KUALA LUMPUR – A new initiative to help small & medium enterprises (SMEs) speed up their adoption of sustainable environmental, social and governance (ESG) practices is on the way.
Jointly created by the Ministry of Environment and Water Malaysia (KASA) and Capital Markets Malaysia (CMM), the initiative targets SMEs to help them play their roles in the national climate change agenda.
According to KASA secretary-general Datuk Seri Ir Dr Zaini Ujang, SMEs account for 38.9% of the country’s gross domestic product in 2020 and believes the sector has to learn to be environmentally sustainable.
“Quantifying your emissions will provide many other benefits for your business, which includes saving money, improving your energy efficiency and managing risks while building competitiveness and your reputation.
“Businesses have no option but to take stock of their emissions in order to be ahead of others and to be relevant in these challenging times,” he said in his welcoming address at the “Adoption of Sustainability for SMEs” webinar.
The webinar also held its first series of capacity-building initiatives to support SMEs in developing corporate sustainability programmes that will contribute towards the nation’s aspiration to achieve net zero greenhouse gas emissions earliest by 2050.
The fulfilment of this target is contingent upon the completion of the Long-Term Low Emissions Development Strategy (LT-LEDS), currently being developed by KASA and expected to be finalised by end-2022.
MNCs transitioning towards eco-friendly suppliers
Meanwhile, CMM chairman Datuk Zainal lzlan Zainal Abidin in his welcoming remarks said that large corporations are seeking to meet enhanced sustainability standards.
He added that companies which have set net zero carbon targets must rely on their suppliers to follow suit.
Quoting a 2021 study by Standard Chartered, it was noted that 78% of multinational corporations (MNCs) responded that they will remove suppliers who do not align with their carbon transition plans.
The study looks at the risks and opportunities for suppliers in fast-growing markets as the MNCs transition to net zero. It also revealed that MNCs are expecting to exclude 35% of their current suppliers as they transition away from carbon.
Out of 400 MNCs surveyed, two-thirds responded that first step to net zero carbon starts from tackling supply chain emissions. The MNCs revealed that the supply chain emissions account for 73% of their total emissions.
“This represents both an opportunity and a risk to suppliers. The cost of inaction is extremely high as large; as corporations race against the clock to achieve their net zero carbon ambitions, suppliers that do not support their emission reduction target, risk being replaced by those able to aid their transition.
“Conversely, suppliers which take proactive steps to prioritise sustainability are in a better position to retain and attract these large corporate customers,” said Zainal lzlan.
He said the programme forms an important component of a key priority for CMM’s Centre for Sustainable Corporations to advance the sustainability efforts of Malaysian public-listed companies.
“As CMM continues supporting these companies in their sustainability journey, it is important to ensure that the SMEs, which form part of their supply chains, also move in tandem,” he added.
For more information on corporate sustainability and sustainable finance in Malaysia, visit CMM’s website here.
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