Background of the company

Tan Sri Dr. Lim Wee Chai founded Top Glove Corporation Berhad (Top Glove)
in 1991, specialising in the manufacture of rubber gloves. (Top Glove, 2023)
They manufacture latex and nitrile gloves to meet demand in both the healthcare
and non-healthcare industries. Top Glove has a significant global presence, with
several manufacturing facilities in various countries, making it a key player in
the global healthcare market. They have committed to publishing an annual
sustainability report because they understand the importance of environmental
and social responsibility.

Introduction
In our research, we dig into a number of facets of the entity's sustainability
reporting. We have emphasised in our report the value of sustainability
reporting to Top Glove. Additionally, we have examined Top Glove's
compliance with the most latest developments in sustainability reporting and
highlighted the significance of ESG rating. Furthermore, we discuss Top
Gloves' experience with the advantages of sustainability reporting and contrast
the position of the business with and without it. Finally, we also address the
essential question that Top Glove needs to address before beginning its
sustainable journey.

Content
1. Why is sustainability reporting important to Top Glove Sdn Bhd. (Top
Glove)?
It is important for Top Glove to publish the sustainability report, in order to
preserve or bolster the trust of its investors. (Claypole, 2022) Investors
analyse the ESG element of a company when making decisions to invest in. By
presenting comprehensive sustainability reports, Top Glove could attract
socially responsible investors as it is showcasing how Top Glove' s dedication
to sustainability, ethical practices, and responsible governance. These contribute
to building trust and confidence among potential investors then access to more
financial assistance for the business.

It is also important for Top Glove in enhancing its supply chain management.
As a manufacturer, Top Glove relies on a complex global supply chain.
Sustainability reporting helps the company assess the sustainability practices of
its suppliers, ensuring that they meet ethical and environmental standards. By
actively monitoring and engaging with suppliers committed to sustainability,
Top Glove mitigates supply chain risks associated with environmental and
ethical issues. (Anderson, 2023) Such proactive measures enhance supplier
relationships and promote a culture of sustainability throughout the supply
chain, contributing to the company's overall sustainability efforts and bolstering
its reputation as a responsible manufacturer.
It also differentiates the company in the market, builds brand recognition and
loyalty

. (Sidharth, 2023When Top Glove transparently communicates its sustainability effort

2. What is the latest development of sustainability reporting in Malaysia

and is this company in compliance with the latest development?

Sustainability reporting has grown in significance over the past few years for
organisations to publicly disclose their environmental, social, and governance
practices. Bursa Malaysia announced the latest development of sustainability
reports about the public listed companies in Malaysia required include Common
Sustainability Matters, Task Force on Climate-related Financial Disclosures
(TCFD), Disclosure Quantitative Information and Statement of Assurance in
their sustainability reporting. (EY, 2022)

Firstly, Top Glove focus reports the common sustainability matters that most
of the company incurred such as anti-corruption, emissions, supply chain
management, investment in energy and water consumption, etc in order to
increase transparency and comparability across industries and markets.
Secondly, Top Glove has provided the climate change scenario analysis based
on the recommendations of TCFD focusing on two scenarios which is
Representative Concentration Pathways 2.5 & 2.8. These two scenarios of
climate change have included type of risks, climate related risks, potential
financial impact and strategy are presented in order to provide clear
comparisons to better understand possible climate change impacts. (Appendix
1)

Thirdly, Top Glove has disclosed quantitative information from the year 2019
to 2022 data about indicators related to the sustainability matters, in order to
help investors better understand how companies are performing and trends on
sustainability issues. For example, Top Glove provides Anti-Corruption and
Anti-Bribery Data from the year 2019 to 2022 showing that Top Glove involved
0 cases in corruption and bribery. (Appendix 2) Lastly, the statement of
assurance showed Top Glove has consigned SIRIM QAS International Sdn.
Bhd. which is a Conformity Assessment Bodies in Malaysia to perform
independent verification and provide assurance services on Top Glove's
Sustainability Report 2022. (Appendix 3) In short, Top Glove is doing well in
compliance with the latest developments announced by Bursa Malaysia.

3.Why is sustainability report rating (ESG rating) important to Top Glove?

A sustainability report rating (ESG rating) is said to be crucial to every

company including Top Glove as it reflects the corporate reputation. A firm
with good ESG rating is characterised by a positive corporate reputation, which
helps to promote customer loyalty and facilitates easy access to capital by
financial institutions and lenders who may provide the company with more
advantageous conditions.

Moreover, an ESG rating will affect the potential investor’s decision,

attraction and retention. Investors will incorporate the rating into their
investment strategies, particularly those who are really concerned with ESG
aspects. A favourable ESG rating will become the factors luring investors who
have identified the value of the company's robust sustainability practices. For
instance, Top Glove has overall improved by 20% for the FTSE Russell ESG
rating, (3.7 out of 5 points). The rating has coverage of improvement 28% in the
environmental category, 21% in social category and 12% in the governance
segment. (Top Glove, 2022) This has been reflected in Top Glove acquiring a
flavorful ESG rating which could not only to attract the investors and broaden
their investor pool and also easy access the capital from lenders.

Besides, ESG rating is also critical for management and mitigation of risk as
the rating is able to highlight and identify the entity about the areas of the risk
incurred in environmental, social or governance, for them to be immediately
mitigating the risk. Previously, the ESG rating of Top Glove was downgraded
significantly from 3.22 to 2.78 which has ruined Top Glove’s reputation due to
the issue of labour practices, and the social environmental risk of Covid-19
outbreak among the workers that caused by poor living conditions and social
distancing. Therefore, a lower ESG rating raises a warning sign for Top Glove's
management to propose immediate action. Finally, their ESG ratings are
improved back as a result of their resolution.(Shankar,2020)

4. How does this company benefit from sustainability reporting?

The first benefit that Top Glove derived from its sustainability report lies in its
capacity to bolster the company's reputation. It allows Top Glove to
emphasise its unwavering commitment to transparency and accountability,
especially in environmental and social responsibilities. This transparency
provides stakeholders with a thorough understanding of Top Glove's operational
procedures and commitment to environmental and social responsibility. For
instance, Top Glove has disclosed its factories are adopting energy conservation
measures to curtail energy consumption and carbon dioxide emissions.
(Business Today Editoria, 2022) By openly sharing such initiatives, Top Glove
is being transparent in disclosing its environmental protection efforts. Hence,
this transparency creates a positive impression among stakeholders and
enhances the company's reputation.

Top Glove will also benefit from having access to capital. Investors closely
scrutinise the company's sustainability report to understand its environmental,
social, and governance policies when making investment decisions. They strive
to ensure that Top Glove operations have no detrimental influence on the
environment or society and to protect it. For example, Top Glove discloses its
water and soil management in order to protect water and soil quality. (Top
Glove, 2022) This may result in Top Glove potentially accessing a low cost of
capital by attracting socially responsible investors.

The third benefit of sustainability reporting for Top Glove is improved risk
control. Top Glove can detect and mitigate environmental, social, and
governance risks early by conducting comprehensive assessments before
reporting. For instance, Top Glove is concerned with employees' health and
safety at work. Top Glove implemented the Zero Harm culture, which includes
factory first aid corners, trained first responders and safety officers to safeguard
employees when unexpected incidents occur. (Top Glove, 2023) Thus,
sustainability reporting assists Top Glove in detecting risks and developing
proactive mitigation measures.

5. Having sustainability reporting – what will be the position of this

company as compared to those companies that do not have it?

Top Glove’s sustainability report will position it differently from companies

without it.
The transparency of sustainability reporting helps Top Glove to prevent
regulatory compliance fails. By disclosing its ESG goals, practice and progress,
it ensures Top Glove complies with relevant regulations and demonstrates
commitment to responsible and ethical business practice. (Celsia, 2023) This
also allows them to address potential issues promptly and sustainability
performance remains aligned with stakeholders expectations. Thus, this
safeguards Top Glove against regulatory penalties and reputation damage.
(Dinter, 2021) However, companies without sustainability reporting may raise
regulatory bodies concerns due to potentially hide neglect of responsible and
compliance practice, leading to scrutiny.
Furthermore, sustainability reporting increases the level of stakeholders' trust
and confidence. Through detailed reporting on ESG performance, they provide
stakeholders value insights into its sustainability efforts, progress and future
aspirations. (Bell, 2022) Also, Top Glove is included in the Dow Jones
Sustainability Index (DJSI) for the fifth consecutive year and improves its score
in the FTSE Russell ESG ratings. (Top Glove, 2023) This transparency and
recognition builds trust and confidence among stakeholders, demonstrating Top
Glove’s commitment to meeting its environmental and social responsibilities,
empowered stakeholders to make informed decisions. (Sustain Life, 2023)
Conversely, companies without sustainability reporting that lack transparency
may cause insufficient information for investors, raise concerns about financial
risks and the legitimacy of sustainability commitments thereby reducing
confidence.

Besides, sustainability reporting improves Top Glove's competitive advantage

in customer attraction. A report shows 60% of Malaysian consumers consider
companies prioritising environmental preservation over its profits, indicating
their consideration of a company’s environmental impact in purchasing
decisions. (Ignatius, 2022) Top Glove’s environmental initiatives, such as
reducing greenhouse gas emissions, conserving water and managing waste,
highlight its commitment to reducing environmental impact and responsible
role. (Top Glove, N.D.) Also, Top Glove has been recognized for its
transformative social initiative and remarkable corporate social responsibility
activities. (Top Glove, 2023) This will significantly attract stakeholders who
prioritise environmental sustainability as they align with customers’ value
thereby cultivate customer loyalty, increase reputation and differentiate from
competitors. Conversely, companies without sustainability reporting may raise
stakeholders questions about its commitment to ethical and sustainable practice.

6. Before embarking on a sustainability journey, what are some questions

that Top Glove should ask/address?

Before embarking on a sustainability journey, Top Glove should identify the

current serious environmental issue faced in Malaysia. Firstly, 29 rivers have
been polluted in Malaysia in the year 2022. (Bernama, 2023) Top Glove should
discuss this issue in the sustainability report including information related to
river pollution, possible causes and how river pollution will affect the
community. The manufacturing process of gloves may contain chemical and
hazardous substances and it may be discharged directly into rivers. Top Glove
needs to mention the plan about the measurement taken to address this issue
such as improving production process and reducing the use of hazardous
substances.
Besides, Top Glove should carefully assess and discuss the environmental
consequences of its glove production processes, particularly the use of
chemicals. Manufacturing and disposing of latex gloves involve these
chemicals, and improper management can result in soil pollution. During the
COVID-19 pandemic, the massive demand for disposable gloves, primarily
non-biodegradable ones, has resulted in significant daily waste disposal.
Accumulated in landfills, these gloves eventually break down into harmful
microplastics, worsening soil quality and pollution. (Philip Golingai, 2021) To
address these challenges, Top Glove should incorporate sustainability measures,
like glove recycling initiatives, into their sustainability reporting and practices.

Top Glove initially aimed to promote inclusivity and respect human rights in
its sustainability reporting by considering 0.1% of its global employees as
individuals with disabilities. However, with the government introducing a 1%
PWD (OKU) employment policy to combat disability unemployment, it's
advisable for Top Glove to realign its policy. (Rozana Sani, 2020) Adhering to
this new government directive would enable Top Glove to actively support job
opportunities for disabled individuals, prioritise their rights, and implement
recruitment strategies, programs, and workplace adaptability. Such an
adjustment demonstrates the company's commitment to social responsibility and
proactive compliance with relevant legislation.

Conclusion/Summary
In conclusion, sustainability reporting plays a pivotal role in Top Glove,
enhancing investor trust, refining supply chain management, and cultivating
brand loyalty. Bursa Malaysia mandates specific sustainability reporting
criteria, all of which Top Glove meticulously adheres to, ensuring compliance
with the latest requirements. Furthermore, the significance of ESG ratings
cannot be overstated, as they reflect corporate reputation, facilitate capital
accessibility, and guide investor decisions while aiding in risk mitigation. Top
Glove derives numerous benefits from sustainability reporting, including
bolstering its reputation, improving access to capital, and enhancing risk
management. Notably, the company's sustainability reporting positions it
distinctly from competitors without such reports, serving as safeguard against
regulatory issues, elevating investor confidence, and attracting environmentally
conscious customers. Lastly, Top Glove needs addressing environmental
impacts on water and soil from glove production and promoting inclusivity and
human rights before embarking on its sustainability journey.

In our opinion, a sustainability report is essential for companies to demonstrate

their business practice and attitude towards sustainability and social
responsibility. It allows companies to manage sustainability-related risks and
opportunities, thereby improving business efficiency and elevating investor’s
confidence. Therefore, sustainability reporting is considered a core component
of corporate social responsibility and sustainability practices which should not
be ignored.