Malaysia’s track record on labour rights under scrutiny as investors prioritise ESG in supply chains

Goods from Sime Darby and FGV Holdings have already been banned by US; Canada banned Supermax Corp on Tuesday

Analysts say Malaysia’s economy could suffer if investors pull out over a lack of business compliance with good environmental, social and governance practices

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Harvested palm oil fruit bunches are loaded onto a truck at a plantation in Malaysia. Palm oil imports from some firms are banned by the US over allegations of labour abuses. Photo: Bloomberg

Published: 8:30am, 20 Jan 2022Updated: 8:31am, 20 Jan 2022

In the last two years, some of Malaysia’s biggest export earners from the glove making and palm oil industries have seen their goods banned by the US government over allegations of forced labour.

The A-listers sanctioned by Washington include Sime Darby and FGV Holdings, among the world’s biggest palm oil producers, with other buyers reportedly blocking them from their own supply chains as well.

An immigration truck carrying Myanmar migrants in Malaysia back to their homeland, heading towards a naval base near Kuala Lumpur last year. Photo: AFP

Top Glove, the world’s largest medical glove maker was banned by the US in July 2020 over accusations of migrant worker abuse. The North American market accounted for 22 per cent of Top Glove’s total sales volume, Reuters reported in September, when the ban was lifted after the company improved working and living conditions for employees.

On Tuesday, Canada terminated its sourcing contract with Malaysian glove maker Supermax Corp following allegations about forced labour, said the country’s public services and procurement department.

Harvested palm oil fruit bunches are put on a truck at a plantation in Selangor, Malaysia. Photo: Bloomberg

Such accusations have surfaced in recent times in part due to advocacy from labour and civil society groups, leading analysts to warn that Malaysia’s reputation as a global production base and investment destination could take a hit.

Allegations can also affect the stock market as these days more international investors are prioritising a firm’s compliance with environmental, social and governance (ESG) guidelines for their operations.

Malaysia’s track record on labour rights under scrutiny as investors prioritise ESG in supply chains

Goods from Sime Darby and FGV Holdings have already been banned by US; Canada banned Supermax Corp on Tuesday Analysts say Malaysia’s economy could suffer if investors pull out over a lack of business compliance with good environmental, social and governance practices

Goods from Sime Darby and FGV Holdings have already been banned by US; Canada banned Supermax Corp on Tuesday

Analysts say Malaysia’s economy could suffer if investors pull out over a lack of business compliance with good environmental, social and governance practices