Sustainable supply chains for the future

As ASEAN continues to grow into a global manufacturing and consumer hub, the topic of sustainable supply chains has only grown in importance. Reducing waste and inefficiency as well as building better business relationships based on shared values, such as promoting humane working conditions and the transparent exchange of information, have all become critical elements in the transition to more sustainable supply networks.

Below is a summary of insights from our ‘Sustainable supply chains for the future’ session at our recent webinar, ‘Connecting EU and UK Businesses to Growth Opportunities in ASEAN’. The segment, moderated by Stuart Milne, CEO of HSBC Malaysia, features Dan Culverhouse, Head of Supply Chain Management, DKSH; Faroze Nadar, Executive Director, UN Global Compact Network Malaysia & Brunei; and Gautam Kamdar, Vice President - Global Supply Chain and Advanced Analytics, Schneider Electric. It was moderated by Stuart Milne, CEO, HSBC Malaysia

One of the keys to effective supply chain management in today’s environment is digitalisation. The call amongst the consumer markets in ASEAN for sustainable products and services is causing companies to adopt a data-led approach that will increase visibility across their supply chains and improve decision-making.

Market expansion service provider DKSH is a good example in this regard, as their use of data is enabling them to improve their fill rates, optimise their delivery frequencies and ensure the right size vehicle is selected for each trip. This is not only improving DKSH’s operational efficiency, but also reducing the carbon footprint of its supply chain.

Schneider Electric, a pioneer in applying digital solutions to improve sustainability, is using technology to manage its over 50,000 suppliers more efficiently as well as air and sea freight capacities. The ability for Schneider Electric to reduce waste by allocating excess materials from one firm in its ecosystem to meet the needs of another is an important benefit of the company’s digitalisation efforts.

Assuming responsibility for every touchpoint along a supply chain is the first step in making it more sustainable – and there is a strong business case for doing so. Describing the economic potential of this trend, Faroze highlighted that “there is an opportunity to unlock about USD200 billion by 2030 in developing efficient and sustainable supply chains.^”1

With a growing number of firms committing to ESG goals and making net zero pledges, transparency has become an important part of the conversation. Businesses want to know the details regarding the source of their raw materials or inputs to ensure that there is no contradiction with their values.

For Schneider Electric, this can be seen in the company’s ambitious goal to achieve carbon neutrality by 2050, both for itself and its suppliers. Gautam explained that there are four key areas where this transformation is happening – in the way the company designs items such as its packaging; in its pricing models and approach to incentives; in how it determines its goals and associated performance indicators; and in its employee competency requirements and training programmes. All of which have been revisited in the light of Schneider Electric’s commitment to sustainability.

Looking at this issue through the lens of ESG, DKSH has developed a multifaceted approach. This involves working on improving transport efficiency and waste management while at the same time initiating measures to ensure adequate safety standards for its own employees as well as the company’s contractors. In this way sustainable supply chains are not only about environmental factors, but increasingly social and governance ones as well.

Looking to the future, where is the conversation about supply chains in ASEAN heading? An important topic is the role of SME suppliers and the supply chains that involve them. Because of certain challenges – including upfront costs and evolving disclosure requirements – there is a growing focus on providing incentives to SME suppliers as they work to green their operations. In Malaysia, this can be seen in enabling policies such as the Green Technology Financing Scheme, which promotes the adoption of green technology through subsidised loan rates.

For international businesses, it is important to understand that supply chain management in ASEAN requires a multi stakeholder approach and collaboration with regional SME suppliers. This way, sustainability goals, including those around packaging, training and competency development, transport fleet and network management, waste management and energy efficiency, can be worked toward collectively.

Further along this vein, building mutually beneficial partnerships in ASEAN is also an important approach, both to understand the local ecosystems as well as for firms to position themselves effectively in the market. Increasingly, these partnerships are based on a common set of values regarding sustainability, which is paramount in creating the supply chains of tomorrow.

The shift to sustainable supply chains is well underway in ASEAN and it is an imperative for international businesses to understand that anticipating this trend is key to their long-term success in the region. For more information about the future of supply chains in ASEAN, please contact your relationship manager.

1 https://www.bain.com/insights/southeast-asias-green-economy-pathway-to-full-potential/