ESG Reporting in Malaysia: Key Findings and Lessons for Future Business Leaders

The role of environmental, social, and governance (ESG) reporting has evolved into a core component of sustainable business strategy. Understanding ESG frameworks is crucial for MBA students preparing for leadership roles in a business landscape increasingly shaped by sustainability and responsible investing. The recent report by the World Bank and Securities Commission Malaysia, titled “ESG Disclosure Assessment of Malaysia’s Listed Companies and Recommendations for Policy Development,” offers insights into Malaysia’s ESG landscape. Below are the key findings and practical takeaways for the next generation of business leaders.

1. Larger Companies Are Ahead in ESG Reporting, SMEs Face Challenges

Larger companies listed on Bursa Malaysia’s Main Market demonstrate more comprehensive ESG disclosures compared to smaller firms. However, SMEs face challenges related to limited resources, expertise, and capacity, resulting in inconsistent reporting.

Takeaway for MBA Students:

• In leadership roles, you may encounter resource-constrained environments. The key to success is developing strategies to embed sustainability in business operations without overwhelming the organization.
• Understanding tailored approaches for SMEs can offer a competitive edge, especially if you pursue roles in consulting or entrepreneurship.

2. Compliance-Driven ESG Reporting Can Limit Innovation

The report finds that many companies treat ESG reporting as a compliance exercise driven by Bursa Malaysia’s Guidelines and FTSE4Good requirements. This limits the potential of ESG strategies to generate long-term business value.

Takeaway for Future Leaders:

• Business leaders who go beyond compliance and integrate ESG into strategy will position their companies as leaders in sustainability.
• Use this knowledge to develop a mindset focused on creating long-term value through ESG—think beyond meeting regulatory requirements.

3. Gaps in Environmental and Climate-Related Reporting

While most companies report Scope 1 and 2 emissions, Scope 3 emissions—which include indirect emissions across supply chains—are largely underreported. Additionally, biodiversity risks are poorly disclosed, with companies focusing on limited conservation efforts rather than measurable impacts.

Key Insight:

• The ability to identify and report on Scope 3 emissions is becoming critical, especially for businesses with complex supply chains. Future leaders will need to navigate these challenges to meet stakeholder expectations and avoid reputational risks.

What You Should Know:

• Integrating frameworks like TCFD (Task Force on Climate-related Financial Disclosures) will be essential for businesses to mitigate climate risks effectively.
• Familiarity with supply chain sustainability can be an asset for roles in operations, procurement, and strategy.

4. Adoption of Global Standards Is Limited

Despite alignment with GRI and Bursa Malaysia Guidelines, adoption of global frameworks such as IFRS S1/S2 and TCFD is minimal. Only a few companies are taking steps to align with international standards.

Implication for Your MBA Journey:

• Global companies and investors increasingly expect alignment with international frameworks. Understanding IFRS sustainability standards will be critical for future leaders.
• This knowledge will prepare you for leadership roles in multinational corporations or investment firms, where compliance with global ESG frameworks is expected.

5. Domestic Investors Are Not Driving ESG Ambitions

The report highlights that domestic investors are not actively pushing companies to adopt high-quality ESG reporting. Large institutional investors are not leveraging their influence to improve corporate disclosures.

Insight for MBA Students:

• Future business leaders will need to engage more actively with investors to shape the ESG agenda. Understanding the role of investor pressure can enhance your ability to align corporate strategy with sustainability goals.
• Asset managers and institutional investors must integrate ESG principles into their frameworks to drive meaningful change.

6. Sector-Specific Reporting Remains Inconsistent

Certain industries—such as plantations and energy—report better on biodiversity metrics, but most sectors show inconsistent reporting across environmental and governance issues. Governance metrics, such as CEO pay ratios, are rarely disclosed, raising concerns about transparency.

Key Takeaway for MBA Students:

• Developing industry-specific ESG knowledge will help you navigate reporting challenges in your sector of interest, whether it’s finance, manufacturing, or energy.
• Leaders who can implement relevant governance frameworks will enhance corporate transparency, improving stakeholder trust.

7. Aligning Global and Local Frameworks: A Delicate Balance

Malaysia’s transition to IFRS standards emphasizes single materiality, focusing on how ESG issues impact the company’s financial performance. However, this shift risks sidelining double materiality, which also considers the company’s impact on society and the environment.

What This Means for Business Leaders:

• Leaders will need to balance financial materiality with broader sustainability objectives. Companies that achieve this balance will enhance both investor confidence and public trust.
• Understanding both financial materiality and double materiality will equip future leaders to manage complex sustainability challenges.

Conclusion: Preparing for a Leadership Role in ESG-Driven Businesses

The report “ESG Disclosure Assessment of Malaysia’s Listed Companies and Recommendations for Policy Development” provides a roadmap for enhancing corporate sustainability in Malaysia. As an MBA student, this offers valuable insights into the evolving relationship between ESG, business strategy, and investor expectations.

Future leaders must learn to integrate ESG practices into corporate strategy rather than treating them as compliance requirements. The adoption of global frameworks, combined with sector-specific strategies and investor engagement, will define the next wave of sustainable business growth.

Whether you aim to lead in multinational corporations, investment firms, or entrepreneurial ventures, the ability to navigate the ESG landscape will be a crucial differentiator. Now is the time to build the knowledge and mindset necessary to lead organizations toward sustainable, long-term growth.

Clement Ong is an adjunct academician at a private university. He is also a non-practicing Advocate and solicitor and a Chartered Governance Professional.

The information provided in this commentary is intended solely for educational purposes and does not constitute legal advice. While every effort has been made to ensure the accuracy and reliability of the information presented, it should not be relied upon as a substitute for professional legal advice tailored to your specific circumstances. The views and opinions expressed in this commentary are those of the author and do not necessarily reflect the opinions of any organization or institution with which the author is affiliated.