Home Malaysia Less Than 30% of Companies Have Set Targets to Improve Supply Chain Sustainability

Less Than 30% of Companies Have Set Targets to Improve Supply Chain Sustainability

Over half struggle with access to data, and reporting on suppliers’ ESG and sustainability practices.

by Gopal Nair
The sustainability commitment paradox, a new research report by Standard Chartered

Companies in Asia, including those in Malaysia, reflect global  trends in being willing to prioritise positive environmental and social impacts over financial  returns moving forward, but only a low percentage have made concrete sustainability  commitments or set targets. 

The sustainability commitment paradox, a new research report by Standard Chartered, reveals that despite 54% of companies being willing to prioritise positive environmental and  social impacts over financial returns, less than 30% have made concrete sustainability  commitments or set targets. Faced with a lack of funding for sustainability initiatives,  inconsistent data on ESG-related supplier compliance and the concern of optimising  shipping to reduce emissions, progress for many companies remains stubbornly slow. 

The research is based on a survey of 300 companies across the world, including from  Malaysia, with turnovers under USD500 million and over USD2 billion, to present the views  of mid-sized companies and large corporates respectively.  

Sustainability across the supply chain 

Overall, large corporates demonstrated a higher level of progress on sustainability action,  proving they are critical to accelerating the agenda. But more leadership is required, as less  than a third of companies overall have made commitments regarding their operational  impact, revealing lack of tangible action.

65% of large anchor corporates are or would be willing to trade off financial returns for  positive sustainability outcomes, compared with 47% of mid-sized companies.  

Among those who have yet to take action to improve sustainability, only 24% of large anchor  corporates are planning to reduce waste, energy consumption, and water usage, compared  to just 19% of mid-sized companies. Additionally, 36% of large anchor corporates plan to  use more recycled and reusable materials, compared to 28% of mid-sized companies. And as climate risk becomes more urgent, 38% of large anchor corporates already have  contingency plans in place if their supply chains are impacted by environmental issues, while  another 38% plan to do so. In comparison, only 25% of mid-sized companies have made  contingency plans, and 50% plan to develop them.  

Approximately 45% of all companies surveyed plan to purchase carbon credits to offset  emissions, which highlights the rising importance of quality carbon credits and accessible  markets.  

What is preventing companies from setting commitments and targets 

Access to finance and data, along with a lack of ESG-compliant shipping, emerged as  critical challenges. 

For approximately 70% of large corporates and mid-sized companies, obtaining funding or  finance for ESG and sustainability-related expenses and investments is a major issue. This  is followed closely by the challenge of accessing data and reporting on the ESG practices of  suppliers for almost 60% of all the companies surveyed. Approximately half also highlighted  their concern in optimising shipments, logistics and distribution routes for ESG compliance. 

What is being done: enabling end-to-end sustainable supply chains 

Encouragingly, all companies surveyed are taking a broad supply chain view of sustainability  by looking outside their operations and products. This is especially critical as it is estimated  that total supply emissions are on average 11.4 times higher than a company’s own  operational emissions.

44% of mid-sized companies and 39% of large anchor corporates plan to provide incentives  for their suppliers to produce more sustainable products and operate in more sustainable  ways. In addition, supporting suppliers with access to finance and know-how for environment  programmes is a priority for almost 45% of both mid-sized companies and large anchor  corporates. 

Patricia Wong, Head, Corporate, Commercial and Institutional Banking, Client  Coverage, Malaysia and Regional Head, Global Subsidiaries ASEAN, Standard  Chartered, said, “Universally, companies want to align business objectives with positive  impact in the journey to a more sustainable world. They face many challenges when  implementing sustainability across their supply chains, some of which can be addressed  through financing incentives, deep-tier financing solutions and sustainable supply chain  finance platforms. 

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