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APAC shifts towards regenerative sustainability amidst execution gaps

Firms face challenges bridging the gap between high sustainability ambitions and practical execution.

The concept of regenerative sustainability is starting to reshape firms in the Asia Pacific amidst the challenge of climate change to economic growth. What makes this approach more viable and attractive than conventional sustainability initiatives is the promise of a more resilient strategy over time.

Whilst industries regionwide are making progress towards a net zero target, the regenerative approach emphasises system-wide transformation towards net positive impacts, including margin protection, financial performance, operating cash flow, decarbonisation, circularity, social impact, supplier diversity, manufacturing adaptability, and logistics flexibility.

Kearney’s study defined a regenerative business as one that seeks to achieve net positive impacts by focusing on the wider system within which it operates, unlike traditional sustainability which focuses more on minimising negative impact.

In the APAC region, about 40% of firms use a regenerative approach with sustainability, with about 70% of them sharing the proactive mindset of generating net-positive outcomes for future generations.

“With this mindset, the region is well-positioned to tackle the challenges related to climate change.” Kearney said in its “Regenerate—an Asia Pacific study on sustainability and beyond” report.

Moreover, about 51% of firms see the potential and long-term growth the paradigm shift offers. This includes reducing costs, increasing revenue, boosting employee productivity and well-being, and gaining investments.

Most business leaders also share a positive outlook on regenerative sustainability, with 86%  believing that organisations can achieve net-positive impacts within the next decade.

Ambition and execution gap

Amidst APAC’s optimism in achieving regenerative sustainability, one key challenge firms face is the ambition-execution gap which highlights the discrepancy between high sustainability ambitions and the practical execution of these initiatives.

“Diverse interpretations of net zero within organisations might contribute to confusion and inconsistencies when defining net zero targets,” Kearney’s study said.

A regional variance was observed as a majority of businesses in Indonesia (92%) and India (91%) have set targets compared with just 65% in Japan, whilst more than one-fifth of organisations remain unaware of their net-zero targets.

“This gap between ambition and execution not only hampers the effective implementation of near-term sustainability initiatives but also undermines the potential for taking a regenerative approach to sustainability, thereby reducing the potential for long-term value creation.” the report added.

This has been observed as about 55% of APAC businesses perceived sustainability trends as having a greater influence on short-term decisions than their long-term strategies.

Although 91% of businesses claimed to have a sustainability framework, more than half (52%) of them have not set their targets for areas of significant impact.

Another factor contributing to the gap is the lack of alignment between sustainability ambitions, and a company’s corporate purpose and values.

Statistics-wise, about three-quarters, or 75% of executives admitted that their sustainability ambitions greatly involved meeting societal expectations and keeping up with competition rather than aligning them with corporate vision.

Transformative mindset

Despite the challenge, Kearney’s study reiterated that closing the gap between ambition and execution will require a transformative change in mindset, including a new approach that encourages innovation, accountability, and resilience.

This new mindset involves communicating visions for systemic change, mapping systems to identify leverage points, setting regenerative strategies, reviewing business models, and defining and delivering value through regenerative practices

The report observes this with 24% of firms incorporating sustainability into their business strategies and driving initiatives at all organisational levels, specifically for Thailand and Indonesian companies in the automotive, transportation, and industrial sectors.

In addition, about 2,500 companies in the region have implemented Science Based Target initiatives (SBTi) in establishing their measurable short and medium-term targets, whilst long-term targets are still being developed.

“Building regenerative business models demands courage and responsibility to nurture the next wave of talent whilst generating positive community and societal impact.” The report added.

Technology adoption also provides valuable opportunities in redefining business processes and supply chains whilst building resilience centred on forging long-term partnerships and value generation.

APAC businesses mostly acknowledge this adoption, as two-thirds believe that technological advancements would accelerate their decarbonisation strategies.

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