Raising Environmental, Social and Governance (ESG) Consciousness in Malaysia to the Next Level: UN Global Compact Network Malaysia & Brunei

UN Global Compact Network Malaysia & Brunei

The IBR Asia Group

Raising ESG Consciousness in Malaysia to the Next Level

In an era where corporations and leaders are turning a corner in their approach to business, Environmental, Social and Governance (ESG) has taken centre stage as the key to ensuring business sustainability and increasing shareholder value. In Malaysia, where ESG consciousness stands at varying levels, a new collaboration between the UN Global Compact Network Malaysia & Brunei (UNGCMYB) and The IBR Asia Group is set to change the playing field and allow both corporate and government organisations to demonstrate their achievements in corporate sustainability.

A Realistic Approach to Corporate Sustainability

UNGCMYB is the local network of the United Nations Global Compact (UNGC) – the world’s largest corporate sustainability initiative. Grounded in the 10 Principles of the UNGC and the Sustainable Development Goals, UNGCMYB aims to drive stakeholder action towards sustainable business practices. Chairperson, Ramesh Kana, draws the connection between sustainability and profitability and why they need not be mutually exclusive.

At the end of the day, in the corporate world nothing is sustainable unless it contributes to your bottom line. If I say to you that you have the opportunity to invest in two products – one is giving a six percent return per annum, while the other is giving you four percent. The latter option partakes in all the good things from an ESG perspective, whereas the former does not concern itself with any of it. Where are you going to put your money?

This is where the rubber hits the road. How does it directly contribute to my bottom line? It is human nature that everyone wants to do good things until it costs us money. So for this to really work, for businesses to take ESG issues seriously, it must correlate on giving us that six percent return and not that four.

Well, it comes back to taking a slightly longer-term perspective of how you do business. When you are doing things the right way (like not flushing toxic waste down the toilet if you are a company involved in the manufacturing of chemicals for example) and you are transparent in the way you do business, you gain the trust of investors, shareholders and other stakeholders.

Sure, companies are valued based on how much profits they make, that is one aspect. Another equally – and sometimes more – important aspect is the volatility of earnings. In investment parlance, volatility equals risk and risk decreases a company’s valuation. When you focus on ESG, it can help you reduce this volatility because whether it is the environment, social-impacting issues like paying workers fair salaries or things like bribery or corruption, all this will have an impact on your earnings.

The implications of not making ESG an integral part of your business strategy is – whilst not evident immediately – very significant. There can be serious reputational issues, compromising being able to attract the best people to work for you, impacting relationships with buyers, suppliers and other supply chain partners. The world is looking for a commitment to making supply chains sustainable – having an ESG focus helps achieve this ambition. That is why ESG is important. ESG is not just this buzzword. It’s not transient – it is here to stay.

A Purposeful Partnership

Increasingly, consumers are also showing awareness towards ESG-related issues and wanting to buy from companies that demonstrate the same level of consciousness.

Building evidence and communicating is such an important aspect of this whole ESG journey. Unfortunately, doing the right thing and spending money is not enough – you need to tell the world. This has to be communicated to stakeholders – investors, shareholders, customers, local communities, government agencies – because this where you up the ante.

The communication strategy is incredibly important to us at UNGCMYB as it also drives other stakeholders along the journey. That is why we are looking forward to our partnership with The IBR Asia Group. Through our deliberations and discussions, we have found a like-minded partner. And this what we are looking for – someone who can help us in this communication aspect. What we are looking for is to influence and impact change, and we believe that this collaboration will help us throughout this change process.

Delineating Sustainability within Marketing

The IBR Asia Group is a New Age Public Relations company with over two decades of experience in corporate and government branding and media. Founder and CEO, Datuk Beatrice Nirmala, reveals the value of strategically communicating ESG consciousness and its impact on shareholder value.

Companies are there to make money – it is as simple as that. We do not want to handcuff them into doing something at the expense of their profits. So is there a way we can intricately weave ESG into profitability? That is what businesses want to know.

I came across the sentence “sustainability across the sales funnel” in a book by Henrik Henriksson and Elaine Weidman Grunewald entitled Sustainability Leadership. This relates to the approach taken by the Swedish transport company, Scania to ensure that sustainability is incorporated in the sales process in order for them to effectively deliver transport solutions to its customers. I thought that it was excellent. So ESG is very much embedded in the company’s purpose and journey towards growth.

It is about taking a broader view of ESG. While some may look at it as a trend, I would argue that it is the way forward, especially in navigating global megatrends, intense competition and increasingly globalised supply chains. So instead of viewing it as something singular, we should approach as something interwoven in a company’s journey of making sales and profits.

Getting the Word Out

Not to mention, there is a global pool of investors that are very focused on companies who are making a difference by doing the right thing. According to Bain & Company, sustainability investments in Southeast Asia rose by 60 percent to US$3.2 billion in the first half of 2019. On a more global scale, Morningstar reveals that total investments in ESG assets breached the US$1 trillion mark in the second quarter of 2020. ESG also influences consumer choices which would impact private companies and SMEs too.

So it has become extremely important for organisations to strategically demonstrate ESG consciousness given its impact on reputation, shareholder value and overall company performance. Let’s say we have two companies – Company A does not care about ESG or sustainability but Company B does. What is the carrot at the end of the stick for Company B? Well, by effectively communicating its ESG consciousness, Company B gets the leverage and the advantage because it is doing something that competitors are not. Company B is raising the bar.

Having said that, we are very happy to work with UNGCMYB to bring this understanding of ESG consciousness to as many clients as possible. When we build a Public Relations campaign for our clients, we do benchmarking to create the right type of marketing, content and design strategies.

But through this partnership, we can take it one step further by bringing ESG into the equation right at the very beginning.

We hope that through this partnership, ESG can be demystified so to speak, and encourage more organisations in the country to participate in this state of consciousness and take the first step in their ESG journey.