Ethical leadership in environmental, social and governance (ESG) adoption for Malaysian micro, small and medium enterprises (MSMEs)

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:Institutional theory applied to ESG adoption in MSMEs offers a framework for studying similar dynamics in other emerging economies.

🏢実務担当者:Corporate sustainability teams can learn how to engage MSME suppliers through ethical leadership and capacity building to improve Scope 3 data quality.

🏛政策担当者:Policymakers can use the findings to design support programs that leverage NGOs and market mechanisms to foster ESG adoption among MSMEs.

Purpose This paper aims to provide an in-depth examination of the role of ethical leadership in environmental, social and governance (ESG) adoption among Malaysian micro, small and medium enterprises (MSMEs). Design/methodology/approach A qualitative study was used, combining surveys, interviews and documentary analysis to explore how ethical leadership influences the adoption of ESG standards within MSMEs. A total of 46 survey respondents and 29 interviewees participated in the study. Thematic analysis connected institutional theory with two core factors: education and awareness, and the leadership mindset in ethical practices. Institutional theory was applied to describe how coercive, mimetic and normative pressures shape leadership behavior in relation to ESG adoption. Findings The research highlights that ethical leadership significantly impacts ESG adoption among MSMEs, especially in relation to Scope 3 emissions. Education and awareness include key areas such as leveraging technology, overcoming legacy challenges, understanding ESG metrics, effective ESG planning, enhancing leadership commitment, ethical conduct and the role of NGOs in education and capacity building. Leadership mindset themes focused on NSRF’s harmonizing role and attributes related to nation-building, ESG culture, customer focus, long-term resilience, agility and strategic integration. Research limitations/implications This study is constrained by its sample size and the unique features of MSMEs in the Malaysian context. As ESG adoption is still in the early phases, MSME companies in the advanced stages of ESG implementation were rare. MSMEs (being primarily subcontractors) are susceptible to extended supply chain network issues. The added funding considerations required to fuel the necessary investments for initiating their sustainability journeys are also a barrier. Practical implications The European Union (EU), the fourth-largest export market for Malaysia, is implementing a new carbon policy that will impact Malaysian exports. The Carbon Border Adjustment Mechanism (CBAM) is a carbon adjustment mechanism designed to encourage cleaner industrial production in non-EU countries. Accurate reporting of total carbon emissions embedded in production will therefore be necessary. This new regulatory requirement is crucial for sustainability in the global supply chain. Therefore, developing ethical leadership to increase the adoption of ESG standards is essential for Malaysian MSMEs to maintain their exports to the EU. Social implications This study highlights the role of coercive, mimetic and normative forces in influencing the education, awareness and mindset of MSME leaders toward ESG adoption in Malaysia. MSMEs constitute more than 90% of business establishments in Malaysia. As global ESG standards require the reporting of Scope 3 emissions (as embodied in the proposed NSRF), larger corporations will need carbon data from MSMEs to complete their sustainability disclosures. Therefore, this study holds great importance for various stakeholders, including policymakers, large corporation, MSMEs and investors. For public–private partnerships, the involvement of ESG NGOs as enablers and low-cost facilitators cannot be underestimated. Originality/value The roles of NGOs, Bursa Carbon Exchange and the NSRF are envisaged to significantly enhance ethical leadership among Malaysian MSMEs and propel Malaysia toward achieving its climate objectives.

• openaire https://doi.org/10.1108/ijoes-08-2024-0266first seen 2026-05-05 19:06:39