Food and Beverage Sector
Strengthening Food Systems through greater capacity building for smallholders and F&B MSMEs
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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: When did your company first begin adopting ESG policies or practices?
F&B MSMEs are integrated not just into F&B supply chains, but often have overlaps in procurement with consumer goods MSMEs and share end-customers with tourism MSMEs. Despite the vulnerability of the F&B sector to extreme weather shocks, only 62% of F&B MSMEs surveyed indicated familiarity with sustainability and ESG.
While this suggests a disconnect between increasing preferences for sustainable consumption and actual ESG practices by F&B MSMEs, as well as increasing ESG implementation pressures from MNC customers, this also reveals a key opportunity in the market to address knowledge gaps. This could also suggest that the dynamism visible in the consumer goods sector in terms of ESG engagement and adoption is not mirrored in the F&B sector, reflecting less exposure to international supply chains or greater day-to-day operating pressures.
Despite efforts by MNCs, governments, and other stakeholders, F&B MSMEs have adopted and implemented a relatively low number of ESG practices among all four sectors in our study at 6.8. Only 84% of F&B MSMEs are likely to have adopted at least one ESG practice.
On a country basis, the disparity among F&B MSMEs who are moderately familiar with sustainability and ESG issues is narrower, with between 27% to 45% of MSMEs in the region indicating moderate familiarity. Greater differences emerge among MSMEs being unfamiliar with ESG practices.
There remain opportunities to boost levels of ESG awareness across the markets in the region. Singaporean F&B MSMEs are more likely to have adopted ESG practices for the longest duration, with most in Indonesia, Malaysia and Vietnam having adopted such practices in the last 2 years.
Key reasons for adopting sustainability/ESG practices in each country
Increasing regulatory pressures, improving consumer awareness toward ESG issues, and shifting consumption habits are helping to drive this increase in ESG adoption.
The top motivations for ESG adoption by F&B MSMEs are market-driven, with the main drivers being 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
The barriers to adopting ESG practices show variations in top barriers on a country-basis relative to the other sectors, even if the top barriers remain the same. For F&B MSMEs, low awareness of ESG issues is the top barrier in Indonesia, high implementation costs in Malaysia and Singapore, and difficulty sourcing sustainable suppliers in Vietnam.
There remain opportunities for F&B MSMEs in Indonesia to receive further training, costs to be brought down for MSMEs in Malaysia and Singapore, and opportunities to develop a pool of sustainable suppliers in Vietnam.
Corporate client incentives for increasing ESG practices
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Weighted sample: n = 1,043 | 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.
In contrast to other sectors, full visibility of the entire supply chain, as well as direct engagement with smallholder farmers downstream, take on greater significance in the supply chain strategies of F&B MNCs. Due to the fragmentation of smallholder farmers and MSME intermediaries across the F&B sector, MNCs play a key role coordinating across ecosystems of the respective commodities that they source, especially if they are primary offtakers. This necessity of reaching directly to smallholder farmers to ensure stable and resilient supply differentiates the sector from others in our study. The heightened focus on direct engagement may stem from the more immediate and visible impacts of climate change on yields and supply stability in the F&B sector. This necessity of reaching directly to smallholder farmers to ensure stable and resilient supply differentiates the sector from others in our study. The heightened focus on direct engagement may stem from the more immediate and visible impacts of climate change on yields and supply stability in the F&B sector.
Ecosystem players will need to understand and engage their supply chains from the ground up. starting from the producers themselves, smallholder farmers. To help improve livelihoods and encourage the adoption of sustainable and regenerative farming practices, a comprehensive awareness of the challenges smallholder farmers face is necessary. Further, building from this awareness, ecosystem players will need to invest in capability development and solutions that are easy for farmers and MSMEs to understand and implement, stakeholders will also need to help farmers and MSMEs secure financing, especially given the rising cost of inputs.
Responses from our survey suggest that F&B MSMEs have the highest preference for four types of support from MNCs. These include longer-term contracts guaranteeing steady business, higher prices for sustainable products or services, preferential payment terms such as shorter payment cycles, and guaranteed minimum purchase volumes. The preference for longer-term contracts is higher relative to MSMEs across our sample on average and reflect the volatility characteristic of the food and beverage industry.
Key Findings for the
Electrical and Electronics Sector