The ESG awakening: why Malaysian SMEs are rushing to catch up
In recent years, the global urgency to combat climate change and environmental degradation has spurred regulators around the world to tighten climate-related policies. Malaysia is no exception.
The impending National Climate Change Bill—a comprehensive framework for national climate action—will serve as a cornerstone in aligning the country's ambitions with its net-zero goal by 2050. This legislation is expected to significantly reshape the local business landscape, particularly for small and medium enterprises (SMEs).
Recognising the vital role of SMEs in this transition, Alliance Bank Malaysia Berhad (Alliance Bank, or the bank) conducted a survey to understand their awareness and adoption of sustainability and ESG practices.
The insights gathered were compiled into a landmark publication, The Path To Sustainable Impact: Sectoral Insights Of Malaysian SMEs, also known as the ESG 2.0 Report, which was officially launched on Jan 21 this year, in partnership with Monash University Malaysia and Zurich Malaysia.
The report is also supported by the United Nations Global Compact Malaysia and Brunei (UNGCMYB), Malaysian Green Technology and Climate Change Corporation (MGTC), SME Corporation Malaysia and INCEIF University.
This report highlights the level of awareness, adoption level of SMEs from four main sectors namely manufacturing, construction, service and agriculture as well as the challenges and recommendations dedicated to each sector.
The ESG 2.0 Report: A promising shift
The report reveals an encouraging rise in sustainability awareness among Malaysian SMEs—80% compared to 14% since the bank's inaugural report – ESG Insights From Malaysia SMEs Building a Better Future Together or ESG 1.0 launched in 2023.
The increase is attributed to the collective efforts of stakeholders—including government bodies, corporates and media—who have worked together to amplify ESG awareness. The report highlights practical resources such as the ESG Quick Guide for MSMEs by SME Corp Malaysia, Capital Markets Malaysia's Simplified ESG Disclosure Guide (SEDG) and MITI's i-ESG Framework that have made ESG concepts more accessible and actionable for SMEs.
Besides regulatory compliance, the increase in adoption (from 28% to 60%) also stems from the realisation by businesses that ESG practices can achieve cost savings, efficiency improvements and also improved revenues. ESG adoption also results in new market opportunities, attracting more customers and enhancing resilience in an increasingly complex business landscape.
One of the key highlights in the report were the top three challenges when adopting ESG—the overwhelming amount of information and guidelines, the high costs of implementation and resource constraints. Despite the challenges listed, it is important to note that the proportion of SMEs with no intention of adopting ESG has dropped significantly from 41% to 14%.
Transforming barriers into business opportunities
As SMEs normally operate on tight budgets, small teams and limited resources, there are still challenges that have delayed or hindered their progress towards sustainability.
However, the rapid rise in embedding ESG practices into businesses demonstrates that SMEs are committed to adopting ESG through a 'kaizen' approach without incurring significant capital expenditures.
By emphasising on small incremental changes and accessing cost-effective tools, training, financing as well as available ecosystems and partnerships, SMEs have started accelerating their ESG journey.
It is evident that SMEs are beginning to implement smart, pragmatic steps that reduce waste and cost—while improving ESG performance. For instance, a manufacturing company can retrofit their machineries to calibrate energy usage according to production cycles. This will help the company to reduce energy consumption which leads to immediate savings on the electricity bill.
Another example would be the installation of a compactor, by a steel processing SME, to compress lightweight shavings—previously considered unusable waste—into dense, recyclable blocks. It may be a modest investment however the impact was significant—where disposal cost is reduced, and additional income is generated via material resale.
The Alliance Bank advantage: A partner in every step
The report underscores a strong correlation between ESG adoption and business gains—including cost efficiency, market expansion and long-term resilience. But how can SMEs take the next step?
Alliance Bank supports SMEs with a holistic 3A Approach:
> Awareness: Through thought leadership initiatives like ESG surveys, sectoral playbooks, barometers, and this very ESG 2.0 Report, the bank fosters a deeper understanding of sustainable business practices.
> Advice: Alliance Bank provides expert guidance and tools, including the PROGRESS Climate Diagnostic Tool, co-developed with UNGCMYB. This dynamic tool helps businesses craft their climate reports and sustainability roadmaps which include steps mapped to their current stage of maturity. It also ties directly to Alliance Bank's sustainability-linked funds.
> Answers: Beyond guidance, the bank provides tangible support through financing, services, providing linkages and curated ecosystem complete with pre-negotiated discounts. To date, Alliance Bank has helped over 1,000 businesses kick-start or accelerate their ESG journey.
Driven by its ambition to become a lifetime ESG-focused bank for SMEs, Alliance Bank is committed to helping businesses not only transition towards sustainable practices but also unlock new growth and future-proof their operations.
Its efforts are already making a mark, with over RM14bil in new sustainable banking business—well on the way to exceeding its RM15bil target ahead of schedule.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
2 hours ago
- New Straits Times
Ringgit set to extend gains as US fundamentals weaken
KUALA LUMPUR: The ringgit is poised to extend its gains against the US dollar next week, buoyed by weakening US fundamentals, easing trade tensions, and stronger domestic economic resilience. The local currency has already strengthened against major and Asean currencies, and Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the trend is likely to persist as economic momentum in the US continues to lose steam. "We expect this trend to hold in the near term, driven by signs of a slowing US economy as business and consumer sentiment continue to weaken," he told Business Times. Afzanizam added that heightened uncertainty over US trade policies is further dampening confidence among businesses, prompting a reassessment of the greenback's global standing. "In some ways, the US dollar's dominance in the global economy is being revisited. This shift could favour emerging market currencies, including the ringgit, in the short to medium term," he said. Echoing this view, SPI Asset Management managing partner Stephen Innes said that foreign appetite for Malaysian assets remains strong, further supporting the local currency. "The ringgit is finally catching a break. With the US dollar on the back foot, tariffs de-escalating, and capital inflows into bonds and FX deposits rising, there is a tangible floor forming under ringgit," he said. Innes pointed to growing foreign appetite for Malaysian debt, highlighting the 3.3 times bid-to-cover ratio in May's 20-year government investment issue (GII) auction as a signal of revived confidence. He noted that foreign holdings of local government bonds have risen to 21.5 per cent, reversing a dip recorded in February. Adding to the ringgit's resilience, foreign currency deposits in local banks have climbed to a record 11.6 per cent of total deposits, offering a buffer against external shocks. Innes said that while Malaysia is not immune to global economic fragility, it is also not a sitting duck, with the domestic investment cycle now taking the lead. "If the trade war cools and global risk sentiment remains stable, Malaysia may continue to navigate the delicate balance between global volatility and domestic resilience. The ringgit, for once, has a shot at playing offence," he added. The ringgit opened higher this morning, extending its gains against the US dollar. At 8am, it stood at 4.2140/4.2335 compared with Thursday's close of 4.2245/4.2295. The local currency also traded mostly higher against major currencies, gaining ground against the Japanese yen and British pound, though it slipped slightly against the euro. Among regional peers, the ringgit appreciated across most Asean currencies, including the Singapore dollar, Thai baht, Indonesian rupiah and Philippine peso. It ended Friday's session at 4.2275 against the greenback.
BusinessToday
2 hours ago
- BusinessToday
Local Yields May Trade Lower On US Optimism
Yields on Malaysian government bonds closed mixed this week, with cautious optimism around global trade and soft US economic data helping to anchor the local fixed-income market. According to Kenanga Research, yields on Malaysian Government Securities (MGS) and Government Investment Issues (GII) moved within a narrow range of -4.2 to +0.9 basis points (bps) across the curve. The benchmark 10-year MGS yield eased 1.6 bps to 3.518% The 10-year GII dipped 0.2 bps to 3.532% Global and Domestic Drivers The slight decline in long-term yields closely followed movements in US Treasuries, which reacted to positive signals in US-China trade negotiations. The improved trade outlook, combined with softer US economic data, has reinforced expectations of an earlier rate cut by the US Federal Reserve. On the domestic front, a modest improvement in Malaysia's Purchasing Managers' Index (PMI) and continued export growth to African markets have supported confidence in local bonds, contributing to the relatively stable yield environment. Outlook: Stable Yields with Eyes on US Inflation Kenanga expects local bond yields to remain stable in the near term, with upcoming economic data — including industrial production, retail sales, and labour market statistics — likely to guide investor sentiment. However, the research house cautioned that any upside surprise in US inflation data could prompt global bond yields to rise, potentially spilling over into the Malaysian market. Additionally, renewed uncertainty in US tariff policy could reintroduce volatility. 'Investors should stay alert to both domestic data and global developments, especially updates on tariff talks,' Kenanga stated. Related
The Star
3 hours ago
- The Star
Cuts hit contract workers
Meeting of minds: Anwar receiving a courtesy call from Muhammad Shahrul in Putrajaya. — Photo courtesy of Anwar's Facebook page PUTRAJAYA: The move by PETRONAS to trim its workforce by about 10% involves mostly contract workers, says Prime Minister Datuk Seri Anwar Ibrahim. 'It mostly involves contract (positions),' Anwar said when asked to comment on reports that PETRONAS would cut about 5,000 employees as part of a 'right-sizing' process. Anwar, who is also Finance Minister, said this after performing Friday prayers with over 500 congregants at Surau Al-Ikhwan, Jalan Pinggiran Putra, near here yesterday, Bernama reported. Also present was Selangor Mentri Besar Datuk Seri Amirudin Shari. On Thursday, PETRONAS president and group chief executive officer Tan Sri Tengku Muhammad Taufik Tengku Kamadjaja Aziz was reported to have said that the national oil and gas company would cut about 10% of its workforce as part of its right-sizing and restructuring process. He also denied that the state-owned company would exit its business in Canada. PETRONAS had previously stated that it needs to right-size its workforce to ensure the company's sustainability in the decades to come. It has nearly 50,000 employees, according to its website. Separately, Anwar said he would contact his Thai counterpart, Paetongtarn Shinawatra, regarding the border dispute between Thailand and Cambodia. Anwar said that as the Asean Chair, Malaysia took note of the developments in both countries. 'We will issue a statement (on the outcome of the discussion with Paetongtarn) later,' he told reporters. On May 28, Thai and Cambodian troops were involved in a brief skirmish in Thailand's Ubon Ratchathani province and Cambodia's Preah Vihear province, which resulted in the death of a Cambodian soldier. Cambodia has since announced its intention to bring the border dispute to the International Court of Justice. Thailand, meanwhile, has reportedly reiterated its commitment to resolving the issue peacefully in accordance with international law, as well as existing agreements and memoranda with Cambodia. Earlier, Anwar received a courtesy call from the new Malaysian Ambassador to the United States, Tan Sri Muhammad Shahrul Ikram Yaakob. Anwar said that they discussed, among others, measures to strengthen bilateral ties between Malaysia and the United States, including strategic efforts to attract quality and high-impact foreign investments. 'Among (the topics) touched on included strengthening Malaysia-US ties as well as efforts to attract quality and high-impact foreign investments from the country,' he said in a Facebook post today. The Prime Minister also wished Muhammad Shahrul all the best on his appointment, while stating his confidence in the former to elevate Malaysia's aspirations, image and reputation to the highest level. On June 3, His Majesty Sultan Ibrahim, King of Malaysia, presented the instrument of appointment to Muhammad Shahrul in a ceremony at Istana Negara.
