Malaysia's new i-ESG Framework to prepare manufacturing sector on embracing ESG principles

The i-ESG’s overarching objective is to accelerate transition towards sustainable practices among manufacturing companies, the Ministry of Investment, Trade & Industry said.

Malaysia's Ministry of Investment, Trade & Industry (MITI) has launched the National Industry Environmental, Social and Governance (ESG) Framework (i-ESG Framework) to prepare the nation’s manufacturing sector on embracing ESG principles, and for tapping into a US$12tn global market on ESG-focused opportunities.

As shared by the Ministry, the i-ESG Framework will serve as a key enabler for the Push for Net Zero mission, one of the four missions of the recently launched New Industrial Master Plan 2030 (NIMP 2030). The i-ESG’s overarching objective is to accelerate transition towards sustainable practices among manufacturing companies. It consists of four pillars:

• standards,
• financing,
• capacity building, and
• market mechanism

It also covers 17 strategies, 50 deliverables, and six key enablers, aimed at providing invaluable guidance and driving ‘Just Transition’ towards ESG compliance for the manufacturing sector, especially for micro, small, and medium enterprises (MSMEs).

According to Minister of Investment, Trade & Industry, Tengku Datuk Seri Utama Zafrul Aziz, while the NIMP 2030 "sets out the 'what' on ESG, this i-ESG Framework presents the 'how', serving as a roadmap for businesses to integrate ESG considerations into their operations, and a tool for regulators to ensure compliance and accountability."

He added that the i-ESG Framework Phase 1.0, which runs from 2024-2026, will prepare the groundwork and foster the development of a robust ecosystem to help companies embark on their ESG journey.

Details on the i-ESG Framework

As shared by MITI, Phase 1.0 of the Framework, named 'Just Transition', will see focus on heightening awareness, delivering training, and providing financial support, with a particular emphasis on assisting MSMEs to embark on their ESG journey.

This phase will include:

• an ESG readiness assessment (i-ESGReady) to assist companies in understanding and evaluating their current ESG adoption level, and
• an i-ESG starter kit (i-ESGStart) to serve as a step-by-step guide with practical examples, as well as calculation methods and templates that companies can tap into to facilitate their sustainability reporting. 

During this phase, MITI will also conduct clinics to empower and guide a total of 50 companies on producing their first sustainability report. The first clinic will be held at end-October 2023, and interested companies may contact their respective business associations or chambers for more details.

"With the i-ESGReady and i-ESGStart, companies that have no sustainability reports at all should be able to produce their report within a year," MITI noted.

This will eventually ensure their readiness to meet the "more rigorous demands" of Phase 2.0. This phase, named 'Accelerate ESG', is scheduled to run from 2027 to 2030, and is geared towards accelerating ESG practices. Strategies for this phase will be carefully crafted to align with both national and international ESG requirements, MITI said. 

Tengku Zafrul commented: "The phased, progressive approach represents the 'Just Transition' that Malaysian companies and MSMEs need to fulfil the growing demand for sustainable products, and the requirements for ESG reporting in export markets. Through the i-ESG Framework, we also have an opportunity to get our ESG target outcomes right via our manufacturing sector.

"For the sake of our children and Planet Earth, let us get this right the first time, as we may not have the luxury of considering Plan B, because there is no Planet B."

In driving the overall initiative, MITI has also begun its 'KenalESG' outreach programme in Kuala Lumpur involving 200 companies, Penang involving 190 companies, and Johor involving 130 companies, to raise ESG awareness and introduce the i-ESG Framework to industries.

The programme will also be conducted in Sarawak, Kelantan, Terengganu, and Pahang by end-2023, while other states will be covered by the first quarter of 2024.

Photo: Tengku Zafrul's Facebook