Sustainability Solution Ep.2 -The First E in ESG - Environmental - YouTube

Hello

We are back with our Sustainability Moves Series from Baker McKenzie.

In our previous video we broadly discussed ESG

and why it is important for companies to consider ESG policy.

In this video we will be discussing in more detail about the environmental aspect of ESG.

Today we are joined by three of our partners from the ESG team at Baker McKenzie Bangkok -

Bulin Sanooj, Ornsiri Samarnmitr and Nam- Ake Lekfuangfu.

First of all may I ask Bulin to explain what we mean when we talk about the "E" in ESG.

Yes, so "E" in this case stands for environmental considerations.

This refers to the analysis and assessment as to how well our company deals with matters that concern the environment.

To do so we may consider how our company's operations impact the environment and how we deal with these issues.

Considerations in this case are multifaceted but it starts with ensuring that the company adheres to the relevant standards

as well as the relevant rules and regulations.

For example, do we have a system to tackle waste management or pollution

as well as looking at renewable energy usage and recycling.

In addition to the company's operations, these considerations should also be taken into account when assessing at our supply chain.

Additionally there are also important climate change considerations,

in this case we might consider whether our company has committed to limit the amount of carbon emissions we release into the atmosphere.

With regards to climate change are there any interesting new developments?

As we mentioned earlier, one significant element concerning the environment is climate change.

The United Nations Climate Change Conference (COP26)

which was held in Glasgow

saw over 200 world leaders coming together to discuss climate change.

There were discussions in order to reach a resolution on how to tackle climate change issues.

You mention that it was a significant conference on the climate change?

To understand this we would have to refer back to the previous convention that was held in Paris back in 2015 (COP21).

COP21 saw countries pledging commitment to limit global warming

to below 2 degree Celsius with the target of 1.5 degree Celsius. Thus the Paris Agreement was created.

Under this commitment countries were asked to submit their plans

or tackling climate change which is known as nationally determined contributions (NDCs).

In order to mitigate climate change committed countries are asked

to update the NDCs ever 5 years.

The agreement works on a five-year cycle making COP26 the first deadline for countries to update their respective NDCs since the Paris Agreement.

So what can we conclude from COP26?

At COP26 a wide range of decisions were reached.

For examples, decisions on phasing out the use of coal, deforestation, reducing methane gas emissions

and providing the necessary financial support for developing countries.

Countries have also committed that by the end of 2022 a plan

will be provided detailing how they are planning to reduce greenhouse gas emissions by around 20-30% within 2030.

Additionally discussions on the Paris Agreement rulebook

which provides guidelines for the undertaking of the Paris Agreement for its signatories, has been concluded.

How about Thailand? Do we have any policies regarding climate change?

During COP26 Thailand pledged reach net-zero carbon emissions by 2065.

Additionally we can look to our National Energy Plan, which includes various provisions that aim to reduce our greenhouse gas emissions.

Some of these provisions include increasing the use of renewable energy or clean energy in power plants.

Additionally the National Energy Plan also promotes to use of electric vehicles (EVs)

as well as the production and use of renewable energy and reducing dependency on fossil fuels.

The National Energy Plan also lays the foundation for a climate change bill

and promoting green jobs which include solar cell and recycling plant technicians.

Khun Nam-Ake, are there any interesting ESG trends that are important to businesses?

Right of course, we will have heard the phrase "sustainable development" thrown around quite a bit.

Essentially this means that when we are analyzing the success of the business,

profits are no longer the sole indicator.

Other considerations need to be made which account for the impact on, and protection of, the environment in order to determine the success of the business.

Not only is this relevant for businesses but consumers too are placing a greater emphasis

on consciously consuming products that are environmentally friendly or sustainable.

We might find that they are willing to pay more for products that are produced by ethical companies.

This indicates a shift in consumers' preference to become more "eco- conscious".

With regards to the environmental aspect of ESG, are there any rules and regulations

we are able to look to? (from developed countries)

There have been consistent developments in this area from those developed countries,

especially countries in Europe or the USA.

These actions were often introduced for the sole purpose of mitigating global warming and climate change.

Therefore many countries have shifted their policies to support these growing concerns.

Additionally, we may have heard of carbon tax or Carbon Border Adjustment Mechanism (CBAM),

or the Sustainable Products Initiative on a global level.

There are also other domestic policies that countries have implemented.

For example, the UK was one of the first countries to fast track achieving net- zero emissions which culminated

in The UK's Net Zero Strategy which was published earlier this year.

We expect that this is only the beginning of countries introducing climate-related legislation.

So how about in Thailand do we have specific legislation that addresses environmental concerns relating to ESG?

To be honest Thai legislation that explicitly tackles environmental concerns with regards to ESG is still in its infancy and there is yet no

ESG specific legislation as such.

However, there are already quite a number of existing environmental legislations that have been enforced in Thailand.

These pieces of legislation are what businesses need to be adhere to in the first place.

Non- compliance could result in sanctions.

We have started to see organizations starting to give ESG scores or ratings.

How would this affect businesses? Especially those who might not have considered ESG?

Right, many of us will have heard of ESG rankings and scores.

This might be extremely relevant for investors

as we are seeing an increasing number of investors taking ESG into consideration.

We might see investors lean towards companies with stronger ESG policies.

From what I have gathered it seems to me that the environmental aspect of ESG seems voluntary.

Are there certain situations where companies might be obligated to comply with the E in ESG?

Yes, there are situations where it could actually be mandatory to comply with environmental matters.

I am sure many of us might have experienced this ourselves.

We might find that our consumers or business partners require us to have explicit environmental policies.

Not only are the policies significant but we as businesses are expected to follow through with these policies.

We might find that they no longer want to engage with us if we don’t follow through with these policies.

Additionally, this might also impact our reputation.

On the one hand engaging in ESG policies and as a result receiving a good score or rating could add to our business reputation.

This might prove an appealing factor to draw in consumers, employees, investors and business partners.

On the other hand if we lack ESG policies or run into problems relating to environmental concerns, the misstep could proves costly to our reputation.

Thank you very much for that. Ornsiri could I ask if you can provide us with some suggestions for businesses that want to start undertaking ESG policies.

As Bulin and Nam-Ake mentioned,

ESG has become an essential consideration for today's businesses to plan for and incorporate into the business to ensure that our company develops sustainably.

Not only for the making of ESG policies themselves but also through to the planning and implementation of the policies.

With regards to environmental considerations businesses might first start with analyzing the environmental impact of the production of the product or services it offers.

We will then need to consider if there are any areas where we can reinforce or incorporate environmental protection policies into. This could be regarding reducing emissions or waste disposal.

We may also look to organizations that have been certified for their policies.

For example investors, banks, other financial institutions, creditors, customers and other stakeholders.

As for how we plan these policies and implementation to make them compatible with the business

our team will be back with other video to discuss that.

I would like to thank our three partners for joining us in today's discussion.

In our next video we will be exploring the other elements of ESG, namely the social and governance aspect.

Thank you.

Goodbye.