Low-carbon transition with data

Amid escalating climate crisis concerns, the imperative for businesses to reduce greenhouse gas (GHG) emissions does not slow down their growth; instead, it paves the way for new opportunities.

Cutting emissions actually enables businesses to curb costs and access new markets in the climate-conscious era. Success stories abound.

For instance, a retail company in home improvement like HomePro has made investments in the use of solar energy to save electricity costs; and also, in the transitioning to electricity-powered vehicles to save logistic expenses estimated around 21%.

Similarly, an energy company, Bangchak Corporation, has established its green strategy focusing on efficiency and process improvement; investment in green and blue carbon; establishing a green portfolio, future technology and carbon offset; and creating a net zero ecosystem.

Smaller enterprises like Union Ratchaburi, a noodle maker, have explored the alternatives to serve their overseas customers by developing paper packaging, and using black ink on the packages because the colour is less carbon intensive than the others.

Those companies have one thing in common: they utilise carbon emission data to make business decisions including operational improvements, corporate goal setting, and investment in GHG emission-reduction initiatives.

This approach has become the blueprint for businesses to thrive in the low-carbon era.

Unquestionably, companies face increasing pressure from both domestic and international regulators to disclose GHG emissions data. The Securities Exchange Commission (SEC) requires listed companies to report their GHG emissions Scope 1 and Scope 2 in the 56-1 One Report.

Besides the local requirements, international standards may pose additional challenges for Thai companies. Among various standards, International Financial Reporting Standards (IFRS) Sustainability Disclosure standards, comprising IFRS S1 and IFRS S2, have won support from the International Organization of Securities Commissions (IOSCO), encouraging its 130 member countries to consider adopting them. This has sent a strong signal to jurisdictions around the world that these standards could fit the purpose of capital market use.

On top of this, the initial EU Carbon Border Adjustment Mechanism (CBAM) regulation, introduced on Oct 1, 2023, will have implications for Thai exporters to provide GHG emissions of products in particular sectors, including steel and iron, cement, electricity, aluminium, fertilisers and hydrogen.

The EU has enacted other regulations that can also potentially impact Thai companies. Those include the Corporate Sustainability Reporting Directive (CSRD); or the Corporate Sustainability Due Diligence Directive (CSDDD), which is still in the legislative proposal stage, requiring large companies to conduct and report on supply chain due diligence both within and outside their borders. These regulations and standards could exert pressure on Thai companies to prepare and disclose their GHG emissions.

In short, all businesses, whether large corporations or smaller supply chain operators, must have their GHG data ready to comply with low-carbon regulations. To stay competitive, they also need to use this data for setting emission-reduction targets, modifying business strategies, and seizing new opportunities.

Changes are taking place. The majority of large listed companies in Thailand have now disclosed their emissions data and set their net zero emission targets to align with the national target in 2065 and the international target in 2050.

For example, Bangchak, which currently emits 0.95 million tonnes of carbon equivalent annually, aims to attain zero emissions in 2050. The company has set a transition pathway by utilising GHG emissions data to make business decisions and set targets.

Crucially, every department within a company must use emissions data in their work. The accounting department, for example, links financial and emission data, while the finance department needs to have knowledge of financing tools for supporting greenhouse gas reduction.

Emission data, now occasionally disclosed on consumer product packages, could serve as a valuable marketing tool. However, exaggerated claims can damage a brand’s credibility.

Businesses are also focusing on reducing indirect emissions (Scope 3) across activities in their supply chains, which also involve business travel, franchises, transportation and financing activities. Financial institutions are also scrutinising businesses to minimise Scope 3 emissions in their portfolios.

Despite businesses recognising the benefits of collecting emission data, challenges persist, ranging from unclear goals and targets; lack of integration of GHG emissions data with the corporate database; lack of GHG emission data from the supply chain; and unclear claims related to GHG reductions.

The solutions are evident. Meaningful emission targets require challenges, concrete implementation, and transparent monitoring. Overcoming data-collection problems involves using information technology, such as the ESG data platform developed by the Stock Exchange of Thailand, to digitise emission data and establish database.

Also, GHG emissions calculation tool can be accessed in a low-cost manner, such as one provided by the Carbon Market Club. The challenges of emissions data from the supply chain can be tackled by collaboration and data-sharing. For instance, the Unilever Climate Programme collaborates with 300 suppliers in a bid to track and reduce greenhouse gas emissions by 50% by 2030.

To mitigate the risk of emission-reduction overclaims, businesses must ensure clear GHG reduction statements supported by reliable data and strategies to refute overclaim allegations.

In addition to reliable GHG data, businesses need financial support for the shift to low-carbon operations. Financial institutions and investors, realising the urgency of climate change, are increasingly supportive.

For example, in the first half of 2023, KBank loaned over 20 billion baht to green businesses and ceased credit support for new coal mines, intending to eliminate credits for existing ones by 2030. Investors also increasingly make decisions based on companies’ emission status. To aid these decisions, the Bank of Thailand and the SEC developed “Thailand Taxonomy (Phrase 1)” in June 2023. The taxonomy can be used by financial institutions to assess their portfolios, business proposals, and product and service development based on criteria linked to carbon emissions.

Green businesses now have access to a range of financial tools, including green credit, sustainability-linked bonds (SLB), and sustainability-linked loans (SLL), with interest rates determined by sustainability performance targets. Examples of companies raising funds from SLBs and SLLs include Thai Union, raising 5,000 million baht from SLBs in 2021; SCGP, securing 5,000 million baht from SLLs in 2021 from Krungsri Bank; and Minor International, securing 500 million euros of SLLs from Kiatnakin Phatra and 19 other financial institutions in Asia.

Since reliable emissions data opens doors to new opportunities, businesses should appoint individuals to be in charge of data collection, establish timeframes, track emissions, and prioritise transparency. This data should inform business and investment planning, aid in securing funds, and guide the development of products and services, packaging, and marketing campaigns.

Financial institutions also play a vital role in reducing GHG emissions by establishing lending and investment policies that align with their GHG targets, starting with GHG-intensive industries.

Transforming climate risks into opportunities enhances business resilience. Using emissions data to cut costs, develop new products, and ensure compliance with reduced emissions rules ultimately strengthens competitive advantages.

In the evolving landscape of climate-conscious commerce, businesses and financial institutions must not only adapt but innovate. Disclosing emissions data is not just a necessity. It is a strategic advantage to thrive in the face of a climate crisis and contribute to a sustainable and value-creating future.

Writer : Charika Channuntapipat, PhD, and Saliltorn Thongmeensuk, PhD, are research fellows at the Thailand Development and Research Institute.

First Publish : On Bangkok Post 28 February 2024