Another key risk related to establishing a presence abroad is localising supply chains in order to streamline operations and minimise waste. While contributing to the development of a global circular economy companies keen on safeguarding supply chain integrity and brand equity must pay particular attention to data privacy standards and to modern slavery risks.
The upcoming Modern Slavery Act will likely impose reporting obligations for all major businesses; first tier suppliers may be in scope if the UK example is followed, raising the bar for ethical sourcing.
In a region characterised not only by high growth rates, but also by wildly varying regulatory landscapes and an above-average incidence of corruption, bribery, and human rights abuse, Australian companies need to manage their risks smartly to drive sustainable investment strategies.
ESG (environmental, social and governance) has been the new black in the investment world for quite a while. The good news: 50.6% of Australian managed funds qualify as sustainable, and the trend does not seem to be fading, with financial institutions seeking to minimise their investments’ carbon footprint, and on the lookout for funding candidates.
Some of the Australian businesses that may access these funds have a regional or global outlook, and are an active part of, or connected to, the tech start-up scene. However, their number is limited.
A winning strategy may be to match shareholders’ expectations at home to investment strategies abroad. Public opinion demands a higher ethical bar, and a growing focus on green investments. With green bonds performing above average, this could be another win-win scenario for financial institutions seeking to grow their portfolio and improve their reputations as backers of sustainable development in the emerging world.
What’s the catch?
Once again, the regulatory landscape might prove to be challenging. However, when companies manage their risks smartly, they can achieve both an increase in revenue and a cut in their production costs, as many Japanese conglomerates are finding out in Vietnam.