Dato’ Ho Kay Tat
Publisher and Group CEO, The Edge Media Group
Ms Ng Wei Wei
CEO, UOB Malaysia
Encik Rashyid Redza Anwarudin
Chief Sustainability Officer, SD Guthrie Berhad
Encik Hafizuddin Sulaiman
Chief Financial Officer, UEM Sunrise Berhad
Ms Kathy Fong
Editor-in-Chief, The Edge Malaysia
Friends and fellow Malaysians
A very good morning and Salam Malaysia Madani.
When I first looked at the title of today’s forum, “ESG at a Time of Global Disorder”, I suspect your biggest concern would be “is there still ESG after President Trump?”.
Let me assure you that we started this ESG journey not because of President Trump, not because of America, but because we think it is important. We as Malaysians think ESG is an important journey that we have to take together.
If there is one word to summarise ESG, it is “resilience”. Resilience is the word to encompass what ESG is all about
Many people have forgotten the core principles of ESG – Environment, Social and Governance.
Very often, stakeholders focus too much on the “E” in ESG, the emission and sustainability targets but neglect the “S” and “G”.
Even when we focus on the “E”, many see it as a cost and a burden. This does not have to be the case.
I think the way we frame energy transition is not the most helpful. We talk about an energy “trilemma”, as if each objective is achieved at the expense of the other. It should be seen as a triple objective instead.
We should build energy sustainability, affordability and security – all at once – because the technologies are in place, and the full potential of rooftop solar as well as new battery storage technology that are increasingly maturing. The key is to effectively manage and project supply and demand.
The objectives laid down in the National Energy Transition Roadmap (NETR) are good, and we must double down to make sure that they materialise.
To do so, we will have to be bold and say that it is not a trilemma but triple objectives that we want to achieve at once.
It is also time for us to rethink our cities.
We have been building landed property which eventually leads to the massive sprawling of our city. But in order for us to deal with the “E”, we have to bring people back to the city, reduce carbon emissions by getting more people off private passenger cars, and repurpose our inner cities like Kuala Lumpur which is actually deserted at night but very active in the morning due to the working population that unfortunately do not live where they work.
We should start thinking about a new model of dealing with cities. And I hope the corporations, particularly developers and GLICs, will rethink our development model so that we can actually do the “E” together.
We should take all these three elements together and build a resilient framework for our society.
At the core of this discussion about ESG is actually the role of corporations in this time and age.
For about 50 years from the 1970s up to the COVID-19 pandemic, there was this belief that the only purpose of a corporation is to make profit, arising from Milton Friedman’s argument of shareholder economy that the sole purpose of a corporation is to satisfy the needs of shareholders, to maximise profit and nothing else. This Milton Friedman idea affected particularly the Anglo-Saxon world, but also beyond that, but that era has ended.
At the turn of the decade, the World Economic Forum, as well as The Business Roundtable in the United States, started to propagate the idea of stakeholder economy, bringing the idea of stakeholders back to the purpose of a corporation.
A corporation has to think about its customers, workers, the environment and the society at large. This is a very important reminder.
Whenever we talk about ESG, we are talking about ESG in the context of a stakeholder economy. We should be clear that corporations are not just an entity that has only one bottom line. It may have double or triple bottom lines.
What is it about this global disorder? I have been telling friends, “Yes, we are dealing with a global disorder, but it is also perhaps a time for us to shape things, to a certain extent.”
While we are aware of the limitations of Malaysia as a comparatively small nation, we should appreciate the power of ideas and know that we may have a chance to reshape not just our domestic framework and structure, but also contribute to reshaping the global order.
We are now dealing with a once-in-a-generation, or maybe a once-in-80-year shift.
For the past 80 years, Asian societies grew rich by exporting to the United States. It started with post-war Japan, followed by the Four Dragons in the 1960s and 70s: Singapore, Hong Kong, Taiwan, and Korea, followed by the Four Tiger Cubs: Malaysia, Thailand, the Philippines and Indonesia, and later on Vietnam and China.
Asian countries compete in a race to the bottom, suppressing wages and damaging the environment, all in the name of chasing lower costs as part of an export-led industrialisation strategy in order to export to the United States.
But times have changed. We have now grown our technologies, and our societies have developed, we have reached a stage where we can do a lot more than just low-end outsourced manufacturing.
But at the same time, the whole idea that we are competing to export to the United States – and by all means, by destroying our environment, by pressing down wages—is still in our mind.
Increasingly, the United States is saying that, “I don’t want you to export to me,” or at least, “I don’t want you to export so much to me.”
And this is not new. There was Trump 1.0. And in terms of trade policies, the Biden administration now seems to us more like a Trump 1.5. And now, it’s Trump 2.0.
We will have to accept that the world that is to come will not have the United States as the only consumer of the last resort and of the first resort.
The rest of the world will have to “create consumers” to be less reliant on an export-led industrialisation strategy with the purpose of exporting only to the United States.
The best way to do this is by creating a middle-class society.
China was successful in creating a middle class. When China joined the WTO in 2001, China had only about 100 million people classified as middle class. Today, by any measurement, at least 400 million Chinese are considered middle class.
If we can replicate that in ASEAN, more of our population will have more disposable income that allows them to have discretionary spending.
If you look at the data and statistics in ASEAN, only Singapore and Greater Kuala Lumpur, and to an extent Greater Jakarta or maybe Bangkok, have some form of middle class. Outside all these major cities, there is no strong middle class among us.
Moving forward, we will have to create a richer ASEAN, and potentially India, South Asia, Africa, South America and the Arab world, as a way out. This is how we will have a sustainable future.
How do we build a stronger middle class? We will have to start with changing the way we look at wages and cost.
I would like to take this opportunity to commend the effort of the GLCs and GLICs. Over the weekend, the GLICs, led by Khazanah, announced that they are going to pay a living wage of at least RM3,100 to all their employees.
This is a major step by the GLICs to take on this responsibility of creating a more sustainable society and to fulfill the “S” part of ESG.
In the Labour Day address by Prime Minister Datuk Seri Anwar Ibrahim and the Solidariti Perjuangan song penned by Human Resources Minister Sdr Steven Sim, the emphasis was the need to think about the welfare and dignity of workers because they are the foundation of our society.
To create a strong and resilient society in terms of E, S and G, should be seen as a national purpose.
I think this is also a time at which societies react to the global disorder by voting for competent governments that they view to be a safe pair of hands and a strong institution. This is reflected in the election results we recently saw in Canada, Australia and Singapore.
This is where I think it is important for us to think about how to create stronger institutions domestically – the G part of ESG – so that we can build resilience against changes and have a hand to shape the world that is to come.
In summary, as I say, ESG is about resilience. And in a time of disorder, we need to build resilience so that we can shape – to a certain extent the global order.
Thank you.