Much of the economic success that Asia has experienced has fault lines in its development model. ‘Growth at all costs’ has created unintended consequences in Asia’s environment and society. Forty percent of China’s arable land is degraded. As a result, food security has become a huge issue for the country. By 2050, there could be as much plastic in the ocean as fish. Over 50% of that plastic-related marine ocean debris comes from countries in Asia.
Companies are coming to realise that current business practices are unsustainable. A new model of growth based on environmental, social, and governance (ESG) principles is necessary. Ethical and moral reasons prompted the initial reflection on these issues. However, concerns of future growth, and even survival, are behind the latest push for change.
Four advocates of change are providing the impetus for new business models based on ESG principles.
- Regulatory authorities are translating the UN’s 17 Sustainable Development Goals into policies, affecting everything from plastic waste to wage levels.
- Investors are taking a closer look at the ESG practices of companies they are investing in. ETFs that incorporate ‘ESG’ factors are projected to grow from US$25 billion to more than US$400 billion in the next decade.
- Consumers in Asia, particularly in China, are demonstrating increased concerns about food and drug security as well as air and water pollution.
- CEOs are being held accountable as environmental and social issues hit the bottom lines of their companies.
Lighting finds opportunity in sustainability
For many companies, sustainability has moved beyond being a moral issue; it has become an issue of survival.
For example, lighting products firms have seen their traditional market collapse over the past decade. The reason: LED bulbs have replaced incandescent bulbs. An LED bulb lasts 50 times longer than an incandescent bulb. Plus, government bulk purchases have brought the LED bulb unit cost down to less than one dollar.
The business model that sustained the lighting industry for decades – sell the bulb, let it fail in two years, and sell the replacement – has been destroyed. But instead of fighting LEDs, the lighting industry voluntarily committed to phasing out incandescent bulbs.
Rather than sell only lightbulbs, they now sell, and guarantee, lighting services. Going beyond lighting, these companies are now in the forefront of the move towards smart cities. Since lighting is everywhere, LED bulbs can be receptacles for cheap IoT sensors. The sensors can control smart lighting, smart buildings, smart offices, and even smart cities. This has given lighting manufacturers an entirely different business model with huge opportunities for growth beyond supplying light bulbs.
How to embrace sustainability
At a recent IMA Asia CEO Forum, members discussed how they can embrace sustainability and open new opportunities.
1. Look beyond profits. Revisit what is the objective of your business. How has that purpose changed since the company’s inception?
2. Make sustainability an integral core of your business strategy and a driver of how you do business.
3. Reinvent your business to be sustainable and then lobby governments to implement tougher sustainability standards. This will distance yourself from your competitors and create a huge advantage.
4. Look for potential disruptors to your business. Identify how you can create products and services that capitalise on that disruption.
5. Educate your customers about their own vested interests in sustainability and get them to adopt practices that support sustainability initiatives.
6. Partner with groups who have a common interest in maximising a shared resource, e.g., water or land.
Click on ‘Deep Read’ at the top of the page to learn more about the how companies are pursuing sustainability opportunities across Asia.
To learn more about IMA Asia’s memberships, click here or contact us at service@imaasia.com.