Environmental, social, and governance (ESG) practices are the cornerstones of sustainable businesses. The widespread adoption of technologies for ecosystem preservation and environmental problem management highlights the crucial role technology plays in catalyzing ESG ambitions.
The Malaysian government has not wavered in its commitment to prioritize any ESG-focused development initiatives and technological innovation. Bank Negara Malaysia (BNM), for instance, has issued the 2022-2026 Financial Sector Blueprint that emphasizes their goals for sustainable growth, which concurrently promotes the 12th Malaysia Plan’s goal to make Malaysia ‘prosperous, inclusive, and sustainable’.
According to the KPMG 2022 CEO Outlook survey, 71 percent of CEOs in Asia Pacific agree that their organization’s digital and ESG investments are inextricably linked. Having reliable information and appropriate technological solutions are crucial to push the organization’s ESG agenda forward. Key technological trends already impacting ESG goals include:
Artificial Intelligence (AI)
ESG-relevant data is pivotal for analyzing an organization’s current state and modeling future prospects. Business leaders require reliable information to make ESG decisions, and AI can help companies make better decisions by filtering unstructured data.
AI can also offer support ethically through automating complex business processes, insights through data analysis, and engagement with customers and employees. More reliable mechanisms are emerging that can help organizations validate, test, and create transparency, and thereby use AI more confidently.
Closer to home, we observe new financial services are now enabled by AI/Machine Learning (ML). These are in the form of aggregator services, personal financial management and robo-advisory platforms e.g., StashAway, BEST Invest, and Wahed Invest, which leverage big data technology and their own proprietary investment strategies to respond to economic factors and the market.
The Internet of Things (IoT)
Future data collection, system efficiency, and online communication will be significantly improved by the IoT. It has the potential to accelerate and enhance the quality of corporate decision-making, as well as to streamline processes and enable the forecasting of future events.
By using IoT tools, businesses may link their whole supply chain, unlocking previously unrealized prospects and potentials. For instance, sensors may be installed to automate the manufacturing line and capture big data for optimization of operations, monitoring of waste and emissions, and reporting on ESG parameters.
Western Digital, for example, in its Batu Kawan, Penang factory has integrated its smart factory model and implemented 4IR technologies i.e. IoT sensors, digital twin modeling, analytics-powered plant management system and lights-out automation with machine learning. With these, the organization was able to achieve a normalized (per unit) reduction in energy by 41%, water consumption by 45% and material waste by 16%, while growing 43% (compound annual growth rate) in the last four years.
Smart cities
Digital infrastructure and smart city initiatives can increase ESG efforts when integrated into municipal planning, and development. The United Nations claims that urban areas are responsible for over 60 percent of global greenhouse gas emissions. In an effort towards sustainable living, Malaysia’s Smart City Project (MSCF) continuously encourages the development and implementation of smart cities to ensure that Malaysia is in line with worldwide urban development trends.
Although the concept of a ‘smart city’ may seem futuristic, it is indeed implementable. Many large cities in Malaysia, such as Kuala Lumpur and Johor, have already made the transition to ‘smart city’ status.
Driving positive change in the automotive industry
There is a growing chorus of Malaysian voices demanding the introduction of electric vehicle (EV) infrastructure. To achieve their aim of boosting the number of electric cars in Malaysia, members of the Malay Vehicle Importers and Traders Association of Malaysia (PEKEMA) are attempting to sell 500 Tesla EVs via grey imports in exchange for a two-year tax exemption.
Accelerating the transition to electric vehicles will not only solve the ever-increasing CO2 emission problem but also allow EV drivers to spend less on fuel than gas-burning vehicle drivers.
There are a variety of advanced technologies entering the ESG scene and are already being utilized to create positive impacts. Business leaders must make a concerted effort to keep up with the rapidly developing technologies in order to move their companies ahead. Companies that take the risk to explore have reported how technology has helped them break into untapped markets and ameliorated their ESG achievements. As the saying goes, there is no ‘Planet B’, so we have everything to lose if we don’t act now.
By Alvin Gan, Head of Technology Consulting, KPMG in Malaysia
