Insight & Analysis

Diversification benefits ripple across Asia

Published: Jan 2024

Having been heavily impacted by the global pandemic and rising geopolitical volatility in recent years, Asian corporates are determined to reduce their dependence on China.

Water ripple in a very still lake

The continued diversification of Asian corporate supply chains is providing a sustained boost to businesses and economies in countries across South East Asia. Meanwhile, growing numbers of corporates in Asia are embracing the need for sustainability in their supply chains.

These were some of the key findings from the Coalition Greenwich Voice of Client – 2023 Asian Large Corporate Trade Finance Study, which found more than two thirds of large corporates in the region were committed to diversifying their supply chains.

The most common step these companies are taking to build resilience in their supply chains is to source new suppliers, both in their own countries and abroad. More than half of large corporates in Asia are working to diversify their supply chains geographically with a focus across South East Asia that is favouring India, Vietnam and Malaysia in particular.

These findings are echoed by similar research conducted among European corporates, who are diversifying their supply chains by extending them into new countries and suppliers in Asia through so-called ‘China+’ strategies.

According to Ruchirangad Agarwal, Senior Relationship Manager at Coalition Greenwich and co-author of the report, corporates in Asia are working through logistical challenges and issues with the reliability and quality of some new suppliers.

“However, they are firmly committed to diversifying their supply chains throughout the region and, in many cases, decreasing their dependence on China,” he says.

Raffi Schieir is the Founder of Prevented Ocean Plastic, which is developing collection and sorting infrastructure across Indonesia to enable the responsible sourcing of recycled plastic.

“South East Asia is an important area for us as we go where the problem is most acute,” explains Schieir. “Our local supply chain operates in areas that lack formal waste management infrastructure and we work directly with recyclers to establish new collection and aggregation centres.”

The company works with some of the leading recyclers in the world, seeking partners prepared to undergo the auditing required to join its programme and adhere to standards that are independently audited to ensure traceability and compliance.

“Our collection centres locations are based in at-risk coastal areas which tend to be burdened by over-population and over-tourism, which increases the risk of plastic entering the ocean and impacting wildlife and biodiversity,” says Schieir. “We are building a circular economy that can support increased demand from outside Asia, while investing in the areas that need it most.”

Just over half of the Asian companies that took part in the Coalition Greenwich study are embracing the need for sustainability in their supply chains and have goals for creating sustainable supply chains.

A growing number of Asian corporates say they would like to introduce sustainability goals but are challenged by a lack of information, expertise or funding, suggests Agarwal. “This evolution represents an opportunity for banks to forge stronger relationships with these corporates by helping them understand and introduce sustainability measures,” he adds.

A number of multinational companies are showing an interest in Prevented Ocean Plastic’s infrastructure builds in the region as a result of the impact of their work and concerns around extended producer responsibility.

“Every business now has sustainability teams and programmes and it is recognised they need to be investing in those areas to minimise the negative – and accentuate the positive – aspects of what they do,” adds Schieir.

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