Many companies in Malaysia can no longer afford to treat sustainability as a reporting exercise.
Instead, it is emerging as a disruptor that is changing how businesses are managed, from cutting costs and reducing negative impacts to improving the wider well-being of society.
That was the message from Global Standards senior advisor Alexander Harrow Kaufman during a session titled “Beyond Reporting: Integrating ESG into Core Management Practice” at the A-EPIC Summit 2026 at Sunway Convention Centre on July 21.
Kaufman traced the evolution of corporate social responsibility in the late 1990s into today’s ESG agenda. He said the approach had shifted from reacting to events affecting companies to identifying and mitigating potential impacts much earlier, embedding sustainability considerations into business operations from the outset.
Global initiatives have also raised awareness of ESG issues, including core labour rights highlighted through International Labour Organization conventions and the growing focus on business and human rights.
Regulatory developments are adding further pressure. Changes in the European Union, for instance, could make sustainability reporting increasingly unavoidable for Malaysian companies supplying businesses within the bloc.
Locally, Malaysia’s National Sustainability Reporting Framework (NSRF), together with the International Financial Reporting Standards 1 and 2, is also raising expectations around corporate sustainability disclosures.
But Kaufman stressed that the value of ESG extends beyond producing a report. Used properly, sustainability data can help companies reduce costs, lower employee turnover, open new markets, manage operational and supply-chain risks, and attract talent who want to work for purpose-driven organisations.
For listed companies, transparent ESG reporting can also improve their attractiveness to investors. More importantly, however, ESG requires businesses to rethink how they are managed. He cautioned against placing too much emphasis on carbon emissions while basic environmental management remained unresolved.
“I think there’s been, in my opinion, an over-emphasis on carbon emissions when companies are still struggling with how to manage their basic environmental impacts,” he said.
No one-size-fits-all approach
ESG cannot be applied through a universal checklist. The material issues facing a bank, manufacturer or service provider can be very different, depending on the sector, business model and stakeholders involved.
For Kaufman, ESG should therefore be incorporated into strategic management, including through the use of relevant ESG taxonomies and frameworks.
He also stressed the importance of governance, suggesting that ESG should be reordered as “GSE”, because sustainability principles need to be integrated at the highest level of an organisation.
One important tool is double materiality, which considers both how sustainability issues affect a company financially and how the company’s activities affect the environment and society.
Determining material issues is often one of the most challenging parts of the process because priorities differ according to the company and its stakeholders. Businesses need to assess not only how environmental and social issues could affect financial performance, but also how their activities affect workers, communities and the environment.
This information then needs to be translated into meaningful data that can be evaluated alongside traditional financial information. Doing so can reveal risks and opportunities that might otherwise remain outside conventional financial reporting.
Stakeholder engagement is another important component, particularly where companies need information from employees, suppliers, communities and other groups affected by their operations.
From goals to action
The board has an important role to play in turning ESG ambitions into a management strategy.
This means setting clear goals, identifying how they will be achieved, establishing ways to measure progress and determining whether the necessary protocols, budgets, technology and resources are in place. Such decisions cannot be left solely to sustainability teams, because achieving them will require resources and investment across the organisation.
Once measurement and reporting criteria are established, the information should return to the boardroom for scrutiny and action, including decisions on technology investments, training and other resources.
Management should know what needs to be done, who is responsible, what resources are required and how progress will be monitored. These responsibilities can be incorporated into job descriptions, key performance indicators and, where appropriate, incentives.
Kaufman suggested that companies begin with SMART goals, which are specific, measurable, achievable, relevant and time-bound. His approach can be distilled into four steps: set goals, embed them into strategy, engage stakeholders and employees, and invest in the necessary technology or human resources.
Where budgets are limited, responsibilities can be distributed among existing departments, with sustainability-related KPIs incorporated into employees’ roles. Companies should also balance short- and long-term goals as they work towards sustainable strategic management.
The process starts at the top, with senior management setting the direction and ensuring training is provided. Policies and procedures can then be cascaded to line managers and employees. At every level, training remains critical.
“Sustainability can be about optimising and being more efficient as a company,” Kaufman said.
Data and talent matter
The growing use of AI in sustainability reporting is also changing the role of data managers. Companies with sufficient resources can feed operational information into digital platforms to measure and track their sustainability performance, while ESG specialists can analyse the data and provide recommendations to boards and executives.
For small and medium-sized enterprises (SMEs), however, the challenge is more acute.
They may lack both the specialised talent and the budget for such sophisticated technology. Nevertheless, blended finance initiatives are increasingly supporting companies on their ESG and climate journeys, while startups are developing technologies and services to help SMEs integrate sustainability into their operations.
Supply-chain complexity presents another challenge, particularly for companies dealing with large numbers of smallholders or other dispersed suppliers. Engaging these suppliers is essential if companies are to address Scope 3 emissions and wider sustainability impacts across their value chains.
Companies may therefore need to retrain existing employees or recruit people with the skills required to integrate ESG into management processes. Climate risks are also becoming increasingly relevant to supply-chain management, particularly for businesses dependent on natural resources such as agricultural products and livestock.
The impact can extend beyond physical disruption to include higher costs, insurance premiums and geopolitical risks. From an ESG perspective, companies can respond by improving resource efficiency, reducing fuel and energy consumption and diversifying their sources of supply and markets.
They may also need to assess the political and environmental stability of the countries and regions on which their supply chains depend.
Making ESG work
The business case for ESG ultimately comes down to managing risk while improving efficiency and resilience. Climate-related disruptions can affect supply chains, while poor labour practices, corruption, social conflicts and greenwashing can damage a company’s reputation.
At the same time, sustainability is increasingly linked to talent attraction.
Younger workers, in particular, may place greater value on working for organisations with a clear purpose and social mission. A company’s reputation and the sense of purpose associated with its work can therefore complement financial rewards in attracting and retaining talent.
For companies, the challenge is to move beyond treating ESG as a disclosure requirement. The real value lies in using sustainability information to influence decisions – from investment and procurement to human resources, supply chains and risk management.
“Ultimately, the hope is that you’re going to reap the benefits of ESG management through strategic ESG integration,” Kaufman emphasised.
