles that
by employers. We work through a network of over 80
offices and centres and more than 8,400 Approved policymakers, investors, corporates
Employers worldwide, who provide high standards of
employee learning and development and accountants need to play to
facilitate the transition to a green
About Accountants for Business
economy.
ACCA’s global programme, Accountants for Business,
champions the role of finance professionals in all sectors
as true value creators in organisations. Through people,
process and professionalism, accountants are central to
great performance. They shape business strategy through
a deep understanding of financial drivers and seek
opportunities for long-term success. By focusing on the
critical role professional accountants play in economies at
all stages of development around the world, and in
diverse organisations, ACCA seeks to highlight and
enhance the role the accountancy profession plays in
supporting a healthy global economy.
www.accaglobal.com/ri
FOR FURTHER INFORMATION
Gordon Hewitt
Sustainability Adviser, ACCA
[email protected]
© The Association of Chartered Certified Accountants,
D24ecember 2012
Is corporate Asia ready for the
green economy?
Gordon Hewitt
ACKNOWLEDGEMENTS
ACCA would like to thank the following people for their contribution to this report:
• Emily McKenzie, manager – natural capital project, World Wide Fund of Nature (WWF)
• David Doré, research manager, the Association for Sustainable and Responsible Investment in Asia (ASrIA)
• Holly Lindsay, country director – Singapore, CSR Asia
• Hugh Gozzard, principal – enterprise risk services, Deloitte.
FOR FURTHER INFORMATION
Gordon Hewitt, Sustainability Adviser, ACCA
[email protected]
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Contents
Executive summary 4
1. Introduction 5
2. The role of policymakers in the shift to a green economy 7
3. The role of investors in the shift to a green economy 10
4. The role of corporates in the shift to a green economy 13
5. The role of accountants in the shift to a green economy 16
6. Conclusion 19
References 20
IS CORPORATE ASIA READY FOR THE GREEN ECONOMY? 3
Executive summary
This report explores the impact on The creation of laws and policies that Accountants have an important role to
corporate Asia of growing arguments promote sustainability is arguably the play in the shift to the green economy
for green economic governance. It greatest driver of responsible in Asia. They will need to develop
describes the concept of a ‘green investment in Asia at present. Although knowledge and experience in a number
economy’, and its relevance in Asia, as the responsible investment industry is of areas that have previously been
well as exploring the roles that not as established in Asia as in other overlooked by the corporate sector.
policymakers, investors, corporates and parts of the world, the past decade has The core skills and experience of
accountants need to play to facilitate seen significant growth. In 2000, there accountants will be valuable to
the transition to a green economy. were only 30 such funds available in the companies seeking to measure and
Asian Market, a figure that has risen to report their environmental and social
The report has been produced 410 in 2012. impacts. In line with companies across
following a series of events that took the world, Asian businesses will
place in April and June 2012 in four Investors have an important role to play increasingly have to produce
cities across Asia (Singapore, Jakarta, in the shift to a green economy in Asia. sustainability and CSR reports.
Hong Kong and Beijing). The events Asset owners and fund managers make Accountants are key stakeholders in the
addressed the potential for and capital allocation decisions and are key process because they are closely
implications of a shift to a green stakeholders in the companies they involved in corporate reporting, either
economy in each of the countries where hold, therefore they are well placed to as report preparers or the providers of
they were held and brought together influence the companies to act in a assurance.
experts from the NGO, investment, more sustainable manner.
corporate and accountancy
communities. They were held in The business case for sustainability is
partnership with the international NGO, gaining momentum in Asia and, as a
WWF. result, leading companies are
integrating sustainability into their
Asia is at the forefront of many of the corporate culture and decision-making
global sustainability issues that are processes. The benefits that such
affecting the world today. In recognition companies experience include more
of this fact, a number of governments resilient supply chains; a lower
across the region have developed dependency on natural resources
policies, regulations and budgets leading to lower input costs; and
intended to address matters such as increased sales, as customers both
climate change and water scarcity. For within Asia and from around the world
example, the Chinese government has are now considering sustainability in
set ambitious targets for reduction of their purchase decisions. Increased
the carbon and water intensity of its government and investor focus on
economic activity, while the South sustainability is creating new markets
Korean government has spent US$37bn and the region has seen a large number
on environmental and low-carbon of green entrepreneurs establish
projects since 2008, representing 81% successful businesses, particularly in the
of its post-financial-crisis economic clean energy space.
stimulus package.
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1. Introduction
On the one hand, the current economic The United Nations Environment THE GREEN ECONOMY IN ASIA
system has been successful: the past 25 Programme (UNEP) has come up with
years have seen the world economy the following definition of a green Economic perspective
quadruple, benefiting hundreds of economy. From an economic perspective, the
millions of people. This growth, region has gone through periods of
however, has come at a cost. It has led ‘An economy that results in improved significant boom and bust. For much of
to an unsustainable use of resources, human well-being and social equity, the late 20th century, many countries in
large income inequalities at both the while significantly reducing Asia experienced high levels of growth.
international and national levels, environmental risks and ecological ‘Tiger’ economies such as Hong Kong,
environmental degradation and a scarcities. In its simplest expression, a Singapore, Taiwan and South Korea
greater level of risk – be that risk of green economy can be thought of as maintained annual growth rates in
financial uncertainty, food insecurity or one which is low carbon, resource excess of 7% during the period. The
water scarcity, to name a few (UNEP efficient and socially inclusive’. 1997 Asian financial crisis saw a halt to
2011). (UNEP 2010) this growth, and raised fears of a
worldwide crash due to financial
The concept of a green economy The concept made up one of two key contagion. Rapid growth then returned
necessitates a new economic model – themes of the United Nations to the region, with economies such as
one that simultaneously reduces both Conference on Sustainable China growing at annual rates in excess
inequality and humankind’s impact on Development, or Rio+20, which took of 10%, but again the 2008 global
the natural world. place in June 2012. Like previous financial crisis slowed growth in Asia,
summits over the years, the conference although it was not affected as badly as
This chapter looks at: brought together a broad range of many European and North American
stakeholders from around the world, countries (UNDP 2009).
• a definition of a green economy including politicians, NGOs, businesses
and the scientific community, with the Green economic governance is
• the green economy in Asia, and aim of determining how to reduce intended to reduce the systemic risks
poverty, advance social equity and inherent in the current system, and
• an overview of this report. enhance environmental protection. could present a solution to the ‘boom
and bust’ cycles that have been seen in
DEFINITION OF A GREEN The conference outcome document, Asia and around the world.
ECONOMY The Future We Want (UNCSD 2012), was
the result of months of negotiations Environmental perspective
In light of the crises in climate, culminating at the 2012 Earth Summit in From an environmental perspective,
biodiversity, fuel, food, water and the Rio. Although the conference outcomes Asia is highly exposed to many global
financial system, it is clear that a new could have gone a lot further in issues, as well as having many country-
economic system needs to be promoting sustainable development, specific problems to address.
developed to avoid large-scale disaster the event did bring the topic up the According to UN estimates, China is
– an economic system that will help political agenda and highlighted the now the world’s largest emitter of
alleviate the numerous risks posed by scale of the challenges facing the world greenhouse gases. The country
the crises noted above, as well as today. The urgent challenge is to build accounts for 24% of global emissions
providing a number of opportunities for the political will and support from (UNSD 2012). Indonesia is home to the
growth and prosperity. The broad term stakeholders to implement change and world’s third-largest tropical rainforest,
for such a system is a ‘green economy’. take action on the most pressing but deforestation and land use change
sustainability challenges. mean that much forest has been lost to
IS CORPORATE ASIA READY FOR THE GREEN ECONOMY? 5
logging and palm oil production. This consumption habits change as people accountancy profession. The events
results in the loss of a vital carbon sink, get richer. Rates of urbanisation are were held in partnership with the
coupled with significant greenhouse high across the region, with many international NGO, WWF.
gas emissions as the carbon locked up people moving from the countryside
in the trees and underlying peat enters into cities for a better quality of life. The report draws together key themes
the atmosphere (Gilbert 2012). More addressed at the roundtables, with
lenient pollution controls and weaker The scale and pace of change is enormous examples from across the region. It is
governance and enforcement regimes in Asia. To manage this change in a structured into sections about the roles
in the region have meant that many manner that addresses existing large- of:
polluting industries have moved in from scale environmental and social problems
elsewhere. According to a World Bank and forestalls others, green economic • policymakers
study, many of the world’s most principles need to be followed.
polluted cities are located in Asia – with • investors
16 of the 20 world’s worst areas for air REPORT OVERVIEW
pollution located in China alone (Pickrell • corporates, and
2012). The shift to a green economy cannot be
achieved by any one party alone, and • accountants.
A transition to a green economy would requires the collaborative efforts of a
result in a much greater focus on range of stakeholders. To achieve this, Included throughout the report are the
environmental protection and place governments need to set policies and views of a number of experts, who have
higher value on the environment, thus regulations that promote green growth; provided their perspectives on the key
halting the unsustainable trade-off investors need to incorporate challenges and initiatives facing each
between natural capital and economic sustainability into their decision making stakeholder group.
capital, which is the root cause of many and capital allocation decisions;
of the environmental problems facing companies need to develop products
us today. and services that minimise
environmental impacts and address
Demographic perspective social problems in the territories where
From a demographic perspective, over they operate; and civil society needs to
4.3bn people or 61% of the world’s engage with the topic and demand
population lived in Asia in 2010, with accountability from governments and
this population rising by 1% a year corporations on environmental and
(UNESCAP 2011). In addition, rising social matters.
income levels are creating a growing
middle class in countries such as In recognition of the need for a multi-
Indonesia, China, Vietnam and the stakeholder approach, ACCA hosted a
Philippines, which are now joining series of roundtables in four Asian cities
countries such as Japan, South Korea, to discuss the potential for, and
Taiwan, Singapore and Hong Kong that implications of, a shift to a green
already have significant middle-class economy. Events were held in
populations (Pilling 2011). These two Singapore, Jakarta, Hong Kong and
factors are driving consumption levels Beijing and drew together
because, firstly, larger populations will representatives from NGOs, business
consume more and secondly, organisations, corporations and the
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2. The role of policymakers in the shift to a green economy
The policies and regulations made by METRICS BEYOND GDP perpetuity, so governments need to
government and the metrics used to develop new metrics for progress that
measure progress are instrumental in Many of the causes of environmental measure more than just economic
determining the direction of an and social problems can be traced back activity (Green Economy Coalition
economy, as well as directing what to economics. In a world where the 2012). New measurements need to take
corporates value. In the face of large- dominant economic paradigm revolves into account human well-being and
scale environmental and social around the free-market economy, much environmental health, thus providing a
problems, from the loss and faith is placed on the market’s ability to more holistic view of how a country is
degradation of productive assets such allocate capital efficiently. As performing (WAVES 2012). The metrics
as fisheries to increasing levels of mainstream economists rarely take into that a government uses to measure
income inequality around the world, account much of the value of natural progress would also need to be applied
strong public policies are necessary. capital and its links to human well- at the corporate level, so a similar
being, these factors that are so reformation of corporate accountability
Policymakers need to form partnerships important to the function of society are standards would also be necessary.
that may not have been made in the being degraded over time.
past. Many of the issues facing POLICY INSTRUMENTS FOR A
countries today are truly global in The majority of countries in the world GREEN ECONOMY
nature, and therefore governments use GDP growth as a means of
need to work together to address them. monitoring the progress and success of Governments have a range of policy
Such problems are highly complex and their economies. This is a narrow options that can be used to influence
hence governments should seek input measure concerned only with economic the direction of the economies they are
from the scientific and academic output and has been traditionally responsible for governing. These
communities to formulate policy applied under the assumption that generally fall into two categories –
solutions that are effective. economic capital can be exchanged for command and control measures (CACs)
natural capital with no loss of well- or market-based economic instruments
This chapter looks at: being. Such an assumption could be (EIs).
reasonable if human impact on the
• the metrics and performance natural environment were small but, CACs involve setting strict regulations,
measures, beyond GDP, that owing to the scale of humankind’s while EIs include tools such as taxes and
governments can use to measure impact on the earth’s natural systems, permit-trading schemes. Each option
progress this assumption is no longer valid. can be a valuable tool of social and
economic policy in relation to the
• the tools and policy instruments that GDP also ‘positively’ measures all forms creation of a green economy, and can
governments can apply to influence of economic activity, including those be designed in a number of ways that
their economies, and that are in response to negative or influence both corporate and individual
unsustainable occurrences, such as behaviour.
• a number of case studies from redevelopment following climate-
around Asia that demonstrate how change-induced storm damage, or For example, tax policy initiatives can
governments are formulating policy health care provided to address focus on incentives (such as reliefs,
to enable transition towards a green air-pollution-related illnesses. credits and market-pricing mechanisms)
economy. that reward environmentally or socially
On a finite planet, it is not realistic to beneficial behaviour, or on disincentives
assume that the material throughput of (such as higher tax burdens for polluting
economies can continue growing in activities and indirect taxes such as
IS CORPORATE ASIA READY FOR THE GREEN ECONOMY? 7
levies generated from non-renewable
energy generation) (ACCA 2012).
EXPERT VIEW
The way that a government spends its Accounting for natural capital in China and Indonesia
money, through either public
procurement or subsidies, can also be Emily McKenzie, manager – Natural Capital Project, WWF
used to influence the direction of an Governments in China and Indonesia are establishing innovative policies to
economy. In the majority of countries account for the benefits that nature provides to people, supporting economic
around the world, governments are prosperity, social cohesion, security and human well-being. An ambitious new
responsible for planning large-scale policy in China designates 24% of the country’s land area as new reserves,
infrastructure projects, which typically called Ecosystem Function Conservation Areas (EFCAs). EFCAs are designed
involve planning over the long term. to secure biodiversity, soils and water resources, and to mitigate floods and
prevent sandstorms. The EFCAs also have a major social goal of alleviating
Factoring green economic principles poverty, particularly in the rural areas of China. In Sumatra and Kalimantan in
into such decisions is a key means by Indonesia, district and provincial governments are accounting for the value of
which governments can drive the ecosystems as they develop spatial plans that guide development and
transition to a more sustainable conservation. The Province of Jambi has explicitly considered natural capital
economy. For example, governments in the Strategic Environmental Assessment for its latest spatial plan. Local
could make a shift from fossil-fuel- governments have identified appropriate sites for forest carbon projects,
based energy generation to renewables water funds and sustainable management of plantations. These provide
when developing national energy plans alternative income to counterbalance the practice of converting natural
and should consider the impacts of forests to harvest high-yield products, such as palm oil.
alternative investment options on
natural capital and human well-being.
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