On 28 April 2024, the Minister of Investment, Trade and Industry, Tengku Zafrul Tengku Abdul Aziz, emphasised the unique challenges and nuances for developing countries to implement Environmental, Social, and Governance (“ESG”) compliance requirements.1
For example, the Malaysian palm oil industry continually adapts under international pressure to be environmentally sustainable. The industry, therefore, continues to proactively push all efforts to adopt and refine ESG practices.
With the national agenda mandating the Malaysian Sustainable Palm Oil (“MSPO”) certification and adherence to the Roundtable on Sustainable Palm Oil (“RSPO”) guidelines, our industry has consistently demonstrated its commitment to sustainable practices, including stringent “No Deforestation, No Peat, No Exploitation” (“NDPE”) policies and zero-burning protocols.
Despite facing hurdles such as the European Union (“EU”)’s Deforestation Regulation and Renewable Energy Directive,2 our industry remains proactive, with ongoing initiatives to improve labour standards, ensure fair employment practices, and continually enhance sustainability. For instance, the oil palm tree, renowned for its efficiency in land use, stands out as a prime example: it boasts the highest yield compared to other oil crops per hectare of land. Despite accounting for only 5.5 per cent of all cultivated land for oils and fats globally, oil palm contributes up to 32 per cent of total output, showcasing its unparalleled productivity and potential for sustainable agriculture.3
On improving labour standards, Malaysia has not only ratified the International Labour Organization’s Forced Labour Convention, but also implemented comprehensive national policies to eliminate labour abuses and uphold workers’ rights. These obligations and policies have been upheld and enforced by the Malaysian courts.
Malaysia has also made significant advancements in ESG compliance and this has been documented, with large plantation companies maintaining high sustainability ratings and making substantial progress towards reducing greenhouse gas emissions. This is indicative of our broader industry’s resolve to align with global sustainability benchmarks and address the challenges posed by regulatory and trade barriers, such as those from the EU.
The Malaysian Bar is of the opinion that consistent with the national policy of improving our sustainability and reducing our national emissions, the introduction of formal emissions-related national laws in Malaysia would elevate and make enforceable compliance requirements in relation to ESG. Such legislation would provide a clear, enforceable framework for reducing emissions, improving sustainability practices, and enhancing corporate governance in a manner that is compatible with the legislative framework of a developing jurisdiction like Malaysia.
Legal mandates can drive significant improvements in corporate and industry practices by setting minimum standards for emissions, requiring regular reporting, mandating transparency and accountability, and enforcing compliance. This is particularly relevant for industries like palm oil, which face intense scrutiny and ESG demands from international markets and regulatory bodies, despite being the world’s most efficient oil crop in terms of land use.
According to the records, countries with stringent climate laws often see improved ESG ratings, because these laws drive systemic changes that contribute to sustainable development goals.4
By aligning more closely with global standards and demonstrating a proactive approach to sustainability, Malaysia could enhance its attractiveness to foreign investors who prioritise ESG compliance in their investment decisions. This would not only help meet current ESG standards but could position Malaysian industries as leaders in sustainability, potentially exceeding basic compliance requirements.
The Malaysian Bar is playing a pivotal role in this green narrative. Dedicated to enhancing the legal expertise of its Members in ESG practices, the Bar is equipping a new generation of lawyers through strategic capacity-building and education. These lawyers are not just participants but leaders in the global dialogue on sustainability, ready to advocate and implement practices that ensure a balance between economic growth and environmental protection.
As Malaysia continues to advance its ESG agenda, the synergy between legal prowess and sustainable practices is creating a beacon of hope and a testament to what is possible when a nation commits to the right to life and the right to a clean, sustainable environment.
Together, we are not just protecting the environment; we are setting a global standard for sustainability and social responsibility, proving that the right to life and the right to a sustainable environment can, indeed, go hand in hand.
Mohamad Ezri b Abdul Wahab
President
Malaysian Bar
13 May 2024
1 “Langkah Berkaitan Dagangan, ESG Perlu Adil Untuk Negara Pesat Membangun – Tengku Zafrul”, Bernama, 28 April 2024.
2 “Sawit: EU Palm Oil Ban: Malaysia, Indonesia Seek Trade Justice”, Ministry of Plantation and Commodities website, 20 March 2024.
3 “Facts on Palm Oil — Highest yield”, The Sustainable Palm Oil Choice website; “8 Things to Know about Palm Oil”, WWF website.
4 “Which Countries Have the Strictest Environmental Laws?”, The Lawyer Portal, 12 October 2023.