Maximise Your Business Potential through ESG: A Guide for SME

Here’s Why ESG Implementation is Essential for Your Business

ESG gives your company the tools it needs to be resilient in both the near-term and long-term. To further understand why ESG is more crucial than ever to your small business, let's examine each of its main advantages in greater detail:

In Malaysia, there are a number of tax incentives available to small business owners to invest in green technology. These incentives are intended to encourage your business to adopt more environmentally-friendly practices, and to help Malaysia transition to a more sustainable, low-carbon economy.

One example of a green technology tax incentive in Malaysia is the Investment Tax Allowance (ITA). According to the Malaysian Investment Development Authority (MIDA), this incentive allows your company to claim a tax deduction on investments in approved green technology projects.

Including ESG principles in your business can help you attract new consumers, lenders, and investors. This will also assist you in locating possible partners with comparable interests or ambitions. Additionally, you could also see more referrals as your new partners  share their experiences with other businesses they support.

ESG practices can also help you mitigate risk. For example, by reducing your environmental footprint, your business can avoid potential legal and regulatory penalties. In addition, companies with strong ESG practices are better positioned to handle potential supply chain disruptions and other challenges that may arise.

ESG practices can improve your company's reputation helping you build trust with customers, employees, and other stakeholders. As consumers become increasingly conscious of the impact of their purchasing decisions on the environment and society, they are more likely to support businesses that prioritise ESG. This can lead to increased customer loyalty and improved brand image for your business. 

94% of Top Malaysian Companies Have ESG Plans, but SMEs Are Not Following. Why?

In short, ESG is all about considering the triple bottom line - people, planet, and profit - when making investment decisions. It's a way of ensuring that a company is doing its part to create a sustainable and responsible future.

Lately, there has been a growing petition for ESG-focused investments due to increasing concern about the environmental and social impact of companies.

This trend has been driven by issues like climate change and income inequality, and has led to an increase in the adoption of ESG practices by companies. In Malaysia, the number of listed companies qualifying for the FTSE4Good Bursa Malaysia (F4GBM) ESG index has grown to 80, three times more than in 2014.

Despite the push, much of the SME industry struggle to adopt ESG practices.  

According to Capital Market Malaysia, 94% of the top 50 Malaysian public limited companies have already established ESG plans. In contrast, a significant portion of SMEs have yet to adopt such practices largely due to various challenges.

Let's delve into these challenges that are preventing SMEs from implementing ESG practices.

• Limited resources: SMEs often have fewer resources than larger companies, which can make it difficult to implement and maintain ESG practices.
  
  
• Lack of knowledge and expertise: Many SMEs may not have the necessary knowledge and expertise to understand the benefits of ESG and how to implement it effectively.
  
  
• Limited access to financing: Some SMEs may struggle to access financing to fund ESG initiatives, especially if they are not seen as financially viable by investors.
  
  
• Insufficient access to information and assistance: SMEs may not have access to the same level of information and support as larger companies, which can make it difficult to implement ESG practices.
  
  
• Limited influence: SMEs may have less influence in their industry or supply chain, which can make it harder to implement ESG practices that may require the cooperation of other companies.

ESG & Your Business: How to Start

As an owner of an SME, you can get started with ESG by incorporating ESG factors into your business operations and decision-making processes. This can involve implementing sustainable practices in business operations, such as reducing your carbon footprint and using renewable energy sources.

The process can also involve engaging with stakeholders and considering the social and community impacts of your business decisions. Additionally, you can improve your governance practices by adopting transparent and responsible business procedures.

With GreenBizReady, CIMB aims to support Malaysian SMEs in transitioning to the green economy, aligning with the Malaysian Government's goal of promoting sustainability as part of a comprehensive and inclusive economic strategy. GreenBizReady will give SMEs a competitive edge by teaching them how to integrate economic, environmental, and social considerations into their business practices, helping them become sustainably-minded for long-term success. It will also help SMEs access resources and incentives offered by government agencies working to encourage the adoption of the green economy.

Find out more on our efforts and how we can help your business on CIMB's Sustainability page. 

This article is for informational purposes only and CIMB does not make any representation and warranty as to the accuracy, completeness and fairness of any information contained in this article. As this article is general in nature, it is not intended to address the circumstances of any particular individual or entity. You are advised to consult a financial advisor or investment professional before making any decisions based on the information contained in this article. CIMB assumes no liability for any consequences arising from your reliance on the information presented here.