Navina Balasingam: PLCs will need to lead by example given their capacity and exposure to international market expectations.
KUALA LUMPUR: Capital Markets Malaysia (CMM) and PwC Malaysia have launched a report entitled "Corporate Malaysia's Journey Towards a Sustainable Supply Chain", which assesses the current state of the country's supply chains in terms of sustainability.
In a statement, CMM, an affiliate of the Securities Commission, said 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.
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.
"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," said CMM general manager Navina Balasingam.
She noted that among Bursa Malaysia’s Top 100 companies, 80% have ESG governance and oversight in place to develop sustainable supply chains, but only 55% have incorporated supply chain risks as part of their overall corporate risks and strategy.
Meanwhile, the absence of a standardised lens to evaluate and measure unlisted companies, predominantly SMEs, presents a challenge for corporations seeking to measure and reduce their Scope 3 emissions, she said.
"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."
PwC Malaysia's sustainability and climate change leader for South East Asia Andrew Chan said 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," he said.
CMM said it is developing a simplified ESG Disclosure Guide specially curated for SMEs, which is scheduled to launch in the fourth quarter of 2023.
According to Navina, 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.
