Are our climate targets too weak or too ambitious? Hang Lung Properties' sustainability chief John Haffner

Setting “stretch targets” that companies are not confident of achieving might help the planet more than targets that companies know they can comfortably hit, he tells the EB Podcast. These targets could also drive more aggressive innovation in decarbonisation, he said.

 “If you stretch too far [with climate targets], you lose credibility. On the other hand, if you don’t stretch enough, we are not going to address the crisis in front of us,” he said on the latest episode of On the frontlines, a podcast series which profiles changemakers on the hard edge of sustainable business.

Haffner’s team has taken a distinctive approach to Hang Lung Properties’ decarbonisation plan – it has opened up the firm’s net zero plan for discussion in a paper that explores a range of scenarios that count down to 2050.

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The climate is indifferent to our political winds and how they may change. Companies still need to invest in physical resilience.

John Haffner, deputy director, sustainability, Hang Lung Properties

What would the company’s net zero progress look like if it stopped building new buildings in Hong Kong and China? How much faster would it reach net zero if it could build using low-carbon steel or cement? These are among the deliberations of Hang Lung’s Our journey to net zero paper, which charts different speeds for the company to decarbonise. 

“That question of how far we aim is fundamental – and I don’t know that there is a clear answer to that,” said Haffner, who shared that Hang Lung is in the process of refreshing its 2030 targets with standard-setter Science Based Targets initiative (SBTi).

Haffner leads a sustainability team of 11 in a company of 4,000 employees that is aiming to achieve net zero by 2050 – on par with Hong Kong’s, but 10 years ahead of China’s national decarbonisation target.

In a wide-ranging discussion on the challenges facing corporate sustainability, Haffner shared that Hang Lung’s ambitions have remained unchanged despite the pushback against environmental, social and governance (ESG) priorities in the West. However, he acknowledged that sustainability professionals do face resistance in pushing the ESG agenda.

“It’s advocacy without authority… we are trying to persuade people across the business to do things, but they don’t report to me,” he said. Having a business case helps to drive the sustainability agenda, but there isn’t always a business case for sustainability – it’s just the right thing to do.”

Tune as we discuss:

• Discipline and sustainability spending
• Are our sustainability targets too weak or too ambitious?
• How do you justify your job?
• Managing greenwashing risk
• Advice for aspiring sustainability professionals
• Burnout risk

The transcript in full:

What is keeping you up at night?

I’m fortunate to be in a company where our long-term view around sustainability remains unchanged despite some of the recent changes, particularly in the United States.

I report to our chairman [Adriel Chan], and for him, in the long term, it is very much also a question of personal legacy. We look at how we can contribute to China’s dual carbon targets [peaking CO2 emissions before 2030 and achieving carbon neutrality before 2060]. Although it gets a lot of media attention, what has been happening in Washington is somewhat removed from where we are operating – and in Hong Kong and mainland China, the long term direction remains unchanged.

Having said that, it’s a more challenging business environment – and so there is a need for more discipline. But I think that discipline is something we have been exercising already anyway.

I have had for a number of years to report to our management around our internal sustainability spending. And we introduced an internal framework for that without reference even to an external taxonomy a number of years ago, but because our CEO just asked us: what we were spending on sustainability?

It turned into a very large project of thinking through what we characterise as sustainability spending. Some of what we consider to be sustainable spending is in fact business-as-usual, but has a beneficial effect.

For example, if a chiller is at this end of life and has to be replaced, it’s replaced by a more efficient chiller. There’s an energy efficiency improvement. But even a business that didn’t care about sustainability would want to do that anyway.

So then comes the question of what we are spending incrementally on sustainability above and beyond business as usual. I feel like we already had discipline in how we approach things and try to stretch resources as far as we can. But I think what keeps me up at night is: how aspirational should we be in our target-setting?

There is an argument that if you stretch too far, you lose credibility. On the other hand, if you don’t stretch enough, we are not going to address the crisis in front of us.

I was saying to a colleague the other day that if every company had one or two stretch targets that they really don’t have confidence around, but they are going to support a demand signal or try to reach out and be innovative, that may help the world more than if everybody just sets targets that they are confident in achieving.

We are in the process of refreshing our 2030 targets now. We originally set our 2030 targets back in 2020. We were less mature in our sustainability journey at that point. We didn’t have as much data, and so we have decided we want to refresh those targets.

What is your sustainability budget is and how do you go about fighting to increase it?

I don’t know that I could publicly disclose our budget. But I can say that we have more than 4,000 employees in Hang Lung, and we have a team, including me, of 11 people working on sustainability. I know that that’s larger than some other organisations though sometimes some of what we do might be covered by other departments or functions and other organisations. So our team works on every aspect, soup to nuts, from the development construction side of the business through to operations, to stakeholder engagement.

But the idea is really that we are an internal advocate, a lever, a consultant to integrate sustainability across the business.

Our budget and headcount are relatively stable. And we are not advocating to increase either one of these either.

Where we do advocacy is more around projects in other parts of the business that will help Hang Lung as a whole to advance on sustainability.

So for example, we have done some pilots to support low carbon construction, and those have involved changing the traditional way we do construction procurement.

We did a pilot for mineralised carbon dioxide (CO2) with low carbon bricks in our Westlake project [in Hangzhou].

More recently, with our Plaza 66 Pavilion extension in Shanghai, we did a transaction where we procured lower carbon emissions steel that involved having to work with the main contractor through to supplier that could provide that.

On the operation side, it’s the CapEx (capital expenditure) projects related to energy efficiency where we try to help support colleagues in showing the business case and reminding people that, yes, there’s CapEx involved, but then it will reduce expenses in the future.

Our advocacy is more looking outward to initiatives that will help the company advance this agenda.

A recent report from Carbon Market Watch finds that none of the top 20 largest corporations have a “high integrity” 2030 climate target. Talk us through how you went about revising your 2030 climate targets.

We are still in the process of looking at that and we are going to be submitting it to SBTi for re-evaluation. Part of it is that we just want to have a more recent baseline and we want a common baseline across our various targets including climate targets, because our previous targets – we had 2018 for some things, 2020 for others. It would be cleaner and simpler if we have a single base year.

But can I just ask why they felt that no company had credible targets? Even companies that are validated are under SBTI against the 1.5 degree trajectory, they find that those companies don’t have credible targets?

The issues raised in the report include: outdated accounting practices for energy procurement that do not reflect the deep emissions cuts needed to meet 2030 climate goals. The market-based accounting approach, which allows companies to buy energy far away from where their operations are, was deemed insufficient in the report.

I do have a point of view on market-based versus location-based accounting in the context of China.

Now, eight of our 10 mainland operating properties are powered by renewable energy through power purchase agreements (PPA). And we are going to look at obtaining a PPA for the Westlake project too. This approach will bring about very significant emissions reduction in Scope 2, compared to location-base accounting, which is just tracking the local grid emissions as they come down.

And we talk about this in the Our Journey to Net Zero paper that we published in March. We are quite transparent. We have a chart where we show the difference in our expected decarbonisation, whether we are using location-based or market-based accounting.

We don’t hide this point and we want to continue to report against both.

I do think if we take a step back and ask which practice incentivises – let’s say real estate landlords on behalf of their tenants – to help support the energy transition that’s needed.

I would argue that clearly market-based accounting does, because our tenants have their own renewable energy commitments.

If the landlord doesn’t do something on their behalf, they have to go and buy unbundled RECs [renewable energy certificates sold to a consumer separately from their electricity tariff] somewhere else. But the tenants that are sophisticated on this are happy when we can procure bundled PPAs where the electrons and attributes are held together.

With the green power framework in China, we know that the electrons and attributes go to us and no one else. Because it is all recorded on the blockchain.

What we found anecdotally, when we were introduced as the first commercial real estate company to do these PPAs in some jurisdictions, the retailer told us they then got phone calls from other real estate companies asking how they could do something similar.

If we can create a norm around this where tenants expect landlords to do this, surely one of our primary objectives is to take the remaining coal that’s on the system in China or elsewhere, and move away from that as quickly as we can.

If the renewable energy developers know there is growing demand from a certain customer for renewable energy, will that help to speed the transition somewhat? I hope the answer is yes.

In that sense, we are contributing to speeding the transition.

But I think it’s of course very important to make sure that there isn’t double counting. And I do think, bundled power purchase agreements with a clear framework in place is one scenario, and maybe in other jurisdictions there are other arrangements in place where there may be more concerns.

I would also note that RE100 [a framework for companies committed to use only renewable energy] is now also recognising the China based green electricity certificates.

So there is international recognition that China set up a good framework here. And for us and our tenants we think it makes sense.

The alternative is we just passively wait for the grid to decarbonise. I just don’t see how that stance is better for the climate crisis.

How much is Hang Lung Properties relying on carbon credits to reduce emissions?

We are evaluating options for carbon removal or negative emissions projects. One option is to do an offset and the other one is that could be beyond value chain mitigation. 

We are studying both, but we will proceed with caution in any offset project. We are actually thinking about the idea of doing something on carbon removal, and then positioning it not as an offset.

In other words, it would just be an above-and-beyond contribution recognising that, again in the context of the climate crisis, there is an argument for companies to invest in removal provided they continue to also work on their sectoral decarbonisation obligations.

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Corporate communications folks will want to emphasise the positive and sometimes it’s our role to say, yes, but we need to put it in context.

Some people will say, well, let’s just make sure we focus on making sure that we don’t add additional emissions from what’s already being planned.

I’m leaning toward this idea of looking at removal, but then holding it and reporting it somewhere separately. So that if a stakeholder discounts they will still see that we’ve got our sectoral targets, we are just doing above and beyond. And I can’t see the downside of doing that. 

To what extent is Hang Lung Properties relying on unknowns, such as technology advancements, to achieve its net zero goals?

I’m more concerned about the next 10 years than the next 20 on the question of whether Hang Lung will be able to decarbonise. If we look at the world of geopolitical turbulence, 20 years out it’s anybody’s guess what kind of world we are going to be living in.

But we have to be optimistic. 

That said, in 10 years, if we are doing another large-scale new project, there will still be significant challenges with the major construction materials such as steel and concrete. There’s no doubt about it.

But I’m actually optimistic that China may surprise the world again on construction materials. We referenced RMI’s work in our paper. And we have a chart showing that for batteries, for renewable energy and storage, in all three cases, the scaling of these technologies has exceeded expectations and China played a major role in surprising people about that.

So I think it would be very interesting to look at the next five-year plan and see what the latest signals are from Beijing. But if China really systematically now turns its attention to these sectors, then I think in 20 years we may all see significant momentum.

It’s just that the next five to 10 years out, the incremental cost and availability of these technologies for projects at scale will definitely be a challenge.

We’ve set a steel decarbonisation target for 2030. That was our stretch target. When we decided to join SteelZero [a global collective of corporates committed to speed up the transition to a net zero steel], it was also based on the idea that rather than passively wait for construction materials to decarbonise, we wanted to light a fire under ourselves with this commitment to try to achieve it.

We don’t want to do that with every target. But with steel in particular, we thought it’s such a large part of our construction emissions, and if we can support that demand signal, even if we fall a little bit short by 2030, that would be a better stance to take.

The other thing is in our paper, we do say when we model up to 2050, we are not making a claim or prediction. We are simply saying that for Hang Lung, we believe that by 2050 these are two credible scenarios.

So, if there’s some available supply of lower carbon steel or concrete by 2050, then from a corporate perspective, we may be able to get there. But we didn’t do the modelling that the International Energy Agency (IEA) would do to say: what about the entire real estate sector? But in the context of China, where [the goal is to achieve] carbon neutrality by 2060, a lot of things may not be fully available unless there’s an acceleration by 2050.

The last thing I’d say about the paper is that because we did a bottom-up model while we incorporated inputs from different sources, we tried to let the model take us where it took us. In other words, by 2050, we don’t magically get to zero just because we are supposed to get to zero. The model takes us from one million tonnes of CO2 equivalent in 2023 to below 100,000 tonnes. In some cases, almost at zero, but not quite at zero. We allow for the possibility of some offsetting or some more technology innovation to take us over the finish line.

So that was an interesting experience because I think often when companies do these sort of roadmaps, they work backwards from the need to get to zero, then they assign a certain amount of desired emissions reduction in different levers, but it’s not necessarily based on the bottom up model. It’s based on, well, if I could do this much energy efficiency and if I could do this much recycling, that’s how I’m going to apportion the emissions reductions across these levers such that I will get to zero.

And it also matters the order in which we select the levers. If you do grid decarbonisation first, it’s different than if you do energy efficiency first.

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No sustainability practitioner has deep capabilities in all aspects of the attributes and knowledge that are required.

It’s often presented as though it’s a static fixed picture.

What we try to do in the paper was to let the scenarios breathe a little and say: You know what? There are a lot of variables here.

Another colleague made a comment that if a chief financial officer was asked the question, what do you expect your revenue will be in 2050? No CFO would just give you a number without any context. 

But somehow in the net zero conversation, because we are supposed to get to zero, companies have this performative exercise of showing how they get to zero. But maybe we need a little more conversation around the fact that there are some key variables that will impact on what that journey looks like.

How do you justify your job as a sustainability practitioner? 

The battles evolve over time. The conversations evolve over time. There is a lot of persuasion and influencing involved – it’s advocacy without authority, right? Because we are trying to persuade people across the business to do things, but they don’t report to me. And they have other considerations.

It’s important to pay attention to your audience because different things will motivate different people. In some cases, some people are very hard-nosed about numbers and where we have return on investment (ROI) and we can quantify the business case that’s very helpful.

But we can’t always quantify a business case. Some things there’s uncertainty but it’s the right thing to do.

So we try to think of a whole spectrum of drivers for sustainability. And we emphasise different drivers based on our audience. And sometimes it’s also about internal coalition building.

For example, our human resource colleagues have come to appreciate and have told us that we have more and more applicants for our management trainee programme and internships who are drawn to Hang Lung because they see it as a place to do sustainability.

So this becomes an argument for attracting more talent. 

There is a sense also that we can derive some benefit from being ahead of the curve, both in terms of discipline around the way we do things and also reputational benefit.

I was last in front of our board in March. We discussed very holistically the kind of investments that we are making. And we had a reaffirmation of support from our board and what we are doing. In March, we discussed the US election, and I had a slide comparing the US and China. My suggestion was to consider the China context and the board was very supportive of that: the long-term direction is unchanged.

It is more the business environment that is getting a lot of colleagues distracted by more immediate preoccupations.

There is an increasing recognition that sustainability is not decisive for tenants today, but there is a sense that five to 10 years out, it will become increasingly a differentiator for tenants when they are choosing landlords.

And I think that argument in particular holds a lot of weight in our business. And we are starting to see that a little bit with mainland office tenants. So in mainland China where we have competitive leasing negotiations for office tenants, particularly multinationals, when we can point out to them the ESG practices we have in place and our plans for the future, it can be a differentiator in a negotiation. 

Do you talk to your peers about how to survive as a sustainability practitioner?

Yes, I talk to my peers. We have a WhatsApp group with a number of sustainability heads, and we get together for drinks every so often and we speak openly and candidly about our shared challenges and compare notes.

My sense is that people are still moving forward. But they are doing it so more quietly and there is more focus on climate in particular, because I think there’s a sense of the climate is changing whether we like it or not. The climate is indifferent to our political winds and how they may change. And so there is a sense of companies needing to invest in physical resilience. The insurers see this very clearly. So a lot of that work is still continuing, but it’s being rebranded.

And there is less discussion in general on the diversity and inclusion (D&I) side. I think that has gone on the back burner. So the “S” side of ESG is maybe getting a little less attention, but the physical risk issue is still coming up.

We had meetings with investors in June, and a number of investors asked us about physical risk issues. 

How do you manage your relationship with the marketing and communications team to ensure greenwashing is not an issue?

We work pretty closely with our corporate communications team and whenever there is any kind of press release around sustainability, I review it myself.

There is a dynamic where the corporate communications folks will want to emphasise the positive and sometimes it’s our role to say, yes, but we need to put it in context. We still have a lot more work to do. We are ultimately trying to be credible to the most sophisticated audience. So if we had to have to add a little bit more nuance in our communication, even if it doesn’t allow for the same simplified soundbite, it’s still maybe a safer position to adopt.

Do you have any advice for aspiring sustainability professionals entering a job market that’s being disrupted by AI?

I would suggest that no sustainability practitioner has deep capabilities and knowledge in all aspects that are required. Nobody has a perfect profile across the board. But if we could imagine a general pattern to aim towards, it would be to have some combination of technical knowledge, and some attention to the communication, persuasion, influencing side of the business as well.

So often we have engineers or technical people that stereotypically may have less on the communication side, or we may have other people that are better communicators but don’t have the same technical knowledge.

So if you are a young person and you can systematically work at cultivating both of those things at the same time, then I think you have something exciting to offer.

The third piece is to figure out how to work with artificial intelligence (AI). We have a summer intern with us and he is schooling all of us on how to use AI effectively.

The next generation of young people are embracing this. But the future is not between AI and people with jobs. It’s people who know how to use AI and people who don’t know how to use AI.

When I look to hire people, I look for that combination of some technical knowledge and the interpersonal capacity that will help mobilse.

What’s your take on burnout? Do you notice that some of your peers are struggling with that, given how the sustainability function is constantly changing?

Well, I’ll share an anecdote from today. I had a meeting at 8:00am this morning back to North America. I have another meeting at 10:00pm tonight back to North America just now.

Not every day is like this. But I think it’s true that if a company and an individual practitioner wants to go beyond compliance and reporting and actually help shape initiatives. That involves a lot of work. There’s no question. And it is ever expanding. And I think now with the finance piece coming into play, that’s adding another layer of sophistication. Digital technology is another layer of sophistication.

No practitioner can be an expert in all of these things, but there’s a constant learning curve and ever evolving set of issues. So I think it is a very real issue. And it’s very important to find ways to recharge personally. I do see colleagues struggling with it. I do acknowledge that for myself I also have to be mindful of how to balance everything and find time for myself to recharge.

I think what’s behind it is that maybe companies don’t fully understand just the full scope of the agenda that’s required to do the job well. Let us hope that with technology, and with this talk about discipline to give an optimistic spin that we can focus on the things that matter and move off the agenda of those things that are nice to have as it just focus on the most material issues that matter most to the business.

This transcript has been edited for brevity and clarity.

Listen to other episodes of On the frontlines here.