Capital Markets Malaysia (“CMM”), an affiliate of the Securities Commission Malaysia (“SC”), today launched its sectoral guidance (“Sector Guides”) featuring enhanced environment and social disclosure guidelines for small-and-medium enterprises (“SMEs”) in the supply chains of five (5) significant sectors in Malaysia’s economy – namely Energy, Transport & Logistics, Construction & Real Estate, Agriculture and Manufacturing.
The Sector Guides are an extension of the Simplified ESG Disclosure Guide (“SEDG”), released by CMM on 18 October 2023, to provide SMEs with a streamlined and standardised set of ESG disclosures expected of companies operating within global supply chains. Malaysia is the first country to have issued a disclosure guidance for SMEs aligned with the various global and local ESG disclosure frameworks to encourage more SMEs to adopt ESG reporting best practices as the nation collectively strives to transform and elevate its economy locally and internationally.
The newly introduced Sector Guides were developed in response to feedback gathered by CMM during their public and market consultations with multiple stakeholder groups, including multinational companies (“MNC”), public-listed companies (“PLCs”), SMEs, regulatory and policy stakeholders. The intention is to address the need for additional guidance around the disclosure expectations specific to SMEs in these five key sectors.
Dato’ Seri Dr. Awang Adek Hussin, Executive Chairman of SC, and Chairman of CMM said, “The complexity and challenges of doing business locally and internationally are not showing any signs of tapering. Instead, there is increasing scrutiny on companies and businesses especially those operating in global supply chains, and our SMEs are most vulnerable. The SEDG was launched last year in response to the challenges highlighted by SMEs in our earlier engagement with market stakeholders.
“Today, we are enhancing the guidance in five sectors to ensure that SMEs within these sectors are prepared and equipped to mitigate industry-specific vulnerabilities and at the same time, keep up with the magnitude of change required to meet national and global standards.
“The industries prioritised in the Sector Guides are based on the significance of their respective contribution to Malaysia’s gross domestic product (“GDP”), economic participation and impact. For this purpose, the Sector Guides offer a more comprehensive and detailed attention to environmental and labour-related disclosures,” he said.
General Manager of CMM, Navina Balasingam added, “While the SEDG was designed with broad applicability, the release of the SEDG Sector Guides comes at a crucial period where global agencies and regulatory bodies are widening their ESG focus on nature-related risks[1] and human rights responsibilities[2]. The Sector Guides are a timely resource that hone in on the material environmental and social considerations for SMEs across these five industries.
The response from SMEs, major multinational supply chain players, financial institutions, government agencies and NGOs to the release of the SEDG last year was overwhelmingly positive and we are confident that the Sector Guides will have a similar impact in helping companies within these five sectors to respond to the enhanced disclosures required of their stakeholders. Our Adopter Programme has also been instrumental in providing SMEs knowledge exchange and networking opportunities as well as in-person workshops and tutorials to gain valuable insights on ESG disclosures and reporting that ensure they meet the various global and local standards”.
Categorised into Basic, Intermediate and Advanced, the Sector Guides follow the main SEDG guide, and cater to the different levels of sustainability maturity of each SME. The Sector Guides delve into environmental considerations which are reflected in the form of additional disclosures required by these individual sectors to better capture the impact by the companies on the ecosystem around them, including specific material considerations such as biodiversity, nature-related and climate disclosures that are likely to impact all five high-emissions industries.
CMM has also released a Human Rights and Labour Rights Guide which incorporates considerations to help companies achieve a deeper understanding of these standards, specifically to address the global concern of forced labour which are especially relevant to the labour-intensive Agriculture, Manufacturing and Construction & Real Estate sectors.
The Sector Guides are aligned to global, local and government frameworks and reporting standards including the International Sustainability Standards Board (“ISSB”), The Greenhouse Gas (GHG) Protocol, the Global Reporting Initiative (“GRI”), the Bursa Malaysia (“Bursa”) Listing Requirements, Bursa’s Sustainability Reporting Guide as well as the Malaysian Code on Corporate Governance (“MCCG”).