Streamlining Sustainability Documentation for Small and Medium Businesses

Streamlining Sustainability Documentation for Small and Medium Businesses

In the ever-changing business landscape, small and medium-sized enterprises (SMEs) in Malaysia are feeling the pressure to adapt to new sustainability reporting requirements. While not yet directly mandated to produce extensive sustainability disclosures like their larger counterparts, SMEs are increasingly being encouraged to align with new climate-related reporting, especially as part of supply chains connected to larger companies subject to regulations.

To help SMEs navigate this new terrain, the Securities Commission Malaysia (SC Malaysia) has introduced the Simplified ESG Disclosure Guide for SMEs in Supply Chains (SEDG), launched in October 2023. This guide provides 35 priority Environmental, Social, and Governance (ESG) disclosures, categorized into Basic, Intermediate, and Advanced levels, to suit SMEs with different sustainability maturity. The guide is available in multiple languages, including Bahasa Melayu and Simplified Chinese, to encourage broader adoption across Malaysian SMEs.

In addition, SC Malaysia is set to release a Simplified GHG Emissions Calculator in July 2025, free for SMEs. This tool helps estimate Scope 1 and Scope 2 emissions using Malaysian-specific data, thereby supporting SMEs in meeting SEDG disclosure requirements and facilitating their integration into global supply chains.

The National Sustainability Reporting Framework (NSRF) primarily affects large publicly listed companies but includes mandatory Scope 3 (value chain) emissions disclosures by 2027. This creates indirect pressure on SMEs in supply chains to provide relevant GHG emissions and ESG data for these companies to comply. Scope 3 emissions account for a substantial portion of corporate carbon footprints, highlighting the importance for SMEs to begin measuring and managing these emissions.

Najwa A'liah Fairuz, head of Brand Engagement of the United Nations Global Compact Network Malaysia and Brunei (UNGCMYB), emphasised the importance of aligning with ESG criteria for SMEs' continued growth, competitive advantage, and market relevance.

To adapt to these evolving disclosure mandates linked to Malaysia’s 2050 net zero ambition, SMEs should:

1. Begin ESG reporting using the Simplified ESG Disclosure Guide (SEDG) to build their reporting capabilities progressively. 2. Utilize the upcoming Simplified GHG Emissions Calculator to estimate and start managing Scope 1 and 2 emissions, laying the foundation for future Scope 3 data provision. 3. Integrate sustainability into operations and supply chain management to align with the demands of larger corporates requiring Scope 3 data disclosure by 2027. 4. Monitor evolving legislation and standards, especially those related to the NSRF and ISSB IFRS disclosure standards, in case future mandates extend more directly to SMEs.

By adopting these strategies, SMEs can position themselves for success in a more sustainable and competitive business environment, contributing to Malaysia's net zero goals by 2050.

1. As part of the evolving business landscape, Small and Medium-sized Enterprises (SMEs) in Malaysia are urged to align with new climate-related reporting, particularly in the context of supply chains connected to larger companies subject to regulations, given the increasing encouragement towards sustainability.
2. In an effort to assist SMEs, the Securities Commission Malaysia (SC Malaysia) has launched the Simplified ESG Disclosure Guide for SMEs in Supply Chains (SEDG) in October 2023, featuring 35 priority Environmental, Social, and Governance (ESG) disclosures.
3. SC Malaysia is planning to release a Simplified GHG Emissions Calculator in July 2025, which will be free for SMEs, enabling them to estimate Scope 1 and Scope 2 emissions using Malaysian-specific data.
4. The National Sustainability Reporting Framework (NSRF) primarily affects large publicly listed companies but includes mandatory Scope 3 (value chain) emissions disclosures by 2027, indirectly putting pressure on SMEs in the supply chain to provide relevant GHG emissions and ESG data.
5. To stay competitive and relevant in the face of these mandates linked to Malaysia’s 2050 net zero ambition, SMEs should embrace corporate responsibility by adopting strategies such as ESG reporting, managing carbon emissions, and integrating sustainability into their operations and supply chain management.

Read also: