KUALA LUMPUR: Most Malaysian small and medium enterprises (SMEs) have lower chances of surviving the tide of the Covid-19 tsunami as they are not well-prepared to mitigate risks should there be an environmental or social disruption.
PwC Malaysia consulting and sustainability and climate change leader Andrew Chan said it is crucial for SMEs to embrace sustainable practices to build their resilience towards combating environmental and social risks.
“Most SMEs do not have robust sustainable business practices embedded because it is not compulsory.
“For example, SMEs are not required to disclose their environment and social performance compared with listed companies on Bursa Malaysia.
“Embracing a sustainability lens will help companies identify and plan for social or environmental risks.
“This would make SMEs better prepared for challenging situations in the future, ” he added.
While there’s a perceived cost, companies adopting robust sustainable practises are more likely to perform better as there is strong correlation between financial performance and stakeholder engagement. For instance, increasing energy efficiency will reduce carbon footprint and energy cost.
From January 2017 to February 2018, the FTSE4Good Sustainability Index had outperformed the FBM KLCI index by 4%. This indicated that the improved performance of companies was driven by strong environmental, social and governance (ESG) practices.
The FTSE4Good Sustainability Index measures the performance of public-listed companies which demonstrate strong ESG practices.
As such, Chan pointed out that more financial institutions are focusing on the sustainability agenda and that Bank Negara and the Securities Commission have committed to implementing the recommendations of the Financial Stability Board (FSB) Taskforce on Climate-related Financial Disclosure (TCFD).
“TCFD would also allow banking institutions to lower the cost of financing for businesses should the companies strike the performance targets of ESG practices, ” noted Chan.
TCFD recommendations are designed to solicit forward-looking information on financial impacts of climate-related risks and opportunities.
Increasingly, investors are looking to plough money in companies that have robust sustainability practices as ESG-oriented business practices gain traction.
Moving forward, Chan pointed out that a “mindset shift” for SMEs is crucial for companies to acknowledge business value and sustainable long-term growth by embracing better ESG practices.
The cXo2020 live virtual conference will be taking place from Aug 4-7 from 10:15am to 12:15pm.
It is organised by the Star Media Group with the Malaysian Investment Development Authority as strategic investment partner. Tata Consultancy Services is Gigabyte Partner while IDC, Kantar and PwC are knowledge partners.
The conference will be held live on Cisco Webex and registration is free at bit.ly/starcxo2020.
For the sustainability panel session, moderated by PwC, the panelists will be CIMB Group sustainability head Luanne Sieh, FarmFresh founder and managing director Loi Tuan Ee and Sime Darby Plantation head of sustainability Rashyid Anwarudin.
In the upcoming conference, Chan would provide practical insights on how companies can generate business value by practising sustainability.
“I will share an easy to adopt framework on how sustainability can be better embedded in the business agenda and how other companies have generated business value from it.
“I am looking forward to sharing practical insights on how innovation has helped address sustainability issues which has enabled businesses to generate better profits or target new revenue streams, ” he said.
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