The Southeast Asia (SEA) region's rapid economic growth has led to a significant increase in manufacturing activity, creating both opportunities and challenges for businesses aiming to meet sustainability targets. As governments across SEA introduce more carbon management regulations, the demand for carbon management software is growing. ABI Research forecasts that investments in this space will increase from US$77 million in 2023 to US$240 million by 2028. Key drivers for this growth include compliance with regulations, cost reduction, and ensuring business continuity. With Artificial Intelligence (AI) and Machine Learning (ML) technologies enhancing the efficiency of carbon management solutions, the market is poised for innovation and expansion. As SEA countries like Singapore and Thailand lead the way with carbon reporting and taxation regulations, there is a growing opportunity for vendors to provide scalable, efficient solutions to help enterprises meet their sustainability goals.
Market Overview
Southeast Asia (SEA) is a region experiencing rapid economic growth. The region’s Gross Domestic Product (GDP) is expected to increase from US$3.1 trillion in 2020 to US$4 trillion by 2024, driven largely by the expansion of manufacturing activities as part of the “China Plus One” strategy. This strategy has seen global giants like Apple, Microsoft, and NVIDIA shift some of their manufacturing operations to SEA. As industrial activity surges, sustainability efforts and net-zero targets are becoming pressing priorities for governments across the region. This transition creates fertile ground for the growth of carbon management software solutions, as businesses look to comply with evolving regulations and mitigate the impact of their operations on the environment.
“Investments in carbon management solutions are forecast to increase from US$77 million in 2023 to US$240 million in 2028 (at a Compound Annual Growth Rate (CAGR) of 25%. Investments will be initially driven by countries such as Singapore and Thailand, which have already implemented or are soon implementing carbon tax regulations.” – Matthias Foo, Senior Analyst at ABI Research
Key Drivers for Carbon Management Software Adoption
Three key drivers are influencing the adoption of carbon management solutions across the SEA region: compliance with regulations, cost reduction, and business operation assurance.
- Compliance with Regulations: Many SEA countries are instituting mandatory Greenhouse Gas (GHG) emissions reporting requirements. These regulations compel enterprises to adopt carbon management solutions to track and report their emissions, ensuring they remain in compliance with national and international standards.
- Cost Reduction: Many countries in SEA, such as Singapore and Thailand, have implemented carbon taxes, while others are considering carbon pricing mechanisms. Enterprises will need to track and reduce their GHG emissions to lower their carbon tax rates. Carbon management software helps businesses do this efficiently, providing a clear Return on Investment (ROI) by enabling businesses to minimize their emissions and associated costs.
- Business Operation Assurance: The introduction of Emissions Trading Systems (ETSs) in several countries is creating new opportunities for businesses to participate in carbon trading. Accurate tracking of GHG emissions is critical to ensuring participation in carbon markets. Industries with high carbon emissions, such as steel, cement, and chemicals, will need reliable solutions to monitor emissions and navigate the complexities of carbon trading.
Approaches Toward ESG Reporting
Southeast Asian countries are adopting a range of carbon pricing strategies, with carbon taxes, Emission Trading Systems (ETSs), and other regulatory frameworks emerging across the region. These regulations aim to reduce GHG emissions and create a marketplace for carbon credits. Some key strategies include:
- Carbon Taxes: Countries like Singapore and Thailand have introduced carbon taxes, compelling industries to reduce their emissions or face financial penalties. These taxes are gradually becoming a significant source of revenue for governments, while also acting as a push for industries to adopt more sustainable practices.
- Emission Trading Systems (ETSs): Vietnam and Indonesia are exploring or piloting ETSs. Under an ETS, businesses receive emissions allowances that can be traded in the marketplace, incentivizing companies to reduce emissions below their allocated cap. These systems are designed to create a market for carbon credits and promote the adoption of carbon reduction technologies.
- Hybrid Approaches: Some countries, like Indonesia, are considering hybrid systems that combine carbon taxes with an ETS. This approach aims to balance financial penalties with market-driven incentives for emissions reductions, ensuring a more flexible and comprehensive carbon pricing strategy.
Southeast Asian Countries’ Responses to Climate Action
Several Southeast Asian countries have implemented or are preparing to implement carbon pricing and Environmental, Social, and Governance (ESG)-related disclosure requirements. These regulations are forcing domestic companies to track, report, and reduce their carbon emissions. Key developments in carbon pricing across SEA countries include:
- Singapore: As a regional leader in sustainability, Singapore has mandated that all Publicly Listed Companies (PLCs) disclose their GHG emissions starting in 2024. By 2026, all PLCs will be required to disclose their Scope 3 emissions, which include emissions across their entire supply chain.
- Malaysia: Malaysia plans to mandate the inclusion of Climate-Related Financial Disclosures (TCFD) in sustainability reports for publicly listed companies by December 2025. Additionally, the country’s Climate Change Bill will require all enterprises to report GHG emissions to meet international climate commitments.
- Thailand: Thailand is introducing ESG-related disclosure requirements starting in 2024, mandating publicly listed companies and Sustainable and Responsible Investment (SRI) funds to disclose carbon emissions on a “comply or explain” basis. The country’s proposed Climate Change Bill also seeks to impose mandatory GHG emissions reporting.
- Vietnam: Vietnam is mandating sustainability reporting for PLCs starting in 2024, and by 2025, emissions measurement, reporting, and verification will be required for industries such as steel, cement, and fertilizers.
- Indonesia: Indonesia will begin requiring publicly listed companies and financial institutions to disclose ESG information starting in 2024, as outlined in OJK Reg 51/2017 and OJK Circular Letter 16/2021.
Key Companies
- Zuno Carbon
- Unravel Carbon
- Pantas
- Everconn
- Terrascope
- Fairatmos
- MCGX Tech
- Jejakin
- Numen
- UL Solutions
- Workiva
- Persefoni
For a deeper dive into the growing carbon management software market in Southeast Asia and insights into the latest trends and opportunities, download ABI Research's full report here.
