Esg

Introduction The increasing focus, on Social and Governance (ESG) factors by the European Union (EU) is making waves worldwide with Malaysia feeling its effects well. The ambitious ESG measures seek to encourage business behaviors and ensure that companies are responsible, for their environmental influence. This piece delves into the EU ESG guidelines. How they could impact businesses in Malaysia. Corporate Sustainability Due Diligence Directive (CSDDD) In May of 2024, the EU Council gave light to the CSDDD, a groundbreaking law. It requires companies working in the EU as those heavily involved, in the region through operations or supply chains to carry out thorough due diligence. The aim is to uncover and address any impacts on rights and the environment. This involves an evaluation of both their activities and those of partners, in their supply chain. Implications for Malaysian Businesses: a) Market Access: Malaysian companies need to adhere to the CSDDD to enter the EU market successfully. Non-compliance may lead to penalties and limitations. b) Proactive Approach: It’s crucial for Malaysian businesses to prioritize ESG frameworks establish due diligence procedures and maintain transparent reporting practices. Environmental Concerns: Moving Towards a Greener Malaysia The European Union’s focus on sustainability is evident, in its ESG agenda. Although Malaysia has made progress by enacting the Energy Efficiency Conservation Bill 2023 more measures are required. Important aspects to consider are: Emissions Management: Focus, on managing emissions by giving importance to eco practices and investing in energy sources. Resource Efficiency: Enhance resource efficiency by minimizing energy waste and taking steps to manage resources effectively. Responsible Sourcing: Maintain a commitment, to sustainable sourcing methods to ensure procurement practices. Social Responsibility: Building Inclusivity and Equity The social aspect of the EU’s ESG framework is, in harmony, with Malaysia’s initiatives to address forced labor enhance employee well-being and foster a workplace atmosphere. Nonetheless, the EU’s guidelines call for heightened attention to areas: Human Rights: Make sure to focus on the well-being of employees and tackle any breaches. Fair Labor Practices: Implement methods, for sourcing materials. Diversity and Inclusion: Encourage a varied and fair work environment. Opportunities and Challenges for Malaysian Businesses 1. Opportunities: a) Reputation Enhancement: Embracing ESG principles can enhance a company’s reputation. b) Investor Attraction: Responsible investors seek ESG-compliant companies. c) Market Expansion: ESG opens doors to new markets. 2. Challenges: a) Investment: Implementing ESG practices demands a financial commitment. b) Cultural Shift: Companies need to adjust to a culture centered around sustainability. Strategies for Compliance Malaysian businesses can thrive by proactively engaging with the EU’s ESG landscape: 1. Build a Strong ESG Framework: Develop comprehensive policies, procedures, and reporting mechanisms. Address environmental, social, and governance issues. 2. Conduct Due Diligence: Identify and mitigate risks across operations and supply chains. 3. Engage with Stakeholders: Communicate ESG initiatives transparently to investors, customers, and employees. 4. Stay Informed: Monitor evolving EU ESG regulations and adapt strategies as needed. Conclusion and Way Forward In wrapping up and looking ahead the EUs strong emphasis, on ESG factors is reshaping the business scene with Malaysia following suit. As Malaysian businesses navigate this changing landscape here’s a strategic plan: Embrace ESG as a Key Priority: Understand that ESG goes beyond compliance; it’s a priority. Align your business objectives with sustainability and ethical practices. Establish Strong ESG Frameworks: Create policies, processes and reporting systems. Involve stakeholders to ensure their support and dedication. Conduct Thorough Due Diligence Across Operations and Supply Chains: Thoroughly evaluate human rights issues and environmental impacts. Collaborate with supply chain partners to boost transparency. Give Priority to Environmental Sustainability: Work on reducing emissions promoting resource efficiency and adopting eco practices. Consider investing in energy sources. Promote Social Responsibility: Encourage fair labor standards, diversity and inclusivity. Proactively address any human rights issues. Tackle Challenges with Resilience: Acknowledge the investment needed for ESG practices. Foster a culture of sustainability, within your organization. Stay up, to date. Adjust: Keep an eye on EU ESG regulations, trends and top practices. Modify your approaches accordingly. Malaysian businesses must stay updated on these EU projects to succeed in a world market that values ESG more and more. Engaging with the ESG initiatives of the EU proactively can help businesses not adhere to regulations but also set themselves up for success, in a world market that is changing quickly. This calls for a dedication to sustainability, transparency and ethical business behaviors, which will eventually pave the way for a fair future, for Malaysia. References: 1.       Yeoh, L., & Teo, S. (2024). ESG in Malaysia: So much to gain so act now without second thoughts or miss out. Retrieved from: https://focusmalaysia.my/esg-in-malaysia-so-much-to-gain-so-act-now-without-second-thoughts-or-miss-out/ 2.       Sippel, H. (2024). Three ESG-related laws from the EU every Malaysian company should know about. Skrine Insights. Retrieved from: https://www.skrine.com/insights/alerts/january-2024/three-esg-related-laws-from-the-eu-every-malaysian 3.       The Star. (2024, February 28). Five Trends in 2024 for Malaysia as Mandatory ESG Reporting Becomes Global Norm. Retrieved from: https://www.thestar.com.my/news/nation/2024/02/28/five-trends-in-2024-for-malaysia-as-mandatory-esg-reporting-becomes-global-norm Author’s Profile: Dr Ifrah Bukhari is a Business Analyst at Softech360, where she leverages her expertise in IT consulting to champion sustainable business practices. Certified in Business Automation, ESG risks and climate change, she guides organizations through the complexities of sustainability, offering strategies to meet their ESG goals. As a published author, Dr. Bukhari uniquely combines IT and sustainability, providing innovative solutions that ensure long-term organizational value and contribute to a greener future.

  Introduction: ESG (Environmental, Social, and Governance) investing has undergone a remarkable transformation over the years, stemming from various initiatives aimed at fostering sustainable development. This blog delves into the historical development of ESG, tracing its roots from early exclusionary practices to its current proactive role in responsible investing. Moreover, we will explore the diverse platforms that have emerged to support ESG principles, driving positive change in the world of finance. The Origins of ESG: The origins of ESG can be traced back to the 1960s when investors began excluding certain industries, such as tobacco or those associated with apartheid, from their investment portfolios. This initial form of socially responsible investing laid the groundwork for subsequent developments. However, it was in the 1980s that the first recognizable version of ESG emerged, with the introduction of Environmental, Health, and Safety (EHS) regulations in the United States. The Rise of Corporate Sustainability: Throughout the 1990s, the concept of corporate sustainability gained prominence as an extension of EHS practices. Organizations recognized the need to surpass mere compliance with environmental regulations and adopted proactive measures to reduce their ecological footprint. This shift in mindset marked a significant milestone in the ESG journey, as companies acknowledged their responsibility towards the environment. The Era of Corporate Social Responsibility: As the new millennium dawned, attention expanded beyond environmental concerns to encompass social issues. The early 2000s witnessed the rise of Corporate Social Responsibility (CSR), emphasizing the importance of businesses engaging with and addressing social challenges. Companies began integrating philanthropy, community involvement, and fair labor practices into their operations. ESG as a Proactive Movement: In the 2010s and beyond, ESG gained momentum as a proactive movement rather than a reactive one. Investors and companies alike recognized the direct impact of ESG factors on financial performance and long-term sustainability. Consequently, ESG considerations became integral to investment decision-making and corporate strategy. The Business Case for ESG: Today, ESG is no longer perceived as a niche or optional approach. Multiple studies have demonstrated the positive correlation between robust ESG performance and financial returns. Investors now understand that considering ESG factors can mitigate risks, enhance brand reputation, and drive innovation. Consequently, institutional investors, asset managers, and individual investors are increasingly integrating ESG criteria into their investment strategies. Different Platforms for ESG: Over the years, various platforms have emerged to support the advancement of ESG principles. These platforms include sustainability indices, such as the FTSE4Good and Dow Jones Sustainability Indices, which provide investors with benchmarks to evaluate companies’ ESG performance. Additionally, global reporting frameworks like the Global Reporting Initiative (GRI) and the Task Force on Climate-related Financial Disclosures (TCFD) offer guidelines for companies to disclose their ESG-related information in a standardized and transparent manner. Over the years, various platforms have emerged to support the advancement of ESG principles. These platforms include: The Science-Based Targets initiative (SBTi): The Science Based Targets initiative (SBTi) is a collaborative effort between CDP, UNGC, WRI, and WWF. It provides a framework for companies to set science-based targets (SBTs) to reduce greenhouse gas emissions in line with the goals of the Paris Agreement. SBTs are based on the best available scientific knowledge and help companies contribute to global efforts to mitigate climate change. The SBTi offers guidance, resources, and tools to support companies in setting and achieving their SBTs, driving innovation, enhancing reputation, and attracting investment. By aligning with SBTs, companies can manage climate risks and seize opportunities in the low-carbon economy. The Sustainability Accounting Standards Board (SASB): The SASB provides industry-specific standards for sustainability disclosure. These standards are designed to be cost-effective for companies and decision-useful for investors. They are developed through a rigorous process that includes evidence-based research, market consultation, and public comment. By providing specific metrics and guidance for each industry, SASB enables companies to report on material ESG factors most relevant to their sector, facilitating comparability and transparency in ESG reporting. The Transition Plan Taskforce (TPT) Disclosure Framework: The TPT Disclosure Framework recommends disclosure of a company’s strategic climate ambition, implementation and engagement approaches, governance and accountability arrangements, and financial plans. By disclosing this information, companies provide investors with better forward-looking information, allowing them to assess the company’s future prospects more accurately. The TPT Framework helps companies communicate their plans and actions related to the transition to a low-carbon economy, supporting investors in making informed decisions. International Sustainability Standards Board (ISSB): The ISSB is a newly established global sustainability standard-setting board that aims to develop a comprehensive set of sustainability standards for companies worldwide. Expected to launch in 2022, the ISSB will operate under the oversight of the International Financial Reporting Standards Foundation (IFRS). The ISSB’s objective is to provide a unified framework for sustainability reporting, ensuring consistency, comparability, and reliability of ESG disclosures across industries and jurisdictions. Carbon Disclosure Project (CDP): The CDP is a widely recognized platform that encourages companies to disclose their environmental impact, particularly in relation to greenhouse gas emissions and climate change. The CDP provides a comprehensive system for companies to measure, manage, and disclose their environmental data. By participating in the CDP, companies demonstrate their commitment to transparency and accountability in addressing climate-related risks and opportunities. The Future of ESG: Looking ahead, ESG is set to continue its upward trajectory. With increasing awareness about climate change, social inequality, and corporate governance issues, investors are demanding greater transparency and accountability from companies. Consequently, businesses are integrating sustainability practices into their core operations, focusing on long-term value creation and aligning their strategies with the United Nations Sustainable Development Goals (SDGs). Conclusion: ESG has evolved significantly from its humble origins, progressing from a narrow exclusionary approach to a comprehensive framework for sustainable investing. As we move forward, it is crucial for companies and investors to recognize the intrinsic value of ESG considerations. By embracing ESG principles, we can collectively drive positive change, create a more sustainable future, and ensure the well-being of both our planet and society. The emergence of various platforms dedicated to ESG, such as the SBTi, SASB, TPT, …

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Introduction The blending of Environmental, Social and Governance (ESG) principles, with Artificial Intelligence (AI) offers an opportunity for companies and investors in Malaysia. As the nation aims for development recognizing the obstacles and adopting trends in ESG AI fusion is crucial. In this blog we delve into the unique context of the Malaysian market, discuss the hurdles faced, and highlight innovative pathways towards a responsible and resilient future. The Regulatory Landscape 1. Mandatory ESG Reporting: Malaysia has taken proactive steps to enforce ESG reporting requirements for publicly listed companies. Bursa Malaysia has strengthened its Sustainability Reporting Framework to align with global standards, boosting investor trust and promoting compliance with ESG guidelines. Capital Markets Malaysia (CMM) has recently introduced the Simplified ESG Disclosure Guide (SEDG) to support Small and Medium Enterprises (SMEs) in integrating ESG practices. Although optional, the SEDG assists SMEs in remaining competitive and meeting the expectations of stakeholders. 2. Budget 2024 and Sustainability Goals: The focus on sustainability is evident in Malaysia’s Budget 2024, intending to achieve carbon neutrality by 2050. The National Energy Transition Roadmap (NETR) and the New Industrial Master Plan 2030 (NIMP) align with the recently introduced National Industry Environmental, Social, and Governance Framework (i-ESG Framework). Impact Measurement and Reporting Impact measurement and reporting are crucial for demonstrating the positive social and environmental effects of companies and investments in Malaysia. While ESG integration focuses on internal risk management, impact measurement extends beyond compliance to quantify outward impact. This provides a pathway for Malaysia to attract impact investors and achieve sustainable development goals. As emphasized by Gray et al., “what gets measured, gets done,” resonates with impact entrepreneurs and businesses alike. Sustainable Investing With Malaysia facing a significant financing gap in achieving the United Nations Sustainable Development Goals (SDGs), sustainable investing plays a vital role in bridging this gap by channeling private sector investment towards impactful initiatives. Impact entrepreneurs, in multistakeholder partnerships, disrupt the status quo and develop innovative solutions aligned with the SDGs. By integrating ESG considerations and impact measurement, investors can identify promising investees contributing to sustainable development in Malaysia. Challenges in ESG-AI Integration 1. Data Quality and Consistency: Ensuring the quality and consistency of ESG data, for AI integration is a challenge due to diversity and fragmentation. Businesses in Malaysia face obstacles with standardized ESG data impacting AI model effectiveness. Overcoming this hurdle involves investing in governance frameworks quality assurance processes and partnerships with data providers to enhance the trustworthiness and uniformity of ESG data sources. It’s crucial to consider context and cultural nuances when evaluating ESG metrics to guarantee the significance and precision of AI-generated insights, within the market. 2. Algorithmic Bias and Fairness: Ensuring algorithmic fairness and mitigating bias are critical challenges in ESG-AI integration for businesses operating in Malaysia. Biased algorithms can perpetuate inequalities in ESG decision-making, leading to unintended consequences and ethical concerns. To navigate this challenge, companies need to prioritize the development of bias-aware AI models that consider diverse perspectives and undergo regular audits to identify and address bias. Implementing transparent and accountable processes for algorithmic decision-making is imperative to build trust with stakeholders and uphold ethical standards in ESG initiatives leveraging AI technology. 3. Interpretable AI Decisions: The need, for clarity and understanding in AI decision-making, presents a hurdle for companies aiming to incorporate ESG factors into their activities in Malaysia. Stakeholders seek clarifications and perspectives on how AI algorithms reach ESG-related conclusions to ensure responsibility and reliability. Striking a balance between the intricacy of AI algorithms and comprehensibility is essential for promoting comprehension and approval of AI-generated insights. Organizations should focus on creating AI methods like representations of models and tools, for interpretation to improve the openness of ESG decision-making processes and encourage stakeholder involvement. 4. Energy Efficiency and Environmental Impact: The use of AI technologies consumes a lot of energy, which is a concern, for businesses in Malaysia that want to be environmentally conscious while using AI for ESG projects. It’s crucial to find a balance between getting insights from AI and saving energy to ensure operations. By implementing energy AI solutions like optimizing algorithms and using cloud-based resources, computing companies can reduce the impact of AI in ESG efforts. Companies need to track the energy consumption of their AI systems and develop strategies to improve energy efficiency while making the most out of AI-driven sustainability projects. Future Trends 1. AI-Driven ESG Analytics: The growing use of Artificial Intelligence (AI) tools, in assessing Social and Governance (ESG) factors in the market is a significant upcoming trend. AI’s ability to analyze amounts of data, recognize trends, and forecast ESG risks offers companies insights for making well-informed decisions. As businesses in Malaysia work towards improving their ESG performance and meeting sustainability objectives incorporating AI-driven analytics helps them uncover hidden connections identify emerging risks and optimize resource distribution efficiently. The integration of AI technology, into ESG evaluations is projected to stimulate innovation and effectiveness ultimately fostering business practices and positive environmental and social outcomes. 2. Blockchain for ESG Transparency: The adoption of blockchain technology to enhance ESG transparency and data integrity is a growing trend in the Malaysian market. Blockchain’s decentralized and tamper-resistant nature makes it an ideal platform for securely storing and sharing ESG-related information, ensuring transparency and accountability in reporting practices. By leveraging blockchain-based ESG reporting platforms, businesses in Malaysia can streamline data verification processes, enhance stakeholder trust, and demonstrate their commitment to sustainability and ethical business practices. The piloting of blockchain solutions for ESG transparency is poised to revolutionize how companies manage and disclose their ESG performance, paving the way for greater accountability and credibility in the Malaysian business landscape. 3. NLP for Unstructured Data Insights: The incorporation of Natural Language Processing (NLP), into ESG reporting procedures is a growing practice that holds the potential to unveil insights from data sources within the Malaysian market. NLP technology allows companies to derive information and sentiment analysis from ESG reports thereby enhancing decision-making processes and strategic planning efforts. By utilizing NLP capabilities for analyzing data organizations …

Challenges and Future Trends in ESG-AI Synergy: Navigating Sustainability in the Malaysian Market Read More »

Introduction: In today’s business landscape, the integration of Environmental, Social, and Governance (ESG) factors has transcended mere compliance—it has become a strategic imperative. As companies strive for sustainable growth, they grapple with the dual challenge of balancing profitability with societal and environmental impact. ESG considerations now occupy the forefront of corporate strategies. However, the path to accurate ESG reporting is fraught with complexities, especially in the era of AI-enabled solutions. Companies must ensure precise ESG reporting while navigating the intricacies of AI-driven technologies. Data integrity, inconsistencies, and the credibility of disclosed ESG information weigh heavily on investors and stakeholders. To address these challenges, a strategic approach is essential—one that seamlessly integrates responsible AI practices with core ESG principles. By harmonizing technology and sustainability, organisations can drive positive impact while maintaining transparency and trust. The Emergence of AI in ESG Reporting 1. Streamlining Data Validation through AI AI-driven systems play a pivotal role in ESG reporting by automating critical processes. These systems conduct cross-validation of information, validate ESG data, and detect inconsistencies or irregularities. The automated validation process ensures data accuracy, minimizes errors, and enhances the credibility of disclosed ESG information. This, in turn, instils confidence in investors and stakeholders regarding the reliability of reported ESG metrics. Noteworthy examples include: – RepRisk employing advanced ML algorithms to analyse ESG risks. – Global Forest Watch utilizing AI to analyse satellite imagery for timely conservation interventions. – Owl Analytics integrates ESG data into investment strategies with human quality control. – IBM leveraging AI for sustainable investments and energy management. These tools empower investors and organizations to make well-informed decisions while advancing sustainability objectives. Despite the efficiency and scalability offered by AI, challenges persist, such as data quality, complexity, and energy consumption. Adhering to responsible AI practices is essential to harness the benefits of AI while mitigating associated risks. ESG-focused IT consulting firms play a critical role in enhancing the efficacy of AI-powered ESG software through: a) Customization and Integration: – Tailoring AI solutions to meet specific ESG reporting requirements. – Ensuring seamless integration of AI tools into existing systems to facilitate efficient data processing and accurate reporting. b) Ethical AI Development: – Advocating for responsible AI practices that consider ethical implications, avoid biases, and align with ESG principles. c) Education and Training: – Educating organizations on AI capabilities and limitations. – Training teams to interpret insights generated by AI effectively. d) Continuous Improvement: – Monitoring AI performance, adapting to evolving ESG standards, and enhancing algorithms. – Leveraging expertise to drive ongoing enhancements in ESG reporting accuracy and transparency. In essence, these consulting firms bridge the gap between technology and sustainability, enabling organizations to navigate the intersection of ESG and AI effectively. 2. Sustainability Objectives and Responsible AI AI systems, particularly large neural networks, demand significant computing power for training, leading to energy-intensive processes that may conflict with sustainability goals. The energy consumption associated with training deep learning models, especially those with numerous parameters, can strain power grids and contribute to greenhouse gas emissions. The predominant use of electricity from fossil fuels for AI model training indirectly exacerbates carbon emissions, impacting climate change. ESG-focused IT consulting firms address these challenges by: a) Prioritizing Smaller AI Models: – Recognizing the environmental impact of AI and advocating for energy-efficient, smaller models. – Prioritizing smaller models not only aligns with sustainability goals but also enhances interpretability. b) Strategic AI Development: – Guiding organizations on strategic AI deployment to support environmental initiatives. – Advancing responsible AI (RAI) and ESG objectives through environmental advocacy. While AI holds significant potential, responsible practices are vital to mitigate its environmental impact and ensure a sustainable future. By strategically applying AI development to support environmental initiatives, organizations can concurrently advance responsible AI (RAI) and ESG objectives. 3. Balancing AI and Humanity: Responsible AI Development Ethical considerations in AI development, particularly regarding fairness, privacy, and human-centred design, are paramount. Responsible AI development intersects with ESG principles in ensuring ethical AI practices. ESG-focused IT consulting firms play a crucial role in this intersection by: a) Upholding Fairness and Privacy: – Emphasizing fairness in algorithmic decision-making and advocating for equitable treatment. – Safeguarding privacy by handling individuals’ data ethically and transparently. b) Championing Human-Cantered Design: – Promoting human-centred design to ensure AI solutions align with societal well-being. – Infusing ESG principles to prioritize human welfare over profit in AI development. c) Avoiding Blind Reliance on AI: – Recognizing the importance of human judgment alongside AI automation. – Guiding companies to balance AI utilization to prevent unintended consequences. d) Integrating ESG Principles: – Embedding ESG principles into AI development to ensure technology serves people while minimizing harm. – Aligning AI practices with sustainability goals to drive positive societal impact. Responsible AI development, guided by ESG expertise, ensures technology enhances humanity rather than detracting from it. Synergies and Alignment When companies align their ESG and RAI initiatives, they unlock synergies and shared resources, leading to efficient prioritization, resource optimization, and enhanced transparency and trust with stakeholders. The collaboration between companies and ESG-focused IT consulting firms drives positive societal impact and advances both responsible AI (RAI) and ESG objectives. 1. Efficient Prioritization: – Combining core training processes and reporting capabilities to prioritize actions aligned with ESG and responsible tech objectives. 2. Resource Optimization: – Leveraging shared expertise and capabilities for effective resource allocation. – ESG-focused IT consulting firms enhance the alignment of AI systems with sustainability goals. 3. Transparency and Trust: – Transparent ESG reporting, powered by responsible AI, fosters trust with stakeholders. – Companies promoting open communication on societal impact build stronger relationships with investors, customers, and communities. Conclusion: In the dynamic landscape of ESG reporting, where technology and sustainability intersect, opportunities and challenges abound. Responsible AI practices emerge as a beacon, addressing accuracy hurdles while deftly navigating the complexities of AI-driven solutions. ESG-focused IT consulting companies play a pivotal role, in bridging the gap between technology and societal impact. Their guidance ensures that AI aligns with ESG principles, fostering transparency and trust. As we navigate this …

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Recognition of ESG Importance and SRI Guidelines in Malaysia: In Malaysia, the recognition of ESG importance and the introduction of Sustainable and Responsible Investment (SRI) guidelines by the Securities Commission (SC) Malaysia have played a crucial role in promoting responsible investing and integrating ESG considerations into the Malaysian capital market. The Corporate Sustainability Initiative (CSI) Platform: One notable initiative in Malaysia is the establishment of the Corporate Sustainability Initiative platform. Launched by Bursa Malaysia in 2015, the CSI platform aims to encourage listed companies to adopt sustainable business practices and improve their ESG performance. It provides companies with a framework to disclose their sustainability efforts and achievements, fostering transparency and accountability. Technology-driven ESG Reporting and Analysis in Malaysia: Additionally, Malaysia has embraced the use of technology to enhance ESG reporting and analysis. The introduction of the Integrated Environmental, Social, and Governance (iESG) scoring system by Bursa Malaysia allows investors to assess the ESG performance of listed companies. The iESG framework incorporates multiple dimensions of ESG, including environmental, social, and governance factors, to provide a comprehensive evaluation of a company’s sustainability practices. Collaboration and Stakeholder Involvement in Driving the ESG Agenda: The collaboration between Bursa Malaysia and various stakeholders, including regulators, industry players, and investors, has been instrumental in driving the ESG agenda in Malaysia. By establishing guidelines and platforms like the CSI and iESG, Malaysia is actively promoting sustainable business practices and encouraging companies to prioritize ESG considerations. Future Outlook: Evolving ESG Standards and Integration of Technology: As businesses in Malaysia and around the world navigate the challenges of the future, ESG standards and frameworks, including initiatives like the CSI platform and iESG, will continue to evolve. The integration of technology and data analytics will further enhance the effectiveness of ESG reporting and analysis, enabling companies to make more informed decisions and investors to assess ESG performance more accurately. Malaysia’s Journey in ESG Integration: Overall, Malaysia’s journey in ESG has seen the implementation of innovative platforms like the CSI and the adoption of technology-driven approaches such as the iESG scoring system. These initiatives contribute to the growth of sustainable business practices in Malaysia and position the country as a leader in ESG integration.    

Introduction: The National Industry Environment, Social, and Governance (ESG) Framework is a comprehensive framework aimed at preparing Malaysia’s manufacturing sector to embrace ESG principles and tap into the US$12-trillion global market focused on ESG opportunities (CEO Morning Brief, 2023). This article explores the key pillars of the framework, its implications for Government-Linked Companies (GLCs) and Public Listed Companies (PLCs), and the initiatives implemented by the Malaysian government to promote ESG practices. The National Industry ESG Framework: The National Industry ESG Framework comprises four pillars: standards, financing, capacity building, and market mechanism. These pillars are complemented by 17 strategies, 50 deliverables, and six key enablers. The framework provides invaluable guidance and drives a ‘Just Transition’ towards ESG-compliance in the manufacturing sector, with a particular focus on Micro, Small, and Medium Enterprises (MSMEs). It is a key enabler for the Push for Net Zero mission, one of the four missions of the New Industrial Master Plan 2030 (NIMP 2030). Pillar 1: Standards Pillar: Establishing ESG Guidelines and Best Practices The standards pillar of the framework aims to establish a set of guidelines and best practices for ESG compliance in the manufacturing sector. These standards will serve as a foundation for companies to ensure their operations align with ESG principles (CEO Morning Brief, 2023). Pillar 2: Financing Pillar: Providing Financial Support for ESG Transition The financing pillar aims to provide financial support to companies that are transitioning towards ESG compliance. This support will facilitate the adoption of sustainable practices and help companies overcome financial barriers associated with the transition (CEO Morning Brief, 2023). Pillar 3: Capacity Building Pillar: Enhancing ESG Skills and Knowledge The capacity building pillar focuses on providing training and development programs to companies, enabling them to adopt ESG practices effectively. By enhancing skills and knowledge, this pillar aims to empower companies to implement sustainable practices across their operations (CEO Morning Brief, 2023). Pillar 4: Market Mechanism Pillar: Creating a Market for ESG-Compliant Products and Services The market mechanism pillar aims to create a market for ESG-compliant products and services. By promoting the demand for sustainable offerings, this pillar incentivizes companies to adopt ESG practices and align their products and services with market preferences (CEO Morning Brief, 2023). Implications for GLCs and PLCs: The i-ESG Framework is expected to have significant implications for Government-Linked Companies (GLCs) and Public Listed Companies (PLCs). GLCs, being government-owned, are expected to lead by example in adopting ESG practices. The framework will help GLCs identify areas for improvement and enhance their ESG practices (CEO Morning Brief, 2023). On the other hand, PLCs will be required to disclose their ESG practices in their annual reports, enabling investors to make informed decisions based on their ESG performance (CEO Morning Brief, 2023). Government Initiatives The Malaysian government has launched several initiatives to support ESG practices in the country. One of these initiatives is Bursa Malaysia’s Centralised Sustainability Intelligence (CSI) platform. Developed in collaboration with the London Stock Exchange Group, this platform serves as a repository for sustainability disclosures by listed companies and their supply chains. It reinforces ESG practices and facilitates the swift adoption of supply chain carbon emissions (Bursa Malaysia Berhad, 2021). The New Industrial Master Plan 2030 (NIMP 2030) is an industrial policy formulated by the Malaysian government to transform the manufacturing and manufacturing-related services sector. NIMP 2030 aims to achieve economic complexity, high-value job opportunities, domestic linkages, cluster development, inclusivity, and enhanced ESG practices (Ministry of International Trade and Industry, 2021). It takes a mission-based approach, fostering collaboration between the government and the private sector to provide strategic direction (New Industrial Master Plan, 2023). Conclusion The National Industry Environment, Social, and Governance (ESG) Framework is instrumental in guiding Malaysian companies towards adopting ESG practices and capitalizing on the vast opportunities presented by the US$12-trillion global market focused on ESG. Its pillars, strategies, and enablers provide invaluable guidance for the manufacturing sector, with a particular focus on Micro, Small and Medium Enterprises (MSMEs). Additionally, initiatives like Bursa Malaysia’s Centralised Sustainability Intelligence (CSI) platform reinforce ESG practices and disclosure among listed companies and their supply chains (Bursa Malaysia Berhad, 2021). With the support of Minister of Investment, Trade & Industry Datuk Seri Tengku Zafrul Abdul Aziz, who recognizes the i-ESG framework as a key enabler for the Push for Net Zero mission, Malaysia is poised to unlock global market opportunities worth US$12 trillion (Malay Mail Online, 2023). Minister Tengku Zafrul emphasizes the potential of the framework to drive sustainable growth and enhance Malaysia’s position in the global market (Malay Mail Online, 2023). The implementation of the National Industry ESG Framework and the New Industrial Master Plan 2030 (NIMP 2030) reflects Malaysia’s commitment to empowering and encouraging environmental, social, and governance (ESG) and sustainability goals within the small and medium enterprise (SME) sector (Ministry of International Trade and Industry, 2021). By capitalizing on emerging global trends and fostering collaboration between the government and the private sector, NIMP 2030 aims to transform the manufacturing sector and create a more inclusive and sustainable economy (New Industrial Master Plan, 2023). In conclusion, the National Industry Environment, Social, and Governance (ESG) Framework, along with initiatives such as Bursa Malaysia’s Centralised Sustainability Intelligence (CSI) platform, play a crucial role in guiding Malaysian companies towards adopting ESG practices and capitalizing on the vast opportunities presented by the US$12-trillion global market focused on ESG. With the support of Minister Tengku Zafrul and the implementation of the New Industrial Master Plan 2030 (NIMP 2030), Malaysia is poised to achieve sustainable growth and enhance its position in the global market.   References CEO Morning Brief. (2023). Industry Environmental, Social, and Governance (iESG) Framework Aims To Speed Up Transition Towards Sustainable Practices. Retrieved from https://www.ceomorningbrief.com/industry-environmental-social-and-governance-iesg-framework-aims-to-speed-up-transition-towards-sustainable-practices/ Chartered Secretaries Malaysia (MAICSA). (2023). National Industry Environment, Social and Governance (ESG) Framework. Retrieved from https://www.maicsa.org.my/resources/technical-research/technical-announcements/2023/231004-miti-national-industry-environmental-social-and-governance-esg-framework Bursa Malaysia Berhad. (2021). Bursa Malaysia Launches Centralised Sustainability Intelligence (CSI) Platform. Retrieved from https://www.bursamalaysia.com/about_bursa/media_centre/bursa-malaysia-launches-centralised-sustainability-intelligence-csi-platform Ministry of International Trade and Industry. (2021). New Industrial Master Plan 2030 (NIMP 2030). Retrieved from https://www.miti.gov.my/miti/resources/NIMP2030.pdf New Industrial Master Plan. (2023). …

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Introduction: Environmental, social, and governance (ESG) factors are increasingly important for the success and sustainability of businesses in the modern world. Stakeholders want to know how companies are managing their ESG impact and performance, and they expect clear and consistent reporting of ESG information. In this article, we will explore how a centralised system of ESG reporting can benefit companies and their stakeholders. We will also look at how IT consulting companies can support the adoption of a centralised system, using the example of the Corporate Sustainability Initiative (CSI) platform by Bursa Malaysia. What is the CSI platform? The CSI platform is a digital solution that enables companies to report their ESG information in a standardised and reliable way. The platform was launched by Bursa Malaysia in collaboration with the London Stock Exchange Group (LSEG) in March 2023, with the aim of building a quality and sustainable capital market and becoming a leading corporate governance and sustainability hub. The platform provides a framework for ESG reporting that aligns with international standards and best practices, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). The platform also allows companies to benchmark their ESG performance against their peers and industry leaders, as well as to access insights and analytics on ESG trends and opportunities. How does a centralised system of ESG reporting benefit companies and their stakeholders? A centralised system of ESG reporting, such as the CSI platform, offers several advantages for companies and their stakeholders, such as: Enhanced Transparency and Accountability: By reporting their ESG information through the CSI platform, companies can demonstrate their environmental and social impact, governance practices, and sustainability efforts in a consistent and reliable way. This transparency enables investors, customers, employees, and other stakeholders to make informed decisions and hold companies accountable for their actions. Facilitates Benchmarking and Performance Comparison: The CSI platform allows companies to compare their ESG performance with their peers and industry leaders, using a standardised framework for ESG reporting. This helps companies identify their strengths and weaknesses, as well as areas for improvement and innovation. Attracts Responsible Investment: By using the CSI platform to report their ESG information, companies can show their commitment to ESG practices and attract responsible investors who value sustainable and ethical businesses. The platform also provides investors with accurate and comprehensive information, giving them confidence in assessing a company’s sustainability and long-term viability. Supports Risk Management: The CSI platform helps companies identify and manage potential ESG risks more effectively. By reporting their ESG information through the platform, companies can evaluate their environmental and social impact, governance practices, and sustainability efforts more systematically. This enables them to implement risk mitigation strategies and avoid negative consequences. Drives Innovation and Efficiency: The CSI platform encourages companies to evaluate their ESG impact more comprehensively, often leading to the discovery of areas for improvement and opportunities for innovation. The platform also facilitates efficient data collection, structuring, and reporting, saving time and resources. How can IT consulting companies support the adoption of a centralised system of ESG reporting?IT consulting companies can play a vital role in supporting the adoption of a centralised system of ESG reporting by offering various services and solutions, such as: Integrating software solutions with the CSI platform: IT consulting companies can provide software solutions that integrate with the CSI platform, ensuring efficient data collection, structuring, and reporting. For example, they can offer data management systems that automate data extraction, validation, transformation, and loading from various sources into the CSI platform. Providing education and training on data sources, data structuring, and the effective use of the CSI platform: IT consulting companies can provide education and training on how to source reliable data for ESG reporting, how to structure data according to the CSI framework, and how to use the CSI platform effectively. For example, they can offer workshops or webinars on data quality assurance, data mapping, data analysis, data visualisation, etc. Offering collaboration and partnership opportunities: IT consulting companies can offer collaboration and partnership opportunities with other stakeholders in the ESG ecosystem, such as regulators, industry associations, NGOs, etc. For example, they can facilitate knowledge sharing or joint projects on ESG topics or issues. Conclusion: A centralised system of ESG reporting is essential for the success and sustainability of businesses in today’s world. By adopting a centralised system such as the CSI platform by Bursa Malaysia, companies can enhance their transparency and accountability on ESG matters; facilitate benchmarking and performance comparison; attract responsible investment; support risk management; and drive innovation and efficiency. IT consulting companies can support this process by offering software solutions that integrate with the CSI platform; providing education and training on data sources, data structuring, and the effective use of the CSI platform; and offering collaboration and partnership opportunities with other stakeholders in the ESG ecosystem. By doing so, IT consulting companies can add value to their clients and contribute to a more sustainable and ethical capital market. References: Accelerating and digitalising ESG with Bursa Malaysia’s Centralised Sustainability Intelligence Platform. (2023, August 14). The Edge Malaysia. https://theedgemalaysia.com/content/advertise/accelerating-digitalising-esg-bursa-malaysia-centralised-sustainability-intelligence-platform Author’s Profile: Ifrah Bukhari is a certified Business Analyst with expertise in IT consulting and business analysis. She specializes in sustainable business practices, holding certifications in ESG risks and opportunities, climate change, and risk identification and materiality. Currently a Business Analyst at Softech360, Ifrah drives ESG reporting and consulting services. With a deep understanding of the challenges organizations face in adopting sustainability, she helps clients identify improvement opportunities and implement effective strategies to achieve their ESG goals. As a published author, Ifrah’s ability to bridge IT and sustainability enables her to provide comprehensive solutions that drive long-term value for organizations, contributing to a more sustainable future.

Abstract ESG reporting is gaining momentum in Malaysia as businesses recognize the importance of sustainable practices. The regulatory framework provided by the Securities Commission encourages companies to disclose relevant ESG information, fostering transparency and accountability. ESG reporting offers numerous benefits, including enhanced long-term sustainability, improved risk management, and attraction of responsible investment. Investor demand for ESG information is growing, leading to increased adoption of ESG criteria in investment decisions. Future trends in ESG reporting include standardization and harmonization, technology integration, focus on materiality, stakeholder engagement, expanded scope, increased investor demand, and regulatory developments. As Malaysia moves towards a greener and more socially responsible future, ESG reporting will continue to play a pivotal role in shaping businesses’ strategies and decision-making processes. Introduction: Environmental, Social, and Governance (ESG) reporting has gained increasing prominence in recent years as businesses worldwide recognize the importance of sustainable practices. In Malaysia, companies are also embracing this trend, as stakeholders demand greater transparency and accountability in their operations. This article explores the current state of ESG reporting in Malaysia, the regulatory framework supporting it, and the benefits it offers to businesses and society at large. The Regulatory Landscape and Different Frameworks: In Malaysia, the Securities Commission (SC) has taken significant steps to promote ESG reporting. In 2018, the SC introduced the Sustainability Reporting Framework (SRF) as a voluntary guideline for listed companies. The SRF aligns with international standards such as the Global Reporting Initiative (GRI) and encourages companies to disclose relevant ESG information in their annual reports. While compliance with the SRF was voluntary, listed companies were encouraged to adopt it to enhance their ESG performance and meet the growing expectations of investors and stakeholders. In 2016, ESG reporting was made mandatory for Public Listed Companies by Bursa Malaysia. The SC issued revised guidelines on sustainable and responsible investment funds in February 2023. It’s important to note that while Bursa Malaysia recommends the use of the GRI Standards, the adoption of specific reporting frameworks remains voluntary for listed companies. However, companies that choose not to adopt these frameworks are encouraged to provide clear and robust ESG disclosures that meet stakeholders’ expectations. Global Reporting Initiative (GRI) is the leading and widely used reporting framework in Malaysia, but several other frameworks are also used by companies for ESG reporting. These frameworks include Sustainability Reporting Framework (SRF) by Securities Commission Malaysia (SC), Carbon Disclosure Project (CDP) and United Nations Sustainable Development Goals (SDGs). However, on 11th April 2023, the Malaysian Government announced to launch a new framework for ESG reporting focusing on small and medium enterprises (SMEs). This reporting framework will be available to use by the end of 2023. Benefits of ESG Reporting: ESG reporting provides numerous benefits to both businesses and society. By incorporating ESG factors into their decision-making processes, companies can identify risks and opportunities that traditional financial reporting may overlook. This enables businesses to enhance their long-term sustainability, manage reputational risks, and attract responsible investment. Moreover, ESG reporting fosters transparency and accountability, allowing stakeholders to make informed decisions and hold companies accountable for their environmental and social impacts. Driving Sustainable Practices: ESG reporting acts as a catalyst for companies to adopt sustainable practices, thereby addressing pressing environmental and social challenges. By disclosing their carbon emissions, water consumption, waste management, and other environmental metrics, companies can identify areas for improvement and set targets to reduce their ecological footprint. Additionally, reporting on social aspects such as employee welfare, diversity, and community engagement helps to foster a positive corporate culture and build stronger relationships with stakeholders. Investor Demand for ESG: Investors are increasingly recognizing the importance of ESG factors in evaluating investment opportunities. Many institutional investors and asset managers have incorporated ESG criteria into their investment decision-making processes. This growing demand for sustainable investments has led to a surge in green bonds and sustainability-linked financing in Malaysia. ESG reporting allows companies to demonstrate their commitment to sustainability, attracting responsible investors who prioritize long-term value creation. Challenges and Opportunities: While ESG reporting in Malaysia is gaining momentum, there are still challenges to overcome. Some companies may perceive ESG reporting as an additional burden, requiring resources and expertise they may lack. However, the benefits of ESG reporting far outweigh the costs, as it enhances a company’s reputation, attracts investors, and mitigates risks. Moreover, the availability of ESG reporting frameworks and guidelines, such as the SRF, helps companies navigate the reporting process effectively. Future trends in ESG reporting: 1. Standardization and Harmonization: As ESG reporting becomes more prevalent globally, there is a growing need for standardization and harmonization of reporting frameworks. Companies and investors alike are calling for a unified set of standards to ensure consistency and comparability of ESG data. Organizations such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) are working towards aligning their frameworks, which will streamline reporting processes and enhance credibility. 2. Integration of Technology: Technology will play a crucial role in the future of ESG reporting. Artificial intelligence, machine learning, and data analytics will enable companies to collect, analyse, and report ESG data more efficiently. This will not only streamline the reporting process but also enhance the accuracy and reliability of the information disclosed. Furthermore, technology can facilitate real-time monitoring and reporting, allowing companies to address ESG issues promptly. 3. Focus on Materiality: In the future, there will be an increased emphasis on materiality in ESG reporting. Materiality refers to identifying and reporting on the ESG issues that are most relevant and impactful to a company’s business and stakeholders. By focusing on material issues, companies can provide more targeted and meaningful information, enabling investors and stakeholders to make better-informed decisions. 4. Stakeholder Engagement: ESG reporting will evolve to include more robust stakeholder engagement. Companies will seek to involve a broader range of stakeholders, including employees, customers, communities, and non-governmental organizations (NGOs), in the reporting process. This will ensure that ESG reporting reflects the diverse perspectives and concerns of all stakeholders, fostering transparency and accountability. 5. Expanded Scope: In the future, ESG …

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