Key ESG Lessons for Malaysian Companies from Bain & Company’s 'Visionary CEO’s Guide to Sustainability 2025'

Despite controversy in the United States, ESG remains one of the buzzwords of 2025. Many Malaysian companies have been asking themselves whether they should continue investing in ESG efforts – or whether the tide is turning. Against this backdrop, Bain & Company recently published The Visionary CEO’s Guide to Sustainability 2025, a global survey of leading CEOs of how business leaders are navigating sustainability in a world of heightened scrutiny, shifting policies, and tightening deadlines. This report is particularly relevant as EU sustainability laws – from deforestation to carbon border measures – reshape the conditions of global trade.

One of Bain’s central insights is the emergence of a “do-say gap” – CEOs are talking less about sustainability, yet acting more decisively. Leaders are moving from aspirational commitments to verifiable actions that deliver both business value and measurable impact. The message is clear – credibility now comes from evidence, not rhetoric.

The European Union’s approach mirrors this shift. By way of example, the EU Deforestation Regulation (EUDR) requires importers to file due diligence statements backed by auditable proof – polygon-level geolocation, legality documents, and risk assessments. As we highlighted in our analysis of EUDR and Malaysia’s MSPO certification, certification schemes may help, but they are no carte blanche. EU buyers demand hard data – and without it, suppliers will be excluded.

For Malaysian exporters, bridging the “do-say gap” means building systems that can withstand external testing. Palm oil, rubber and wood suppliers must track and document compliance down to the plot, while manufacturers must prepare to disclose verifiable emissions data. Those who provide proof – not promises – will secure EU market access and earn a competitive advantage.

Building on the insights from The Visionary CEO’s Guide to Sustainability 2025, this article links the perspectives of the world’s leading CEOs with the hard edge of law – translating global trends into actionable steps that Malaysian companies should take now to safeguard market access and competitiveness.

Bridging the “Do-Say Gap”: Proof Over Promises

In The Visionary CEO’s Guide to Sustainability 2025, Bain highlights a growing “do-say gap” – CEOs may speak less about sustainability in public, but they are doing more behind the scenes. The leaders are those who shift from aspirational goals to measurable actions that demonstrate tangible value. In other words, promises no longer matter – proof does.

The European Union has taken exactly this approach. Take the EU Deforestation Regulation (EUDR), for example, which requires importers to submit due diligence statements backed by evidence – including polygon-level geolocation of land, legality documentation, and risk assessments. As we observed in our recent analysis of EUDR and Malaysia’s MSPO certification, certification may facilitate compliance, but it is not a substitute for hard data when it comes to EUDR compliance in Malaysia. This also holds true in other areas, not merely for the EUDR. EU-buyers are already making it clear: they will not accept broad assurances – they require verifiable and auditable information that can withstand regulatory scrutiny.

For Malaysian businesses, this means that reputational sustainability claims are no longer sufficient. Exporters of palm oil, rubber, and wood must invest in traceability systems that track supply chains down to the plot.

Legal compliance must be documented in a way that is defensible to EU regulators and persuasive to EU buyers. Those who can bridge the “do-say gap” will not only maintain market access but also differentiate themselves in a crowded export landscape.

⮕ Need an update on the latest developments regarding the EUDR? See our write-up for 2025-2026 here.

Turning Sustainability into Business Value

Bain’s report underlines a major shift – companies no longer see sustainability purely as an ethical obligation. Instead, they increasingly view it as a driver of business value. In Bain’s global survey, half of B2B buyers indicate that they already assign more business to sustainable suppliers – and by 2028, nearly two-thirds plan to do so. For growth leaders, sustainability is not philanthropy – it is a lever for competitiveness, differentiation, and revenue.

This is exactly the dynamic emerging in Europe. The EU’s Carbon Border Adjustment Mechanism (CBAM), which begins its financial phase in 2026, will impose a cost on carbon-intensive imports such as aluminium, steel, cement, fertilisers, and electricity. For exporters, this translates into direct challenges for CBAM Malaysia exports across energy-intensive sectors. At the same time, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) will require large companies to identify and mitigate human rights and environmental risks among their suppliers. In practice, this means that EU buyers are already shifting preference towards suppliers who can demonstrate lower embedded emissions and credible due diligence – much like how U.S. tariff rules are reshaping competitiveness for Malaysian exporters, as we discussed here.

For Malaysian exporters, the lesson is clear – sustainability is not just about keeping regulators satisfied. It is a commercial issue that will determine whether EU customers continue to place orders. Engineering, energy and manufacturing firms that can provide verifiable carbon data will avoid CBAM costs and become preferred partners.

Agribusinesses that embed sustainability into their supply chains will not only maintain EU market access but also capture a price premium from buyers seeking to meet their own ESG targets. In other words, treating sustainability as part of the business model – not merely a compliance obligation – is fast becoming a condition for growth.

Why Malaysian Supply Chains Must Be Robust, Not Just Efficient

Bain’s analysis stresses that many companies remain overly focused on efficiency – lean inventories, single-source suppliers, just-in-time logistics – when today’s environment demands robustness. The firms that succeed are those that build resilience into their supply chains through redundancy, diversification, and adaptability. In volatile conditions, efficiency without resilience quickly turns into fragility.

New ESG-related rules in the European Union will bring this fragility to the surface. The Packaging and Packaging Waste Regulation (PPWR) will require all packaging to meet recyclability, labelling, and waste-reduction standards from 2026 onwards. The Ecodesign for Sustainable Products Regulation (ESPR), with its Digital Product Passport, will demand product-level traceability across multiple tiers of the supply chain. Neither regulation is satisfied by broad assurances – companies must obtain specific, verifiable data from each supplier. If a business relies on a single packaging provider or a supplier unable to produce compliant data, its entire export stream may be blocked.

For Malaysian companies, the lesson is clear – fragile supply chains cannot meet EU sustainability demands. Electronics and machinery exporters will need multi-tier transparency to comply with the Digital Product Passport. Packaging suppliers must be able to prove recyclability and material content under the PPWR. Even food and beverage producers will face pressure to demonstrate that every input, from packaging to additives, meets EU traceability standards. Robustness – diversifying suppliers, building compliance-ready data systems, and maintaining fallback options – is no longer optional. It is the only way to ensure both regulatory compliance and resilience against disruption.

Tackling Scope 3 and Supplier Engagement

Bain’s research shows that while many companies are on track to meet their direct (Scope 1 and 2) emissions targets, nearly half are falling behind on Scope 3 – the indirect emissions generated in their supply chains. For Malaysian exporters, these Scope 3 supply chain Malaysia challenges are no longer theoretical – they are already shaping buyer expectations. This is not surprising: managing emissions, human rights, and environmental impacts across thousands of suppliers is complex. Yet for global buyers, Scope 3 is where the pressure is intensifying. Customers increasingly demand that their suppliers provide not only their own data, but also evidence of how upstream partners are managed.

The European Union has already moved to hardwire this expectation into law. The Corporate Sustainability Due Diligence Directive (CSDDD) will require large EU companies to identify and mitigate adverse human rights and environmental impacts in their supply chains. The Deforestation Regulation (EUDR) similarly places legal responsibility on EU operators to verify that upstream producers comply with traceability and legality standards. In practice, this means EU buyers will push the burden onto their suppliers – including those in Malaysia – to produce reliable data and evidence.

For Malaysian exporters, the implication is direct. It is no longer enough to provide self-certifications or rely on industry-wide averages. Examples include:

• Electronics manufacturers may be asked to disclose the carbon intensity of their components.
• Textile producers may face checks on upstream labour standards.
• Food and beverage suppliers may need to demonstrate responsible sourcing of ingredients.

Companies that can engage suppliers early – building systems for data collection, verification, and continuous improvement – will position themselves as trustworthy partners. This requires embedding governance and accountability into day-to-day operations, echoing the principles we examined here. Those that cannot may find their contracts terminated, not because of their own failings, but because of weaknesses in their supply chain.

Conclusion: Compliance as Market Access

Bain’s global survey makes one point repeatedly – tomorrow’s leaders are those who treat sustainability not as a slogan but as a practical, embedded part of their operations. For Malaysian exporters, this lesson translates directly into law and market access. The European Union’s ESG regulations – from CBAM to EUDR, CSDDD and PPWR – are transforming sustainability from a voluntary initiative into a binding condition of doing business. Other parts of the world may follow suit in the future.

It is important to remember that Malaysian companies are not, strictly speaking, bound by EU law. Yet EU buyers are – and that makes compliance a de facto requirement for any supplier wishing to continue accessing the European market. Promises and certifications are no longer enough – what matters is data that is auditable, systems that are resilient, and supply chains that can withstand scrutiny.

The message is clear. Malaysian businesses should begin mapping their supply chains to the origin, tightening compliance documentation and engaging proactively with EU buyers. Those who act now will not only preserve market access but also turn sustainability into a competitive advantage. Those who wait risk being excluded from one of the world’s largest markets. In this new landscape, sustainability is not just about doing good – it is about staying in business.

The coming years will separate those who view sustainability as a compliance burden from those who embrace it as a competitive advantage. Malaysian businesses that act now – by mapping their supply chains, investing in verifiable data, and engaging with EU buyers – will not only secure access to Europe but also strengthen their long-term resilience. Our team at Aqran Vijandran advises companies across sectors on ESG compliance, EU market access and sustainable supply chain strategies. To explore how these developments may affect your business – and how to prepare – we invite you to connect with us.