Malaysian businesses urged to prioritise ESG compliance to compete in US market
13 Nov 2024
Malaysia’s businesses must now adapt the US regulatory and environmental, social and governance (ESG) compliance standards to remain competitive in one of the world’s largest markets.
This necessity is underscored by Malaysia’s strong trade relationship with the US, which is characterised by a 19.8% trade surplus and robust export growth, highlighting the nation’s competitiveness, according to the American Malaysian Chamber of Commerce (Amcham Malaysia) chief executive officer Datuk Siobhan Das.
During her presentation on What does it take to export to the US and participate in the US Global value chains today?, Siobhan said the US remains a critical export destination for Malaysian goods, ranging from petroleum products to machinery and palm oil.
“However, evolving consumer expectations and new regulations such as California’s SB 253 mandate [Passed in October 2024] for emission disclosures, require Malaysian exporters to realign their operations.
“If your customer demands ESG requirements, it is incumbent on suppliers to either meet those compliance areas or opt out of the market,” she said at the Malaysia External Trade Development Corporation (Matrade) webinar entitled “Remain relevant with ESG or exit US market” held on Wednesday.
She added that Malaysian businesses must understand their customers’ needs to succeed in the US supply chain.
Highlighting the importance of due diligence, Siobhan noted that compliance issues, such as forced labour concerns and the US Customs Border Protection’s enforcement measures, could severely impact trade.
“Malaysia’s reputation as a trusted trading partner depends on adhering to these requirements,” she said, urging companies to ensure transparency and traceability in their supply chains.
New US regulations, including the Green New Deal and stricter enforcement under acts such as the Foreign Corrupt Practices Act (FCPA) and the Lacey Act, pose additional challenges, she noted.
Siobhan said Malaysian exporters must also account for emerging tariffs and sanctions amid shifting geopolitical dynamics, particularly with the potential implications of a new US administration.
“Despite these challenges, Malaysia’s role in global supply chains remains significant.
“The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) provides Malaysian exporters a competitive edge, allowing them to tap the US market,” she said.
She, however, said businesses must avoid risks associated with transshipment practices and comply with country-of-origin rules.
“Compliance is not just about fulfilling regulatory requirements. It is also about protecting Malaysia’s reputation and ensuring continued trade success to the US,” Das added.
She also emphasised the importance of leveraging technology to enhance supply chain traceability and mitigate risks.
“As the US consumer market increasingly prioritises sustainability and ethical practices, Malaysian exporters must proactively address these expectations to remain competitive.
“The alignment with ESG principles not only boosts brand reputation but also attracts new business opportunities and mitigates regulatory risks,” she said.
Earlier, Matrade senior director Raja Badrulnizam Raja Kamalzaman said in his opening remarks that ESG is no longer a peripheral topic but has become integral to corporate operations across industries.
“Businesses that fail to adopt ESG practices risk losing market share and face regulatory backlash, which could ultimately lead to their exit from the US market,” he said.
He noted that compliance with sustainable practices such as utilising eco-friendly materials and minimising waste can significantly enhance the marketability of Malaysian exporters.
Source: Bernama
