Addressing ESG concerns in Malaysia’s glovemaking industry

While much of the world is starting to treat Covid-19 as endemic, the demand for medical equipment, including rubber gloves, is expected to continue growing.

Yet, Malaysia’s leading glovemakers are faced with declining revenues and share prices. On top of this, they have to deal with stakeholders who are increasingly focused on compliance with ESG considerations.

Perhaps, they can look to Mölnlycke for inspiration. The Swedish medical products and solutions company only has four factories in Malaysia, compared to over 70 collectively for the country’s leading players. Yet, Mölnlycke is taking a proactive role in using tech to ensure compliance with ESG guidelines.

Supply-demand imbalance

The Malaysian Rubber Gloves Manufacturers Association (MARGMA) estimates global demand for gloves in 2022 at about 399 billion pieces, 11% higher than the previous year. It expects the number to grow by around 12% to 15% more in 2023.

Malaysia alone accounts for about 65% of the world’s rubber glove production, which translates to 259 billion pieces.

However, others are less sanguine about the industry’s prospects. RHB Invest analyst Chun Sung Oong stated in a research note that the bank expects growth of global demand for rubber gloves to remain sluggish at 4% to 6% in 2023 and 2024. Further, he noted the “persistent imbalance in the demand-supply dynamic,” with high levels of inventory needing at least a year to normalize.

These imbalances have affected the country’s top four glove manufacturers – Top Glove Corporation, Kossan Rubber Industries, Hartalega Holdings, and Supermax Corporation – which saw their revenues collectively decline by US$782 million, or 57%, over the past year.

Similarly, total profit for these four companies has shriveled from US$496 million to US$38 million over the last year, a decrease of 92%.

These poor results have been reflected in the firms’ share prices. Year-to-date, they are down between 42% to 73%.

Sustainability efforts may help rein in expenses

Still, MARGMA remains optimistic, with president Supramaniam Shanmugam stating that the supply-demand imbalance will reach equilibrium within six to nine months, compared to Oong’s more conservative estimate of at least one year.

While these conditions usually push companies to narrow their focus, it remains imperative that glovemakers continue to work toward sustainability, especially since the higher cost of energy is a major factor in their operating expenses.

The process of glove manufacturing involves using vulcanizers, which heat the gloves as part of the curing process. Heating of any form makes up two-thirds of the energy demand of industrial companies around the world.

Tech plays major role in compliance

Can local players keep up?