Looking at the bright side


IN ASEAN, where economies and societies are deeply reliant on interconnected supply chains, reducing Scope 3 emissions is a strategic necessity to build resilience against climate change. These emissions, which stem from indirect activities such as transportation, supplier operations, and product use, make up the majority of carbon footprints for companies in the region.

For economies like Malaysia, addressing Scope 3 emissions helps mitigate risks associated with climate-related supply chain disruptions, such as extreme weather or resource scarcity.

Mitigating climate change impacts

As a major exporter, the country is particularly vulnerable to shifting global trade dynamics, including policies like the European Union’s Carbon Border Adjustment Mechanism (CBAM). By decarbonising supply chains, businesses can remain competitive in low-carbon markets and avoid increased costs or loss of market access.

Singapore’s initiatives in green shipping and Indonesia’s renewable energy goals showcase how Asean economies are tackling emissions linked to key industries. Thailand’s push for sustainable agriculture, for example, demonstrates efforts to reduce emissions from land use, aligning with regional decarbonisation targets.

Recently, Malaysia’s National Energy Transition Roadmap (NETR) outlined actions to decarbonise sectors like energy and transportation, projecting to deliver a 32% reduction in emissions by 2050 from 2019 levels.

Achieving this requires scaling renewable energy to 23% of the energy mix while addressing challenges such as reliance on natural gas and the growing energy demand from industries like data centres​. By prioritising Scope 3 reductions, businesses not only address climate risks but also support inclusive and sustainable growth across Asean, benefiting both economies and societies.

Regional challenges

Scope 3 emissions present some of the most significant yet challenging areas to address for businesses across Asean.

One key obstacle is the lack of standardised data and reporting frameworks. Many businesses, especially small and medium sized enterprises (SMEs), struggle with insufficient resources and expertise to measure emissions across their value chains.

This makes it hard to set realistic reduction targets or comply with international standards. In the Malaysian and Asean context, SMEs dominate the market and supply chains, making this challenge is particularly pronounced.

While the NETR underscores the country’s decarbonisation efforts, gaps persist in scaling solutions for high-emission sectors like logistics and agriculture.

Indonesia’s reliance on agriculture and forestry poses challenges for mitigating emissions from deforestation and land use. Efforts like its deforestation moratorium show promise but require stricter enforcement and incentives for sustainable practices.

Singapore focuses on leveraging innovation and technology to decarbonise supply chains, particularly in aviation and maritime logistics through initiatives under its Green Plan 2030. While Thailand emphasised sustainable agriculture to reduce upstream emissions, a critical step given its role as a regional food exporter.

Balancing economic growth with sustainability goals adds further complexity. Rising trade pressures, such as the CBAM, compel companies to decarbonise supply chains quickly. At the same time, investments in energy-intensive industries, like data centres across Asean, risk increasing emissions unless renewable energy is scaled appropriately.

To overcome such challenges, businesses must invest in capacity-building, improve supply chain transparency, and leverage collaborative regional platforms to share resources and innovation.

These steps can enable the region to reduce Scope 3 emissions while maintaining global competitiveness.

Present opportunities

Amid the rise in sustainable procurement, addressing Scope 3 emissions not only meets regulatory demands but also unlocks opportunities for Asean businesses to innovate and thrive in a low-carbon economy.

Companies can capitalise on regional shifts towards sustainable trade practices by rethinking value chain processes. This aligns with Malaysia’s increasing focus on energy transition and sustainable development, and aims to support green technologies like renewable energy and carbon capture solutions​.

Collaborations within Asean offer another avenue for growth. The Asean Power Grid, which aims to enhance cross-border energy trade, allows companies to tap into regional renewable energy sources, reducing carbon footprints while lowering operational costs. Such collaborative platforms provide shared benefits that strengthen collective climate action.

Benjamin Soh is the founder and managing director of ESGpedia. The platform powers the ESCAP Sustainable Business Network (ESBN) Asia-Pacific Green Deal digital platform and the Asia-Pacific Single Accesspoint for ESG Data (SAFE) initiative, and is part of the Singapore-Australia Go-Green Co-Innovation Programme. It serves as the nexus of ESG, digitally empowering corporates, SMEs and the financial sector to ensure compliance towards ESG regulations and attain their ESG goals.Benjamin Soh is the founder and managing director of ESGpedia. The platform powers the ESCAP Sustainable Business Network (ESBN) Asia-Pacific Green Deal digital platform and the Asia-Pacific Single Accesspoint for ESG Data (SAFE) initiative, and is part of the Singapore-Australia Go-Green Co-Innovation Programme. It serves as the nexus of ESG, digitally empowering corporates, SMEs and the financial sector to ensure compliance towards ESG regulations and attain their ESG goals.A growing demand for green products and services also creates new market opportunities. For example, sustainable supply chain practices in agriculture and manufacturing allow companies to cater to environmentally conscious consumers. Thailand’s focus on sustainable agriculture and Singapore’s advancements in green logistics demonstrate how regional efforts can build globally competitive industries.

Moreover, these exercises can lead to improved transparency and stakeholder trust, with businesses that embrace clear and measurable carbon reduction strategies deemed to be better positioned to secure green financing and sustainability-linked loans.

This is particularly advantageous for SMEs, which form the backbone of Asean economies and stand to gain from such incentives.

Technology as strategy

The rapid advancement of digital technologies is transforming how Asean businesses address sustainability challenges, including tracking and managing emissions in their value chains.

Innovations like AI are starting to empower companies to navigate the complexities of Scope 3 emissions with greater efficiency and transparency.

Platforms such as ESGpedia provide comprehensive GHG emissions calculation and digital solutions for businesses across Asean to accurately measure, monitor, verify and gather Scope 3 emissions data effectively.

It provides an extensive base of more than 280,000 emission factors hyper-localised to all Asia Pacific countries, covering over 1,100 product categories, allowing for accurate, localised, and credible emissions calculations for Asean businesses. These tools support compliance with global and regional regulations, fostering transparency in interconnected regional supply chains.

AI-powered solutions are particularly impactful in agriculture, manufacturing and logistics – key sectors for most Asean countries.

Optimising resource use in fertiliser, water and energy can aid in streamlining transportation networks, reduce emissions and improve operational efficiency in the long term. Digital solutions are also being adopted to improve data accuracy and traceability in supply chains. Advanced emissions tracking systems and IoT-enabled sensors let companies gather real-time data on production processes, ensuring emissions reporting is reliable and aligned with international standards.

Across the region, governments and organisations are encouraging the adoption of digital tools to align with Asean’s collective sustainability objectives, in addition to cross-border initiatives, to leverage these technologies to better integrate renewable energy and reduce carbon intensity across borders.

Although Scope 3 emissions present several obstacles for many companies, especially the SMEs, there are ways to flip the coin and consider the many possibilities of doing good, while gaining greater attractiveness to attract investors.

This is the first of a two-part series on Scope 3 reporting. Part two will be featured next month.

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