Corporate Malaysia to leverage Supply Chain Sustainability as Competitive Strategy

CMM and PwC Malaysia aim to drive awareness of sustainability value propositions throughout the supply chain

KUALA LUMPUR, Malaysia, April 11, 2023 /PRNewswire/ -- Capital Markets Malaysia ("CMM"), an affiliate of the Securities Commission Malaysia, and PwC Malaysia ("PwC"), today launched "Corporate Malaysia's Journey Towards a Sustainable Supply Chain", a report, assessing the current state of Malaysia's supply chains through a sustainability lens. The report highlights the opportunities to be gained from greater engagement of small-to-medium-sized enterprises ("SMEs"), which are typically the largest contributors to the supplier ecosystem. To date, SMEs make up the majority of suppliers for public- listed companies ("PLCs"), contributing 38% of the nation's gross domestic product ("GDP") and accounting for 48% of the national employment rate.

Malaysia is at a crossroads, with mounting pressures to address sustainability considerations within supply chains as the country's major trading partners step up their focus on net zero commitments, while increasing regulatory scrutiny and consumer concerns continue to play a check and balance role. Developed against the backdrop of Corporate Malaysia's transition towards a low carbon economy, the report explores how sustainable supply chains can be a new growth lever for the nation, by improving Malaysia's attractiveness as an investment destination. The report presents three key areas that PLCs will need to consider for the adoption of greater supply chain sustainability - governance and integration, engagement and incentive, as well as data and reporting.

Navina Balasingam, General Manager of CMM said, "PLCs will need to lead by example given their capacity and exposure to international market expectations. While Malaysia's PLCs have made significant progress in incorporating ESG principles as part of their business strategy, there is still much to be done to strengthen sustainability practices within their supply chains. This report finds that of Bursa Malaysia's Top 100 companies, while 80% have ESG governance and oversight in place to develop sustainable supply chains, only 55% have incorporated supply chain risks as part of their overall corporate risks and strategy. As for the unlisted space which are predominantly made up of SMEs, the absence of a standardised lens to evaluate and measure these companies does present a challenge for corporations seeking to measure and reduce their Scope 3 emissions. With this report, we aim to provide examples of initiatives and measures that can be taken by both private and public sector actors to support sustainability within supply chains."

The report features case studies of Malaysian companies that have exemplified efforts in improving their supply chain sustainability by engaging SME suppliers. These initiatives include working with suppliers to build dashboards for traceability of raw materials or emissions, driving collaborative relationships that uplift suppliers' income opportunities, and developing incentive programmes to encourage desired sustainable behaviours, amongst others.

Andrew Chan, South East Asia's Sustainability and Climate Change Leader, PwC Malaysia commented, "As an active trading nation, Malaysia is not alone in facing hurdles around supply chain sustainability amidst the greater push globally around disclosure and uplift of supply chain practices. Considering how intricately linked companies' sustainability performance is with their supply chains, companies will need to rethink their relationship with suppliers beyond contracted transactions, to inspire suppliers to adopt sustainability practices and enhance their performance. We're also seeing a number of initiatives by the public sector to support the transition including working with SMEs to encourage adoption of low carbon practices, which is certainly encouraging.

However, this will need to be backed up by investment in the right infrastructure and policies to allow Malaysian companies to truly transform their supply chains and build long term value for their stakeholders beyond helping local suppliers to meet the stringent sustainability requirements needed to participate in global supply chains."

Recognising the challenging operating backdrop today, CMM is developing a Simplified ESG Disclosure Guide ("Guide") specially curated for SMEs, scheduled to launch in the fourth quarter of 2023. The Guide will provide practical guidance and the baseline disclosures expected of SMEs in relation to ESG aligned with international standards, to encourage greater transparency and improve the quality of SMEs' ESG disclosures.

Navina commented, "We recognise the urgent need to enable and support the SMEs' journey by defining and paving the best path forward towards impactful change. In addition to ensuring alignment in the disclosure indicators with global disclosure frameworks, the Guide will further bring value to the overall process of enabling supply chain partners to meet their sustainability commitments."

For more information on the report, please visit: https://www.capitalmarketsmalaysia.com/corporate-malaysias-journey-towards-a-sustainable-supply-chain/