ESG is often dismissed as something only large corporations can afford. But in Malaysia, where over 97% of all businesses are SMEs, that logic no longer holds, and in fact, may be holding them back. From family businesses to homegrown startups, or even regional brands, sustainability is becoming a business necessity, not a luxury.
The Institute of Chartered Accountants in England and Wales (ICAEW) plays a large part in translating this transition into tangible business terms. By quantifying savings and projecting returns, the organisation helps businesses future-proof operations — not through hype, but through hard numbers. ICAEW supports this shift by equipping businesses and finance professionals with the tools, training, and data-driven insights needed to quantify sustainability risks, measure returns, and embed ESG into long-term strategy. For Malaysian businesses, sustainability is not the cost — it is the payoff.
Here are 10 data-backed insights, each paired with a clear business rationale, showing how ESG drives results at any scale.
1. ESG reporting rules will soon impact SMEs across the supply chain
Bursa Malaysia now requires large, listed companies to adopt ESG disclosures, starting from financial year 2025. While most listed companies are not SMEs, this mandate will cascade through procurement chains, prompting thousands of SMEs to align with ESG standards if they wish to remain competitive vendors. Companies that act early will be better positioned to retain key contracts, access green capital, and maintain investor trust.
2. More SMEs are embracing ESG as a growth strategy
A growing number of Malaysian SMEs are embracing ESG not just for compliance, but as a growth driver. For those already taking action, the commercial returns are starting to show. According to a recent study, 60% of SMEs have adopted ESG practices, up from just 28% two years ago. Among these adopters, 38% reported revenue growth exceeding 50%, driven by improved market access and customer demand.
3. But few have embedded it into core operations
While awareness is rising, many Malaysian SMEs have yet to embed ESG into their core operations. A study found that only 19% of SMEs have adopted environmentally friendly production processes, and just 12% are involved in structured social responsibility programmes. This gap shows the opportunity for early movers to lead the transition.
4. Solar isn’t just green, it’s cost-efficient
One key area where ESG delivers fast returns is energy. Malaysian businesses now benefit from incentives like 100% investment tax allowance, soft loans under the Green Technology Financing Scheme, and the Net Energy Metering (NEM) programme. Local companies have cut electricity costs by nearly half, with some saving up to 75% after switching to rooftop solar.
5. Sustainability drives customer loyalty and willingness to pay
Consumers are increasingly voting with their wallets. Businesses that can demonstrate environmental responsibility are more likely to attract and retain customers as well as command a price premium. According to the Malaysian Green Technology and Climate Change Corporation, 78% of Malaysian consumers consider a product’s environmental impact before making a purchase.
And the business case doesn’t stop there. Beyond regulatory pressure, revenue growth, and energy savings, ESG also opens doors to financing, talent retention, and long-term resilience. The following insights show how sustainability strategies are delivering measurable returns across different parts of the business.
6. Banks are unlocking ESG access through green finance
Banks are increasing sustainable lending, making ESG investments more accessible for Malaysian businesses. CIMB Group had mobilised RM86.2 billion in sustainable finance. Maybank reported RM83.2 billion in sustainable financing as of mid-2024, surpassing its RM80 billion goal set for 2025. RHB Bank disbursed RM23.8 billion and raised its target to RM50 billion by 2026.
7. ESG is becoming a driver of talent attraction and retention
Employees now expect more than pay—they want purpose and meaning from their work. A global IBM study found that over 70% of employees say they’d be more likely to apply for or accept a job with a company they consider environmentally or socially responsible, and around 35% of those who switched jobs last year did so to work for such companies.
8. ESG readiness protects export competitiveness
International buyers are raising the bar on climate standards. With the EU’s Carbon Border Adjustment Mechanism (CBAM) phasing in from 2026, Malaysian exporters will need to track and report their carbon footprint to avoid penalties. ESG compliance is becoming essential for protecting access to international markets. According to the Securities Commission, 75 percent of Malaysia’s exports to the EU could be affected, even though the EU accounts for just over 8 percent of total exports.
9. Greening supply chains saves millions in disruption
Climate risks, labour shortages and tightening ESG standards are creating vulnerabilities across global supply chains. Companies that adopt sustainable procurement practices and build resilience into their supply chain operations are better able to avoid revenue loss and delivery delays. Malaysia’s economy is losing an estimated RM8.7 billion each year to supply chain disruptions. ESG-aligned businesses can mitigate these risks while maintaining competitiveness and customer trust.
10. ESG signals long-term business strength to investors
Investors are prioritising companies with credible sustainability credentials, viewing them as more resilient, compliant, and better positioned for long-term growth. ESG performance is increasingly seen as a proxy for risk management and future-readiness. For SMEs seeking funding, this shift is especially relevant, ESG alignment isn’t just a moral imperative, it’s a competitive edge in attracting capital. In Malaysia, Sustainable and Responsible Investment (SRI) fund assets grew from RM7.05 billion in 2022 to RM7.7 billion in 2023, reflecting growing investor appetite for businesses that take ESG seriously. While this isn’t exponential growth, it marks a consistent upward trend in capital flowing into sustainability-focused investments — a signal SMEs can’t afford to ignore.
