Electrical and Electronics Sector
Helping E&E MSMEs meet Global Sustainability Requirements in Resource Efficiency
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ESG awareness varies across different countries and industry sectors
Not familiar
Moderately familiar
Very familiar
Survey question: How familiar is the management of your company with the concept of sustainability/ESG for business?
Note: Figures have been rounded to the nearest whole number.
ESG practice adoption rate across countries and sectors – average number of practices and percentage of MSMEs implementing at least one
Average number of ESG practices per MSME
Percentage of MSMEs having implemented at least one practice
Survey question: Has your company taken any actions or adopted practices in the following areas to 1) reduce its environmental impact, 2) increase its social impact, and 3) ensure its good governance? Please select all that apply
Note: A p-value of less than 0.05 indicates statistical significance, in which the null hypothesis is rejected. Figures have been rounded to the nearest whole number.
Year of initial ESG adoption by companies
Indonesia
Malaysia
Singapore
Vietnam
Weighted sample: n = 910 | Survey question: How familiar is the management of your company with the concept of sustainability/ESG for business?
MSMEs from Singapore and Vietnam are more likely to have adopted ESG practices in the last 3 to 5 years. However, as E&E MNCs continue to increasingly locate hubs, factories, and other operating entities in markets in Southeast Asia, it is likely that levels of adoption will increase.
Global E&E supply chains are highly complex, involving multiple cross-border activities spanning procurement, manufacturing, fabrication, and quality control before products reach end-users. MSMEs in this sector often need to meet diverse supplier standards and regulatory requirements across jurisdictions. While direct consumer demand for sustainably produced electronics may be less prominent compared to other sectors, the pressure to align with international compliance and sourcing standards remain high. Reflecting this, 80% of E&E MSMEs surveyed reported being moderately to very familiar with ESG and sustainability issues, the highest among all sectors in the study.
On a country basis, the percentage of MSMEs reporting high levels of familiarity varied, ranging from 7 to 65% in markets across the region.
There remains a gap between awareness and implementation. E&E MSMEs have adopted an average number of 7.7 ESG practices per MSME. Meanwhile, the percentage of E&E MSMEs having implemented at least one practice is 87%.
MSMEs from Singapore and Vietnam are more likely to have adopted ESG practices in the last 3 to 5 years. However, as E&E MNCs continue to increasingly locate hubs, factories, and other operating entities in markets in Southeast Asia, it is likely that levels of adoption will increase.
Key reasons for adopting sustainability/ESG practices in each country
As is common across all MSMEs in our study, the main drivers for ESG adoption are lowering costs and increasing long-run efficiency, meeting increased demand for sustainable products and services, and improving branding and reducing reputational risks.
Key challenges to adopting sustainability/ESG practices in each country
Key barriers remain for implementation, with limited in-house skills, low awareness about ESG, and high implementation costs emerging as the top challenges for the E&E sector. Low awareness for ESG is the top challenge for Indonesian and Malaysian E&E MSMEs, while high implementation costs are the primary difficulty for Singaporean MSMEs and sourcing sustainable suppliers the biggest barrier for Vietnamese MSMEs.
Low awareness of ESG issues may be surprising given the global orientation of the sector. There remain opportunities for MSMEs in Indonesia and Malaysia to receive stronger support in cultivating ESG awareness, while defraying costs and enlarging the pool of sustainable suppliers will remain key in Singapore and Vietnam.
Corporate client incentives for increasing ESG practices
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Weighted sample: n = 676 | Survey question: Which types of incentives from a corporate client would most impact your company’s decisions to consider further increasing its sustainability/ESG practices? Please select up to 3 options that apply.
Note: The top two incentives for each country are highlighted.
Given the sector’s supply chain complexity, intensive use of resources and high levels of waste generation, transparency in supplier requirements is crucial. Adherence to supplier codes of conduct for suppliers is crucial to secure commercial incentives from large clients.
In the course of our study, we engaged several MNCs and solution providers which offer products and services across electrification, electric vehicles, semiconductors, and other categories – each with a well-developed strategy to manage ESG risks within their supply chains.
MNCs play a leading role in driving behavioural change among MSMEs through supplier codes of conduct and capacity building. Many MNCs have already introduced supplier codes of conduct and made training available, creating transparent commercial opportunities for suppliers. MNCs can also drive cost savings for MSMEs through greater resource efficiency and other approaches. Furthermore, solution providers can provide innovative methods to address the challenges of waste management, component recycling, and resource intensity. The scale and intensity of the sector’s challenges mean that significant attention will need to be placed on streamlining operations to mitigate its social and environmental impact.
Stringent standards and requirements from MNCs will help to induce behavioural change among the MSMEs in their supply chain, which will be crucial in helping to improve resource efficiency, and mitigate environmental and social risks.
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