What is ESG (Environmental, Social and Governance) in Malaysia?

by | Branding, Business

Today, many organisations are moving towards sustainable development. In accordance with that, organisations should also start incorporating ESG initiatives into their business operations.

The incorporation of ESG as a concept assists in determining whether the organisation is in line with the values it tries to portray.

In a broader context, organisations practising ESG can also contribute towards a more sustainable and healthy environment and society.

This article explains the fundamentals of ESG and how organisations can incorporate them into their daily business operations.

What Is ESG?

ESG stands for Environmental, Social, and Governance. It is a framework for evaluating an organisation’s performance and impact in terms of sustainability.

Each letter in ESG represents a different aspect:

1. Environmental

This refers to the impact of a company’s operations on the environment, such as:

  • Climate change
  • Resource usage
  • Pollution
  • Waste management
  • Conservation efforts

2. Social

The social element of ESG emphasises how a company interacts with its employees, customers, communities, and other stakeholders. It covers:

  • Labour practices
  • Diversity and inclusion
  • Human rights
  • Customer satisfaction
  • Community engagement

3. Governance

Governance highlights how a company is managed, including its leadership, decision-making processes, transparency, and accountability.

Good governance ensures that a company operates ethically, with adequate oversight and adherence to legal and regulatory requirements.

The ESG framework is used by investors, asset managers, and financial institutions to evaluate investments’ sustainability and long-term performance.

Therefore, it helps to evaluate the potential risks and opportunities associated with environmental and social issues and the quality of corporate governance within a company.

How Can Companies Incorporate ESG Values To Their Daily Operations?

1. Develop a Clear ESG Strategy

Firstly, the company should develop a formal strategy outlining its commitment to ESG principles.

In addition, the company’s overall mission, values, and long-term goals should align with its ESG strategy.

2. Set Measurable Goals and Targets

Moreover, the company should set Specific, Measurable, Achievable, Relevant, and Time-bound (SMART) business objectives related to ESG performance.

These goals should address areas such as:

  • Reducing carbon emissions
  • Increasing diversity in the workforce
  • Improving workplace safety
  • Enhancing board diversity

3. Environmental Considerations

Additionally, companies can practise environmentally responsible practices by implementing the following initiatives:

  • Reducing greenhouse gas emissions
  • Conserving energy and water
  • Minimising waste generation
  • Promoting recycling
  • Adopting sustainable supply chain practices

4. Social Considerations 

Furthermore, companies should emphasise social factors in their operations by:

  • Fostering a diverse and inclusive workplace
  • Ensuring fair labour practices
  • Respecting human rights
  • Promoting employee health and well-being
  • Supporting community development initiatives
  • Engaging in philanthropy and corporate social responsibility programs

5. Governance Considerations

Companies should also initiate robust governance practices, such as:

  • Transparent decision-making processes
  • Effective board oversight
  • Appropriate risk management
  • Compliance with legal and regulatory requirements

6. ESG Reporting and Disclosure

Besides, transparent and comprehensive sustainability reporting on their ESG performance should be provided by the company.

This includes disclosing relevant metrics, goals, progress, and potential risks and opportunities related to ESG factors.

7. Stakeholder Engagement

In addition, engaging with stakeholders, including investors, employees, customers, communities, and NGOs, is crucial for understanding their concerns and expectations regarding ESG issues. 

Companies can incorporate stakeholder feedback into their decision-making processes and regularly communicate their ESG efforts and progress.

8. Collaboration and Partnerships

Companies can also collaborate with industry peers, NGOs, governmental organisations, and other stakeholders to address common ESG challenges and develop innovative solutions.

Companies can facilitate knowledge sharing, best practice adoption, and collective action by collaborating and initiating partnerships.

Top 3 Malaysian Companies That Incorporate ESG

1.Tenaga Nasional Berhad (TNB)

TNB is Malaysia’s largest electricity utility company and has implemented various initiatives to promote sustainability and renewable energy.

For example, TNB has a renewable energy division that focuses on expanding the use of clean energy sources and reducing carbon emissions. The company also prioritises employee safety and community engagement in its operations.

2. Sime Darby Berhad

Sime Darby is a diversified Malaysian multinational conglomerate with businesses in plantations, industrial equipment, and motors. 

The company has integrated sustainability into its operations through responsible palm oil production, biodiversity conservation efforts, and renewable energy projects. 

Sime Darby also promotes community development and prioritises the well-being of its employees.

3. Petronas

Petroliam Nasional Berhad (Petronas) is Malaysia’s national oil and gas company. Petronas has committed to reducing greenhouse gas emissions, improving energy efficiency, and promoting sustainable development.

For instance, the company invests in renewable energy projects and has implemented initiatives to enhance health, safety, and social well-being in the communities where it operates.

Final Thoughts

Overall, the common goal of ESG is to create a more sustainable and responsible business practice that benefits the company and society.

Thus, incorporating ESG considerations into business operations allows companies to enhance their long-term sustainability, mitigate risks, and attract responsible investors. Aside from that, companies can also build trust with stakeholders and contribute positively to society and the environment through ESG implementation.

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