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FACULTY OPINION PIECE Issue no. 4 | 2022
FACULTY OPINION PIECE
Businesses run by irresponsible groups of people often act serious efforts in the area by incorporating the elements in
as the agents of public corruption. Actions such as bribing the 12th Malaysia Plan (12 MP).
officials to bend regulations or policies are commonly
reported in certain parts of the world. Thus the efforts to Besides that, there are also efforts made by bodies like the
ensure responsible business practices led to the creation Security Commission (a statutory body). The Malaysian
of Environmental, Social and Governance disclosures and Code of Corporate Governance (under the purview of the
reporting. Security Commission) recommends directors of public
listed companies in Malaysia to fully disclose their
ESG is defined as firms’ obligation to increase sustainable policies and implementation of ESG in its
environmental protection (preserving and conserving the annual report. In a similar vein, Bursa Malaysia Securities
ecological systems), improve social welfare (upgrading Berhad had also published a guide called Sustainability
the wellbeing and quality of life of communities), and Reporting Guide to assist the listed companies in
securing good governance practices (incorporating preparing sustainability statements as required by the
transparency, accountability and integrity in decision BSKL. The sustainability framework provided in this guide
making) while maintaining equitable and sustainable long- and the adoption of the SDGs in 2015 had resulted in an
term wealth for stakeholders. ESG disclosures act as an increase in ESG disclosures in Malaysia.
effective tool in aiding decision making actions among
stakeholders in businesses. On the other hand, SIRIM Malaysia Berhad (a corporate
organization owned wholly by the Malaysian
Investors and shareholders will put their trust in Government), is also working on establishing SIRIM
businesses that demonstrate responsible behavior standards, pertaining to this matter. Two standards – SIRIM
towards man-environment interaction, conduct business 55 (on ESG requirements) and SIRIM 56 (on ESG reporting)
ethically, practice good governance, and behave ethically are expected to be ready by the middle of 2023. These
in improving societal wellbeing. Several studies standards are expected to provide structured ESG
conducted in Malaysia, USA, EU and OECD countries have reporting in Malaysia, to benefit both the stakeholders of
shown that sustainability efforts such as ESG disclosure businesses and the society as a whole.
actions have positive association with business
performance and firm’s competitiveness. Among the As ESG disclosure is a voluntary action, a stern and
contributing factors are lower risk to the investors due to stringent intervention of the state actors is expected
transparency in reporting, and hence, increase the returns; especially for small and medium-sized enterprises (SMEs)
and lower cost of debt as lending institutions value a firms’ which represent more than 95% of all the registered
effort in disclosing ESG. businesses in Malaysia. Among actions which can be
"Among actions which can be taken taken to increase ESG disclosure among SMEs is to
to increase ESG disclosure among provide economic incentives in the form of tax exemption
or deduction, for a start. This should work as a trade off as
SMEs is to provide economic ESG disclosure requires extra cost, in terms of resources,
incentives in the form of tax effort, time and human resources.

exemption or deduction, for a start.
This should work as a trade off..." Government should also provide clear guidelines on ESG
disclosure for different elements of sustainability such as
ESG is more readily adopted in nations and regions in the climate change, resource extraction, waste management,
Global North such as the USA and Europe compared to the pollution control, diversity, human rights, health and
Global South. For example, the European Commission has welfare of communities as this will reduce ambiguity in
issued directives on the non-financial reporting of ESG, reporting and enable a high quality output. Workshops
while the government of USA has made it mandatory for and training opportunities should also be an area of
companies to disclose certain ESG information as an effort concern to increase consciousness of ESG among the
to create a more sustainable business environment. With SMEs operators.
the increasing recognition of the importance of the ESG at
the global level, ESG disclosure is getting more attention As a conclusion, ESG in Malaysia is a possible way to strike
from the state and non-state actors in Malaysia. ESG a balance between economic prosperity, social inclusion
disclosures by businesses in Malaysia will contribute to and cohesion, environmental sustainability and good
Malaysian commitments to SDGs. Although there are no governance by major social actors, including governments
strict regulations on ESG disclosures in Malaysia at the and businesses – and a way to stride confidently towards
moment, the Malaysian government has made some Malaysia’s sustainability targets.

25 | Pulse @ FASS