The Simplified ESG Disclosure Guide (SEDG) for SMEs in supply chains by Capital Markets Malaysia provides SMEs with a standardised, accessible framework for sustainability reporting, helping them respond to diverse sustainability data requests. The guide is modular, offering Basic, Intermediate, and Advanced levels to support SMEs at varying stages of ESG maturity. It is complemented by the Adopters Programme, which provides workshops, training sessions, and knowledge-sharing networks to ensure practical implementation of the guide. By aligning with local and international reporting standards, promoting stakeholder engagement, and simplifying reporting processes, the guide enables SMEs to embed sustainability into operations, strengthen supply chain resilience, and meet stakeholder expectations effectively.
Capital Markets Malaysia – Simplified ESG Disclosure Guide for SMEs in Supply Chains
Abstract
The Simplified ESG Disclosure Guide (SEDG) for SMEs in supply chains was launched by Capital Markets Malaysia (CMM) in late 2023 in response to the growing demand for sustainability-related data within supply chains and the challenges that SMEs face in responding to these data requests. By providing a simplified and standardised set of sustainability disclosures, it seeks to address fragmented and varying data requests from SMEs, thereby reducing the reporting burden of SMEs that are integrated in supply chains.
As CMM is an affiliate of the Securities Commission Malaysia, supporting the capital market and its intermediaries, the SEDG received funding for its development from the Capital Market Development Fund.
The voluntary guide provides a set of 35 sector-agnostic disclosures to measure progress along Environmental, Social and Governance (ESG) metrics. It was initially created for the Malaysian context only. An expanded ASEAN version was introduced in 2025, eligible for use in the ten ASEAN member states.
The guide was designed through two key mechanisms:
A benchmarking exercise of local and national sustainability regulations, alongside international sustainability reporting frameworks such as the Global Reporting Initiative (GRI), the International Sustainability Standards Board (ISSB), as well as the Carbon Disclosure Project (CDP);
Conducting stakeholder consultations with a diverse range of actors, covering both data users (i.e. SMEs), as well as data requesters (i.e. large companies, financial institutions, government actors, chambers of commerce and trade associations).
This dual approach aimed to align the guide with local regulations and existing global reporting frameworks, whilst also incorporating the practical insights and needs of its key users. The same process was repeated for the development of the ASEAN guide, leading to the inclusion of three additional disclosures, to a total set of 38. These additional disclosures will also be integrated into the second version of the Malaysian guide.
The guide takes a modular approach, offering Basic, Intermediate, and Advanced options tailored to SMEs at different stages of sustainability measurement and reporting maturity. The Basic level focuses on core sustainability disclosures to meet stakeholder expectations, while the Intermediate and Advanced levels expand the range of reported metrics to provide a more comprehensive picture of the entity’s sustainability performance. The Advanced option also introduces greater complexity, including supply chain-related indicators such as Scope 3 emissions and climate risk disclosures. SMEs are strongly encouraged to complete at least the Basic level of the SEDG during their first year of reporting.
To facilitate SME sustainability reporting, the SEDG offers key resources, including:
A comprehensive guide detailing the reporting instructions for each indicator and maturity level, clearly explaining the required data points and mapping them to relevant frameworks and regulatory requirements;
Standardised templates in the form of excel sheets where SMEs can seamlessly input their data, enabling SMEs to generate a sustainability report to share with their key stakeholders.
Recognising that SMEs operating in high-impact sectors often face additional data requests relevant to their sector, CMM published Sector Guides six months after the launch of the SEDG guide. These are for a select number of sectors, which were deemed to require additional datapoints based on their inherent characteristics. These include:
Energy;
Transport and Logistics;
Construction and Real Estate;
Agriculture and Manufacturing.
Given the large number of migrant workers in Malaysia and the ASEAN region, CMM also developed a specific Human Rights and Labour Practices Guide. This guide addresses human rights issues such as forced and child labour and is intended for SME sectors with a high concentration of migrant workers, including, but not limited to, agriculture, construction and real estate, and manufacturing.1
To support effective implementation, CMM launched the SEDG Adopters Programme alongside the release of the SEDG. Key stakeholders can participate in this programme alongside their SME suppliers to gain access to workshops and in-person trainings conducted by CMM to gain practical insights into enabling effective SME sustainability reporting. The programme is currently made up of 46 participants, including multinational companies, financial institutions, as well as chambers of commerce.
CMM engages regularly with various chambers of commerce and business associations across the country to raise awareness on the SEDG. It also conducts nationwide adoption workshops five times a year with SMEs to raise awareness and to increase uptake of the SEDG. To further enhance accessibility, the Malaysian guide is available in a multitude of languages, including in English, the national language Bahasa Malayu, and simplified Chinese.
So far, CMM estimates that through its Adopters Programme, several thousand Malaysian SMEs have adopted the SEDG.
SMEs form the backbone of the Malaysian economy, accounting for approximately 1 million enterprises, around 97% of all businesses in Malaysia. Of these, an estimated 250,000 are integrated into large supply chains and are thus the primary target of the SEDG.
The guide was developed in response to two key drivers: increasing sustainability reporting demands on SMEs from large companies, and the risk of supply chain exclusion for non-compliant SME suppliers. Although SMEs are not directly subject to the Malaysian stock exchange’s mandatory sustainability reporting for listed companies, they are indirectly affected as the large companies must report on their entire supply chains. A report published by Standard Chartered highlighted the growing risk of supply chain exclusion for SME suppliers who were unable to provide sustainability-related data to the large companies they serve. Malaysia was ranked 7th in terms of risk exposure. These developments, combined with national commitments, such as the introduction of Malaysia’s 2050 net zero goal, reinforced the need for a standardised framework which enables SMEs to report on their ESG progress in a simple and accessible way.
With Malaysia holding the Chair of ASEAN in 2025, one of its key economic deliverables is to enhance access to financing and advance a just transition towards low-carbon, climate-resilient economies. As part of this agenda, and in its capacity as Chair of the ASEAN Capital Markets Forum, it has shared its SEDG with the other nine member states. This led to the development of the ASEAN version of the guide.
Despite broad uptake, the SEDG has also faced a number of challenges:
SMEs have reported difficulties in measuring and calculating GHG emissions. In response, CMM is developing a Malaysian GHG calculator, which will have Malaysian emission factors integrated into it. SMEs will need to input relevant data (e.g. energy bills), and the tool will calculate emissions automatically, simplifying the process and reducing reliance on external data sources.
SME adoption has been a challenge due to the multitude of sustainability reporting frameworks and guides that are available globally. This has made it difficult to encourage SMEs to adopt the SEDG guide specifically. To address this, CMM has undertaken large-scale awareness campaigns targeting SMEs.
For the development of the ASEAN guide, securing approval from all ten securities regulators involved extensive stakeholder engagement.
Since the guide is voluntary, some supply chain data requests still go beyond the disclosures covered by the SEDG.
Inclusive stakeholder engagement: A key strength of the SEDG has been its strong stakeholder engagement, both during its development and ongoing implementation. The SEDG Adopters programme played a central role in bringing together a diverse range of actors, ensuring the guide reflects the perspectives and needs of key stakeholders across the ecosystem.
Continuous feedback and responsiveness to SME needs. The guide benefits from ongoing engagement with SMEs through regular training sessions and workshops. This interaction creates a valuable feedback loop, enabling CMM to identify common challenges and adapt accordingly. A successful example of this responsiveness is the development of the GHG calculator, created in direct response to SME needs.
Flexible and modular design: The SEDG’s modular structure is another identified success factor, offering Basic, Intermediate, and Advanced options that accommodate varying levels of SME maturity in sustainability reporting. It also addresses sector-specific requirements through tailored guides, allowing SMEs to engage with the framework at a pace suited to their capabilities.
Knowledge-sharing through the Adopters programme: The Adopters programme functions as a knowledge-sharing network, playing a vital role in supporting widespread adoption. Beyond SMEs, it has also helped build acceptance among data requesters, further strengthening the credibility and uptake of the framework.
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