PETALING JAYA: Malaysian firms have been urged to embrace the opportunities created by European Union (EU) laws to remain competitive in an evolving global market.
Harald Sippel, executive director of environmental, social and governance consultancy firm ESG Malaysia, acknowledged that Malaysian companies were not legally bound by EU laws such as the EU Deforestation Regulation or Forced Labour Regulation.
However, he said the legislation imposed on their European counterparts would indirectly compel them to comply with them.
He said severe consequences, which might include harsh penalties, could be imposed on European firms if they failed to comply.
Because of this, they would demand the same standards from their Malaysian suppliers, he said.
Sippel said any failure to adhere to the requirements imposed on European firms could see Malaysian firms risk losing contracts with EU-based buyers or having the products of third parties banned.
This could restrict access to one of the world’s largest markets, he added.
“The companies which adapt early to these EU laws will see an abundance of opportunities when it comes to European companies.”
Malaysian businesses that proactively address the compliance issue can differentiate themselves as the preferred partners for European companies, Sippel wrote in the latest edition of CME Monthly Espresso, a newsletter produced by think tank Center for Market Education.
He also suggested three strategies for Malaysian companies looking to meet the expectations of their European counterparts.
Firstly, they must obtain a better understanding of the requirements they need to meet, he said.
Secondly, Malaysian firms should conduct in-depth audits of their supply chains to identify high-risk areas and ensure compliance with EU regulations.
Thirdly, Sippel said Malaysian firms should engage local stakeholders, who might include the indigenous people. He said this was an area “very often overlooked in Malaysia”.
“By embracing compliance as an opportunity rather than a burden, Malaysian businesses can not only retain their European partners but also position themselves as leaders in sustainable and ethical trade,” he said.
Sippel said addressing these challenges head-on would not only secure market access but also build resilience against future regulatory changes.
“In a world where regulations transcend borders, adaptability and foresight are the keys to long-term success,” he said.
