PwC sets up a Center of Excellence in Singapore to usher in the ESG wave

This is a featured interview by Lai Oi Lai (吕爱丽), Business Correspondent at Lianhe Zaobao, of Marcus Lam, our Executive Chairman, and was first published on Lianhe ZaoBao on 9 August 2021.

Marcus Lam believes that the COVID-19 pandemic has raised more awareness towards ESG issues. There are several events that highlighted the importance of these issues, one of which is supply chain disruption.

"In the past you took it for granted. No matter what you want in this world, you will get it. This pandemic has made us realise that this is not necessarily the case."

Marcus Lam

Environment, Social and Governance (ESG) will be the next wave sweeping through the audit and assurance industry.

PwC Singapore announced in July that the firm will invest 50 million to expand its business in the next five years. The establishment of an ESG Centre of Excellence is one of its plans to enhance the company's capabilities in this area.

Marcus (50 years old), who officially took over as the Executive Chairman of PwC Singapore on July 1, intends to establish a team which will initially comprise 30 people and then gradually expand to include more than 200 people.

PwC (globally) made an announcement in June, in which it pledged to invest US$12 billion (approximately S$16.2 billion) to hire 100,000 more people by the year 2026. These investments are aimed at providing better consulting services to companies facing increasingly strict scrutiny from investors on issues such as data privacy, diversity, and sustainable development.

Marcus believes that the COVID-19 pandemic has raised more awareness towards ESG issues. There are several events that highlighted the importance of these issues, one of which is supply chain disruption.

"In the past, you took it for granted. No matter what you want in this world, you will get it. This pandemic has made us realise that this is not necessarily the case."

Secondly, it’s the social factor. Although he has never been through quarantine, Marcus witnessed the significant mental stress his daughter, friends and colleagues had to endure during quarantine.

"In the past, we all talked about mental health. You didn't realise that maintaining mental health was not easy until you were actually being quarantined."

The COVID-19 pandemic has also disrupted the “work from office” model. In the one-and-a-half years till date, PwC Singapore has completed audits for clients online. When ‘working from home’ or ‘remote office’ becomes a norm, companies will have to establish a more comprehensive support system to help employees adjust to changes.

Vital to the survival of country and enterprise

All of these are vital to the sustainable operation of an enterprise, a society and a country. It is then not surprising that ESG receives so much more attention from the public now.

"Now when you ‘throw a stone on the road’, you will find that everyone is discussing ESG," said Marcus with a slight dramatic flair.

He pointed out that five years ago, Singapore used to think that a small country like ours will have very low carbon emissions and therefore we believed that our contribution to global carbon emissions was negligible. However, today Singapore has put forward a clear carbon reduction strategy.

"Why do we do this? As a country, if you don't do this, multinational companies will not come here to invest," he said.

Every company must be accountable to its shareholders. Marcus said that if society as a whole agrees that carbon emissions and climate change is a problem, then companies will face pressure to respond to queries coming from everywhere, including those from shareholders, stakeholders and social activists.

"If a client asks, when buying a product, how much carbon did you emit? The company will realise then that it is best to do something. When the entire ecosystem starts to ask, this issue will become more prominent."

If MNCs do not come here to invest anymore, it will directly impact the local job market and our competitiveness in a negative way.

Marcus said: "The second reason why Singapore must do this, is simply that the jobs and opportunities in this field are actually remarkable."

In the past, companies mainly focused on getting assurance on financial figures in annual reports. Marcus expects that in the future there will also be a need to get assurance on non-financial reporting.

"People will start to ask, how can we ensure that a company's drive to reduce carbon emission is real? How much has the carbon footprint been actually reduced? What standards and procedures have been adopted?"

Help companies implement ESG

Marcus emphasised that auditing and attestation are only part of the whole equation.

"More importantly, how do we help our clients achieve sustainable development, provide them with sustainable development advice, assist them in evaluating the entire supply chain, identify the most important elements for the company and stakeholders, and help them see strategy through to execution?"

The Singapore Exchange (SGX) is one of the first exchanges in Asia to implement sustainability reports for listed companies. SGX introduced this approach in the year 2016 based on the principle of ‘comply or explain’.

In Marcus's view, it is no longer appropriate for companies to issue sustainability reports just for the sake of compliance.

He said, in the past, individual companies only had to confirm which ESG elements were directly relevant to them.

"In the future, companies must examine from the perspective of the entire industry. Whoever can respond faster and better will have an advantage."

This is not an overnight change, but a gradual process. Change is not limited to the environmental aspect, but the social aspect will also gain more and more importance.

During the pandemic, companies were suspected of exploiting employees, causing disputes in some markets. All these attracted global attention. Some call it "modern slavery". Marcus pointed out that some major manufacturing countries have been particularly affected.

Take Apple for instance. The company reviews their suppliers and expects them to provide employees with better living conditions and wages, and to take care of their welfare. If the supplier is unable to do so, the company will transfer their orders to other manufacturers.

Marcus said: "If you are one of my main suppliers, I can request that you do so, because my products are sold to the world, and consumers will care about these issues. It may not be apparent now, but it will definitely be prominent in the future."

Singapore still lacks ESG talent

If PwC were to recruit environmentalists, climate risk experts, and even professionals dealing with labour and mental health issues, the world should not be surprised.

However, Marcus admits that Singapore still lacks ESG specialist expertise.

"For a start, we have to recruit from outside. In this field, the American, British and European countries are more advanced. We must bring these perspectives here to train our people."

In addition, PwC provides internal staff with the opportunity to change career pathways within the organisation. Marcus revealed that some management level talent have switched to the ESG field.

Besides ESG, PwC Singapore’s 50-million-dollar 5-year plan includes digital transformation.

Marcus anticipates that artificial intelligence and blockchain will be the two important technologies that industries will deploy in the future.

PwC currently has artificial intelligence pilot projects in other markets. Marcus said that once the timing is right, relevant technologies will be introduced to Singapore. As more and more data is injected into this AI system, it will become smarter and can assist auditors in detecting abnormalities that may not be easy to spot.

Currently, the company does not have any pilot plans for blockchain but Marcus is optimistic about its application potential.

"Simply put, blockchain is the technical ability to trace from the source to the end. It guarantees that what you see and hold does come from somewhere."

The most direct example is supply chain management. Marcus believes that PwC can provide verification services for suppliers using blockchain in the future.

Whether it is improving ESG capabilities or promoting digital transformation, talent is still key. After taking office, Marcus promised to promote a total of 10 new partners internally or hire from outside every year.

"What’s important is not numbers. Numbers are just symbolic. When we have new partners on board, this organisation can become better. They represent new ideas, new hopes, and new dreams. If we continue to do this, then I can safely say that we will be able to maintain the top position in Singapore."

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Marcus Lam

Marcus Lam

Executive Chairman, PwC Singapore

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