Speech by Senior Minister and Coordinating Minister for National Security Teo Chee Hean at the 2022 Global Compact Network Singapore (GCNS) Summit

Time for Action

Ms Goh Swee Chen,
President of Global Compact Network Singapore, or GCNS Distinguished Guests
Ladies and Gentlemen

Introduction

It is my pleasure to see all of you today to discuss this very important topic - not just how it impacts the world but how it impacts your own businesses and your own businesses’ future. I think that is what you have foremost in your minds.

As a small low-lying country with an open economy, Singapore is particularly vulnerable to the impact of climate change. We emit about 0.1% of global emissions, but like everyone else in the world we are affected by the other 99.9%. This is why we are a strong supporter of global efforts to tackle climate change. Singapore is firmly committed to our raised climate ambition to achieve net zero by or around mid-century, as announced at Budget earlier this year. Our commitment to our climate targets provides a clear target for businesses and individuals to work towards. It also positions Singapore as the choice location for businesses interested to be part of the regional green economy.

In the international realm, we are glad that other countries are also determined to act. 197 countries have committed to the Glasgow Climate Pact and more than 70 countries already have a net zero target of 2050 or earlier. This was discussed in Glasgow at the climate change meeting last year. We need collective global action to keep the 1.5-degree goal alive. Given variations in countries’ climate commitments, more countries may impose cross-border requirements to address the issue of carbon leakage with other countries that do not share the same climate ambition. For example, the European Union (EU) has announced its Carbon Border Adjustment Mechanism which is expected to take effect from 2026. Policies like this have implications on business decisions and individual choices. So if you are doing business in Singapore, and exporting to other countries, you have to take into account that these issues will impact the movement of goods across borders.

Taking decisive action

We have spent much time talking about climate change. You have probably read and heard many articles and speeches on this subject, and why it is so important for the world. But you also need to understand why it is important for yourselves and for your businesses, and why now is the time to take action. To survive and do well in the new environment, businesses need to make their processes green; their products green; and move into new products and services that are green. The current global energy crisis is actually a wake-up call for businesses to act now. Businesses that postpone action do so at their own peril. First movers will capture upsides, while those who are slow to act will lose out to their competitors and may be written off as doing too little, too late.

The three sessions for this Summit, in the areas of:
(i) decarbonisation
(ii) supply chain management, and
(iii) sustainable innovation
are key areas that all businesses need to focus on, so that they can thrive in a new low-carbon world. Let me speak about each of these areas.

Decarbonisation

First, decarbonisation.

With the impetus for global climate action, businesses must incorporate decarbonisation and climate risks in their strategies to remain competitive in the long term. They need to review their value chains, identify carbon-intensive processes, and implement changes to their business operations that will reduce emissions. Businesses also need to pivot away from short term returns, and toward the longer game of both environmental and financial sustainability. This will help companies avoid stranded assets or legacy lines of production that may be rendered obsolete in a low carbon future. The oil and gas industry has already found itself in the spotlight and the Big Five oil giants have responded by pledging to reduce emissions. For example, Shell, ExxonMobil and Chevron, which have major operations in Singapore, have all committed to reach net-zero emissions by 2050. We are glad to hear that as it gives us an opportunity to work together with our industry partners to achieve this goal together.

Besides reviewing existing carbon-intensive business activities and processes, another key enabler of decarbonisation is access to green financing. Globally, we are seeing a growing shift towards private sector investment in decarbonisation technologies and clean solutions. Through the Glasgow Financial Alliance for Net Zero, 450 financial firms representing some 40% of global banking assets pledged to make US$130 trillion of private capital available for investment to reach global net zero by 2050. When capital from private financing flows preferentially into sustainable projects, it will not only accelerate global emissions reduction, but also provide capital for new economic opportunities in the global green economy. If your prospective projects are not green, you will find that financing is going to be more difficult to obtain or more expensive to obtain because the risk premium for such projects is going to increase.

The Singapore Government has set the overall strategy for decarbonising our economy by introducing a comprehensive suite of mitigation measures, including pricing carbon emissions appropriately. We are the first Southeast Asian country to introduce a carbon tax, and we plan to progressively increase our broad-based carbon tax to reach S$50 to S$80 per tonne by 2030. We started with S$5 to get the system working and to get companies to understand what it means. And for us, who are maintaining and operating the system, to also have it run smoothly. A carbon tax puts a price tag on the externality of carbon, and provides the impetus for businesses to decarbonise by optimising their business operations for carbon, and investing in green technology and solutions.

Right-pricing carbon also supports our ambition for Singapore to be the carbon services and trading hub, for the region and connected globally. By allowing businesses in hard-to-abate sectors to offset up to 5% of their carbon tax bills with high quality credits, we can generate a base demand, over and on top of the growing voluntary credit market that has the potential to grow to US$50 billion globally by 2030. On the supply side, we have successfully attracted global exchanges for high-quality carbon credits, such as Climate Impact X and AirCarbon Exchange, to establish themselves in Singapore. Singapore is also entering advanced discussions on high quality credits with countries like Ghana and Colombia, to forge win-win partnerships that advance global climate action and decarbonisation goals.

Supply Chain Management

Second, sustainable supply chain management.

Businesses will be affected not just by the primary effects of climate change, but also by the second and third order effects, disrupting their operating models and supply chains. Climate policies, technological advancements and stakeholder preferences will fundamentally impact what is the sustainable value of a company, and its valuation in the long term. A growing awareness of the climate crisis has also changed how people today define value in business, and what values a company should uphold. According to the 2021 Global Sustainability Study, half of consumers ranked sustainability as a top five value driver when making purchases. More than one third of consumers were willing to pay more for sustainable products, and those willing to pay more would accept a 25% premium on average. This of course has to be market tested. In addition, nearly all OECD countries have enacted policies to support Green Public Procurement. Under the GreenGov.SG movement, Singapore has done so as well.

To remain competitive in the long term, businesses need to develop sustainable supply chain management practices. Businesses that want to pursue a circular economy approach and become more resource-efficient have opportunities to do so in Singapore. Neste is one example of a circular economy pioneer which has set up its regional hub for renewable production and circular solutions in Singapore. Neste produces sustainable aviation fuel by blending used cooking oil and waste animal fat with refined jet fuel at ExxonMobil’s integrated refining and petrochemical complex in Singapore. Airlines that wish to have a certain proportion of their aviation fuel as sustainable aviation fuel are able to get it now in Singapore.

Adopting a circular economy approach in production and operations can also help unlock new revenue streams for companies. For example, upcycling was once a small industry espoused by perhaps the most avid environmentalists, but has now become a popular trend with broad appeal around the world. Patagonia is famous for having sold thousands of upcycled clothes made from fabric waste destined for landfills as part of its ReCrafted collection launched in 2019. Within Singapore, upcycling has also become a new niche area for businesses to leverage the growing market and consumer preferences for sustainable products and business practices. For example, Smoke by Shou Sugi Ban Gallery, a local SME, makes bespoke furniture from wood disposed by local tree cutting contractors.

Sustainable Innovations

Third, investing in R&D for sustainable innovations.

Investing in and leveraging innovative technologies can often offer companies opportunities for cost savings and sustainable growth. Going green can help companies transform their core business operations or build new profitable business lines. One such example is our local company Red Dot Analytics, which leverages NTU-developed green technologies powered by AI, to optimise data centre operations and improve their energy efficiency. The company’s solutions, which aim to reduce energy costs and carbon emission, have already been successfully test bedded with companies such as Alibaba.

Singapore is a good “living laboratory” for companies to develop and testbed new technologies and solutions, to make them technologically and economically viable even earlier. Through funding opportunities, such as the S$55 million Low-carbon Energy Research Funding Initiative, we aim to lower cost as a barrier to entry for companies. For example, one awarded project led by a consortium of NUS, NTU, Mitsubishi and other companies will research new methods of extracting hydrogen from Liquid Organic Hydrogen Carriers and design a minimum-cost hydrogen supply chain network.

Conclusion

Businesses are core players to translate climate ideas into action, through decarbonisation, sustainable supply chain management, and investment in innovative technologies. The Government will support you on this journey. We should do so not just for the interest of the global community but also in your own self-interest. As we look forward to COP-27 next month, a COP focused on translating pledges into implementation plans, the time to act is now. This year, we will be setting up our inaugural Singapore Pavilion at COP-27 in Sharm El-Sheik, Egypt. The pavilion will showcase how different stakeholders in Singapore – the Government, businesses, NGOs and academics – are playing our part. Together, let’s act now to build a better, greener and more sustainable future.

Thank you.