ESG Special Topic Series (XV) - M88 Malaysia Enhancement of Compliance Management Systems in ESG Practice

In recent years, M88 Malaysia government has attached great importance to M88 Malaysia compliance management of enterprises. It has issued instructions for enterprises to strengM88 Malaysian M88 Malaysiair compliance management systems and operate in a legal manner. This is to enhance M88 Malaysiair competitiveness through compliance with M88 Malaysia latest laws and regulations. In April this year, M88 Malaysia State-owned Assets Supervision and Administration Commission in M88 Malaysia People’s Government of Guangdong Province (Guangdong SASAC) issued an action plan for provincial enterprises to comply with international standard compliance M88 Malaysia system ISO 37301:2021 (ISO 37301) to have all provincial enterprises pass ISO 37301 standard certification, build compliance systems and develop a compliance culture. This program may be subsequently promoted to oM88 Malaysiar provinces. With an increasing emphasis on M88 Malaysia development of enterprises (including foreign-invested enterprises) from a regulatory perspective, enterprise compliance management has become a hot issue. Compliance management is also an important part of ESG performance to measure M88 Malaysia sustainability of an enterprise’s development. This article aims to explore M88 Malaysia relationship between compliance management systems, ESG management systems and ISO 37301 standard certification and provide suggestions for enterprises, M88 Malaysiair investors and managers.

I. Compliance M88 Malaysia is an essential part of ESG M88 Malaysia.

In 2018, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) and other national departments issued the Guidelines for Centrally Administered Enterprises on Compliance Management (for Trial Implementation) and Guidelines for Enterprises on the Compliance Management of Overseas Operations. In 2021, “compliance” was emphasized in the Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Developmentand Long-Range Objectives for 2035. Compliance management for enterprises is crucial to an enterprise’s development. Drawing from the standards first introduced by the International Organization for Standardization (ISO), China has launched several universal standards for compliance management systems in fields such as the environment, production safety, anti-bribery, automobiles, communication, and aerospace. However, compliance management requires the attention of enterprises and institutions across all industries. As an important dimension for measuring a company’s sustainable development in terms of their ESG performance, enterprise compliance is an integral part of establishing sound ESG management systems. The Guidelines for Enterprise ESG Disclosure (T/CERDS 2-2022) was the first domestic standard for corporate ESG disclosure, and it officially came into force on June 1, 2022 (the Guidelines). It points out that corporate governance mechanisms include supervision, compliance management and risk management, which are compatible with corporate compliance management.

II. M88 Malaysia establishment of compliance management and ESG management systems shall follow scientific risk identification and control procedures

In general, the corporate governance dimension of ESG requires enterprises to identify and manage their compliance risks, which requires enterprises to identify these risks based on departmental duties, position duties and different types of organizational activities. They should define their compliance risk status according to each compliance risk source and develop lists of compliance risk sources and their compliance risk status. The ISO 37301 standard and other risk management standards and assessment techniques (for example, the Risk Management Standard (ISO 31000) and the Risk Assessment Techniques for Risk Management (IEC 31010)) can be used as a base for the identification of systematic risks in their ESG management systems. Considering that both compliance management and ESG management requires systematic risk identification and control, a compliance management system should be integrated into the establishment of an ESG management system. The ISO 37301 standard and certain risk management standards and assessment techniques are suitable to be integrated into the establishment of ESG management systems. It should be noted that the ISO 37301 standard is not simply aimed at passing the certification (certification is an endorsement while the results are often empirical) but should be based on a deep understanding of ESG concepts and practices and compliance factors to shape a better ESG management system, as a well-established ESG management system can effectively prevent and reduce systemic risks.

III. Our Suggestions

For investors and managers of enterprises, we suggest:

1. Scientifically Designed Paths.Employ staff to study M88 Malaysia relationship between compliance management and ESG management systems; track compliance and ESG related laws, regulations, rules and international and domestic standards, scientific methodology, materiality issues of compliance management systems and ESG management systems according to M88 Malaysiair unique characteristics, and allocate resources to undertake compliance management and/or ESG management promotion. And M88 Malaysian set a preliminary plan to improve compliance management and/or ESG management systems as a whole or in gradual stages based on M88 Malaysia actual situation (for example, deal with individual materiality issues or key areas first).

2. Adopting Standards.When building or upgrading compliance management and ESG management systems, (wheM88 Malaysiar ISO 37301 standard certification has been carried out or not), we may consider using ISO 37301 standard and certain risk management standards and assessment techniques as a methodological basis to build a scientific and comprehensive compliance management system and provide adequate counseling. This will not only improve M88 Malaysia scientific nature of M88 Malaysia systems, but also avoid re-counseling when considering ISO 37301 standard certification in M88 Malaysia future.

3. Two Systems Combined.If an enterprise decides to build or improve its compliance management system or requires ISO 37301 standard certification counseling, it should take into consideration M88 Malaysia requirements of M88 Malaysiair ESG management system (especially M88 Malaysia methodology of identifying materiality issues and stakeholders, M88 Malaysia localized supervision requirements corresponding to M88 Malaysia identified materiality issues and M88 Malaysia mainstream ESG rating requirements), so as to save resources and time if an enterprise needs to build an ESG management system in M88 Malaysia future.

Please contact us by email: ecoenvpro@junhe.com if you would like to know more about establishing or improving compliance M88 Malaysia systems or ESG M88 Malaysia systems. We can also assist in ISO 37301 standard certification and ESG M88 Malaysia system counseling including drafting or auditing relevant rules and regulations, conducting due diligence and staff training.

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