The floods Malaysia has endured in recent years were not just natural disasters. They were financial signals. Climate volatility is already affecting cost structures, insurance coverage, and operational continuity.
Yet, many businesses still treat ESG as a branding exercise or compliance checklist. The reality is more serious. ESG is increasingly the lens through which your business resilience is measured.
Strong cash flow matters, but resilience today includes how well you manage risks, protect your workforce, maintain stakeholder trust, and adapt to a shifting regulatory environment. ESG now shapes investor confidence, financing access, and even export viability.
Malaysia has already signalled where the future lies. Budget 2024 has unlocked billions in green incentives, including the Green Technology Financing Scheme and the National Energy Transition Facility. The National ESG Blueprint for the manufacturing sector is now live. And by 2026, the European Union will begin enforcing its Carbon Border Adjustment Mechanism (CBAM), applying carbon tariffs to high-emission imports.
To support ESG adoption, a new tax incentive was recently gazetted. Under the Income Tax (Deduction for Expenditure in relation to Environmental Preservation, Social and Governance) Rules 2025, eligible companies can claim up to RM50,000 annually between the years of assessment 2024 and 2027. This includes costs related to ESG reporting, sustainability assessments, e-invoicing setup, governance frameworks, and staff training.
This is a valuable step forward. But businesses must act. The incentive will not last forever, and the expectations from stakeholders are only rising.
Here are a few steps SMEs can begin with:
- Conduct a basic sustainability audit of energy, water and waste
- Identify material ESG risks linked to your sector or supply chain
- Integrate ESG awareness at board or founder level
- Use the RM50,000 tax deduction to invest in systems, tools, and training that support sustainability
- Integrate ESG into internal decision-making, not just external messaging
SMEs connected to global supply chains will not be spared. The cost of inaction will grow.
You don’t have to be perfect. But you do have to begin. ESG is not about keeping up with the big boys. It’s about staying in the game.
#SyarikatOng #ESGForSMEs #BusinessStrategy #SustainabilityMatters #GreenShift
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