Coping with Climate Change – Feeling the Heat in Southeast Asia’s Corporate Boardrooms

by Purnima Joshi

The paper by Michael T Schaper, ‘Getting On Board with Climate Change: A New Challenge for Company Directors in Southeast Asia’, addresses the growing pressure that corporate board rooms in Southeast Asian companies have been feeling recently with the clear establishment that climate change is a corporate risk globally.

The recent IPCC Assessment Report 6’s verdict clearly spelt out climate change as a ‘code red for humanity, if we don’t limit global warming to 1.5-2℃ by 2030. This requires companies to fast-track transformation in every aspect of how they operate. While governance changes are already being effected in countries of the Global North, companies in Southeast Asia have been remarkably slow to incorporate sustainability and climate change resilience into their businesses.

The ultimate responsibility to address climate change, reduce emissions and adapt to a warmer world rests with the boards of directors.

Among countries in the ASEAN, Malaysia is the only member of the World Economic Forum’s Climate Governance Initiative. Climate Governance Malaysia, launched in 2019, has been very active in its efforts in the region to build awareness among organizations to acknowledge climate change as a corporate risk. Through webinars, workshops, training programmes it has also been working to upskill directors on climate abatement and adjustment. Yet, it is largely run on a voluntary basis, and needs more support for its efforts to be scaled up to cope with the urgent need to address climate change in corporate boardrooms in the region.

While businesses in ASEAN are aware of climate change, and have developed strategies relating to energy efficiency and greenhouse gas emissions reduction, only very few have looked more strategically at, and integrated climate change into, their overall business planning.

There is more that can be done in the region to facilitate greater director focus on climate change adaptation. Change in this field is coming for company directors in Southeast Asia – along with a range of new responsibilities and expectations.

After CGI Malaysia, a second chapter, that of CGI Singapore, is in the process of being formed, and an ASEAN hub is being launched in the near future.

The challenges faced by organizations in this regard are many - most directors have no prior experience in managing climate-related matters, it can often be quite difficult for individual directors, and boards collectively, to decide how they should rise to the challenge, especially in the banking and financial sectors. A director-specific focus on climate change is a relatively new phenomenon, and perhaps indicative of the speed with which global warming is increasingly becoming a core issue for much of the business community.

Schaper recommends that a first step for many ASEAN jurisdictions would be to form a local CGI chapter, or some other similar director-focused climate initiative. This will allow local directors to access some of the global networks of other firms who have already begun the decarbonisation journey. Understanding a firm’s risks, examining case studies showing how other companies have made the adjustment, and building relationships with other directors is a useful way to expedite the change process. Given that so few firms in Southeast Asia have become involved in the CGI, there is plenty of scope to encourage much greater participation. Just like the CGI at the cross-border level, there is a need for national associations to provide governance guidance, ideas and information directly to their members.

Moreover, education and information should be offered to unlisted private sector firms, non-profit organizations, SME and statutory corporations, who also face a climate challenge, and their boards need to understand how they can deal with this issue.

Finally, non-executive director positions, especially, are ideal points in which to secure candidates with a knowledge of climate issues, and can potentially help firms not only to develop resilience, but also to identify some of the many new business opportunities emerging as nations decarbonise.

Michael T Schaper, ‘Getting On Board with Climate Change: A New Challenge for Company Directors in Southeast Asia’, ISEAS – YUSOF ISHAK INSTITUTE, ISSUE: 2021 No. 131, ISSN 2335-6677 , Singapore, 6 October 2021

* Michael T Schaper is Visiting Senior Fellow with the ISEAS – Yusof Ishak Institute, an Adjunct Professor at the John Curtin Institute of Public Policy, Curtin University, and a Fellow of the Australian Institute of Company Directors. Email: michael.schaper@gmail.com.