If you think your company can ignore ESG, think again

Ignoring Environmental, Social, and Governance (ESG) factors is not just a missed opportunity in today’s business world—it’s a risk.

ESG is a framework used when assessing an organisation’s practices and performances regarding sustainability and ethical issues.

With Malaysia’s ambitious goal to achieve carbon neutrality by 2050, the urgency for companies to adopt sustainable practices is clear.

Speakers from BEYOND Expo 2024 at Macao shed light on why ESG is now a critical driver for startups in Malaysia and beyond.

Not a theory, it’s a practice

Malaysia Venture Capital Management Berhad’s (MAVCAP) strategic development director Tan Shyue Wern emphasised that true ESG goes beyond fancy reports.

It’s about integrating sustainable practices into everyday operations. This aligns perfectly with Malaysia’s ambitious goal of achieving carbon neutrality by 2050, he said.

“I always say, ESG is not a framework. ESG is not a theory. ESG is always a practice. So you have to practise every single day in what you do, in the E, S, and G components of it,” he shared.

Startups that embrace sustainable practices early on will be well-positioned for the future.

“So what we’ve done, we’ve taken all this feedback, run a few workshops as well, and developed an ESG toolkit. So that toolkit is supposed to help our fund managers if they don’t have a framework among their portfolio company,” he said.

According to him, this toolkit helps them assess their sustainability journey and identify areas for improvement, empowering them to become more sustainable businesses.

Impact investing is about more than just green startups

April Ong Vano, head of ESG from Quest Ventures, clarified a common misconception: impact investing isn’t limited to just “green” startups. It’s about identifying companies across all sectors that create a positive social and environmental impact, alongside financial returns.

This opens doors for a wider range of Malaysian startups to contribute to a sustainable future.

Whether it’s a social enterprise empowering local communities or a tech startup developing innovative solutions for renewable energy, companies that weave positive impact into their core business models become attractive investment opportunities.

Both venture capitalists (VCs) agree that strong ESG practices provide a significant competitive edge.

Companies with a demonstrably positive ESG performance attract more investors and gain access to international markets.

“For example, strict ESG requirements in Europe can act as a barrier for exporters who don’t comply. In Malaysia as well, we export to Europe quite a lot, and we have to meet their requirements. If we don’t, we lose out in that sense,” said Shyue Wern.

By prioritising ESG, Malaysian startups can ensure they remain competitive in the global marketplace.

The role of VCs in building a sustainable ecosystem

April emphasised the crucial role VCs play in promoting a sustainable startup ecosystem.

“Quest Ventures, for instance, leverages its involvement in early-stage investments to help founders build a culture of good governance from the ground up.”

“This integrates ESG seamlessly into the startup’s DNA, making it a natural part of their business model rather than an afterthought,” she said.

It’s not just about the environment

While environmental and social impact depends on the specific industry, good governance is essential for all startups, said April.

This includes treating employees fairly, having strong ethical practices, and responsibly engaging with stakeholders.

By focusing on these aspects, startups build a strong foundation for sustainable growth and establish themselves as trustworthy players in their respective fields.

ESG isn’t a burden for Malaysian startups. It’s a strategic approach that unlocks opportunities for growth and leadership in a world increasingly focused on sustainability.

By integrating ESG as a core practice, startups can create positive change, attract investors, and thrive in the long run. They can become not just successful businesses, but also responsible members of a global community striving for a sustainable future.

Featured Image Credit: Vulcan Post