Bridging the ESG Gap: Tailored Implementation Frameworks for Heterogeneous Firm Sizes and Sectors in Malaysia's Consumer Industry

Abstract

Corporate Environmental, Social and Governance (ESG) integration has assumed a strategic necessity to the entire corporation of the world, and the consumer product sector in Malaysia is at the crossroad. Though most of the research on the impact of ESG on firm performance has continued to increase, the findings are typically not consistent, hence offering a lot of confusion to corporate managers and shareholders. The formulation of the present situation of ESG research in Malaysia offered in this study recognizes three gaps in the existing body of knowledge. The first one is the impossibility to take into account the heterogeneity of the firms’ size and sector risk, the second issue is the specific implementation challenges of the Small and Medium-sized Enterprises (SMEs), and the third problem is the unresolved trade-offs between the short-term cost of the financial investment in environmental projects and long-term value creation. To address these lapses, this paper proposes the Contingent ESG Implementation Framework (CEIF) a conceptual framework within which companies can employ in prioritizing ESG pillars based on their field of operation. The framework is further developed according to the analysis of 50 major studies as well as a mixed-methods research design is provided to validate it empirically. The CEIF indicates that a one-size-fits-all approach is not perfect; firms, particularly SME and operating in risky sectors need to adopt a progressive approach whereby, in most instances, governance and social considerations are prioritized before firms and corporations undertake capital-intensive environmental initiatives. This research adds value to stakeholder and resource-based theories by building a contingency strategy of ESG strategy and offering practical and evidence-based recommendations to managers, investors, and policymakers taking into account maximization of sustainable development and competitive advantage in the context of Malaysian dynamic consumer market.