Faroze (left) and Iskandar delivering their presentation during the event.
PETALING JAYA: Corporates must go beyond mere compliance and focus on measurable performance to be able drive a meaningful impact in environmental, social and governance (ESG) initiatives.
UN Global Compact Network, Malaysia and Brunei executive director Faroze Nadar said when discussing the existential crisis of our time – climate change – the key performance target is not net-zero by 2050.
Rather, it is to prevent global temperatures from rising by more than 1.5 degrees Celsius by 2030, as set out in the Paris Agreement.
“While we are fixated on ESG, all this means nothing if we do not talk about performance. On its own, it is hard to say if ESG means anything. For example, if someone reduced their carbon footprint by 0.2%, there are differing views as to whether that is good or bad,” he said during his presentation, Humanising Sustainability: Growing the talent pool for ESG impact, at the ESG Summit yesterday.
Faroze said performance is made up of a number of components including people, process, products and leadership.
Highlighting the aspect of talent, he added that companies need four types of sustainability talents within an organisation to drive meaningful impact and change. These are, namely, sponsors, strategists, communicators and technologists.
“Moreover, I believe a sustainable business requires four key elements. First, it must be profitable. Without profit, you lack the second element which is power; the power to make decisions.
“However, the decisions and power that a company has must be based on its sustainability performance, which is material to the firm.
“These decisions must also be powered by stewardship; by the leaders and people who understand the value of sustainability,” he noted.
Meanwhile, Sime Darby Property
sustainability general manager Dr Yasmin Rasyid shed light on “Harmonising Urban Biodiversity in Real Estate: The Sime Darby Property Coexistence Approach”.
Another aspect that needs to be considered is with regards to the rolling out of regulatory frameworks in support of the green energy economy.
To this end, IBM Envizi Asia Pacific sustainability leader Sachin Gupta said more cross-border policies and frameworks need to be introduced by governments.
He remarked that thus far, most economies have focused on their own country’s energy demands and created regulations based on that.
“However, green energy – whether from hydro, solar, or nuclear sources – is increasingly becoming a cross-border issue.
“I do not think we have enough cross-border policies in place to facilitate the movement of energy generation to areas where it is most suitable and consumption to regions where there is a deficit,” he said in a panel discussion.
Moreover, Sachin added that new frameworks should include performance indicators and not just the ESG metrics.
“The focus should be on how electricity is produced and distributed. When evaluating the performance outcome of using a particular energy source, it is important to consider its real-world impact rather than just signalling ESG compliance,” he said.
Apart from this, Sachin said it is also important for frameworks to be consumer-friendly and protective of consumer rights.
“Last but not the least, it also has to be more harmonised and should not be like other convoluted ESG frameworks which are difficult to understand.
“The frameworks should be designed in a way that whole economies are able to understand and transact with each other in a more simpler way,” he said.
To be sure, artificial intelligence (AI) and Internet of Things (IoT) plays a vital role in enhancing energy efficiency by providing real-time monitoring, optimising energy consumption and enabling more precise management of energy resources.
This, ultimately, leads to reduced waste and improved sustainability across various sectors.
Sachin said the bulk of renewable energy sources today are solar and hydro which are very unpredictable, influenced by the weather as well as wind speed and direction.
“AI and IoT are used to adjust the way solar panels and wind turbines move, ensuring they are positioned and moving at the right speed to maximise energy production.
“When it comes to distribution, AI is able to carry out efficient real-time tracking of energy supply and demand and matching the two, particularly across varying periods like day and night.
“Similarly, on the consumption side, AI is able to analyse detailed consumption patterns and identifies areas where consumers can be more energy-efficient,” he said.
Concerns are also raised on the potential strain the rapid expansion of data centres (DCs) could place on Malaysia’s ESG goals, as DCs are known to be guzzlers of water and electricity.
In this regard, Pantas Software chief executive officer and co-founder Max Lee said that as the country continues to pursue its ambition of becoming a regional data centre hub, it is important to strike a balance between economic benefits and maintaining investment growth.
“Firstly, expanding the renewable energy sources is essential in achieving this balance. The government’s efforts can be seen in this area. However, an equally important yet often overlooked aspect is the reduction of energy consumption, which everyone can contribute to.
“There are many devices and IoT solutions. This is our opportunity here. This is how I believe Malaysia can maintain its lead in the global AI and DC space,” he said.
In terms of making AI accessible and affordable to developing economies, Fuller Impact chief executive officer Ts. Wan Imran said an open-source AI would enable a further progression.
“In Budget 2025, a lot of funds has been allocated and it is crucial that these funds do not stop at building infrastructure and should have a broader impact on the entire economy, ensuring that the technology is fully leveraged for growth and development.
“While we can adopt advanced technologies from the US and Europe, localisation is also critical, particularly when considering the different aspects of biodiversity or countries in the Asean region, there may one day be opportunities for transactional data sharing for better progression,” he said.
Meanwhile, Saxon Renewables founder and managing director Reik Ong said while Malaysia is making progress in its energy transition goals, there are still some challenges that need to be addressed in terms of achieving net-zero.
“For renewable energy, one of the biggest challenges is the capacity and health of the grid.
“For example, in Vietnam, their grid is already facing a big issue because, in just a few years, they have pumped so much renewable energy into the grid. Now the government is forced to give some curtailments to project owners, to stop their licence or curtail their operations.
“However, for Malaysia, we are in a better situation where the investors also feel safer. We do not foresee a similar situation happening in the country. So, overall, our progress is still very good, but moving forward, we will continue to monitor and address any emerging challenges,” he said.
Interestingly, it is also pertinent for companies to ensure transparency in their procurement processes and ensure the process of competition is being protected to achieve their ESG goals.
Malaysia Competition Commission chief executive officer Iskandar Ismail said governance is the foundation of ESG success which goes beyond environmental concerns.
“ESG should not be seen as a limited or niche concept and is more than just caring for the environment or a temporary trend. It is about being honest and ensuring economic activities are sustainable. It embeds principles of integrity, transparency and fairness into every aspect of business and governance,” he said.
Iskandar highlighted that one of the potential risks in procurement is bid rigging, which has been a long-standing problem in Malaysia.
By definition, bid rigging is any agreement (written or oral) between bidders that limits or reduces competition in a tender.
“The impact of bid rigging to businesses include wastage of taxpayers money. This is because cartels will charge higher than market rates and sometimes these individuals will give businesses low-quality products or incomplete projects, which would lead to incompetent players ruling the market,” Iskandar said.
He added that when there is transparency and integrity in tenders, prices will be kept fair for consumers and this protects public resources, prevents damage to the industry and thus promotes healthy competition.
“This will help ensure a stable and sustainable economy, not only for your company but also for future generations. There are a lot of benefits when businesses deal with bid rigging,” Iskandar said.
For Zurich Malaysia, at the end of the day, embracing ESG in business operations is a no brainer.
The group’s chief risk officer of property and casualty and sustainability risk head Teresa Wong said businesses need to do so, without which those who are exporting to the European Union or the US could face the risk of closure.
“This is why organisations should embrace this change and take ESG in stride, embedding it into their operations. Not only will they have a happier workforce, businesses will also be able to run their operations more efficiently.
“Even for ourselves, we reduce paper a lot. Insurance contract is just a piece of paper and we learned during the Covid-19 pandemic that you did not need to see that piece of paper to know that you have an insurance contract. Clients can have an e-policy instead,” she said.
The ESG Summit is organised by Star Media Group Bhd, with Sime Darby Property Bhd as the Urban Biodiversity Partner.
Saxon Renewables and Zurich Malaysia are silver sponsors. For more information, visit https://conference.thestar.com.my/esgsummit/.
