The ESG Playbook:
PRACTICAL STEPS FOR MANUFACTURING SMEs

The ESG Playbook: PRACTICAL STEPS FOR MANUFACTURING SMEs
 
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This playbook, titled “The ESG Playbook: Practical Steps for Manufacturing SMEs”, is designed to support Small and Medium Enterprises (SMEs) in Malaysia’s manufacturing sector by providing practical guidance on how to integrate Environmental, Social, and Governance (ESG) principles into their business operations. It aims to help manufacturing SMEs remain competitive while contributing to Malaysia’s sustainable economic development.
 
ESG Playbook for Manufacturing SMEs  
 

THIS PLAYBOOK AIMS TO:

  1. Provide an overview of how ESG principles are shaping Malaysia's manufacturing sector, highlighting industry trends that promote sustainable practices.
  2. Feature success stories from local manufacturers who have integrated ESG into their operations, demonstrating practical steps and tangible benefits.
  3. Outline tools and programmes, including government grants, initiatives, and financial incentives, to support SMEs in transitioning towards sustainability.

HOW CAN ESG ENHANCE EACH STAGE OF THE VALUE CHAIN?

Today, ESG transforms the manufacturing value chain from a linear, cost-driven model into a circular responsible, and future-ready system. By embedding ESG into each stage, SMEs can unlock efficiencies, meet stakeholder expectations, and build resilience in a rapidly evolving market. This playbook illustrates how ESG integration enhances each process across the value chain.

UPSTREAM
CORE
DOWNSTREAM
 Procurement & Sourcing
Traditionally focused on cost and speed, procurement is now a gateway to sustainability. ESG encourages manufacturers to prioritise suppliers that uphold environmental and ethical standards.
ESG Initiatives
  • Sustainable sourcing and fair trade practices strengthen supply chain resilience.
  • Ethical material choices improve brand credibility and export readiness.
  • Consolidated logistics reduces emissions and transport costs.
ESG Impact Builds a responsible supply base, reduces reputational risk, and aligns with global buyer expectations.
Business Impact Enhances supplier reliability, reduces procurement disruptions, and improves access to premium markets and financing.
  Operations: Production & Process Management
Manufacturing operations are typically resource-intensive. ESG introduces efficiency, accountability, and innovation into the production process.
ESG Initiatives
  • Energy-efficient machinery lowers electricity consumption.
  • Lean manufacturing reduces waste and improves throughput.
  • Sustainable packaging enhances product appeal and reduces landfill impact.
  • Safety and compliance measures protect workers and ensure product integrity.
ESG Impact Drives operational excellence while reducing environmental footprint and improving workforce wellbeing.
Business Impact Lowers operating costs, boosts productivity, and strengthens workforce retention and product quality.
  Operations: Waste & Resource Management
Often seen as a cost centre, waste management becomes a value generator under ESG.
ESG Initiatives
  • Circular economy practices reprocess defective goods.
  • Closed-loop recycling reduces raw material dependency.
  • Safe disposal ensures compliance and prevents environmental harm.
ESG Impact Minimises waste, lowers disposal costs, and supports regulatory alignment.
Business Impact Unlocks new revenue streams, reduces material costs, and avoids penalties or reputational damage.
  Distribution & Delivery
Logistics contribute significantly to carbon emissions. ESG encourages green logistics and responsible trade
ESG Initiatives
  • Renewable energy in warehousing (for example, solar-powered cold storage) cuts utility costs.
  • Electrified fleets reduce transport emissions.
  • Compliance with international standards (for example, RoHS, REACH) facilitates smoother exports.
ESG Impact Enhances supply chain sustainability, reduces carbon footprint, and improves market access.
Business Impact Improves delivery efficiency, reduces fuel and energy costs, and accelerates entry into regulated global markets.
Note: Upstream and downstream activities often overlap with core operations, as procurement, logistics, and delivery are integral to operational processes.

WHAT ARE THE ESG ARCHETYPES IN MANUFACTURING?

Manufacturers are not all at the same stage of ESG maturity, nor do they approach sustainability in the same way. This playbook illustrates how different ESG archetypes provide a practical lens to identify how various players drive ESG transformation based on their strategic focus and operational strengths. These archetypes span the entire value chain, from upstream sourcing to downstream product stewardship, and include enabling roles that support ESG integration across all stages.

UPSTREAM
 
Green Material Innovators (Raw materials sourcing & sustainable inputs)
 
E
 
Develop sustainable, renewable, or low carbon alternatives to traditional inputs.
 
  Ethical Supply Chain Stewards (Sourcing, supplier responsibility, traceability)
G
Ensure traceable, transparent, and ethical sourcing.
 
CORE
 
Clean Energy & Efficiency Champions (Energy efficiency and low-carbon production processes)
 
E
 
Integrate renewable energy, carbon neutral ops, energy efficient production.
 
  Lean / Operational Excellence Leaders (Process optimisation, waste reduction, productivity)
E
G
Use Lean, Kaizen, Six Sigma, TPM to eliminate inefficiency, reduce defects, save resources.
 
DOWNSTREAM
 
Circular Economy Innovators (Recycling, reuse, closed-loop production, end-of-life management)
 
E
 
Reuse, recycle, and valorise waste streams into new inputs.
 
  Responsible Design Champions (Design for sustainability, lifecycle accountability, customer use impacts)
E
S
Design safe, eco friendly, inclusive products with life cycle responsibility (take back, repair).
 
ENABLERS
 
ESG Tech & Data Enablers (Digital, data, and AI solutions supporting ESG integration across the chain)
 
G
 
Use IoT, AI, blockchain for ESG monitoring, reporting, optimisation.
 
  Responsible Employer & Community Builders (Human capital, workplace practices, and community engagement outcomes)
S
Prioritise worker safety, inclusivity, welfare, and community impact.
LEGEND:
E
Environmental
S
Social
G
Governance

ESG IN PRACTICE:
CASE STUDIES FROM THE MANUFACTURING SECTOR

A manufacturer specialising in spices, herbs, and seasoning products for both retail and industrial markets.
 

 
A producer of advanced, low-VOC nanotechnology based coatings under the IGL Coatings brand.
 

 
A printing and packaging company offering a wide range of sustainable paper-based packaging solutions.
 

 
A provider of modern office furniture solutions with a strong focus on green manufacturing practices.
 

Resources

Navigating ESG in Sarawak - Insights from the SMEs

Navigating ESG in Sarawak - Insights from the SMEs

This report provides timely insights into the current state of SMEs in Sarawak, evaluating their readiness for ESG practices and highlighting avenues for sustainable business development. View More
The Path to Sustainable Impact - Sectoral Insights of Malaysian SMEs

ESG Report 2.0 (2025)

This report unveils a sixfold increase in awareness amongst the Malaysian SMEs and sheds light on significant shifts in ESG across the various sectors in Malaysia View More
ESG Survey Report for SMEs (2023)

ESG Survey Report for SMEs (2023)

This report provides an overview of the state of ESG among SMEs in Malaysia and aims to raise awareness among businesses on the importance of adopting ESG practices. View More
Sustainability Impact Programme

Sustainability Impact Programme (SIP)

The Sustainability Impact Programme (SIP) promotes sustainability in the business community through:
  • Advocacy
  • Advisory services
  • Answers and green financing solutions at preferential rates
View More