For the direction you are headed, it’s wise to seek a mentor who’s a master of the craft you want to immerse yourself in. Read books in your field of interest as a short-term solution until you’ve built a mindset to move onto the next level of your craft.
– Lewis Howes, author and entrepreneur
I had the honour to be present at a meeting chaired by Datuk Seri Norazman Ayob, deputy secretary general for Industrial Standards under the Ministry of International Trade and Industry on a discussion on the Adoption of Environmental, Social and Governance (ESG) for the manufacturing sector in Malaysia.
The crux of the meeting was on how ESG was going to become a mainstay in all our business operatives in the near future
The National Framework for ESG Adoption is now being put together and is expected to be completed by the end of 2023. It will focus on four pillars which are ESG standards, access to financing, capacity building and market mechanism.
According to the ministry, the urgency for adoption of ESG in all elements of the manufacturing ecosystem is due to the following:
- In the near future, there will be a carbon tax on companies. It is generally 5 SGD for every metric ton of CO2 omitted but in Singapore they are raising it to $S50 per every metric ton of CO2 emitted.
There are mechanisms to offset carbon tax – enter the carbon credit system. You can engage in alternative methodologies whereby you gain carbon credits and you can either sell these carbon credits or offset it against your carbon footprints.
- Norazman goes on to say that ESG plays an important future for trade and sustainable development, and supply management
In Germany, the biggest proponent of ESG, they are passing laws where companies across the supply chain must comply with ESG and next year, Europe is implementing cross border carbon tax.
So suppliers to this part of the world from the rest of the world must comply with ESG standards or else the Europeans won’t buy from them.
- Banking institutions are putting pressure on the companies that need continuous large financing by asking them to prove their ESG compliancy before being approved for various credit facilities.
- Business parks like Kulim Hi Tech are now even considering to be exclusive to only companies that exhibit ESG compliance so it is a trend that seems to becoming accelerated into a reality, and it is no longer about choice but that everyone must do it. Like covid vaccinations.
Some questions and concerns from the representatives:
Malaysian Consortium of Mid-Tier Companies (MCMTC) said we should not follow the European guidelines blindly and set a framework that would work for Malaysians.
SME associations said that most SMEs are not even in Level 1. They need to have a buy-in to understand the impact they will need.
Academy of Certified Case Managers (ACCM) talked about the micro-SMEs, how they will find difficulty in complying and needing incentives/free workshops to be able to do so. For example, United Nations Global Compact (UNGC) training on ESG costs RM10,000 and is only subsidised by RM7,000 by the government, the SMEs have to pay RM3,000 on this own.
Malaysian Associated Indian Chambers of Commerce and Industry (MAICCI) asked if it is correct to assume that only US and Europe are demanding ESG compliancy and that other countries we export to such as India, China and SEA, Africa and Latin America do not demand ESG compliancy and so why are we making all SMEs go through training expenses and be audited for ESG compliancy.
Norazman said yes, agreed but then you get the banks favouring ESG, so might as well get in the game.
MAICCI also added that for SMEs there is a general confusion of how do you measure ESG across various diverse industries to have a consistency?
What is the gauge/determining factor/the parameters? How do you measure it and what do you measure it with? Carbon rating is just the E part of the ESG, and if you are imposing such stringent demands and expectations on small businesses to be ESG compliant, how are you measuring ESG which transcends social, governance and environment?
Though Norazman said that was a good question, he did not have an immediate answer to give. He said that they are still studying various reporting standards and are sort of favouring the Task Force on Climate-related Financial Disclosures (TCFD) and might go with that but it is not conclusive yet at the moment.
Norazman added that there is no difference between SME, mid-tier or multinational corporations (MNCs) in how they will be treated by the new rulings from Europe. His concern is for the SMEs which will be affected by the carbon taxes. So he suggested having an ESG committee amongst the associations, which might be a good start. He also said a centre of excellence will be set up, government funded initially, and eventually private funded to head this.
Lastly, he said that Singapore, due to its tiny size and not having the capacity to produce sufficient carbon credits, are very much interested to work with Malaysia.
And that’s the ESP into the ESG, which I thought might be useful for readers to understand this week, instead of my usual thoughts on the universe and life.
The views expressed here are those of the columnist and do not necessarily represent the views of New Sarawak Tribune. Feedback can reach the writer at beatrice@ibrasiagroup.com
