The role of Asean in contributing to meaningful carbon reduction has never been clearer.
Asean is home to some of the world’s most important natural carbon sinks, particularly tropical forests, peatlands, and coastal “blue carbon” ecosystems.
Collectively, these ecosystems play a critical role in climate mitigation, supporting biodiversity, water and food security and disaster resilience.
A 2025 study found that protecting and restoring peatlands and mangroves alone could provide approximately 770 tonnes of carbon dioxide equivalent of climate mitigation annually, equivalent to more than half of South-East Asia’s land-use emissions.
It is against this backdrop that the adoption of mandatory sustainability reporting requirements is set. The level of ambition and breadth of companies that are required to report are not however, uniform across Asean.
Comparing ambition and scope
At present, Malaysia requires public listed companies and large non-listed companies (NLCos) to comply with sustainability disclosures.
The Companies Commission of Malaysia’s proposal of extending sustainability reporting to NLCos with annual revenue exceeding RM15mil is arguably the most ambitious.
By comparison, the focus of both Indonesia and the Philippines is primarily set around listed and public companies, financial institutions and large public interest entities.
Indonesia does not impose sustainability reporting obligations on private companies, unless they are already captured through sectoral requirements or market expectations. In the Philippines, large non-listed entities with an annual revenue of more than 15bil pesos (RM969mil) are slated for mandatory reporting from 2028.
Real impact of including NLCos
The question of whether including NLCos in sustainability reporting requirements is beneficial should be evaluated through four different lenses:
Relative contribution to economic and environmental impacts: A company’s contribution to carbon emissions is not predicated on whether it is listed or not but is driven by the nature of its business model. Including non-listed entities would therefore ensure a complete understanding of carbon emissions and carbon reduction efforts in the real economy.
Value chain transparency: The nature of disclosures required under international sustainability standards require companies to actively engage with their value chains and to prepare Scope 3 emissions reporting, for example.
This approach is predicated on both the need for organisations to understand the location of their inherent sustainability risks and to apply suitable actions to reduce such risks. From a climate perspective, this means ensuring that the total carbon emissions of a product or service are understood from cradle to grave.
Comprehensive support for national sustainability targets: The Paris Agreement tasks governments to set overarching time-bound net zero targets, referred to as Nationally Determined Contributions. Excluding NLCos from reporting requirements risks incomplete data to evaluate progress towards achieving jurisdictional targets.
Fairness and inclusion: A final consideration centres around inclusivity and fairness. Holding economic participants accountable to a single set of requirements would support comparable reporting providing transparency across the economy.
NLCos may face pressure to secure resources and appropriate funding to comply with sustainability reporting. Existing financial reporting and broader regulatory requirements may also prove problematic.
Skills and expertise
The move from voluntary to mandatory sustainability reporting will not only provide comparable information and inform better decision-making by users of information.
It would also increase the level of rigour required from reporting companies particularly where disclosures would need to stand up to external assurance.
Sustainability is increasingly being incorporated into the broader external reporting remit of chief financial officers, requiring finance and sustainability teams to work together to ensure disclosures are credible and verifiable.
Finance professionals bring a strong professional background anchored in judgement, scrutiny, impartiality and structured narrative creation. Sustainability disclosures, although based in data and established methodologies require a different way of thinking.
Financial reporting largely focuses on past performance, whereas sustainability reporting is immersed in future-looking information. This raises a question for finance professionals: How can we reasonably discount future information into a current financial impact?
The conceptual framework that underpins the recognition of accounting elements such as assets, liabilities and equity is hardly going to undergo wholesale change.
Uncertainty is amplified if extended over the long term, and this makes the risk that business leaders need to navigate more ambiguous.
These philosophical points of debate aside, there are several key things that finance professionals can bring to the table to support the adaptation of strategic decision making, business model transformations, ongoing performance management and ultimately external reporting.
Internal controls: Reliable, robust data will be required for sustainability calculations, risk assessment and decision-making. Ensuring that existing data control frameworks are adaptive and can include climate and broader sustainability data points will be critical.
Target and metrics: Science based targets, which aligns with overarching national commitments and global ambition would be vital. Targets should challenge the organisation’s ambition and response and provide transparency on an organisation’s contribution to carbon emission reduction.
Ongoing performance management: The response to sustainability risks would require ongoing performance management, aligning performance to targets and providing decision-makers with timely feedback on any appropriate course correction.
Business partnering: Finance business partners work at the heart of the business, connecting a deep understanding of operations against dedicated finance acumen. This relationship would naturally extend to understanding how climate targets and an organisational response would cascade down to operational level, ensuring alignment of purpose from the bottom up.
Storytelling: Reporting on climate contains both qualitative and quantitative elements. Financial professionals are adept at creating compelling narratives, ensuring that reporting is not only free from misstatement, but also articulates actions in a manner that is useful to users of information.
Asean continues to play a pivotal role in the transition to a more sustainable future. Malaysia’s ambition to be a leader is therefore to be commended. Future conversations should ideally focus on balancing between the need for change and the skills and resources available to companies as they progress their own response to sustainability.
