THE disclosure on environmental, social and governance matters, or ESG reporting, was made mandatory by Bursa Malaysia since 2016 to provide evidence for transparency and accountability in business decisions and operations to investors.
However, for many companies — especially small and medium-sized enterprises (SMEs) — reporting on their ESG impacts is akin to sailing on uncharted waters.
Many are unfamiliar with what to report, and how to quantify and qualify their results.
In order to assist them, the StarESG Academy hosted an ESG Sustainability Reporting Workshop on April 13 at Menara Star that featured experts in the field of sustainability reporting.
The Securities Industries Development Corporation (SIDC) had assisted in bringing KPMG’s Phang Oy Cheng to the workshop.
Phang Oy Cheng
executive director and Sustainability Advisory Services head
KPMG in Malaysia
The mindset that ESG is a cost and done only for Bursa compliance is the biggest hindrance that we have at this present mode.
Unless Malaysian companies move away from this mindset, they'll never derive value in share prices, investments, better rates from banks and more.
Sustainability reporting adds share value, ESG rating. That's why FTSE4Good was established and why Standard & Poor (S&P) has an ESG index.
It is because investors want to invest in responsible companies that do better for both financial and non-financial risk.
Traditionally companies that lead in ESG have been able to weather inflation and economic crises better.
Even in Malaysia, the latest FTSE4Good data shows that there is already a separation, with ESG companies performing much better than those who are not.
There is value and if you are able to demonstrate this long-term, you maintain and attract better value, and that's what Malaysian companies need to understand.
Social and Governance head
Boardroom Group Environmental
One of the main challenges for SMEs is having the in-house resources to take on this sustainability journey, in terms of how to report, what to implement, what they need to do. All these require resources and time.
They would require a full-time sustainability officer, when it's a small business. They may also occasionally need someone who can guide them by providing focused solutions.
The other challenge is on the data, especially if they are on the stock exchange, they would have stringent requirements in terms of what sort of data and how they should be reporting against.
If it were a large company, they would have resources to study and implement.
But for SMEs, they need to be efficient and be focused on the sort of data required by narrowing down to five to ten topics that are important to them.
Datin Vijayalakshmi Samuel
Director and principal consultant
AGV Environment Sdn Bhd
Malaysian companies are already embracing and implementing ESG elements in their daily operations so it’s not entirely new.
ESG reporting simply brings these elements together using appropriate reporting framework and standards to be comparable with industry peers and benchmark their performance.
By looking at ESG as one entity, companies can understand how that impacts business sustainability in terms of risks and opportunities, and build on established strategies, internal frameworks and roadmaps to achieve their targets.
The starting point to ESG reporting is having a good grasp of sustainability and its implications to the company, stakeholders, business environment and global trends, then inculcating a sustainability mindset across the organisation.
Because ESG data is considerable, having a robust database management system is crucial to ensure data collected is accurate and verifiable.
With systematic data tracking, trends in ESG performance can be properly assessed and presented in the sustainability report.
Koh Jia Fang
Climate Change and Sustainability Services senior manager
Ernst & Young Consulting Sdn Bhd
To embark on sustainability reporting, organisations and their employees need to first upskill their knowledge on sustainability.
This included having a good understanding of the available frameworks, guidelines and requirements which are the fundamentals to sustainability reporting, such as GRI standards, IR framework and more.
It is also important to understand the regulatory requirements and trends.
Data availability and integrity is also an important element to ensure organisations are able to embark more effectively along their reporting journey.
It is crucial for an organisation to understand the importance of materiality in prioritising the economic, environmental and people aspects of their organisation and stakeholders.
A well conducted materiality assessment is the foundation to an organisation’s sustainability reporting journey and setting their sustainability strategy.
Tengku Zarina Tengku Chik
Chief executive officer, SIDC
As in any new practice, the challenges faced in sustainability reporting are related to skills and competency gaps.
This is faced by all types of companies in the capital market industry and beyond, for both locally and globally owned companies.
There is a critical need to both enhance the competencies of current professionals, and increase the pipeline of qualified talents who are well-versed and equipped to navigate the latest sustainability trend.
As the SC’s capacity building arm, SIDC is proud to have embarked early in various culture and competency building initiatives to align with and be future-ready for the industry’s sustainability journey.
Together with committed industry partners, we charted the thought leadership conversations with our Sustainable and Responsible (SRI) Conference series.