Source of article: https://www.businesstimes.com.sg/

WHAT do Covid-19 and climate change have in common? Lots, if you were to ask Robson Lee, a partner with global law firm Gibson Dunn & Crutcher. They are both complex issues that require concurrence and coordination by all and sundry, and unanimity to comply with standards and protocols being upheld to a T to prevent a total lockdown of activity on earth, he puts it. They also depend on technological advancements – new vaccines in Covid’s case, and carbon capture and sequestration in the case of climate change – to navigate out of, but that doesn’t necessarily mean people can take a blasé, business-as-usual attitude while the needle-moving solutions are being developed, he added.

In advising companies on sustainability-related risks and preparing them for mandatory climate reporting disclosures soon to be required of them, Lee takes pains to help clients
understand the principles and raison d’etre for the drill.

What’s required of companies to make a difference to the grand, relatively abstract topic called climate change is the same mindset change and a similar resolve to follow through with plans, he said in an interview with The Business Times.

“From the outset, we need to have a global awareness, just as the whole world recognised that Covid was a real problem and started to take action by changing lifestyles, putting on masks and going into quarantine,” Lee said.

Reluctant players might want to turn their minds to how new regulations came down hard on Covid-19 rule violators, as Lee reminded that those who did not put on a mask were jailed, named and shamed.

Companies that choose to keep the status quo may find themselves poorer for it, as everyone would have settled on a “new consensus” on what should be expected of businesses,
he added. “People are recognising that all these so called ‘acts of god’ that were thought of as remote, isolated incidents are mainstream problems.”

The lawyer offers some food for thought for directors who might still be on the fence about why they should care about sustainability.

How did you start thinking about businesses’ sustainability imperative as a lawyer?

I advise companies on their sustainability reporting. This includes a number of Singapore-listed companies in the past one year. Regulators have given enough heads up on the climate reporting disclosures that would be expected of companies from 2023 onwards, so they are seeking legal advice with questions like ‘How do you comply?’, ‘What should I do?’, ‘Is this compulsory? What if I don’t?’.

For want of a better analogy, there will always be people who would be dragging their feet, but subconsciously, they also know that this is something that they have to fulfil. It’s like
remuneration disclosure – there are those who still refuse and say, well, for competitive reasons, I don’t talk about this, but standards are such that people are asking why the disclosure is so poor. The spotlight could be on you on squawk box, with people saying that you are ducking the issue.

On including climate-related issues in sustainability reporting, regulators have published a number of announcements and given ample public reminders that this is going to be par for the course. Someone no less than the managing director of the Monetary Authority of Singapore (MAS) has announced that it will be mandatory. (Ravi Menon had said in June last year that MAS and SGX will set out roadmaps for mandatory climate-related financial disclosures by financial institutions and listed entities.) So better take this as your responsibility, because it is going to be part of board responsibility to see this through and exercise oversight on climate-related risks and opportunities.

Everything has a cost element, but I am of the view that it is not just compliance costs because regulators have taken a top-down approach. Rather, you are investing in future-proofing your business because the global market and the entire ecosystem expects that. As a director, you can’t cop out because ultimately the buck stops at your door.

What are some steps directors can take to move away from making cosmetic changes to business operations in adapting to the new sustainability reporting regime?

Lee: Those at the very top should do a thorough review of their entire business operations, not because they are compelled by MAS or SGX rules. They must not check all the boxes for the sake of it, but dive in and exercise real oversight as fiduciaries responsible and accountable to stakeholders.

This is not a duty that can be lightly dismissed and relegated to someone else in the organisation. The board itself has to conduct a proper review of the business, identify areas for improvement, and formulate a strategy. And this strategy has to be curated and tailored to your business, rather than just another well-written script that looks great on paper but does not truly represent what the company intends to carry out.

Of course, you can draw reference from the industry you’re in, but you can’t just copy, cut and paste a model answer. The plan has to be what you can do, what you really want to do, and something you are prepared to be accountable for, bearing in mind that once you disclose something, you better make sure that it is true, and that you intend to carry it out. If not, I believe SGX will come and ask you to ‘please elaborate’. Worse, you can be taken to task for misleading the market.

Meanwhile, the steps a company eventually decides to take must have material impact, not just because you have to report a 20 per cent growth in the short term. In the long term,
does it make the business environmentally-friendly and operationally more efficient? Efficient outfits can be more productive and reap higher profits, which would, in turn, attract bankers, fund managers and investors who realise that the company is taking meaningful steps to transform their business.

One might argue that the technology in the sustainability space not mature yet for widespread adoption, so there is really nothing much that they can do for now. What do you say a responsible company would do?

Lee: The first step is to recognize that the winds of change is not a momentary or transient fad. It is the genesis of an epochal transformation of the global economy, of all industries, whether you are in the carbon intensive or an indirect industry.

Eventually, climate change is something that will affect all of us. All and sundry must get their act together and recognise that there is more to it than accumulating short-term
profits.

What are the stakes involved when companies don’t move quick enough to get a handle on climate change?

Lee: To be honest, there is no first mover advantage. It is not a 100-metre sprint. It is a marathon. Everybody must be running in the same direction because it benefits everyone.
GIC took the lead in partnering with certain organisations, and you have Blackrock’s chief executive officer himself putting sustainability investing as a core strategy. And the MAS
has also taken the lead to prescribe policies and ground rules. In addition, you have the G20 taskforce requiring companies to be transparent on climate risks, disclosing clear strategies and action plans to transform business operations.

It is a total effort thing, and you cannot take your eye off because it is a moving target. It motivates everybody to understand that when corporate giants and institutions are taking all
these measures, I better align myself. But no one can also say that they had succeeded just because they had moved first.

There is no prize for being the first. The ultimate goal must be that all corporations and industries are willing to change and are taking concrete steps to transform business operations, in what would spark a global effort to engender continuous improvements to make the world a better place to live in.

I posted of it on my LinkedIn here.