Session 4: Sustainable business in Southeast Asia - Part 2

The second part of session 4 continued with further discussions around sustainable businesses and corporate sustainable responsibility.

A panel led by Ms Angeline Martin, Corporate Engagement Centre, Save the Children in Singapore shared many valuable and interesting insights and challenges from different viewpoints; investors, sustainability specialist consultants and global corporate brands with well-known footprint as well as recognized sustainability approaches.

This summary, only a few points are covered out of an extensive array of interesting topics during the discussion.

As a global brand with deep Swedish roots and values, H&M have integrated CSR in the business from an early start. Ms Hanna Hallin, Sustainability Manager at H&M quoted her company’s CEO Karl Johan Persson who has officially stated that he cares more about what his business will be delivering in 40-50 years time, than the results over the next quarter.

This long-term view and commitment is necessary when trying to steer a business in the right sustainable direction, when acting within one of the dirtiest and most polluting industries in the world, known for using an abundance of scares resources like water, land and oil.

“When I retire the researchers say we will be more than 9 billion inhabitants globally. Will it be possible to grow crops for fashion when we instead might need the same land for growing crops for feeding the world?”, said Hanna.

With a wish and will to take the planetary boundaries and social inclusion into account when planning for the future business, H&M have been working hard to make the production more sustainable. There is even a clear goal to become 100% circular “but we just don´t know exactly how, yet”.

There are obvious challenges on this journey of course. Not only pure environmental aspects, nor worker’s right issues but also the slow consumer adaptation to buy sustainable clothes. As an example, Hanna mentions that H&M has spent a lot of effort in making a line of jeans made of only recycled textile fibres. Since launching the line two year ago, only 1,5 million pairs have been sold.

When people hear this, they usually find that a remarkable low quantity, which is true. If a startup had had the same numbers sold, it would have been considered a success story! Nevertheless, the consumer demand is not there yet.

“We have been working hard to make fashion sustainable. Now we have to work to make sustainable clothes fashionable.”

Mr Lars Svensson, Sustainability & Communication Director IKEA, which is run by Ikano Retail in Southeast Asia, shared that a brand like IKEA, that is not publicly traded, has the advantage of not being quarterly driven, and therefore can take a long term view on all the aspects of the business.

Already when IKEA was founded 70 years ago the aim was to attract people with slim wallets to buy furniture. That fundamental business model meant that the business had to use as little resources as possible, to make products cheap.

At that point it was not a conscious decision to be “green” but the business model was actually built on the wish of using resources efficiently – and today this means in a sustainable way. Going forward, we want to be “planet and people positive” in our way of doing business, Lars said.

One of many aspects to consider is also that the customers don’t come to IKEA because that they are a sustainable company. They still choose the brand for other reasons and it is usually the value proposition the cost efficient furniture.

How can IKEA convey the message of sustainability so that customers still buy the goods and also understand, accept and maybe even agrees with the sustainable approach?

As an investor with a sustainability mindset, Mr Sasja Beslik, Director ESG Analysis, Nordea and Chairman of UNEP FI Water Work Group add another angle on the CSR topic. The fact that investors evaluate and invest in businesses based on what return they can deliver to their shareholders. Often financial return is expected already the next quarter. There are hurdles for companies to invest in CSR and can sometimes be seen as a “competitive disadvantage” instead. Having said that, Mr Beslik states that the costs for violating the basic global compact policies are extremely high. Examples like BP and Volkswagen are very concrete and scary proof of how high those costs can become.

Mr Beslik also stressed that the usual supply chain perspective should be shifted to the product and commercial side.

As a global professional services firm specialized in business driven sustainability Ian Spaulding, CEO at Elevate brings up the challenge for countries, and businesses, to overcome the short-term negative impact of implementing stricter CSR policies.

He brings up an example from Bangladesh where there are today about 4000 to 5000 factories and a fair amount of them are deemed not safe enough for manufacturing. Efforts are under way to ensure the safety, which also means closing down several of them. The result is then that people actually lose their jobs. A shorter very negative consequence for the individuals and communities, with a long-term positive aim.

Another example is the Malaysian electronics industry that is dependent on foreign labour in their factories recruited by brokers. These brokers sometimes ask for unreasonable fees from the workers. Up to 15 months salary and other conditions like confiscated passports. New CSR regulations don’t allow fees anymore, with a result is that factories are no longer able to recruit enough workers.

Bottom line is that these kind of short term challenges have to be addressed when implementing new CSR legislations and where possible also ensure that the cost of change are absorbed.