Conscientious procurement

In a world where environmental challenges are becoming increasingly urgent, sustainable sourcing is now vital, helping preserve natural resources, reducing carbon footprints, and supporting biodiversity. It is a strategic imperative, and companies that embrace related practices will be well positioned to capture more market opportunities, meet regulatory requirements, and, most importantly in today’s world, strengthen their brand in an increasingly eco-conscious market.

At the “Gateway to ASEAN” conference held recently in Ho Chi Minh City by UOB, Mr. Adrian Ow, Head of ESG Solutions, Sector Solutions Group, at the bank said Vietnam is becoming a key center of ASEAN’s robust growth and is establishing itself as a strong and sustainable sourcing hub. This is crucial for driving Vietnam and ASEAN’s economic growth and supporting livelihoods and jobs.

Which is why, Mr. Ow stressed, it is essential for businesses to discuss broad topics like how global sourcing requirements are evolving at the global level, how innovative companies are innovating to meet these global sourcing challenges, and how supply chain partners, such as logistics and on-site energy optimization providers, are also innovating to improve the resilience and sustainability of the supply chain.

Producers stepping in

Mr. Bui Khanh Nguyen, Vice President of Public Affairs, Communications, and Sustainability, at Coca-Cola Beverages Vietnam, shared his experience with conference participants on global sourcing requirements, the situation at Coca-Cola, and what the drivers of change are. He said Coca-Cola has been in Vietnam for 30 years and was one of the earliest investors following the government introducing its open policies. Over the decades, it has witnessed significant changes both in the country and within the supply chain. He added that as a global company operating across multiple markets, it faces pressure from various stakeholders and must continually adapt to meet international standards and sourcing requirements.

There are several key drivers behind these changes, he explained. First, regulatory compliance is a major factor. Governments and international bodies have introduced various standards for companies operating in one or more markets. For instance, in the beverage industry, this year marks the first time the Extended Producer Responsibility (EPR) has been implemented. The government expects companies like Coca-Cola to collect and recycle their own packaging or to cover the cost of doing so, contributing to a cleaner, more sustainable country, and it is actively supporting this government initiative.

Second, he spoke of the growing influence of consumer demand. Today’s consumers are making more informed choices, favoring companies that produce environmentally-friendly and ethically-sourced products. Coca-Cola views this not as a challenge but as an opportunity to make its products more sustainable and to better serve its customers.

He added that investors are increasingly focusing on environmental, social, governance (ESG) aspects of other companies before making investment decisions. Supply chain resilience has also become critical, especially in the aftermath of Covid-19, which caused significant disruption. Companies like Coca-Cola must now be more resilient to sustain growth.

Lastly, he emphasized the role of technology. While it presents both advantages and challenges, Coca-Cola is embracing it as it builds its fourth plant in Vietnam, located near Ho Chi Minh City. The company is adopting new technologies to ensure the new plant operates more sustainably, using water and energy more efficiently and improving production management.

Both consumer demand and regulatory compliance are equally important, he noted. Regulatory compliance is key because there must be consistent standards to follow. It is essential for companies to know where they are headed and how they measure up. “I remember 20 years ago, sustainability was a simple, almost charitable idea, because people weren’t fully aware of their responsibilities to consumers, the environment, or their employees,” he told the conference. “It has taken time for companies to evolve on this path.”

Logistics player looks to the skies

Mr. Bernardo Bautista, Managing Director of DHL Express Vietnam, spoke about how it has evolved amid the global shift towards a more sustainable and traceable supply chain. “It all starts with a vision,” he said. “We wanted to do something for our brand and for our customers. We set ourselves very aggressive targets and began by electrifying our last-mile deliveries, installing solar panels and doing everything we can to be sustainable. But then we took a hard look inside and realized that over 90 per cent of the emissions generated by DHL Express came from aircraft fuel consumption, so we knew we had to address this.”

The company determined that the solution was to adopt sustainable aviation fuel. Unlike traditional jet fuel derived from petroleum, sustainable aviation fuel is produced from renewable sources such as used oil and organic matter. By using this fuel blend, emissions can be reduced by over 90 per cent or in some cases by around 80 per cent. DHL made the decision to act on this, he said, emphasizing that the time for change is now.

He also explained that the initiative is not only beneficial for the planet but also for customers. To support them along their sustainability journey, DHL introduced the “GoGreen” program, which allows customers to contribute to covering the additional cost of sustainable fuel, which is currently more expensive than traditional jet fuel. In return, DHL provides certificates acknowledging the customers’ role in reducing carbon emissions, particularly Scope 3 emissions. Through DHL’s GoGreen program, customers can be assured that they are making a tangible impact in reducing these emissions.

He proudly told the conference that this innovation is being embraced by more than 3,000 customers around Vietnam, with over 14 per cent of DHL’s shipments now going through the GoGreen program; an impressive achievement in its sustainability efforts.

However, obstacles remain. “The problem we were facing with sustainable aviation fuel is that there wasn’t enough being produced,” he went on. “There continues to be a shortage. So, what we decided at DHL Express was to break that cycle by signing a long-term contract with a sustainable aviation fuel provider.”

Role of energy management

Mr. Yoon Young Kim, Cluster President for Singapore and Brunei at Schneider Electric, detailed the German giant’s role in the development of the North-South transmission line in Vietnam 30 years ago, noting that the company was instrumental in building this piece of infrastructure. As Schneider Electric celebrates its 30th anniversary in Vietnam, it has received recognition from various platforms, including being named the most sustainable company in the world by Time Magazine.

Mr. Kim emphasized the company’s $40 million investment in innovation and sustainability, addressing common misconceptions about technology’s role in supporting sustainability. He pointed out that while AI, including Generative AI, is often discussed, it is important to recognize that GPUs (graphics processing units), which are commonly used in AI, consume significantly more energy than CPUs (central processing units), and that technologies like ChatGPT have a higher energy footprint compared to a Google search.

Despite the growing demand for new tech models, which drives up energy consumption, IT and digital solutions currently represent only 1-2 per cent of global energy use. This consumption is expected to double, indicating that there is still substantial progress to be made. Schneider Electric is leading the way with new technologies like Liquid Cooling that are more energy-efficient compared to traditional fan-based cooling systems used in data centers. In places like Singapore, stringent Power Usage Effectiveness (PUE) requirements are in place, and similar considerations are becoming relevant in Vietnam as well.

He also discussed the importance of addressing Scope 1, 2, and 3 emissions in supply chains. Fortune 500 companies are now required to report on these sustainability metrics, making it crucial for Vietnam to align with global sustainability demands. He noted that Schneider Electric is involved in various projects in Vietnam that use digital technologies to enhance energy and water efficiency, such as solutions that monitor and address wastewater leakages.

One key point about sustainability is that it provides payback, Mr. Kim noted. “This payback can be seen early in the journey, though the journey itself is ongoing,” he explained. “It’s not something you can simply switch off; it’s a continuous process. Leadership must actively model and drive this commitment, as the organization will benefit from it. Proper utilization of resources - such as achieving zero waste or optimizing energy efficiency - leads to positive outcomes. These results can manifest as both monetary payback and qualitative benefits, contributing to the company’s long-term sustainability.”