Malaysia’s government has charted an ambitious course with frameworks like the National Sustainability Reporting Framework (NSRF) and the i-ESG Framework – these two and more, signal a shift from voluntary sustainability measures to mandatory compliance.
A little bird chirped to IBB however, that small to medium enterprises (SMEs) are not ready to comply.
SMEs constitute the backbone of Malaysia’s economy, contributing approximately 40% to the national GDP and providing 60% of the country’s employment. Yet industry insiders reveal a concerning reality – many of these businesses are unprepared for the coming wave of ESG regulations.
The NSRF already mandates sustainability reporting for all companies listed on Bursa Malaysia’s MAIN and ACE Markets, as well as large non-listed companies with annual revenues exceeding RM2 billion. While large cap companies must comply by 2025, smaller listed firms have until 2027.
What will happen to the economy if half (optimistically!) of these SMEs are unable to comply and have to shut down operations?
Why are SMEs at risk?
Insiders reveal that the local ESG ecosystem is massively silo-ed, with at least 5 ministries advancing their respective ESG initiatives, but none taking action to consolidate and spearhead efforts. One minister herself has described the local ESG ecosystem as being ‘fragmented’.
Yet another ESG advocate who refuses to be named has said, there are over 20 ESG frameworks with associated fund grants that no one knows the purpose for. This lack of transparency leads to another concerning matter that our anonymous tipster vocalised, “How the money flows, we don’t even know!”
More pressing: Lack of cohesive policy implementation
ESG in Malaysia, or any other country, doesn’t fall neatly under a single ministerial portfolio, which is part of the challenge. Several ministries will have overlapping responsibilities.
For example, an economy ministry oversees economic planning and sustainability integration into development, while natural resources handles environmental aspects, green energy and resources management.
A finance ministry manages green financing and economic incentives while international trade and industry deals with international ESG standards compliance for Malaysian businesses.
Malaysia’s ESG initiative would benefit from a coordinated approach and clear leadership. The country has over 20 frameworks however, and not one agency is able to help SMEs make head or tail of it all.
SMEs are left to interpret complex requirements on their own, often without the resources or expertise to do so effectively.
To date, there are two non-profit associations that want to further ESG in the country. But which public sector body can they collaborate with to provide framework guidance to SMEs before the 2027 deadline?
IT BYTES BACK! says:
Where should ESG be positioned in a country’s government structure? More importantly, how do we ensure our SMEs aren’t caught with their pants down when the regulatory hammer falls in 2027?
