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Thursday, 29 February 2024 6:55pm

Navigating ESG Integrity in Sarawak

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Whistleblowing, an act of reporting wrongdoing in good faith, has garnered increasing attention in the public sphere. Its relevance within the Environmental, Social, and Corporate Governance (ESG) framework is undeniable, as it is pivotal in ensuring ethical conduct, transparency, and sustainability. This article explores the intricate relationship between whistleblowing and ESG, shedding light on Malaysia’s evolving landscape.

In the wake of global concerns such as climate change, stakeholders increasingly scrutinise companies for prioritising short-term profits over sustainable practices. ESG criteria, emerging as standards, are reshaping investor preferences, demanding companies to contribute positively to the world. As Malaysia commits to becoming net-zero by 2050, the regulatory burden on companies regarding ESG credentials intensifies.

In Malaysia, ESG reporting has become mandatory for listed companies since 2016. Through initiatives like the FTSE4Good Bursa Malaysia Index, the Bursa Malaysia stock exchange enforces stringent reporting requirements. The recent introduction of the enhanced Sustainability Reporting Framework aims to standardise reporting, fostering transparency and boosting investor confidence.

Commonly referenced topics in ESG disclosure (Data reference: Simplified ESD Disclosure Guide (SEDG))

More recently, the Capital Markets Malaysia and Securities Commission Malaysia also jointly published a Simplified ESG Disclosure Guide (SEDG) to aid Malaysian small and medium enterprises (SMEs) in tracking and reporting on ESG data.

The Whistleblower Protection Act of 2010 is a cornerstone of corporate governance in Malaysia, fostering transparency and accountability. Key ESG updates since November 2023 showcase Malaysia’s commitment to ESG adoption, with initiatives like the ESG Commercial Initiatives under Budget 2024 and the National Industry Environmental, Social, and Governance Framework.

The role of whistleblowing in ESG compliance becomes evident, ensuring adherence to applicable laws and identifying irregularities related to environmental protection, employee issues, and procedural compliance.

A sample sequence of a whistleblowing mechanism (Data reference: Sarawak Plantation Berhad)

Effective whistleblowing lines are crucial for preventing wrongdoing associated with ESG, identifying risks, and safeguarding a company’s reputation. These channels offer employees a private and secure means to report misconduct, protecting them from retaliation and contributing to a transparent workplace culture. Therefore, it is a proactive approach to identify and address potential wrongdoing, contributing to a culture of transparency and accountability. Here’s a detailed exploration of key considerations when establishing a whistleblowing mechanism.

Several Sarawakian entities have exemplified their commitment to integrity and transparency through established whistleblowing policies. Notable entities include PETROS, Sarawak Economic Development Corporation (SEDC), Sarawak Energy Berhad (SEB), RECODA, Sarawak Forestry Corporation (SFC), Sacofa, and several others. Based on their whistleblowing policies and Malaysia laws regarding the subject, the following is detailed exploration of key considerations when establishing a whistleblowing mechanism:

  • Clear Accessibility: Ensure that the whistleblowing line is easily accessible to all employees, irrespective of their position or location.
  • Confidentiality: Maintain strict confidentiality to shield whistleblowers from potential reprisals. Ensure their identity and the report’s details are confidential so to instil confidence in the whistleblowing process.
  • Anonymity: Allow whistleblowers to report concerns anonymously. An anonymous reporting option empowers individuals who may fear retaliation, promoting a culture of security.
  • Protection Against Retaliation: Clearly outline policies and procedures to protect whistleblowers from any form of retaliation. Assure employees of their protection from adverse consequences such as job loss, demotion, or harassment for making a genuine report.
  • Investigation and Corrective Action: Establish a robust procedure for investigating reports of wrongdoing. Clearly define the steps involved in the investigation process, from initial receipt of the complaint to the resolution. Ensure that corrective actions are taken promptly based on the findings.
  • Reporting: Integrate whistleblowing efforts into the overall ESG reporting framework. When possible, embed the number and nature of cases reported and the effectiveness of the whistleblowing mechanism in regular ESG reports to demonstrate transparency and commitment to solving internal issues.
  • Training and Awareness: Conduct comprehensive training programs for employees and management to raise awareness about the whistleblowing system. Ensure that all stakeholders understand how to use the channel effectively.
  • Continuous Improvement: Implement mechanisms for continuous improvement of the whistleblowing system. Regularly evaluate the effectiveness of the channel, gather feedback from users, and make adjustments to address any identified shortcomings.
  • Integration with ESG Strategy: Align the whistleblowing system with broader ESG goals. Showcase how reporting misconduct contributes to the organisation’s commitment to environmental sustainability, social responsibility, and ethical governance.
  • Legal Compliance: Ensure the whistleblowing system complies with relevant laws and regulations, such as Malaysia’s Whistleblower Protection Act 2010. Legal compliance instils confidence in whistleblowers and ensures the organisation’s adherence to ethical standards.
Corporate behaviours to adopt for whistleblowing policies. (Image credit: Norton Rose Fulbright)

Establishing a whistleblowing line is not merely a procedural formality but a strategic investment in the organisation’s ethical culture and long-term sustainability. By prioritising accessibility, confidentiality, and alignment with ESG objectives, businesses can cultivate an environment where employees actively contribute to the organisation’s integrity and ethical conduct.

In the Malaysian context, especially in Sarawak, the synergy between whistleblowing and ESG is imperative for sustainable development. As companies navigate the evolving ESG landscape, a robust whistleblowing framework ensures compliance, identifies risks and contributes to a culture of transparency and ethical conduct. Sarawak’s commitment to ESG principles and established whistleblowing policies position the region as a responsible player in the global sustainability arena.

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