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Top 5 ESG Trends Reshaping Malaysia's SME Landscape



In the fast-paced world of business, it's crucial to recognise that Environmental, Social, and Governance (ESG) considerations are not something you can evade. Picture ESG as an unwavering force; it consistently impacts and shapes the corporate landscape. 


Wondering why? Unveiling these pivotal trends is the first step to comprehending its persistent presence in the corporate landscape.


 

These five key trends will provide insights into how it impacts your business:


TREND #1

Many SMEs are shifting their businesses to sustainable practices for more than US$12 trillion ESG-related market opportunities.


The Better Business, Better World, has projected that embracing sustainability as a new avenue for growth has the potential to create market opportunities worth at least US$12 trillion (RM56.18 trillion) and generate 380 million jobs by 2030. Almost 90% of these opportunities are anticipated to emerge in developing countries. 


Specifically, in Southeast Asia, green businesses are poised to offer an estimated opportunity at US$200 billion by the year 2030.


TREND #2

Access to more financing options and new ones are being introduced in various phases.


Financial institutions are increasingly offering incentives for sustainable business operations, from lower interest rates to favourable loan terms.


In Malaysia, under the guidance and directives of Bank Negara Malaysia, banks are increasingly assessing climate-related risks through their financed activities and financial services. SMEs that have a climate transition action plan in place are more likely to access financing at better rates. 


TREND #3

Various frameworks and guidelines on ESG are being introduced by developed countries.


ESG principles have already gained increasing prominence, with Malaysia’s multinational corporation (MNC) investors and trading partners increasingly incorporating these components into their operations, procurement, and sourcing requirements.


It is crucial to ensure that SMEs will not be excluded from ESG-sensitive supply chains, such as those connected to larger companies' vendor networks, and ESG-sensitive markets, such as the European Union market.


For SMEs, recognising the gaps and taking action — implementing effective operational policies and support is vital to secure their ongoing involvement with ESG-compliant public listed companies (PLCs) and multinational corporations' (MNC) vendor ecosystems. This is crucial for maintaining access to ESG-sensitive export markets.


TREND #4

Aligning with the expectations of regulators and customers.


Consumer Demand: As awareness grows, consumers will increasingly seek out businesses that prioritise sustainability in their operations and products. This shift in consumer behaviour underscores the importance for businesses, especially SMEs, to align their offerings with responsible business practices to meet evolving market demands.


Regulatory Landscape: Governments are progressively tightening regulations around sustainability, making compliance a top priority. As these standards evolve, businesses that proactively adapt will not only avoid potential penalties but also gain a competitive edge in an increasingly sustainable-conscious market.


TREND #5

Rise in government and NGO initiatives offering complimentary programmes for businesses transitioning towards sustainability.


There's a noticeable increase in platforms and programmes initiated by both government bodies and non-governmental organisations (NGOs), providing complimentary resources and support for small and medium-sized enterprises (SMEs) as they make the shift towards sustainability. 


These programs encompass a variety of offerings, including training sessions, mentorship programs, and financial incentives, aimed at assisting SMEs in adopting more responsible business practices. This collaborative effort not only facilitates the growth of individual enterprises but also contributes to the broader goal of fostering a sustainable and responsible business landscape.


 

Here are some examples of resources, tools and programmes for MSMEs:


SME ESG Hub by UN Global Compact Malaysia & Brunei (UNGCMYB)


If you're thinking about the next steps and where to find guidance, the SME ESG Hub is a one-stop ESG platform made for SMEs in Malaysia. SMEs can start off by measuring their current ESG performance with the free ESG Maturity Assessment tool available on the SME ESG Hub, which also recommends steps for improvement via 8 ESG Indicators.


Here, you'll find helpful videos and tools to learn more about ESG and sustainability to prepare you for the first step in your journey. 


The hub is free to all and only a one-time registration is required to fully access everything ESG you need.



Simplified ESG Disclosure Guide (SEDG) by Capital Markets Malaysia


The SEDG is a guide to help SMEs to decide what ESG disclosures to track and report. It seeks to provide a simple and standard way for Malaysian SMEs in supply chains to disclose on ESG.


The guidance structure of the disclosures consists of most referenced topics in ESG disclosures. The guide provides the metrics needed to track progression in each 15 topics and identifies 35 disclosures in selected standards that correlate to chosen disclosures.


The SEDG also offers additional guidance to provide SMEs additional information to further guide on the requirements of the disclosure.




i-ESG framework by the Ministry of International Trade and Industry (Miti)


The National Environmental, Social and Governance Industry Framework (i-ESG) aims to build and strengthen a system to encourage and enhance ESG practices in the manufacturing sector. 


The i-ESG framework serves as a roadmap for businesses to integrate ESG considerations into their operations and a tool for regulators to ensure compliance and accountability. The framework’s 3 key missions includes:- Supporting manufacturing firms to learn, be agile and adopt ESG practices- Transforming challenges into opportunities - Fostering symbiotic public-private partnerships for value creation.


 

Facing the ESG Challenge as an SME


For many SMEs that are starting out with sustainability and ESG, the challenges are clear. The field is wide and filled with new terms. Which framework do you have to follow? How do you meet ESG standards? How do you keep up with changing regulations? And how do you manage all this while focusing on your main business goals?




If you’re new to sustainability and are looking for a one-stop platform to start on this journey, we recommend the SME ESG Hub. The Hub consists of four (4) gateways in which you can access the various resources under each section.



Here, you'll find helpful videos and tools to learn more about ESG as an SME.

Access is free to all and only a one-time registration is required for you to get full access to everything you need.

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