Image credit: MDCC
KUALA LUMPUR: Small and medium enterprises (SMEs) are being urged to adopt environmental, social and governance (ESG) practices to fast track business opportunities locally and abroad.
SME Association of Malaysia (Samenta) chairman Datuk William Ng said ESG adoption in Malaysia among SMEs is still very low.
“The early adopters are primarily exporters, driven by customer and destination market requirements,” he told StarBiz.
Ng is advocating that more SMEs embrace ESG practices into their businesses.
“ESG requirements will only get stiffer, so it makes sense for SMEs to comply or at least prepare the necessary data early, before it becomes a roadblock to their business.”
He added that ESG can offer new opportunities and new markets for local SMEs.
“This is not only in our existing business but also in new verticals such as clean and renewable energy, sustainable financing, new packaging materials and low carbon alternatives.
“There are also benefits in terms of stronger reputation and branding, improved motivation and productivity among workers and, of course, increasingly better access to financing and lower costs of financing.”
For Malaysian SMEs, Ng explained that there are various challenges in adopting ESG.
“These include a knowledge gap, lack of in-house experts, funds to transition existing machineries and processes and at this point in time, a lack of alternatives in terms of materials.
“As such, any ESG standard that we adopt for SMEs must be robust and take into consideration not just the reality that most SMEs can ill afford a sudden transition, but that it will take time for the know-how and expertise to be developed,” he said.
Samenta is the first association to form a Sustainability and Circular Economy Committee in 2010 and has continued to promote ESG among SMEs even during the pandemic.
Meanwhile, Alliance Bank Malaysia Bhd (ABMB) in its inaugural annual ESG survey released recently, revealed that three out of five Malaysian SMEs believe embedding ESG practices in their business will create long-term value, build a strong workforce and increase opportunities.
The survey, titled “ESG Insights from Malaysian SMEs: Building A Better Future Together,” said ESG adopters cited improving productivity, cost savings and brand reputation as the key motivation for including ESG practices in their strategy.
“As for the non-ESG adopters, three key themes were identified for their hesitations towards adopting ESG, namely uncertainty about the impact of ESG, limited knowledge of ESG and financial constraints.
“However, this group of SMEs highlighted that financial support from banks, sponsored training and learning opportunities and tax incentives will facilitate their ESG adoption,” said ABMB in a statement.
Additionally, the survey revealed that one in four Malaysian SMEs have adopted elements of ESG practices into their business.
The survey also said 80% of ESG adopters recognised the value of ESG adoption and plan to continue pursuing it moving forward.
“Meanwhile, 39% of ESG adopters reported improved profits and cost savings from ESG practices, while 76% of ESG adopters started their journey within the last five years.”
The survey also said 58% of non-ESG adopters are open and keen to adopt ESG practices in the near future.
The survey was jointly commissioned with the UN Global Compact Network Malaysia and Brunei, and SME Corp Malaysia to provide insights on the awareness, adoption and challenges of SMEs striving to integrate ESG factors into business practices in Malaysia.
The study was developed using three approaches, namely in-depth interviews, a large-scale survey among 610 SMEs and secondary research.
Source: https://www.thestar.com.my/business/business-news/2023/05/22/calls-for-smes-to-adopt-esg-practices