Dr. Noor Zalina Mahmood is head of the Universiti Malaya Centre of Excellence for ESG.ESG has recently gained prominence not only at global level but also in Malaysia.
It serves as a comprehensive framework that encapsulates a company’s sustainable development endeavours, encompassing the environmental impact, societal contributions, and governance practices.
While some organisations might still be voluntary to disclose their ESG performance, the disclosure has already been mandatory for many companies.
The popular term used – ESG reporting, is what companies report or disclose their activities related to environmental, social and governance components. Therefore, the ESG reporting is seen as central in positioning the company on how it deals with the environment, social and governance among their businesses.
It has also become pivotal in building trust with the investors, employees, regulators, customers and other stakeholders. Given the growing demand from stakeholders, it’s evident that ESG reporting plays a crucial role in ensuring the long-term viability of an organisation.
While measuring social topics in ESG may be more challenging than assessing environmental issues, several emerging trends are shaping how companies define and report their social impact to stakeholders. In many parts of the world, among social issues such as fair wages, health and safety standards for the employees, workplace conditions to name a few, create long-term social benefit and diversity of thought. These, in the long run, will bring commercial advantages to the organisation.
Employees would want to align themselves with organisations that reflect their values and demonstrate sensitivity to their needs and conditions. Therefore, getting the “S” in ESG right means an organisation manages its relationships with its employees, suppliers, customers, and the communities where it operates puts positive human impacts at the centre of its ESG implementation.
Employees are the core members of a company and the backbone of its daily operations. Thus, adopting a people-centric approach, starting with employee care and extending responsibilities to consumers and society is important.
Following the announcement of Malaysia’s Budget 2025, there are several initiatives that bolster ESG implementation, particularly the social component. These initiatives can be seen to enhance social welfare, promote inclusivity and elevate the quality of life for diverse communities.
Workforce empowerment
The Budget 2025 proposes increasing the minimum wage to RM1,700 starting February 2025.
This measure aims to improve living standards and reduce income inequality by ensuring that low-income workers can better cope with the rising cost of living.
Social security
Mandatory Employees Provident Fund (EPF) contributions will be extended to non-citizen workers, promoting inclusivity in social security.
In addressing the inclusivity in social security, this initiative will ensure that, regardless of any nationality as long as they are part of the work force and contributing to the development of the business, they have to have the ‘facility’ and access to their social protection and retirement savings.
While this proposal initiative will be implemented in phases, it shows how Malaysian companies are aiming to ensure equitable treatment for all workers in accordance with international standards.
Gender equality and work-life balance
The initiatives contribute to social well-being by improving the quality of life for women and families.
With the additional income tax exemption of 50% for 12 months to employers who hire women who are returning to the workforce, implementing flexible work arrangements, and granting paid caregiver leave support for women in the workforce.
These initiatives help to support their emotional and mental well-being while at work. As ESG becomes an important component for any organisation, recognising the social component of an ESG is crucial for creating an equitable, inclusive, and just society.
By emphasising fair labour practices, diversity and inclusion, businesses can create healthier work environments and stronger relationships with the employees and other stakeholders.
This, in turn, boosts employee morale, enhances productivity, and builds consumer trust, driving sustainable economic growth.
For an organisation, investing in the social aspects of ESG ultimately creates a robust foundation for long-term prosperity and resilience in the economy.
In life, we will not be able to make everybody happy, but we should try to make less people unhappy!Dr Noor Zalina Mahmood is head of the Universiti Malaya Centre of Excellence for ESG.
