Following this year’s COP27, countries around the world have stepped up efforts towards a net-zero world by the middle of this century. From Uruguay to China, countries have been crafting strategies to reduce reliance on fossil fuels in a reasonable and timely manner. At the same time, there has been an increased focus on tackling social issues such as wealth inequality amplified by the Covid-19 pandemic.
These efforts are reflected in the way companies have been conducting their activities in Asia. The region’s leading companies we have engaged with are deeply mindful of their impact on the environment and the communities where they are operating. And as part of their overall environmental, social and governance (ESG) strategy, they have been actively collaborating and coordinating with clients, stock exchanges, financial institutions, and regulators who expect full transparency on these matters.
As part of Asset Benchmark Research’s (ABR) annual review and recognition of the leading companies in Asia, we assessed what were the best ESG practices being executed in the region during the review period.
For starters, the companies we have chosen for recognition demonstrated proactive efforts in reducing their Scope 1 and Scope 2 emissions with a clear pathway on how they would tackle the more challenging Scope 3 emissions. Efforts to reduce carbon emissions included increasing reliance on renewable energy. According to ABR data, solar power was the most common form of renewable energy used by Asia-based corporates to support their operations.
Supply chain initiatives
Other interesting initiatives detailed to the ABR team include the establishment of sustainable supply-chain initiatives, with the companies reaching out to their core suppliers and encouraging them to adopt greener and equitable methods of conducting their business. Progressive organizations worked alongside financial institutions to craft supplier financing programmes that reduce the cost of borrowing if they are able to hit specific sustainability KPIs (key performance indicators). Despite initial negative sentiment around supply chain disruptions and geopolitical risks, 87% of the companies said they were on track to hit their ESG targets.
Moreover, 93% of the leading Asian corporates that participated in ABR’s ESG corporate survey shared that they were looking, at least semi-annually, at their progress in environmental protection. Despite this proactive environmental approach, just half of the companies engaged by ABR said they had adopted a firm net-zero carbon emission target.
In addition to reducing their carbon footprint, the region’s leading corporates have been proactively supporting the communities where they operate. From Covid-19 relief/protection measures to providing livelihood opportunities for those facing economic hardships, companies that excelled in this segment demonstrated a greater awareness of the positive impact they could make on their communities.
In view of the new working conditions resulting from the pandemic, a number of companies now offer flexible working hours or remote working arrangements for their employees, with 93% of companies interacting with ABR noting that they had put in place schemes that adequately respond to the situation. However, we noticed less flexibility on the part of many employers when it came to providing paid childcare or onsite childcare, with only 45% of those surveyed saying they had such arrangements in place.
As in 2021, ABR survey participants cited providing a safe working environment amid a public health emergency as the most important corporate social responsibility, followed by employment welfare and ethical business practices.
Clear governance and transparency to stakeholders were also cited as key traits for leading corporates in Asia. In a world awash with information, companies that are able to communicate their message to stakeholders in the most effective manner distinguish themselves from the rest. The ABR team noted that the companies who were transparent about what they could deliver and timely in providing updates on their work progress were the ones most appreciated by their clients, investors, and analysts.
The capability to encourage diverse views on issues affecting a company is another positive trait observed by the ABR team. It is heartening to see that 82% of the surveyed companies have a CEO who is not the chairperson of the board of directors, indicating independence as well as strength and balance in the company’s decision-making process.
Women’s representation in the board of directors is something that leaves much to be desired in several companies, however. Only 42% of companies surveyed have women representing over 25% of their respective boards. Moreover, the independence and effectiveness of the board can still be improved; only 49% of the companies surveyed have an independent third party to evaluate their board of directors.
Despite the challenges and areas that need improvement, the drive towards sustainability is strengthening across Asia, with 86% of the companies in the survey noting that they have obtained an ESG rating from rating agencies and index providers.
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