“We shouldn't talk about green products or sustainable products. Instead, we should talk about normal products and products that destroy the world. This is a narrative shift we need to work towards.” — Assistant Professor Simon Schillebeeckx

In Brief

1. A new generation of entrepreneurs is tackling sustainability head on, by incorporating business models and digital tools that allow them to build a thriving enterprise while also creating a positive impact on the world.
    
2. Many of these start-ups are emerging in Southeast Asia, and are demonstrating that problems of valuation, coordination and trust, access and reach can be overcome by using the right innovative technologies.
    
3. Southeast Asia’s diversity makes it fertile ground for innovation in the sustainability space, but only if governments and businesses work together to tackle this urgent global crisis.

At the 27th Future of Asia conference in Tokyo in May 2022, conversations emerged about Southeast Asia’s role and capacity to contribute to global crises. Sandhya Sriram, CEO and co-founder of Singapore’s Shiok Meats shared that bio start-ups like hers have powerful potential to address global food challenges and therefore should be more common, but the problem lies in the support needed to get them off the ground. Deep technology and other digital tools offer an explosion of possibilities in solving the world’s most pressing socio-environmental challenges, but resources like investments and talent need to be allocated to developing these solutions.

Assistant Professor of Strategic Management Simon Schillebeeckx echoes this sentiment, and shares that more attention should be given to new generation of ‘sustainable entrepreneurs’ who are on the rise: businesses that are taking strides towards achieving socio-environmental goals while still remaining profitable. Based on his research on high level problems that hinder organisations from effectively tackling sustainability, he shares how some start-ups in Southeast Asia are overcoming these challenges and thus changing the game through the use of innovative digital technologies.

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Overcoming the problem of valuation

What is the monetary value of having clean air? This complex question reflects the problem of valuation: the challenge of putting an economic price on natural resources, natural capital and social value. A mangrove forest, for example, protects human lives from cyclones and offers biodiversity and carbon sequestration benefits but the first two factors are often dismissed due to the difficulty in quantifying the value they provide. This explains why many ‘difficult to measure’ socio-ecological challenges remain in the dark, while the true cost of unsustainability remains obscure.

Prof Schillebeeckx shares one start-up in Southeast Asia that is overcoming this challenge with digital tools: Kumi Analytics. Through the use of satellite imagery and machine learning, they have developed a tool that measures carbon sequestration rates at an unprecedented speed; thereby helping environmental initiatives reduce their timelines, optimise their resources and understand the impact made in a much deeper way. With their product line expanding to include property insights for lenders (i.e., calculating solar power potential and environmental risk assessment), Kumi Analytics is empowering more customers to make well-informed decisions at scale; a necessary step for reaching our sustainability goals.

Prof Schillebeeckx on putting a price to clean air:

“This is really the core of the problem of valuation is how do we recognise the true value of using the services nature provides to people and to other living beings? So, if you look at what is the value of clean air - well, it's very high, and we all like to breathe clean air, but nobody's paying for clean air. It's a free resource that is given to us by nature, right, and the more carbon we put in the atmosphere, the more we pollute, through different kinds of industrial processes, the more we undermine the ability of us to breathe. Now, everyone would agree that this has a very high value, but nobody agrees on how to turn that value into a price so that we can actually put it and make it part of the economy. And without being able to do that, the free market, and capitalism as a system fundamentally fails, right? Because the free market is the most effective way that we know so far of organising economic activity. If information is fully captured in prices - this is a condition if you do economics 101 - you need to price information fully. And we don't do this for anything when it comes to environmental externalities or social externalities.”

Creating trust and enabling seamless coordination

Trust is an essential component in any businesses. Both parties need to have confidence that the other will hold up their end of the deal through payment or the provision of a product or service. Prof Schillebeeckx explains that this can be especially challenging in the sustainability space, where companies often look for and engage with non-profit organisations or social enterprises in other countries with a high need. With so many socio-environmental initiatives claiming to do good work but limited insight to how they actually operate, it is often difficult to choose a quality organisation to partner.

To tackle this problem of trust and coordination, the company Handprint, which is currently incubated by the Institute of Innovation and Entrepreneurship at SMU, has developed a sustainability software that essentially automates and simplifies the Corporate Social Responsibility (CSR) process. By sourcing and onboarding trustworthy non-profits to their platform, and then using digital tools to monitor and report their real-world impact, Handprint makes it easier for companies to ‘do good’ without the need for multiple (and often costly) intermediaries. Every cent that is contributed to the cause is tracked and metrics are produced by the software to show the progress being made in quasi real-time. The achievement here is two-fold: more businesses can become credible and responsible organisations, while at the same time giving socio-environmental initiatives the fuel needed to multiply their impact.

Prof Schillebeeckx on choosing a trustworthy NGO to partner:

“So if you're a big organisation like, let's say, a big FMCG company, and you want to support a non-profit organisation in a third world country that is doing something around female empowerment. Right? How are you going to find that organisation? Where are you going to look for this organisation? How are you going to know that this is a trustworthy organisation - that if you send them money, they actually will do something good with it - this is a really a key challenge in the impact space. And so solving that is incredibly important in order to boost confidence in philanthropic giving, and boost the value in doing so because if you as a company, say we want to do something good, we're going to give money to this NGO; that we've we met them and we trust that they're doing something great. And then it turns out that this NGO has been stealing from you or they've been scamming you, your reputation is at risk as a company. So, the value of trust and of being able to coordinate that economic exchange is very, very high for companies.”

Empowerment through access and reach

The problem of access and reach works on two levels: access to people and access for people. The former is where individuals are unable to attain access to basic services (e.g. internet access), while the latter refers to the exclusion of groups from drawing benefits from private or public goods (e.g. attaining a loan). While this in itself is a large social problem, the consequences are manifold since it means that companies working on other socio-environmental issues are unable to reach, engage with, and help these individuals who, in many cases, play a key role in the solution. Generating any kind of impact at scale is therefore compromised.

Prof Schillebeeckx shares that the Financial-Tech (or FinTech) space is showing great promise in solving the problem of access and reach. The example he provides is up and coming start-up InRemit: a mobile-only remittance service that helps unbanked migrant workers make basic financial services with ease. The app, which can be set to the user’s mother tongue, allows them to send money to their loved ones, top up mobile phone credits and pay their bills seamlessly and confidently. By understanding the customer pain points and meeting them where they are on digital platforms, companies like InRemit are taking small but real steps towards financial inclusion; thereby opening the door to greater types of access.

Prof Schillebeeckx on creating access to finance for excluded groups:

“So, these kinds of fintech organisations are trying to figure out, how do we assess the real wealth of an individual? Not by purely looking at how much money they have on the bank. Can we use, for instance, livestock as a type of collateral? That gives us faith in the fact that this is a person that can engage in long term planning. Because if you're living in a small village and you’re based in a rural area, be it Indonesia, be it Cambodia, you don't have access to banking services, but you're able to keep your cattle alive for 10-15 years, well, clearly this person can plan. This person has a way of figuring out so there is this other thing, like, how can we, um, use a more holistic perspective on the individual to assess their credit worthiness. And to assess whether or not they would be able to repay in two years' time.”

Southeast Asia’s role in this global challenge

Prof Schillebeeckx encourages more Southeast Asian businesses to contribute to this global challenge and believes that no player is too small. At the Future of Asia conference, Mr. Akitaka Wilhelm Fujii, President of Japanese venture fund Real Tech Holdings, shared that the region’s diversity in culture, gender and academic background makes it fertile ground for the type of innovation needed to solve today’s problems.

Prof Schillebeeckx adds to this by saying that small companies have the upper hand of not needing to unlearn or rehaul their systems to adopt these technologies, unlike their larger counterparts. This makes them the perfect candidates for developing these digital tools for the sustainability space. However, they cannot do it alone. He stresses that "Governments and businesses need to work together, just as they did during the Covid –19 pandemic, to tackle our socio-environmental crisis. But we need to develop a sense of urgency. The time to act is now.”