Thailand’s boardrooms are bringing sustainability to the top

Author: Dr. Suphamit Techamontrikul
Chairman of Audit & Assurance | Deloitte Thailand

As the global climate crisis continues to unfold, companies are acknowledging the high stakes of sustainability, not only for the benefit of the environment, but also for their own productivity and competitiveness. Scrutiny towards business activities are arising across the ecosystem, both internally and externally. With the effects of the pandemic winding down, it is now time for the board to revisit their policies covering sustainability and bring it back to the forefront of decision making.

One of the overarching goals at the 26th UN Climate Change Conference (COP26) was to work collectively towards a global net-zero target by mid-century. This led to countries coming forward with ambitious emission reduction targets, including Thailand’s commitment to reduce greenhouse gas emission by 20% from the business-as-usual course by 2030, and reach net-zero carbon emissions by 2065. Businesses in Thailand are no stranger to the adverse effects of climate change, being susceptible to flooding and droughts, and already seeing the worst floods in decades during 2011, causing over 100 billion THB in damages.

ESG matters are generating more conversation than ever now in corporate boardrooms. Board members are seeking out greater understanding of their business ecosystems, learning who their stakeholders are, and their expectations. Issues such as climate change will not only directly affect many business operations, but also indirectly through other markets as well. These implications need to be recognized so that the business ensures that it has considered impacts across all angles. Lack of attention to changing consumer and commercial expectations, and the actions of market-leaders, can threaten the organization’s ability to operate.

Establishing the right tone straight from the boardroom will help the agenda properly develop throughout the rest of the organization. It will foster open and honest discussion about what has been, and what could be done, as well as encourage transparent reflection on how the board can do better in the future. Boards are in a unique position to connect sustainability with corporate purpose and strategy. To ensure accountability, boards should clearly define the oversight responsibilities across the board itself and its committees. When setting sustainable strategic direction, the board should consider the company’s core values, and if there are any areas that must be prioritized for long-run success. There is growing consensus that ESG success depends on a well-defined strategy aligning with purpose and strategic direction. Stakeholders and investors want to see that the board is actively engaged in integrating ESG into long-term strategy.

Board oversight is central to investor trust and confidence in an organization’s future performance. Thailand’s recent enforcement of ESG disclosures for listed companies in the ’56-1 One Report’ gives an advantage to investors as they are provided with greater information and opportunities for comparison between organisations to aid their decision making. This is an opportunity for boards to better communicate to investors and other stakeholders, demonstrating their progress on sustainability, and also means that board and audit committees need to stay on top of any new disclosure regulations. Notably, Thai listed companies are also looking towards international criteria to show their commitment to sustainable development, which saw 25 Thai companies (the highest in ASEAN in 2021) selected for the Dow Jones Sustainability Index (DJSI) for emerging markets, out of which 13 were also selected as part of the DJSI World list.

Board members should consider if the organization has access to the necessary data and tools to further assess and discuss current issues and risks related to ESG areas, and to be able to analyze current performance and recognize areas of improvement. This also means that the board must have the capabilities to evaluate and adopt digital solutions.

However, for many organisations, there is still a disconnect between the ambitions and the actions that are taken. Active collaboration between the board and management will help translate ESG risks and stakeholder expectations into the business context, and establish effective measurement and reporting practices that are understood throughout the organization. Monitoring goals and metrics such as stakeholder assessments and KPI’s are key indicators of whether the strategies put in place are truly aligned with company objectives, and if they will have a lasting impact.

Thailand’s pledge to curb harmful emissions has heightened interest and investment incentives towards markets such as renewable energy and EV production. However, long-lasting sustainability means that every organization should do their part. Today’s companies are being continuously challenged into developing sustainable strategies, business models and at times new products and services, to not only fight issues such as climate change, but also to ensure resilience in the long term. Given the growing consensus around ESG performance tied to company value, boards now have a great deal to consider. Sustainability topics have clearly made their way up, and board members now play a crucial role of placing it on the top of their agendas.