Experts on adopting ESG standards: Rebuild supply chain and business models, prioritise sustainable and ethical practices

As consumers become more conscious of ESG issues, companies must keep up with this shift by becoming "listening organisations" and focusing on ESG practices.

The retail industry is undergoing a significant shift, with consumers becoming increasingly conscious of environmental, social, and governance (ESG) issues. Consumers are now more inclined to spend on products that are not only good for themselves but also “for society.” However, keeping up with this shift can lead to a potential increase in spending.

Neil Sutton, Corporate Finance business head for the Asia Pacific at PwC, holds over 30 years of experience in the consumer products sector. In the past year alone, he had led his team to complete over 200 deals in the food manufacturing sector, retail, home, personal care, and luxury, amongst others.

Given that the current consumer landscape is focused on ESG issues, Sutton said companies must now adapt to customers' expectations to remain relevant and competitive. However, this brings up another concern in spending for labour, raw materials, logistics, and transportation, as well as supply chain challenges. 

To address these additional concerns, it can be noted that organisations are now focusing on their digital transformation and leveraging online channels to market their brands, influence consumers, and build affinity. On top of that, others have also made use of on and off-line channels for awareness building.

EY leader Atul Chandna meanwhile said that in response to this shift, companies must rebuild their supply chain and business models around the lives of consumers. Chandna is currently EY Asia-Pacific’s Supply Chain Leader and EY Asean Consumer Consulting Leader. In his role, he had supported numerous local and multinational clients, from conceptualisation to the final delivery of large-scale turnaround programs, as well as spearheaded innovation engagements, amongst others.

For Chandna, businesses must prioritise the needs and values of consumers and incorporate them into the design and implementation of supply chain processes. This means consumer products companies must become "listening organisations," prioritising how consumers live instead of just what they buy. Becoming a "listening organisation" gives companies the agility to meet changing consumer needs, amidst inefficiencies and structural gaps that were exposed by the pandemic.

In addition to rebuilding business models, companies must also diversify their supply sources to reduce business risk, according to RSM Chio Lim LLP Partner David Eu. Eu, who is also a practising member of the Institute of Singapore Chartered Accountants and a member of CPA Australia, handles initial public offering engagements and is responsible for a diverse portfolio of listed and privately owned clients.

He stated that by establishing a diverse network of suppliers, companies can minimise the risk of logistic disruptions that will contribute to production delays. To remain competitive in the retail industry, companies must also take note of three key elements: innovation, sustainability, and people.

Eu believes that for businesses to succeed, they must double down on consumer demands and re-examine existing marketing strategies, focus on ESG practices, as well as ensure employee retention by offering new incentives and opportunities for growth.

In conclusion, the retail industry is undergoing a transformation, driven by consumers who are increasingly conscious of ESG issues. Companies that seek to adapt successfully to this shift should look into rebuilding their supply chain and business models around consumers' lives, prioritising sustainable and ethical business practices, as well as diversifying their supply sources to reduce risks.

Sutton, Chandna, and Eu were the judges at the FMCG Asia Awards 2022. To find out more about the awards programme, click here.

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