It is difficult for regulators to meaningfully encourage businesses to think and move beyond their own “economic islands.” In particular, prescriptive legislation can impose burdens for businesses, inadvertently leading to antipathy and shortcuts, sometimes resulting in mere ‘tick-box’ exercises.

We believe incentives from regulators are a more effective lever that will help usher a positive change in corporate behaviour and underscore the intrinsic value of stakeholder engagement and sustainability as strategic business opportunities.

Our proposal focuses on the development of attractive “carrot” incentives for businesses that are linked to areas of growing importance for long-term resilience and corporate wellbeing, from education to diversity to R&D. They include:

• Creation of clusters of excellence dedicated to advancing knowledge on long-term business resilience, risk management and sustainability. Clusters can showcase best-in-class companies, encourage more PPPs, and offer training/exchanges for companies.
• Establishment of tax credits and differentiated policy treatments for firms meeting ESG-related metrics through spending as a % of their overall revenue. Metrics can include upskilling employees, board diversity, innovation on topics of national interest, carbon footprint reduction, etc.
• Formulation of an accreditation process that offers businesses recognition, certain privileges and specific monetary and/or non-monetary advantages that encourage more collaborative business partnerships.
• Introduction of subsidies for investments made by VCs and other PE/institutional investors in sustainable assets.
• Development of regulatory sandboxes to ensure continuous adaptability of government policies through co-creation with business.

In the near future, we forecast greater corporate transparency in data and reporting to the public, together with stronger corporate purpose and stakeholder engagement. In the long term, the burden of public priorities, such as education and innovation, can be shared more equally, resulting in savings to the public purse. At the same time, we can also witness the growth of the strategic importance of ESG, upskilling and innovation among firms.