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Insights from the ASEAN-5countries

July 2013

Pulse check on climatechange

TBC

Contents

1

Foreword 3

About this survey 4

Climate change – Key driver to corporatesustainability

5

How do companies fare in climate changemanagement?

6

What is stopping companies from climatechange reporting?

7

Case study: Measuring carbon emissions asthe first step to strategically reduce carbonemissions

9

Key lessons for climate change management 11

Conclusion 12

PwC Malaysia’s sustainability team 13

Contact us 15

PwC

3

It’s time to act on climate change.

The ASEAN region is home to some ofthe world’s most diverse landscapesand ecosystems, making it particularlyvulnerable to the impacts of climatechange with much of the populationand infrastructure located in coastaland river delta areas. Furtherexacerbating the issue, energy relatedemissions are expected to double by2030 due to the region’s aggressiveeconomic development plans.Sprawling megacities and expandingagricultural lands lead to land useconversion and forest loss, which willcontinue to be a major source ofgreenhouse gas emissions.

The business community within theregion is starting to realise that thereare risks to be alleviated andopportunities to be seized byaddressing climate change. Preparingfor the future will help companies tonot only enhance their brand andreputation but also create new valueand revenue opportunities, giving thema competitive edge both regionally andglobally.

Sundara RajConsulting Leader

Sustainability and Climate ChangePwC Malaysia

Foreword

This report highlights some interestingperspectives on the maturity of climatechange reporting in the region based ona survey we conducted of a largenumber of companies in the ASEANregion. Furthermore, this report alsohighlights a case study on how PwCassisted a global conglomerate’s effortto measure their carbon footprint andidentifying reduction initiatives.

We hope you find this report insightfuland welcome opportunities to engagewith you further. If you have anycomments or questions, please do nothesitate to contact one of our regionalsustainability experts.

4

About thissurvey

Are companies acknowledging theimpact of climate change and howare they managing it? Our surveysought to understand the keydriving forces behind thecorporate climate change efforts.

We aimed to determine the levelof disclosure for climate changereporting and understand thereasons for non-disclosure.

This report summarises theresults of our survey and presentsour view on the key issues arising.The ASEAN-5* countries are:Malaysia, Thailand, Indonesia,Philippines and Vietnam.

*ASEAN-5: Association of Southeast AsianNations’ five largest developing countries.

The survey was conducted online from August 10 to September 21,2012. The online survey link was distributed to prominent companiesacross different industries in Malaysia, Thailand, Indonesia,Philippines and Vietnam. We invited over 700 companies andreceived 211 responses. These were analysed and the findings arepresented in this report.

Our Approach

32%

15%29%

7%

17%Less than 500

500 - 1,000

1,001 - 5,000

5,001 - 10,000

More than 10,000

30%

36%

9%

25% Privately owned / Partnership

Public-listed

Government-linked

Multinational Corporation

Country ofoperation orheadquarter

Number ofemployees

Ownershipstructure

25%

27%15%

20%

13% Malaysia

Thailand

Philippines

Vietnam

Indonesia

Climate change – Key driver to corporatesustainability

5

Under the influence of globalclimate change, Southeast Asiais facing severe threats causedby natural disasters over thelast decade such as droughts,floods and tropical storms. Asa result, millions of people andbusinesses were affected. TheWorld Bank estimated aneconomic loss of USD 45.7billion from the 2011 floodingin Thailand making it one ofthe costliest natural disasterevent.

At the 2011 17th Conference ofthe Parties (COP 17) inDurban, South Africa, it wasforecasted that globaltemperature will rise by 3.5°Cby 2100 based on the emissionreduction targets set byinternational heads of stateinstead of the 2°C risepredicted earlier.

This means that the climatechange impacts predicted forthe 2°C rise, such as changes inweather patterns, will beexacerbated and climaterelated disasters will also bemore frequent. For SoutheastAsia, key economy sectors suchas agriculture, manufacturingand tourism may be affected.

*Source: The World Bank SupportsThailand's Post-Floods RecoveryEffort". World Bank. 13 December2011. Retrieved 25 January 2012

Climate change has become a hot sustainability topic in the corporate agendain the region. Our survey highlighted the key factors driving sustainabilityand the result shows companies are already taking a keener interest on therisks and opportunities of climate change impacts on their business.

Competitive advantage and brand enhancement are currently the topsustainability drivers and will remain to be the top drivers over the next fiveyears. Corporations can achieve this by developing low-carbon businessstrategies and building a carbon neutral image.

However, companies are moving beyond compliance, agreeing that in thenear future, energy and carbon related costs will be the number onesustainability driver in the region.

While climate change weaves its effects into companies’ corporate strategy,we also looked at how these companies fare in terms of measuring theirgreenhouse gas (GHG) emissions and reporting on climate change in thefollowing sections.

Top 5 sustainability drivers in ASEAN

Competitive advantage

Product / serviceinnovation

Energy & Carbon-related costs

Brand enhancement Competitive advantage

Energy & Carbon-related costs

Buyer / customerexpectations

Brand enhancement

Currently In 5 years

Product / serviceinnovation

Compliance tolegislation

1

2

3

4

5

6

Nearly 30%of the companies set targets fortheir GHG emission reduction

Less than 50%of companies measure andmonitor their GHG emissions

Only 26%of the companies disclose GHGemissions externally

“You can’t manage what you don’t measure.”

Measuring and monitoring GHG emissions are first steps to managing acompany’s carbon footprint. Initiatives to measure and monitor GHGemissions enable companies to manage and communicate their carbonperformance to their stakeholders. As GHG emissions can strongly relate toenergy consumption, companies can identify cost savings initiatives and setenergy efficiency and emissions reduction targets.

Although climate change and carbon emission aremoving up the corporate agenda, our survey showsthat 52% of the companies surveyed do not measureand monitor their GHG emissions. This mayindicate a lack of awareness on climate change risksand opportunities or corporate GHG accounting andmonitoring methodologies. About 20% of therespondents feel that it is difficult to measure theirGHG emissions and 12% do not know how to trackthem. As a result, companies that do not measuretheir emissions miss out on potential cost savingsand growth opportunities.

Once a company has measured its GHG emissions,it is able to establish an emissions reduction targetand work towards attaining it. Setting a target basedon an accurate and thorough inventory of GHGemissions communicates a company’s commitmentto managing its carbon footprint. With countriespledging a reduction in carbon emissions andrecently developing climate-related legislations, theonus is on industries to contribute to their nationsemissions reduction. However, our survey showsthat only 28% of the companies set targets for theirGHG emissions reduction. Establishing clear,achievable, but ambitious targets can save moneyfor the company, motivate staff and help drive long-term strategies. Examples of initiatives that canbring about cost savings are: retrofitting oldtechnology with more efficient ones and recoveringmethane from wastewater treatment to produceheat and power.

In terms of disclosing GHG emissions, only 26% ofthe respondents disclosed their performanceexternally while 15% are planning to publish theirresults in the near future. Meanwhile, 8% of therespondents do not wish to disclose their GHGperformance externally.

How do companies fare inclimate change management?

7

Companies are not reportingbecause it is not a regulatoryrequirement

Our survey highlighted that 26% donot measure and 44% do notdisclose their GHG emissionsbecause it is not a regulatoryrequirement. Without guidelinesand direction set by regulators,most companies have no immediatemotivation to change.

Of the five countries surveyed, onlyregulators in Indonesia, Malaysiaand Philippines have initiatives inplace that promote the disclosure ofGHG emissions and even so, theinitiatives are not robust enough toensure proper management of thecompanies’ emissions.

We also found that respondentsfrom the Philippines have thehighest percentage of carbondisclosure. This could be driven bythe Philippine Greenhouse GasAccounting & Reporting Program(PhilGARP), a voluntary program

launched in 2006 to helpcompanies prepare GHGinventories and reduce GHGemissions.

Malaysia is likely to follow suit withthe development of a nationalvoluntary GHG reportingprogramme called MYCarbon. Theprogramme is anticipated to beimplemented in late 2013 andparticipating companies mayreceive incentives such as taxbreaks and awards.

Companies will need to prepare forfuture regulatory changes. Recentdevelopments in the region includeplans by Vietnam and Indonesia toset up domestic carbon marketschemes and Vietnam and Thailandto launch listing requirements fortheir stock exchanges.

What is stopping companiesfrom climate change reporting?

Othersare concerned that potentially sensitiveinformation could be released or areawaiting establishment of propermanagement and monitoring systems

6%are not confidentof disclosing theiremissions

44%are not disclosingand 26% are notmeasuring becauseit is not a regulatoryrequirement

11%are seekingassurance on theirGHG emissionsbefore they disclose

17%feel that it isdifficult tomeasure theirGHG emissions

12%do not know howto track theirGHG emissions

18%feel theirstakeholders arenot interested intheir GHGemissions

8

Lack of awareness isholding back carbonreporting

While regulation seems to bethe key factor in driving carbonreporting, the lack of GHG andclimate change awareness in theregion has also affected thenumber of companies reportingtheir GHG emissions. Thisbecomes apparent when 18% ofthe respondents cited that theydo not disclose their GHGemissions because they thinkthat their stakeholders wouldnot be interested.

However, stakeholders areincreasingly interested in howcompanies are managingclimate change. In the 2012Carbon Disclosure Project(CDP) Supply Chain Report,39% of its members highlightedthat they are prepared todeselect companies from theirlist of suppliers in the future ifthey do not employ good carbonmanagement practices while30% factor climate change intotheir evaluation of suppliers.

Companies are also lacking theproper knowledge andcapabilities as 17% feel that it istoo difficult to measure theirGHG emissions, while 12% ofthe respondents cited they donot know how to track theirGHG emissions.

Companies are notconfident with the integrityof their carbon data

The other factor preventingcompanies from disclosing theirGHG emissions is because theyare not confident with theintegrity of their carbonemissions measurement with6% of the respondents cited theyare not confident to disclosetheir emissions and some arewaiting for the establishment ofmore robust management andmonitoring systems.

Nonetheless, the integrity andaccuracy of carbon data can beensured through verification.Companies are alreadyacknowledging that anindependent third party

assurance can provide greatercredibility to the data beingreported. However, only 11% ofthe respondents have soughtindependent assurance on theircarbon data before disclosing itexternally.

% of companies measuring theirGHG emissions by country

% of companies disclosing theirGHG emissions by country

31%

42%

14%17%

33%

0%

10%

20%

30%

40%

50%

Perc

en

tag

e

63%70%

26%36%

59%

0%

20%

40%

60%

80%

Perc

en

tag

e

9

The ever changing and evolvingglobal business environmenthas governments, investors,shareholders and the publicincreasingly concerned andinterested in organisations’commitment to, and efforts in,environmental and socialinitiatives.

A diversified conglomeratebased in Malaysia recognisedtheir vulnerability as they didnot know what their carbonemissions were and had nostandard way of calculatingtheir emissions across thegroup. With operations in highimpact industries, this wasespecially risky as they were notin a position to estimatepotential financial risks underfuture climate change policiesand regulations.

Recognising the need to stayahead of competitors andmanage risks, the companyengaged PwC to work withthem to develop a tailoredcarbon inventory calculator andembed an appreciation andunderstanding of the relevanceof carbon throughout theirorganisation and facilitate theidentification of reductionopportunities and reductiontargets.

Project Objectives

Operationally, there were key benefits for embarking on this journey. Bytaking stock of their carbon emissions, the conglomerate would be able to:

• Take position on climate change and engage governments on policies inmajor countries where they operate currently and in the future

• Identify key opportunities for carbon reductions and the associatedcost savings to be feed into business strategies going forward

• Build and develop stronger stakeholder relationships by enablingreporting to, and dialogue with, their key stakeholders aroundemissions and risks

Approach

The project was divided into two phases.

Project Outcome

In phase 1, the carbon data were analysed and broken down into variouscomponents. Top emission sources for each site and business unit and thetop emitters by country, business unit and site were also identified. As aresult the conglomerate were able to have an in-depth look at their carbonimpact on a local and global scale.

Phase 1 - Establishing acarbon inventory baseline

Phase 2 – Identifyingstrategic carbonreduction initiativesfor each business unit

• This phase involved developinga global carbon inventory forthe conglomerate coveringseven countries and alldivisions using 2009 as a baseyear

• This phase involved identifyingstrategic emissions reductionopportunities, developing astrategic carbon reductionroadmap and develop guidelineson setting carbon targets.

Case study – Measuring carbon emissions is thefirst step to strategically reduce carbon emissions

0

10

20

30

40

50

Div A Div B Div C Div D Div E Div F

tCO

2-e

('0

00

)

Scope 1 Scope 2 Scope 3

0

500

1000

1500

2000

2500

3000

Pu

rch

ase

del

ectr

icit

y(P

roce

ss)

Ca

rs

Ele

ctri

city

gen

era

tio

n

Lig

ht

go

od

sv

ehic

les

Oth

ers

tCO

2-e

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Site A Site B Site C Site D Site E Site FtC

O2-e

/buil

t-u

par

ea(m

2)

Diesel,48.69%

LPG,18.31%

Petrol,33.01%

10

Emissions byfuel type:Emissions werecategorised by fueltype, which helpedin identifyingpossible fuelrelated reductionopportunities

Emissions bybusiness unit:Total emissionsfor each businessunit werecalculated andanalysed by scopeto compare atgroup level

Top emissionsources:The top 5 carbonemission sources foreach site andbusiness unit wereidentified andanalysed. This datawas used as a basisfor carbon reductiontargets in Phase 2.

Scope 1 Scope 2 Scope 3

Carbonintensity by siteand businessunit:Standard unitswere identified tonormalise data,enablingcomparison ofemissions data bysite, business unitand with otherorganisations.

3.7 Prioritisation matrix of Division A’s initiatives (PI)

SD Property Phase 2: Strategic Carbon Reduction Opportunities Report

1. Details of calculated NPV, carbon reduction potential and implementation effort for each initiative are listed in the Appendix

Fin

an

cia

lAtt

ra

cti

ve

ne

ss

Implementation Effort

Lo

wH

igh

Difficult Easy

10y

rN

PV

Legend

Circle size reflects potential carbon reduction

P2

P7

P2 – Install VRVunits forA/C splitunits

P7 – Harness windpower from coolingtower exhaust

NPV = 0

P11

P11 – Install a VPO

P8

P8 – Set A/Ctemperature at 24degrees Celsius

P10

P10 – Install VSDson AHUs andpumps

P9

P9 – Replace exitsigns and emergencylights with LEDs

P1

P1 – Install energyefficientlighting

Considered for

short term orimmediate

implementation.Some are already

underway

Included for short termimplementation at thedivision’s request

Considered for

medium termimplementation orpilot studies

Dropped initiatives: Cannot be estimated / not applicable

Install double glazed windows

P13 Install l ight motion sensors

P14 Install temperature sensorsfor A/Cs

P15 Install an Energy Power Management System(EPMS)

P12

Potential carbon reduction initiatives were identified andmodelled to estimate total potential carbon emissionsreduction and financial attractiveness. The initiatives werethen prioritised bases on criteria including potentialcarbon reduction, financial attractiveness andimplementation effort.

Strategic reduction initiatives were compiled into ahigh level roadmap to identify potential reduction inthe short, medium and long term timeframes at thedivision level. These enabled these enable them to setrealistic targets that were then consolidated at thegroup level.

Key lessons for climate change management

11

Be prepared for future regulatory changes.Governments in the region are beginning to take a serious look atmitigating effects of climate change. Companies should start thinking ofpotential financial opportunities and risks under future climate changepolicies and regulations and take action to address these issues.

Action speaks louder than words.Saying that one is committed to climate change reduction is one thing;actually doing something to reduce climate change impacts is a wholedifferent ball game. Companies should always be transparent with theirgoals, reduction strategies and their climate change reporting in order toeffectively demonstrate their commitment.

Start measuring and monitoring it.Emissions data help companies understand the impacts of their businessactivities on climate change. Development of a carbon emissions inventoryshould follow the five principles of completeness, relevance, accuracy,transparency and consistency.

Turn data into actionable information.Once emissions data collection and visualization is in place, companiesshould use this information to monitor their emissions performance andidentify opportunities, as well as use the data as a tool in decision-making for the reduction of climate change risks and associated costsavings.

Keep track.Climate change and emissions reporting are most beneficial when it isclear and comparable, with supporting data. Companies should keeptrack of their performance and summarise against targets to gaugeprogress in climate change initiatives. If this is absent, responsiblecompanies are missing an opportunity to differentiate themselves andstakeholders are unable to make comparisons of management qualityand performance improvement.

12

Conclusion

Companies in the region areacknowledging the risks andopportunities of climate change.Energy and carbon costs havebeen identified as a key driverfor companies to report onclimate change in the nearfuture.

However, due to lack ofregulations, awareness androbust monitoring systems,many companies are yet tomeasure and report on theirGHG emissions. Even thoughthere are no regulations in theregion to mandate companiesfrom reporting on climatechange, many governments areplanning to have nationalpolicies in place to encouragecompanies to report their GHGemissions such as theMYCarbon programme inMalaysia.

Nonetheless the case studyshows that there are many otherbenefits to reporting on climatechange such as developingstronger stakeholderrelationship, preparing forinternational compliance andrealising operational costsavings.

PwC Malaysia’s Sustainability Team

13

At PwC, we put strategic thinking at the heart of sustainability, andsustainability at the heart of corporate strategy

We can help you understand which areas pose the greatest sustainability and climate change risks to yourbusiness, form strategies to address them and support you through the necessary organisational changes andreporting processes.

Our core range of services include:

Governance, risk andcompliance

Working with you to setup or realign yourstructure, policies, orprocedures to reducereputational riskand ensure compliance

Supply chain andoperations

Understanding andaddressing sustainabilityimpacts in the supplychain to improveyour performance

Assurance andreporting

Assisting you with non-financial informationframeworks, reportingand assurance, furtheringefforts to influencestakeholders trust

Tax and the regulatoryenvironment

Assessing your exposureto environmental tax andregulation while advisingon relevant incentives orsubsidies to optimise yourtax position

Strategicsustainability

Generating, assessing oraligning yoursustainability strategy tomake the most ofyour sustainableinitiatives

Climate change andcarbon management

Helping you anticipatechanges in markets andpolicy, as well asmanaging climate changerisks and respond toopportunities

The Malaysian, Thailand and Indonesian firms are GRI-certified training partners.Being a Certified Training Partner enables the firms to deliver training on how toreport effectively based on the GRI Reporting Framework.

Global Reporting Initiative

14

Our team has a blend of skills and experience, gained across diverse sectors

PwC Malaysia has an experienced team of Sustainability and Climate Change professionals who have a range oftechnical skills and industry knowledge. The team has considerable sector experience across the following: Retail& FMCG, Banking & Financial Institutions Government & Regulators, Telecommunications, Oil & Gas,Plantations, Property and Automotive.

Elaine Chan

Manager

Elaine specialises in climatechange and carbon inventorydevelopment with deepexperience in the Plantation,Property and Governmentsectors.

Adelene Anthony

Manager

Adelene is a risk, complianceand environmental duediligence expert withparticular experience in theOil & Gas, Shipping andAutomotive sectors.

Rashyid Anwarudin

Associate Director

Rashyid leads climate change& carbon management,assurance & reporting andtax & the regulatoryenvironment. Rashyid is aGRI certified trainer.

Yvonne Au Yong

Manager

Yvonne focuses on strategyand has experience instrategic sustainability and isthe east region champion ofPwC’s global sustainabilitystrategy framework.

Jack Cunningham

Associate Director

Jack leads strategicsustainability services,governance, risk &compliance, supply chain &operations, Board- & senior-management engagement.

Natasha Yap

Manager

Natasha focuses onsustainability benchmarking,impacts, and frameworks withexperience across Telco andFinancial sectors. Natasha is aGRI certified trainer.

15

Jack Cunninghamjack.cunningham@my.pwc.com+60(3) 2173 0621

Rashyid Anwarudinrashyid.anwarudin@my.pwc.com+60(3) 2173 0956

Malaysia

Rosalind Yunibandhurosalind.yunibandhu@th.pwc.com+66(2) 344 1326

Thailand

Nguyen Viet Thinhnguyen.viet.thinh@vn.pwc.com+84(4) 3946 2246 (ext. 1604)

Vietnam

Rob Danielrob.daniel@id.pwc.com+62(21) 5212901, 90897

Indonesia

Gene Alfred Moralesgene.alfred.morales@ph.pwc.com+63(2) 845 2728 (ext. 3003)

Philippines

Contact Us

16

PwC firms provide industry focused assurance, tax and advisory services to enhance value for their clients. More than 169,000 people in 158countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspective and practical advice. Seepwc.com/my for more information.

© 2013 PricewaterhouseCoopers Advisory Services Sdn Bhd. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopersAdvisory Services Sdn Bhd which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separatelegal entity. Please see www.pwc.com/structure for further details.

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