Sustainable Sourcing Trends in Asia

by Rex Aguado

Image from Unsplash

Sustainable Sourcing Trends in Asia and Beyond

At the March 2021 Ecovadis Scientific Committee annual meeting, several trends were identified that could further reshape and accelerate the evolution of the ESG reporting landscape – and one of these has an important implication for Asia.

Crucially for the region, CSR Works International managing director Rajesh Chhabara has noted a remarkable growth in ESG reporting by Asian businesses, thanks in large part to state regulators, as well as ESG-oriented multinational customers and investors.

Chhabara says that more and more Asian suppliers are producing integrated reports and are submitting to the Carbon Disclosure Project much more frequently, with 29% of global responses now coming from Asia. In fact, Chhabara adds, Asian companies have even surpassed their North American counterparts in several Task-Force on Climate-Related Financial Disclosures reporting categories.

“Supply chain assessment will be particularly relevant in markets like Singapore, which is home to a large number of multinational companies with complex supply chains and ambitious sustainability agendas. The Philippines, which is beginning to mandate ESG disclosure for certain companies, also represents an emerging growth market for assessment,” Chhabara says. “These developments, combined with the emergence of green bonds and carbon taxes, will continue to drive supply chain sustainability in the region.”

Taking Ownership of Sustainability

Once Sustainability pledges, strategies and tools are in place, what’s next? How can Sustainability be sustained in a corporate world where various priorities jostle for executive attention?

For McKinsey, the solution is simple enough. “Value creation should be the CEO’s core message. Anything else could sound off-key… To get everyone on board, make the case that your company’s ESG priorities do link to value, and show leaders how – ideally with hard metrics that feed into the business model (for example, output per baseline electricity use, waste cost in a given plant or location per employee, or revenue per calorie for a food-and-beverage business).”

In a 12 May 2020 article for McKinsey Quarterly, CB Bhattacharya – author and the H. J. Zoffer Chair in Sustainability at the University of Pittsburgh’s Katz Graduate School of Business – posits the idea of “ownership” as a critical step in institutionalizing ESG practices.

“Senior leaders making real progress on the sustainability front are those who tackle it with what organizational psychologists refer to as an ownership mentality. Simply put, they ‘own’ the problem and then extend and infuse the feelings of ownership and connection across their organization and to the external world,” Bhattacharya writes.

Modest Actions, Huge Impact

Indeed, testimonials from some of the world’s leading business leaders point to this sense of ownership – and transformation.

In a May 2020 interview with McKinsey Quarterly, former Coca-Cola Enterprises CEO John Brock describes his evolution of thinking, from simply focusing on “making good decisions for the future of the planet” to incorporating social issues such as gender and ethnic diversity, as well as community service and well-being. “If you have the personal commitment but aren’t willing to invest the time, money, and resources, it’s not going to happen. And if you don’t have the personal commitment, even if you invest the time, money and resources, it won’t happen,” Brock says.

Simple but meaningful ESG-oriented actions are also key to Lotte Mastwijk, manager of communications and sustainability at LC Packaging, maker and distributor of flexible packaging solutions. In a February 2021 guest blog post for Ecovadis, Mastwijk says: “Every year we understand more about our impact. All colleagues are involved now one way or another. By actively conducting our awareness training sessions. By helping local communities and initiating sustainable innovations. By selecting production partners who share our values. By helping us work in the cloud and communicate via Microsoft teams so we do not have to jump on a plane as much. By always paying our production partners on time and upfront if needed and by supporting them in difficult times. By explaining to our customer the importance of reusing and recycling our packaging. By speaking out against misconduct. By treating each other well and by turning off our screens when we go home.”

And Francesco Starace, chief executive of Enel, a company transformed under his leadership from a large, traditional electric utility into a renewable-energy powerhouse, tells McKinsey Quarterly in a May 2020 report: “It’s not because we want to change things that we do it; we do it because it is the only thing we can do going forward – there is no other alternative.”

Indeed, as Ecovadis has noted in a May 2021 online article, Sustainable Sourcing has moved from an isolated procurement action to an organizational driver of brand protection, risk management, and innovation over the past two decades. “Sustainability is a marathon, not a sprint,” it says.

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