KUALA LUMPUR: The outlook for the adoption of environmental, social and governance (ESG) standards by companies in Malaysia looks highly positive next year due largely to practical policy initiatives unveiled this year, such as the carbon tax, increased ESG reporting and scaling up sustainability initiatives.
The carbon tax is expected to encourage firms to reduce carbon emissions, a move that would advance Malaysia’s ESG commitment further.
“The outlook for ESG adoption among Malaysian companies across all sectors next year is highly positive,” said Dr Norsaidatul Akmar Mazelan, chief executive officer of ThinkPlus Group of Companies.
“These policies strongly incentivise companies to integrate ESG into their strategies for compliance, competitiveness and access to financing,” she said when reviewing ESG initiatives that are transforming the business climate in the country today.
“Malaysia’s phased ESG adoption framework – starting with the ‘just-transition’ phase from 2024 to 2026 and moving into the ‘accelerate ESG practices’ phase from 2027 to 2030 provides a clear roadmap that encourages companies to improve ESG disclosures and strengthen sustainable operations.
“This foundation is supported by increasing regulatory clarity, technological advancements and stakeholder demand for accountability in ESG performance, positioning 2026 as a pivotal year for scaling sustainability efforts,” she added.
There is no doubt that Malaysia is taking the ESG agenda seriously, both to strengthen national competitiveness and safeguard national sustainability.
The carbon tax, important legislation that takes effect next year after being unveiled in Budget 2025, will initially apply to high-emissions sectors such as energy, steel and heavy industries as part of the nation’s transition towards a low-carbon economy.
Malaysia will also roll out the National Environmental, Social and Governance Strategic Plan soon, an initiative designed to guide businesses towards adopting sustainable and ESG-compliant practices, which industry players are eager to leverage the plan to elevate their businesses.
This year was undoubtedly a turning point, with more small and medium enterprises (SMEs) shifting towards sustainable practices through support from banks, corporations and non-governmental organisations offering financing, advisory services and practical assistance for ESG adoption.
Alliance Bank’s ESG Report 2025 indicates a sharp rise in ESG awareness and adoption among Malaysian SMEs, with awareness climbing from 14% in 2023 to 80% this year, while adoption increased from 28% to 60% over the same period.
These developments reflect growing awareness among small and medium businesses of global sustainability demands in supply chains, with many viewing ESG adoption as a strategic move to expand market access amid current economic challenges.
Another key initiative this year is the government’s push, through the Securities Commission Malaysia and Bursa Malaysia, to require listed companies to comply with the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards (IFRS S1 and S2) in their ESG reporting.
Introduced by the International Sustainability Standards Board (ISSB), the standards provide a globally recognised framework for sustainability and climate-related disclosures, aligned with Malaysia’s National Sustainability Reporting Framework (NSRF) to enhance transparency and consistency in local capital markets.
Under a phased rollout, large Main Market-listed issuers must comply from this year, other Main Market issuers next year, and ACE Market issuers and large non-listed companies in 2027.
Malaysia is the only Asean jurisdiction to adopt the ISSB standards with a limited transition, reinforcing the global standing of its NSRF.
In another development, effective Dec 1, the government implemented a new renewable energy (RE) initiative leveraging building rooftops under the Solar Accelerated Transition Action Programme (Solar Atap).
A continuation of the Net Energy Metering initiative, which ended on June 30, Solar Atap is expected to boost distributed generation.
It will give consumers more rooftop options, supporting Malaysia’s goal of 70% RE in electricity supply by 2050.
As Asean chair this year, Malaysia has also acted as a bridge to promote ESG adoption across sectors and businesses in the region.
Key efforts include the launch of the Asean Simplified ESG Disclosure Guide for SMEs in supply chains in April, developed under the Asean Capital Markets Forum led by the Securities Commission. — Bernama
