16 COVER STORY
@ green | May-June , 2022
ESG for Malaysia – What are the conundrums ?
Malaysian businesses must face the need to comply with circular economy mindset change
PACESETTING
ESG ...
BY BEN ONG
MALAYSIA IS a developing country having a considerable number of small and medium enterprises ( SMEs ) as its economic driver . These SMEs are mainly in the service sectors of the business .
That being the case , to implement a new system of global criteria for Environmental , Social and Governance ( ESG ), the great enthusiasm of the entrepreneurs who are themselves direct owners of SMEs is crucial , relevant and pertinent .
For SMEs to take care of their businesses in the light of the Triple Bottom Line approach of people , planet and profit will be a challenge from human resource and capital commitment standpoints .
SME proprietors are excellent commercial persons of brilliant ideas , bright ingenuity and absolute meritocracy when it comes to designing , operational , marketing and product management for which they are truly experts .
To expect SMEs to consider the nonfinancial incidence of direct or indirect destruction to the environment , or known and unknown disruptions to social dimensions , can be an uphill task in their enterprising spectrum , understanding and perspective .
This is especially when they run a tight ship with minimal available slacks to tackle matters outside their regular business domain .
Many of the Malaysian SMEs are , however , contractors , suppliers , or service providers to MNCs ( multinational companies ), PLCs ( public listed companies ), GLCs ( government-linked companies ) or large corporations , which will impose on SMEs to comply , report and disclose their ESG statistics , very soon if not the near future .
Bursa Malaysia and all government ministries involved in policy formulations , implementations and supervision are also playing their roles to enable the achievement of carbon neutrality by 2050 , which
Malaysia has committed to , in line with climate action for reduced emissions and global warming .
Keeping temperatures below 1.5 degrees Celsius per year relative to the preindustrial era is a combined effort needed by the global community to avoid erratic floods , storms havoc and irregular rise of sea water level , seriously threatening human livelihood , safe food production and overall business certainty .
Deforestation
With the widespread deforestation , decarbonisation measures are at risk as lesser trees are now available to capture , sequestrate and store carbon to CO2 to fertilise the expansive growth of trees .
Trees are natural air-conditioners because they lock the CO2 in their trunk to release moist vapour when mixed with water to cool the atmospheric ambience . Fewer trees mean more energy is needed to power air-conditioners , which results in higher electricity usage and energy wastage .
All the consequences of increased heat increase the cost of doing business , particularly for SMEs operating on a small energy budget , even if they happen to be in refrigerated trucking or cold room warehousing .
Air , water , and soil pollution are inevitable with more industrial manufacturing , farming , or logistics activities . Converting waste to resources for wealth creation is a paradigm shift .
The change catalyst is such that the second life of spent or used materials must be remodelled , redesigned , or recovered based on the 3Rs of reduce , reuse , or recycle in the first place , supplemented by appropriate technology to realise their end-of-life values .
When the workforce ’ s productivity achieves its optimal performance as limited by labour law and legal work hours , enlarged sales can only come from digitisation and automation of non-cost prohibitive nature .
Improve performance
Using technology to improve performance is good ESG as it enhances profitability through waste reduction , quality assurance , minimal reworks , product recalls and service failures compensation .
When ESG matrices , scoring and rating turn mandatory , businesses may lose their overseas customers , foreign markets and / or competitiveness .
This is a survival issue with post-pandemic uncertainty and global turbulence ahead , even if Malaysian companies sell domestically since their eventual end customers are likely foreigners from international free trade .
In the final analysis , the long-term themes of ESG in all its practical implications require Malaysian businesses to face the need to comply with a circular economy mindset change . They sternly view the adoption of the broader care of employees for equal pay , gender equality , social welfare and continuous training , which are the basic requirements of Sustainable Development Goals ( SDGs ) of the United Nations .
Government aid and assistance , when given on time , will , of course , make the transition to ESG acceptance more appealing . — @ Green
Ben Ong is a hands-on practitioner experienced in Digital Supply Chain , automation and Enterprise Resource Planning ( ERP ), general management , and anticipative forward corporate planning for long-term growth . He is also chairman of the Malaysian Association of Public Advocacy For Nature .