Sustainable Strategies: transition planning at Swire Pacific

CFO Leadership Network (Asia Pacific) Martin Murray, OBE, discusses the important role of the CFO in embedding sustainability into business culture and practice to drive growth, innovation and shareholder value.

In the ever-evolving landscape of the finance sector, the significance of sustainability influencing corporate decisions cannot be overlooked. Equally vital is the role that finance teams must assume in integrating sustainability into a company’s objectives and commitments. As a CFO, it is my role to strengthen the direct link between value, strategic risk management and sustainability – all the while ensuring long-term sustainable value to shareholders.

Swire Pacific Ltd is a Hong Kong based conglomerate, focused on Greater China, which operates through three core divisions: Property (Swire Properties), Beverages (Coca-Cola Bottling) and Aviation (incl. Cathay Pacific). The past year witnessed our businesses navigating through the continuing aftermath of the pandemic, while concurrently experiencing record-high temperatures in 2023, underscoring the global impact of climatic events. Geopolitical tensions further complicated matters, posing challenges to the advancement of sustainability goals worldwide.

At Swire Pacific, we are steadfast in our commitment to pioneering practical sustainable business solutions that foster positive environmental, social and community outcomes – avoiding, where possible, the potential pitfalls of diverging compliance frameworks.

Delivering growth sustainably

Our commitment to sustainability is a strategic imperative aimed at delivering sustainable growth in shareholder value. By investing in sustainable development, we bolster our vision through enhanced innovation and operational efficiency.

We continue to craft roadmaps and transition plans to deliver on our environmental aspirations, delving deep into comprehending climate and nature risks and opportunities, and factoring the cost of carbon and impact of nature into business decisions. We are also exploring what maturity in diversity, equity and inclusion truly looks like, while continuing to invest in our communities through our “Swire Trust”. The sustainable pillars against which we measure ourselves can be viewed here.

We leverage two key tools – the Sustainable Development Fund and the Internal Carbon Pricing mechanism – to embed key sustainability considerations into our financial strategies, budgeting and investment choices. Our pilot Internal Carbon Pricing mechanism combines a carbon fee and shadow price approach, enabling us to allocate funds for additional decarbonization projects, help our businesses determine the potential impact of carbon emissions from investments, quantify carbon risks and enable decision making in line with our net zero ambitions.

Our Sustainable Development Fund provides important financial support to operating companies for projects that yield long-term environmental benefits. With an annual allocation of up to HK$100 million, this fund drives projects that curtail carbon, water, and waste footprints, in line with our overarching sustainability targets and supporting our operating companies since 2016.

These initiatives ensure our sustainability targets are closely aligned with financial decision making, align with global standards and set robust internal processes and controls.

Sustainability values in practice

At Swire Pacific, we demonstrate our dedication to sustainability through concrete actions and tangible accomplishments.

We have made significant progress in lowering the amount of greenhouse gases emitted from specific operations included in our 2030 environmental goals by leveraging innovative technologies, driving operational efficiencies, introducing internal carbon pricing and using renewable energy. For example:

• Our Property Division, Swire Properties,  Swire Properties obtained the top position globally in the Dow Jones Sustainability World Index (DJSI World) 2024 in the Real Estate Management & Development Industry category, rising from second place last year. It also became the first Hong Kong corporation to issue an RMB-denominated public green bond, known as a "green dim sum bond".
• In 2023, Swire Properties pioneered new ground as an early adopter of the Taskforce on Nature-related Financial Disclosures which will help companies integrate nature-related considerations into their investment decisions and business operations.
• In our Beverage Division, Swire Coca-Cola has successfully piloted and begun scaling advanced technology that significantly reduces energy and steam requirements for its sparkling production lines in the Chinese Mainland. Progressing towards its 100% renewable energy goal, a quarter of its electricity consumption in 2023 was derived from renewable sources.
• In our Aviation Division, HAECO continues to expand its solar panel installations at the Hong Kong International Airport, with plans for over 9,000 panels generating four megawatts annually.
• The Cathay Group is actively working to rebuild its passenger and cargo businesses, managing an increase in aircraft emissions by investing in modern, fuel-efficient aircraft. Its Sustainable Aviation Fuel agreements and coalitions demonstrate a commitment to low-emission aviation.

Embedding values into action

To ensure the alignment with all stakeholders, sustainability needs to be embedded into the company’s corporate culture, vision and mission statement.

To catalyse sustainability efforts, business leaders can start by:

• Setting clear sustainability goals aligned with their company values;
• Engaging with sustainability networks and resources (eg Accounting for Sustainability, World Business Council for Sustainable Development and the UN Global Compact can provide valuable insights and guidance);
• Addressing potential objections by highlighting the financial benefits of sustainability; showcasing successful case studies to help build internal support; and finally
• Making the most out of reporting tools and frameworks to track progress and communicate achievements transparently. 

We must use our networks to ensure we maximize the value proposition at every point and avoid well-meaning but inefficient box-ticking exercises.

To this end, we have set up a Group Sustainability Committee, chaired by the Group CFO, which is made up of the core divisions’ CFOs, the Chief Risk Officer and our Sustainability Heads at both the Head Office and Operating Company level. This body provides guidance and takes direction to and from the Board via the Audit Committee. It also provides healthy discussion between the C-suites and sustainability practitioners and a sensible guide to materiality in what is becoming a more regulated environment.

In this context, finance teams driving the implementation of mandatory reporting, play a key role in the identification of topics that are financially material to investors and which disclosures should be based on, as required by IFRS Sustainability Disclosure Standards. Upskilling finance teams and collaboration with other functions are therefore fundamental to ensure that the financial and impact materiality assessment processes result in disclosures that provide decision-useful information to the intended users and stakeholders.

Embracing sustainability as a key driver of value

Sustainability is not just a choice but a necessity for businesses today. Embrace sustainability as a driver of value through growth and innovation. As leaders, you hold the power to integrate sustainability thinking into overall business culture. Let sustainability be a guiding principle in value creation decision making, paving the way for a more sustainable and prosperous future.