Greening Asia’s supply chains

Asia Pacific is the world’s manufacturing powerhouse, accounting for more than half of global manufacturing output and trade, with major nodes across the Pacific Rim. Over the last half-decade, the region’s export outputs have ballooned, rising from US$18.76 trillion in 2020 to US$23.93 trillion in 2024.

Within this constellation, Southeast Asia is emerging as an increasingly prominent focal point, with its constituent markets supplying 60% of global export goods, including electronics, automobiles, textiles and chemicals. In 2023, the region exported US$1.8 trillion worth of goods—around 40% destined for OECD nations—and this number is sure to rise amid geopolitical shifts and accelerations in Southeast Asia’s manufacturing capabilities.

Despite widespread reassessments as to the benefits of globalisation, the world economy remains dependent on international trade and cross-border supply chains—creating an imperative to transition to more sustainable operations, especially in rising Asia.

The push factors

There is evidently growing momentum for more sustainable practices: regulators across Asia (and beyond) are putting in place requirements for companies to disclose their sustainability performance and demonstrate tangible efforts to make change.

For example, the EU’s Corporate Sustainability Reporting Directive—adopted by all major economies in the bloc—requires listed SMEs to provide evidence of due diligence on labour rights, carbon intensity and environmental practices. These requirements also apply to these firms’ Asian suppliers, thus forcing European companies to up the pressure on their global partners to clean up their operations and demonstrate transparency in carbon emissions, labour standards and supply chain practices.

In effect, the Directive cascades responsibility for positive social practices from the highest echelons of leadership all the way to the firms at the fringes of the supply chain in order to generate real change.

These regulatory changes come amid a sea change in mindset within the business community, many of whom are taking actions to cut their carbon footprints, minimise environmental impacts and eradicate unfair labour practices in their supply chains.

To an extent, these changes are also being driven by consumer pressure as everyday people vote with their dollars for greater transparency, stronger action, and social good from the brands and companies they buy from. Studies have shown that 90% of consumers in Asia Pacific are willing to pay a premium for sustainable products—a record high for the region.

Slowing pace for greener supply chains

Although there is increased awareness among consumers and heightened actions are being taken by businesses and governments in the region, the pace of change is yet to pick up due to several barriers:

• Policy barriers: There is lack of regulations and sustainable policies, as well as support by policymakers and executive government. A constant lack of commitment from top management is also hindering sufficient resource allocation towards sustainability initiatives among companies in the region. Moreover, initial high investments may deter organisations from prioritising budgets for sustainability programmes.
• Human resource barriers: Organisations tend to overly focus on the initial cost for sustainability implementation without weighing them against the benefits that sustainable initiatives usually introduce in the long term. Culture also plays a role, with different countries and industries demonstrating varying attitudes and perceptions towards the importance of sustainability in the supply chain.
• Technology barriers: Organisations also often fail to allocate necessary resources to sustainability-focused R&D which impedes the pace of its implementation. Moreover, the traditional accounting methods, lack the guidance and tools to measure sustainability in operations and supply chain.

Landmark initiatives

Despite these barriers, there are clear examples in the region of companies and initiatives aimed at greening the global supply chains. For example, Singapore is exploring the potential of Green and Digital Shipping Corridors (GDSCs) to decarbonise its maritime sector, a major contributor to the national economy. The Singapore-Rotterdam GDSC established in August 2022 has already brought together 26 global partners to pilot the use of zero and near-zero emission fuels in ships.

On the regulatory front, from 2025 onwards, the Singapore Exchange Regulation (SGX RegCo) will require all listed companies to disclose Scope 1, 2 and 3 emissions in alignment with the International Financial Reporting Standards. Larger companies will be required to disclose their Scope 3 emissions, which are often harder to measure due to their broad scope (covering indirect emissions from the value chain), starting from FY2026. This will impact companies requiring them to invest in compliance systems, by enhancing their infrastructure and data collection capabilities.

Finally, a leading global logistics and supply chain company has taken significant steps to make its operations more sustainable, launching the world’s first methanol-enabled container vessel, to prove that green methanol is feasible as a low-emission fuel within maritime transportation. Other than this, the company is also investing in sustainable logistics using electrification and AI and integrating circular economy principles into its operations to minimise waste and promote sustainability.