Singapore
ASEAN Firms Scale Back Decarbonisation Plans Amid Rising Energy Costs
A recent survey reveals that nearly half of businesses in Southeast Asia are delaying sustainability initiatives due to increased energy prices, with Singapore experiencing the most significant setbacks.
Recent findings from a survey conducted by The Business Times and Kantar indicate that close to eight in 10 businesses across Southeast Asia have faced higher energy costs since the onset of the Iran conflict, resulting in significant profitability pressures. As a consequence, about half of the companies in the region are postponing their decarbonisation and sustainability strategies.
Singapore stands out with the highest percentage of firms reporting delays in sustainability efforts, at 29%, compared to the regional average of 20%. In contrast, Indonesia and Vietnam are witnessing more companies accelerating their decarbonisation plans, at 39% and 37% respectively. This divergence may be attributed to Singapore's advanced stage in energy efficiency and decarbonisation, where further improvements are increasingly challenging and costly, according to Professor Johan Sulaeman from the National University of Singapore.
“More businesses are accelerating their procurement of solar and adding battery storage where the site allows it.”Douglas Macfarlane, founder of VHALT
Despite the setbacks, businesses across the region remain committed to transitioning towards low-carbon energy solutions. Many are focusing on productivity-led strategies to navigate cost pressures, with over 60% increasing their investments in artificial intelligence (AI) to enhance operational efficiency. This shift indicates a strategic pivot in how companies view energy, transitioning from an operational expense to a critical enabler of competitiveness.
In Vietnam, while 87% of businesses reported elevated energy costs, only 61% said this has had a negative impact on profitability, which is lower than the regional average of 76%. Douglas Macfarlane, founder of clean energy development company VHALT, noted that Vietnamese firms are increasingly investing in solar energy and battery storage as a response to rising costs.
Furthermore, the survey revealed that 61% of respondents are investing in energy efficiency initiatives, with 66% planning to continue these investments if high energy prices persist. The emphasis on energy-efficient technologies and automation reflects a broader trend where companies are seeking to improve their energy consumption patterns.
“Ong Shu Yi, OCBC ESG analyst, indicated that Singapore companies could be reassessing the timing and pace of further capital-intensive decarbonisation investments amid elevated costs and a more uncertain operating environment.”Ong Shu Yi, OCBC ESG analyst
Analysts, including OCBC ESG analyst Ong Shu Yi, caution that while there may be short-term relief from elevated prices, the uncertainty surrounding the Middle East conflict and ongoing security risks could prolong volatility in energy markets. This has led to a prioritisation of cost efficiency over decarbonisation, with only 9% of ASEAN companies currently placing sustainability goals at the forefront of their business strategies.
Despite these challenges, a significant portion of firms, around 76%, continue to integrate environmental, social, and governance (ESG) considerations into their decision-making processes. As the transition to cleaner energy sources progresses, companies are increasingly favouring mature and scalable solutions, such as rooftop solar installations and power purchase agreements.
“Ultimately, the challenge is not simply to decarbonise the energy system, but to expand it while decarbonising it.”Professor Johan Sulaeman, National University of Singapore
Access to renewable energy sources and procurement options has emerged as a critical need for ASEAN businesses, with 55% of respondents highlighting it as the most important policy support they seek. Analysts suggest that stronger regional connectivity through initiatives like the ASEAN Power Grid (APG) is essential for meeting the growing demand for renewable energy.
As ASEAN firms navigate the complexities of rising energy costs and sustainability targets, the need for a more robust energy infrastructure and policy alignment across the region becomes increasingly apparent. The ability to decarbonise while expanding energy systems will be crucial for maintaining economic growth and resilience in the face of ongoing challenges.