AS a keen corporate observer, the development of environmental, social and governance (ESG), especially in the reporting space, has always been close to my heart and I can’t help but notice the growing momentum of this issue in Malaysia.
With all stakeholders, be they investors, consumers and others, everyone is on board, demanding more transparency and accountability from companies.
But with such great intent comes great responsibility.
As more companies are already on the bandwagon, the risk of greenwashing and superficial disclosures grows larger and larger.
While most of the companies on Bursa Malaysia have issued sustainability reports, there is still a dearth of information as they have been cherry picking on what they want to report and how they want to report it.
And this is where the regulators have to play a more strident role. Over the past few years, we have seen Bank Negara, the Securities Commission (SC) and Bursa Malaysia step up to the plate and take a more proactive role in shaping the ESG reporting ecosystem.
From the development of a national carbon accounting framework, capacity building and all the way to the introduction of the sustainability reporting guidelines, these regulators to their credit are sending a clear signal that ESG is not just a passing fad but is here to stay for the long haul.
The numbers speak for themselves. According to Bank Negara Malaysia Annual Report 2023, the continued development of the updated climate data catalogue for key sectors will be crucial for enabling companies to measure and report their environmental footprint that is localised in Malaysia.
This will form the basis of the monitoring and measurement of our carbon footprint, which is crucial if Malaysia is to achieve its target of net-zero by 2050.
This also gives rise to an appropriate assessment of whether the transition to a low-carbon economy is just.
Although we may hark on setting standards, it’s merely the tip of the iceberg.
For us to move the needle of ESG reporting, our regulators must lead by example.
They must walk the talk and embed ESG considerations into their own decision-making processes and embark on their own ESG reporting.
There is no two ways about it.
Just like how the Singapore government has done, it would indeed be a mark of transparency if the Malaysian government embarks on the same trajectory.
They must also be transparent about their own sustainability performance at a micro level and hold themselves accountable to the same standards that they expect the Malaysian corporate to abide by. None of this will be easy, of course.
The road ahead is fraught with obstacles and uncertainties, from the lack of standardisation in ESG rating, the sheer lack of local reference points and potential costs and complexities of reporting for smaller firms.
But with the right mix of guidance, support and accountability from our regulators, I believe the Malaysian corporates can rise to the occasion and be at the forefront of ESG reporting.
The regulators can also take a more strident role in enforcing their obligations, where they would take action against those who prepare their report in a fraudulent manner or do not abide by the standards set.
The recent strengthening of the Environmental Quality Act is an encouraging step but enforcement still remains key.
Assurers and prepares of the said sustainability reports should also be regulated by the SC and only qualified personnel are preparing those reports. This is similar to what it does with financial auditors via the Audit Oversight Board.
As we navigate this complex landscape together, let us remember that the stakes could not be higher.
The decisions we make today about how we measure, manage and report on ESG factors will have a significant impact on the long-term resilience and sustainability of our economy, our society and planet.
With climate-related risks, especially with the rise in global temperatures and sea levels and its impact on businesses which rely on natural resources, this would further propagate the urgent need for action.
By working together to build a more robust and transparent ESG reporting ecosystem, we can help mitigate these risks and unlock the full potentials of what sustainability adoption can offer in driving Malaysia’s long-term growth and competitiveness.
The journey ahead may be challenging but the destination is worth it. With the right tools, frameworks and mindsets, I believe that Malaysian companies can become global leaders in ESG reporting, thus setting an example for others to follow.
The time for action is now, and the role of our regulators in guiding and supporting this transition has never been more crucial.
Let us seize this opportunity and work together to build a more sustainable, resilient and prosperous future for all.
Kishan Jasani is the country chief executive officer at Grant Thornton Malaysia. The views expressed here are the writer’s own.
