In today’s rapidly changing business landscape, Environmental, Social, and Governance (ESG) practise have emerged as a powerful framework that extends far beyond environmental concerns. While ESG is often associated with larger firms and global corporations, its significance for small and medium-sized enterprises (SMEs) driving long-term sustainable growth cannot be underestimated.
With the recent announcement of the revised Malaysia Budget 2023 with a strong emphasis on ESG activities, the stage is set for SMEs to embrace ESG and unlock their true potential.
At the recent GoFlex Mingle with Entrepreneurs, “How ESG Factors Drive Business Success”, eminent speakers shared their thoughts on how embracing ESG can encourage economic growth and contribute to a sustainable future.
GoFlex Mingle with Entrepreneurs aims to bring the latest business knowledge to SME owners by providing access to speakers and fostering knowledge exchange among entrepreneurs.
A journey into ESG: More than meets the eye
ESG encompasses a comprehensive range of initiatives that intertwine seamlessly to create a holistic framework. It goes beyond the environment and includes social responsibility and sound governance practices. By integrating these three pillars into their operations, businesses can cultivate resilience, adaptability, and long-term sustainability.
As Ms. Amy Rashina, CEO and Founder of GoFlex Events, points out, ESG is more than just the sum of its parts; it is a fully comprehensive framework where initiatives complement each other, leading to enhanced business outcomes.
Budget 2023: A catalyst for ESG initiatives
The revised Budget for 2023 catalyses ESG initiatives, reflecting the government’s unwavering commitment to sustainable development. Recognising the immense potential of ESG practises, the budget allocates additional funds and incentives for green technology, aiming to accelerate the adoption of ESG across industries.
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Ar. Ahila Ganesan, an ESG professional and Founder of Future Linq, emphasises that the dedicated focus on ESG reflects an understanding that sustainable development is not only an ethical imperative but also a driver of long-term economic growth and competitiveness.
Why ESG matters for SMEs
ESG is often seen as the domain of larger corporations, but SMEs are well-positioned to benefit from its adoption. SMEs play a vital role in driving economic growth and job creation in Malaysia, and they are increasingly recognising the value of embracing ESG practices.
According to a report by Alliance Bank, one in four Malaysian SMEs has already adopted elements of ESG practices, with 80 per cent of ESG adopters acknowledging their value and planning to continue pursuing them. This trend demonstrates that SMEs are keenly aware of the positive impact ESG can have on their businesses, as highlighted by Ms. Pauline Goh, former General Manager of MAREA, Malaysia Recycling Alliance.
Empowering SMEs through ESG: A win-win approach
SMEs have much to gain from embracing ESG practices. By prioritising the environment, they not only align with global sustainability goals but also address the growing expectations of younger generations. This, in turn, enhances their ability to attract and retain top talent.
Furthermore, implementing sustainable measures leads to long-term cost savings, such as reduced power consumption, water usage, paper waste, and travel expenses. In essence, short-term investments in ESG initiatives yield long-term benefits for SMEs.
As Prof. Dr. Reuben Clemens, Conservation Scientist, Biodiversity Specialist and former Deputy Dean at Sunway University, highlights, the social aspects of ESG also provide SMEs with a clear competitive advantage. Embracing diversity and inclusivity within their workforce not only enhances their business outcomes but also fosters a positive work environment.
By meeting the expectations of younger generations through social initiatives, SMEs can improve recruitment efforts and enhance employee retention rates. Dr. Clemens emphasises that companies that prioritise ESG gain a competitive edge and foster customer loyalty by doing the right thing.
Placing innovation and governance at the forefront
Enforcing ESG practises within SMEs is a transformative process that unleashes their true potential. Mr. Georg Chmiel, Executive Chair and Founder of Chmiel Global Advisory highlights that ESG implementation drives profitability for SMEs. By adopting ESG principles, SMEs can also identify and address internal control breakdowns at an early stage, leading to more cost-effective resolutions.
Furthermore, aligning with ESG practices enhances SMEs’ credibility and attractiveness to lenders and investors. When SMEs demonstrate a strong commitment to sustainable and responsible practices, they increase their chances of securing funding and building strong partnerships.
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Chmiel also added that ESG practises also contribute to the stability of SMEs by reducing the risk of insolvencies, enabling early detection of operational challenges, proactive identification of areas for improvement, and strengthening competitiveness.
In conclusion, ESG practises have transcended the realm of larger corporations and are now empowering Malaysia’s SMEs for sustainable growth. The emphasis on ESG in the Malaysian Budget 2023 highlights the government’s commitment to promoting sustainability and creating an environment where businesses can thrive. By embracing ESG, SMEs can enhance their competitiveness, attract investors, improve their financial performance, and contribute to a sustainable and prosperous future for Malaysia.
As Ms. Pauline Goh also aptly pointed out, ESG practises have a positive impact not only on the environment but also extend to other areas such as social responsibility and governance. SMEs that prioritise ESG practices can benefit from improved recruitment efforts, higher employee retention rates, and increased customer loyalty.
Furthermore, ESG practises drive profitability by enabling the early detection of internal control breakdowns and impressing potential funders.
The findings from Alliance Bank reinforce the value of ESG adoption among Malaysian SMEs. With one in four SMEs already embracing elements of ESG practises and 80 per cent of ESG adopters recognising the long-term benefits, it is clear that the momentum for ESG is building. SMEs that proactively integrate ESG into their operations have reported improved profits, cost savings, and enhanced operational efficiency.
ESG practises have become a fully comprehensive framework that goes beyond the environment and holds immense significance for the growth and success of SMEs in Malaysia. The government’s commitment, coupled with the benefits that SMEs can reap from embracing ESG, paves the way for a sustainable and prosperous future.
Continuous education, learning from others, and exchanging ideas will play a crucial role in empowering SMEs to succeed in their ESG journey. By embracing ESG, SMEs can unlock their true potential, contribute to a sustainable Malaysia, and thrive in an evolving business landscape.
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This article was first published on May 30, 2023
The post ESG empowerment: Fueling Malaysia’s SMEs for a sustainable future appeared first on e27.