Asian countries less transparent in ESG reporting: report

China is still the least transparent major sourcing market globally.

Major Asian manufacturing hubs China, India, Indonesia, Vietnam and Thailand all became less transparent in reporting ESG risks this year since the pandemic, a new report by market data provider Elevate showed.

The report, which identifies major sourcing markets posing a high risk to global supply chains, ranked China as the least transparent with only 38% of the audits undertaken in the second half of 2022 were deemed as an accurate representation of factory conditions. 

This was followed by India where only half of the audits were transparent. Countries that have historically shown transparency such as Indonesia, Vietnam, and Thailand, have now become less transparent due to poor access to information.

Declining levels of transparency have been traced to audit deception including withholding of information, falsifying data, and other attempts to conceal malpractices in the industry. 

Travel restrictions during the pandemic made it even more difficult for auditors to accurately assess the factory conditions or even detect instances of deception.

“If suppliers in high risk countries engage in falsifying or concealing data, the likelihood of businesses unwittingly producing through high risk practices increases significantly,” Elevate said in its 2023 Supply Chain ESG Risk Ratings report. 

While the audit limitations caused by the pandemic have subsided, it said the levels of transparency have not recovered enough to reverse the decline seen during the crisis.

Elevate said countries with high risk ratings are highly likely to experience risk events violating ESG governance frameworks both locally and internationally, ranging from environmental degradation to the use of child labour.

The study was done using the firm’s data analytics solution that analysed 45 million data audit points from major sourcing markets across the world.