FMGC SMEs face ESG risks from overseas suppliers: study

They may not have the same social and environmental protections.

Singapore’s small and medium enterprises (SMEs) in the fast-moving consumer goods (FMGC) sector face upstream supply chain risks associated with sourcing from countries with lesser social and environmental protections.

Over 8 in 10 (84%) of MSMEs in Southeast Asia— including Singapore— have adopted at least one environmental, social, and governance (ESG) practice, according to a survey by the Center for Impact Investing and Practices (CIIP).

Singapore businesses specifically were noted for having strong ESG compliance. It ranked 44 out of 180 countries in the 2022 Yale Environmental Performance Index, second only to Japan in the APAC region. Labor rights are also “generally understood to be strong” in the country with legal right to freedom of association and collective bargaining.

The key risk lies in the fact that Singapore FMCG businesses have to source their products from overseas countries with lesser social and environmental protections, CIIP said.

Malaysia and Indonesia were part of Singapore’s top five importing countries for consumer goods, with an import partner share in Singapore of 18% and 6% respectively.

Singapore is also host to several major global FMCG regional hubs such as 
Unilever, P&G, Coca-Cola and L’Oreal,43 44 and their key activities include procurement, warehousing, distribution, human resources and R&D.

This demonstrates Singapore’s high degree of reliance on regional supply chains for satisfying the demand of the local market, the CIIP said.

SMEs make up the majority of FMCG-adjacent sectors such as wholesale trade, retail trade, transportation and storage, and food and beverage services.