Turning ESG into a business strategy

FOR many companies, ESG (Environmental, Social and Governance) has too often been treated as a reputational exercise – a glossy chapter in the annual report or a slide deck for investors.

That era is drawing to a close. With Malaysia moving towards a carbon tax in 2026 and strengthening the domestic carbon market through the Bursa Carbon Exchange (BCX), sustainability has become a direct business driver.

The government has already signalled its intent with a set of clear financial mechanisms. The Further Tax Deduction for Carbon Projects (FTC) allows companies to claim up to RM300,000 in additional deductions for the measurement, reporting and verification (MRV) of qualifying carbon projects, provided the credits are traded on the BCX.

In practice, this lowers the upfront cost of developing carbon projects while ensuring that the end product – certified, tradeable credits – becomes a genuine revenue-generating asset.

In addition, the government is introducing a Carbon Credit trading system to raise awareness and incentivise better waste management.

Corporations will be able to trade waste offsets to reduce taxes – a positive step that reframes waste control as a potential revenue source rather than just a compliance burden.

At the same time, the government’s plan to introduce a carbon tax means inaction will carry a very real financial penalty.

The choice facing corporate Malaysia is stark: treat ESG as a strategic opportunity or wait until it shows up as a line item on the expense side of the balance sheet.

Malaysia generates an estimated 38,000 tonnes of solid waste daily, much of which ends up in landfills that leak methane, a greenhouse gas more than 25 times as potent as carbon dioxide.

For years, this has been treated as a disposal problem. But with carbon credits and offset trading in place, waste can now be converted into measurable savings or even income. The new corporate mindset should be: “Convert all this rubbish into money”.

Waste is no longer just about management costs; it can be monetised through verified offsets, tax incentives and credit trading. For Malaysia, the more immediate focus should be on waste reduction and management. These are areas that can deliver carbon credits, tax benefits and new profit streams today without waiting years for costly plants to come online.

Alongside large-scale plants, new decentralised waste management technologies are emerging that make the model viable even for islands, smaller towns, municipalities and estates.

These compact systems are designed to process up to 10 tonnes of municipal solid waste per day, operating continuously in a fully enclosed, high-efficiency structure that meets stringent environmental standards. Their modularity means they can be deployed closer to the source of waste, reducing transport costs and emissions while turning small-scale waste streams into measurable carbon savings.

This approach expands the ESG opportunity beyond large corporations, allowing industrial parks, estates and even municipalities to participate in carbon markets and tax credit schemes.

In other words, waste is no longer just a disposal issue; it is a strategic asset that can be monetised through smart infrastructure.

The message for boardrooms is simple: by 2026, carbon will have a price and every company will feel its weight.

Those who act now – by developing credible projects, tapping into credit trading and viewing waste as a monetisable asset – will turn ESG into a source of competitive advantage.

Those who wait will discover that delay carries a cost measured not in reputation but in lost margins and market share – because when carbon pricing arrives, ESG will not be about glossy reports or stakeholder applause. It will be about who pays the tax – and who gets paid instead.

LEONARD OH

Executive chairman

MOSB Logistics Sdn Bhd