Sustainability Is Smart Business: 10 ESG Facts Every Malaysian SME Should Know. Environmental, Social, and Governance (ESG) practices are often viewed as the domain of big corporations with deep pockets. However, in Malaysia—where over 97% of all businesses are small and medium-sized enterprises (SMEs)—this mindset is not only outdated, it’s potentially limiting. Today, sustainability is no longer a luxury reserved for the elite; it’s fast becoming a business necessity for companies of all sizes. Whether you run a family-owned business, a fast-growing startup, or a regional brand, adopting ESG principles can help future-proof your operations, build long-term value, and unlock new opportunities.
The Institute of Chartered Accountants in England and Wales (ICAEW) is at the forefront of helping Malaysian businesses make this shift. Rather than relying on vague ideals, the ICAEW translates sustainability into real business terms—quantifying risk, calculating returns, and providing data-driven training and tools. Their approach underscores a critical message: ESG isn’t the cost—it’s the payoff. And for Malaysian SMEs, the case for ESG adoption is becoming clearer with each new regulation, customer trend, and financial opportunity.
For example, new ESG reporting requirements by Bursa Malaysia, effective from 2025, will apply directly to listed companies—but indirectly, they will ripple through supply chains, affecting thousands of SMEs. Vendors that fail to align with ESG standards may lose contracts or miss out on growth opportunities, while early adopters will be better positioned to attract green financing and retain investor trust.
In fact, many Malaysian SMEs are already turning to ESG as a strategy for growth rather than mere compliance. A recent study shows that 60% of SMEs have implemented some form of ESG practice, up from just 28% two years ago. Among these adopters, 38% reported over 50% revenue growth, largely driven by greater market access and rising consumer demand for responsible products. However, while awareness is rising, full integration remains low. Only 19% of SMEs have adopted green production practices, and just 12% are involved in structured social responsibility programmes—indicating room for improvement and leadership among forward-thinking businesses.
One area offering immediate returns is renewable energy. With government-backed incentives such as 100% investment tax allowances, soft loans under the Green Technology Financing Scheme, and the Net Energy Metering (NEM) programme, many local businesses have cut their electricity bills in half—some saving up to 75% after switching to rooftop solar. Beyond cost savings, sustainability efforts also build customer loyalty. In Malaysia, 78% of consumers consider environmental impact before making a purchase, and brands that can demonstrate accountability often enjoy a premium in pricing and reputation.
Access to sustainable financing is also expanding. Major banks are unlocking billions in green loans and ESG-focused investments. CIMB has mobilised RM86.2 billion in sustainable finance, while Maybank has already surpassed its RM80 billion goal with RM83.2 billion in green lending. RHB Bank also raised its target to RM50 billion by 2026. This surge in sustainable financing opens the door for SMEs to fund energy upgrades, supply chain improvements, and ESG initiatives with greater ease and confidence.
At the same time, ESG is emerging as a key factor in attracting and retaining talent. Today’s workforce, particularly younger employees, want more than just a paycheck—they seek purpose. A global IBM study found that over 70% of employees are more likely to join companies they perceive as socially or environmentally responsible. Around 35% of job-switchers in the past year did so to join companies with stronger ESG values.
International competitiveness is also on the line. With the EU’s Carbon Border Adjustment Mechanism (CBAM) phasing in from 2026, Malaysian exporters must begin tracking and reporting their carbon footprints to avoid tariffs and retain market access. The Securities Commission warns that 75% of Malaysia’s EU exports could be impacted, making ESG alignment essential to protect export viability.
Supply chain resilience is another compelling reason for ESG adoption. Disruptions due to climate risks, labour shortages, and ESG non-compliance are costing Malaysia’s economy an estimated RM8.7 billion annually. Businesses that build sustainability into their procurement practices and logistics are better equipped to avoid costly delays, preserve revenue, and maintain customer trust.
Finally, ESG performance is increasingly viewed by investors as a proxy for long-term strength and risk management. Sustainable and Responsible Investment (SRI) fund assets in Malaysia grew from RM7.05 billion in 2022 to RM7.7 billion in 2023—an upward trend that indicates growing appetite for ESG-aligned businesses. For SMEs seeking funding, this trend is particularly significant. By taking sustainability seriously, they position themselves as credible, forward-looking investment opportunities.
In short, ESG is no longer a “big business” issue—it’s a survival strategy and growth engine for SMEs in Malaysia. From regulatory preparedness and cost savings to market access and talent attraction, the benefits are tangible. For those willing to act early, ESG isn’t just about doing good. It’s about doing smart business.
