Environmental, Social, and Governance (ESG) factors are no longer optional — they are becoming a core part of how companies in Malaysia are assessed, regulated, and valued. With increasing investor scrutiny and regulatory mandates, ESG and sustainability reporting are fast becoming essential, even for SMEs and private companies.
🌱 Why ESG Now?
The world is facing unprecedented challenges — climate change, inequality, resource depletion — and stakeholders are demanding greater corporate accountability. In response, ESG reporting has evolved from a “nice to have” into a critical component of corporate strategy, risk management, and investor relations.
In Malaysia, the push toward ESG is driven by a mix of regulatory action, market forces, and global alignment.
KEY DEVELOPMENTS IN MALAYSIA
1. Bursa Malaysia’s Sustainability Reporting Enhancements (2023–2025)
Bursa Malaysia is progressively tightening ESG disclosure requirements:
- 2023: Mandatory disclosure of sustainability governance and material ESG risks.
- 2024: Climate-related disclosures aligned with TCFD (Task Force on Climate-related Financial Disclosures) for Main Market listed companies.
- 2025: Similar requirements for ACE Market companies.
These changes signal a transition toward globally aligned, decision-useful, and assured sustainability disclosures.
2. Launch of the Malaysian Code on Corporate Governance (MCCG) 2021 Update
- Reinforces ESG oversight at the board level.
- Encourages integration of ESG metrics in performance evaluations and remuneration.
3. Bank Negara’s Climate Risk Stress Testing
Financial institutions are now required to assess and disclose climate-related risks, which will cascade down to their borrowers — especially large businesses and exporters.
4. Adoption of ISSB Standards (IFRS S1 & S2)
The International Sustainability Standards Board (ISSB), under the IFRS Foundation, released global baseline standards in 2023. Malaysia, via the Malaysian Sustainability Reporting Advisory Committee (MSRAC), is expected to adopt or adapt these as national ESG reporting standards.
WHAT SHOULD COMPANIES DO?
Whether listed or not, businesses need to start embedding ESG principles. Here’s a roadmap:
✅ Start with a Materiality Assessment
Identify which ESG issues (climate risk, water use, labor practices, etc.) matter most to your business and stakeholders.
✅ Build Governance and Responsibility
Form an ESG or sustainability committee, assign roles, and set KPIs.
✅ Begin Reporting — Even Voluntarily
Use frameworks like GRI or TCFD. Early reporting builds stakeholder trust and prepares you for future mandates.
✅ Get Your Data in Order
Many companies struggle with ESG data. Start with what’s available (energy usage, workforce data) and develop internal tracking systems.
✅ Seek Independent Assurance
Having your ESG report independently assured (under ISAE 3000) boosts its credibility and helps identify improvement areas.
Why Companies Must Prepare Ahead
Many businesses mistakenly believe that ESG reporting only applies to large listed companies — but that’s changing rapidly. Regulatory timelines are tightening, investor expectations are rising, and access to capital increasingly depends on transparent, credible sustainability disclosures. Here’s why forward-thinking companies must act now:
1. Avoid Last-Minute Compliance Scramble
Bursa Malaysia has introduced phased ESG reporting requirements with stricter expectations in 2024 and 2025. Businesses that wait until the deadline will face:
- Insufficient data readiness
- Incomplete ESG governance structures
- High consultancy and assurance costs due to rushed reporting
Preparing early allows companies to build systems gradually and at lower cost.
2. Access to Capital and Financing
Banks and investors are embedding ESG risk into their lending and investment decisions. Companies that can’t demonstrate ESG maturity may face:
- Higher interest rates
- Loan rejections
- Exclusion from ESG-focused funds or supply chains
Early ESG reporting helps build trust with capital providers.
3. Attract and Retain Talent
Today’s workforce, especially younger generations, wants to work for companies that care about the environment and society. A public commitment to ESG goals helps attract purpose-driven talent and reduce employee turnover.
4. Prepare for International Market Demands
Exporters, manufacturers, and suppliers linked to global supply chains will soon be required to meet ESG disclosure standards set by international buyers — particularly those in the EU and US. Without documented sustainability practices, your business may be dropped from preferred supplier lists.
5. Identify Operational Risks and Cost Savings
ESG reporting isn’t just about compliance — it offers insights. For example:
- Tracking energy and water usage may reveal inefficiencies and cost-saving opportunities
- Assessing governance gaps can strengthen internal controls and reduce fraud risk
6. Stay Ahead of Competitors
Early adopters of ESG practices will shape industry standards, influence policy, and gain competitive edge in reputation, partnerships, and innovation.
Final Thoughts
Don’t wait until ESG reporting becomes mandatory — start building your foundation now. Companies that act early will be better prepared, more resilient, and positioned to grow in a future where sustainability is no longer optional, but essential.
Malaysia’s corporate landscape is undergoing a sustainability shift. ESG is no longer about box-ticking — it’s about long-term value creation, risk management, and reputation. Businesses that act now will not only comply with regulations but also build trust with investors, customers, and employees.
Let’s build a more sustainable, resilient future — together.