DESPITE mentioning sustainable development goals (SDG) in their reporting, only 20% of Malaysian companies have actually included strategies in their published business strategy.
This is among the findings made by PwC Malaysia in a report entitled Rethinking ESG in A Post COVID-19 World.
PwC Malaysia executive chairman Datuk Mohammad Faiz Azmi said the data showed that businesses’ environmental, social and governance (ESG) considerations were still taking a backseat in Malaysia.
“The COVID-19 pandemic is a wake-up call to address the need for more sustainable practices. Businesses are reflecting on their objectives, whether to focus on profit alone or are there social and environmental metrics which needs to be considered?
“This is an opportunity for corporates to build trust with their stakeholders, by showing their commitment to addressing ESG issues before it’s too late,” he noted.
Lauding the Government’s commitment to accelerate the sustainability agenda through initiatives under Budget 2021, Faiz said the effort needs multi-layer support from businesses and the public as well.
However, he acknowledged that it is tough for businesses given the sluggish economy to focus on many things at one-go.
“In the face of competing priorities during COVID-19, where safeguarding livelihoods and ensuring business continuity are priorities, are businesses ready for a commitment to sustainability?” he asked.
However, Faiz reiterated that SDG are important measures to be considered as the economic recovery post COVID-19 will bring new challenges.
He detailed five key elements to drive SDG, which are:
- Investor expectations: Environmental and social factors as having greater influence over a company’s future performance and valuation. Returns on socially responsible investment indices are outperforming their conventional index counterparts.
- Sustainability reporting: Global investors are calling for mandatory inclusion of climate risk disclosures in financial accounts for use by companies, banks, and investors in providing information to stakeholders. Bank Negara Malaysia and the Securities Commission Malaysia are also pushing for the adoption of reporting standards as recommended by the Task Force on Climate-related Financial Disclosures among local financial institutions.
- Regulations: There has been an increasing need to address scrutiny and adverse public reaction over environmental and social concerns on several sectors, especially when subject to more stringent foreign regulations.
- Fiscal policies: Incentives to promote responsible behaviour can propel companies to be sustainable. Budget 2021 introduced Malaysia’s first sustainable bond, as well as the extension of the successful Green Technology Financing Scheme to encourage the private sector to participate in green technology.
- Customer behaviour: PwC’s Global Consumer Insights Survey 2020 research revealed a clear embrace of sustainability and a sense of civic duty. 52% of its respondents in Southeast Asia say they expect businesses to be accountable for their environmental impact. 52% of them also say they would avoid the use of plastic whenever possible.
Echoing Faiz’s sentiments, PwC Malaysia Sustainability & Climate Change leader Andrew Chan said Malaysian businesses are risking opportunities if they are not proactively communicating on how they are doing business responsibly.
“Studies have shown that investors turn to public information and third party research when they assess companies’ ESG practices, instead of communications or filings from the companies themselves.
“And much of this third-party information may be unverified. So, companies need to ensure that material ESG risks, opportunities, and strategic decisions are consistently and transparently disclosed to stakeholders through their reporting exercise,” noted Chan.
He added: “Beyond reporting, companies need to have a dialogue with their stakeholders on their impacts and plans, so that informal channels reinforce their formal disclosures.” – Nov 17, 2020
