As Malaysia targets net-zero emissions by 2050, small and medium-sized enterprises (SMEs) face mounting pressure to align their operations with the country’s ambitious sustainability goals. A crucial component of this shift is the requirement for companies to disclose Scope 3 emissions by 2027. This mandate, part of the National Sustainability Reporting Framework (NSRF), is reshaping the landscape of ESG practices in Malaysia, urging businesses to rethink how they approach sustainability and reporting.
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Understanding Scope 3 Emissions in ESG Reporting
Scope 3 emissions represent indirect greenhouse gas (GHG) emissions that occur throughout a company’s entire value chain—ranging from the extraction of raw materials to the disposal of products. These emissions can account for up to 90% of a company’s carbon footprint, making them a critical area of focus. Unlike direct emissions (Scope 1) and energy-related emissions (Scope 2), Scope 3 emissions are more challenging to measure but are essential for a holistic sustainability strategy. As part of Malaysia’s ESG reporting framework, businesses must not only track but actively manage and disclose these emissions to align with both national and global sustainability targets.
Challenges Faced by SMEs in Malaysia in Complying with ESG
For many SMEs, the transition to comprehensive ESG reporting can seem like a daunting task. Several barriers complicate effective Scope 3 emissions reporting:
- Data Availability: SMEs often find it difficult to gather accurate emissions data from suppliers, many of whom do not yet engage in formal emissions tracking.
- Limited Awareness: A lack of understanding regarding the importance of Scope 3 reporting and broader ESG expectations in Malaysia means that many SMEs are unprepared for the changes ahead.
- Resource Constraints: Smaller companies may lack the necessary tools, expertise, and infrastructure to accurately measure, report, and manage emissions.
For example, Thumbprints Utd Sdn Bhd, a Malaysian printing company, struggles to collect reliable emissions data from its suppliers, highlighting a broader issue across the sector. This points to the need for greater awareness and capacity-building within Malaysia’s SME sector to ensure compliance with the country’s ESG framework.
Strategic Importance of ESG Compliance in Malaysia
While Scope 3 reporting is a legal requirement, it also offers significant strategic benefits for SMEs, especially in the context of ESG in Malaysia:
- Enhance Competitiveness: SMEs that meet sustainability expectations from large corporations and international partners gain a competitive edge in the market. By aligning with ESG standards, they can appeal to customers, clients, and partners who prioritise sustainability.
- Access New Markets: Committing to sustainability opens up new opportunities, particularly as more businesses integrate ESG factors into their procurement processes. This can help SMEs secure contracts and expand their reach in global markets.
- Attract Investment: Investors are increasingly seeking companies with strong ESG credentials. By adhering to Malaysia’s ESG requirements, SMEs position themselves as attractive investment opportunities in an evolving market focused on long-term sustainability.
Najwa A’liah Fairuz from the United Nations Global Compact Network Malaysia and Brunei highlights that SMEs must align with ESG Malaysia standards not only to meet regulatory obligations but also to enhance their competitiveness in an increasingly conscious business environment.
Support Systems for ESG Compliance in Malaysian SMEs
Recognising the challenges that SMEs face, several initiatives have been introduced to support their transition to effective ESG reporting:
- Simplified ESG Disclosure Guide (SEDG): Developed by Capital Markets Malaysia, the SEDG offers practical guidance for SMEs on what to measure, how to report, and how to communicate their sustainability efforts. While helpful, it is one of many resources available for businesses navigating ESG reporting.
- Sector-Specific Guidelines: Tailored guidance has been created for key sectors like agriculture, energy, and manufacturing, helping businesses in these industries meet national ESG expectations.
- Training and Capacity Building: Sustainability practitioners and consulting firms, such as Bernard Business Academy, offer training programmes to raise ESG awareness and develop the skills SMEs need for successful implementation and reporting.
These initiatives play a key role in equipping SMEs with the tools and knowledge required to comply with ESG reporting standards, fostering a culture of sustainability in Malaysia’s business landscape.
The upcoming Scope 3 emissions reporting mandate presents both challenges and opportunities for SMEs in Malaysia. While transitioning to comprehensive ESG reporting may initially appear overwhelming, it offers significant benefits, such as access to new markets, enhanced competitiveness, and the ability to attract investment. SMEs that proactively embrace ESG practices and prepare for Scope 3 emissions reporting will not only ensure compliance with regulations but also play a key role in driving Malaysia’s path towards a net-zero future.
Source: Eco-Business
At Bernard Business Consulting, we offer a variety of hands-on workshops through Bernard Business Academy to help SMEs in Malaysia navigate the complexities of ESG reporting and compliance. Our workshops are tailored to enhance ESG awareness and build the essential skills needed to address the challenges of Scope 3 emissions reporting, sustainability practices, and evolving regulations.
Explore our series of public workshops to strengthen your capacity and create transformative business strategies aligned with ESG principles.
Public Workshop
August 21 & 22, 2025 @ 9:00 AM to 5:00 PM MYT
Building Expertise in Carbon Accounting and Verification for Organisations
This workshop provides practical tools for carbon accounting and verification, helping organisations measure and report greenhouse gas emissions in line with ISO 14064 and the GHG Protocol.