Mid-sized Malaysian companies and large Asian corporations want to be more sustainable, but are faced with challenges

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 US$500 million and over US$2 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.

“At Standard Chartered, we’re working hard to help them navigate the transition, and our clients can leverage our Sustainable Trade Finance propositions and the partnerships we are forging with third-party platforms to confidently shift to sustainable practices.” - DagangNews.com