Environmental (E): This aspect focuses on how companies interact with the environment. It includes practices related to energy efficiency, waste management, pollution control, and conservation. For example, companies that reduce their carbon footprint, use sustainable resources, or protect biodiversity are considered environmentally responsible.
Social (S): The “S” in ESG refers to social factors. It encompasses how companies treat their employees, engage with communities, and address social issues. Socially responsible companies prioritize fair labor practices, diversity and inclusion, and community development. They also consider human rights and ethical behavior.
Governance (G): Governance relates to how companies are managed and governed. It involves transparency, accountability, and ethical decision-making. Good governance ensures that companies follow regulations, have effective leadership, and maintain integrity. For instance, transparent financial reporting and independent boards contribute to strong governance.
Why does ESG matter?
- ESG practices impact a company’s long-term sustainability and reputation.
- Investors increasingly consider ESG factors when making investment decisions.
- Companies that prioritize ESG tend to attract socially conscious consumers and gain a competitive edge.
In Malaysia, ESG reporting is becoming mandatory for both listed companies and small-medium enterprises (SMEs). Bursa Malaysia (the stock exchange) has enhanced the Sustainability Reporting Framework to standardize ESG disclosures. Additionally, the Simplified ESG Disclosure Guide (SEDG) assists SMEs in adopting ESG practices. The country aims to achieve carbon neutrality by 2050 through its National Industry Environmental, Social, and Governance Framework (i-ESG Framework)