EMPOWERING SUSTAINABLE PROGRESS IN MALAYSIA

Sustainability reporting encompasses a comprehensive assessment, revealing not only a company's economic value but also its environmental and societal impacts. By participating in sustainability reporting, firms can establish objectives and assess the execution of their environmental, social, and governance (ESG) strategies to achieve short and long-term goals. 

Bursa Malaysia, the Malaysia Stock Exchange, mandates all listed companies with a market capitalisation exceeding RM2 billion to integrate sustainability disclosures by including a Sustainability Statement in their annual reports. In September 2022, Bursa strengthened its sustainability reporting prerequisites to better correspond with global expectations, aligning the country's reporting practices with international standards.

Bursa Malaysia’s Sustainability Reporting Requirements

In the early 2000s, an increasing number of Malaysian firms were voluntarily disclosing ESG practices despite the absence of statutory requirements for sustainability reporting. Subsequently in 2006, Bursa Malaysia implemented Listing Requirements mandating listed companies to include corporate social responsibility (CSR) initiatives in annual reports. 

However, the quality and extent of sustainability reporting by the listed Malaysian businesses remained low. Companies focused primarily on social aspects, thus neglecting the alignment of value creation with core business strategies. To address this issue, Bursa Malaysia introduced a new Sustainability Reporting Framework (“Framework”) in 2015. This comprehensive framework amended Listing Requirements and published a Sustainable Reporting Guide and Toolkit, obligating listed companies with a market capitalisation exceeding RM2 billion to include a Sustainability Statement in annual reports.

In 2018, Bursa Malaysia released the revised second edition of its Framework to include more current case studies, which included references to the United Nations' 17 Sustainable Development Goals (SDGs), the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations and a new chapter on assurance to provide guidance on how it may be conducted. Despite commendable efforts, there wasn’t any strict adherence to international standards for Malaysian companies' sustainability reporting. Consequently, reporting practices diverged significantly, with some companies opting for established standards such as Global Reporting Initiative (“GRI”) Standards, while others didn't adhere to any specific guidelines. This absence of standardisation posed challenges for investors in comparing Malaysian companies' sustainability efforts effectively.

In 2022, Bursa Malaysia took a significant step forward by releasing its upgraded third edition of the Framework. This updated framework introduced stricter disclosure requirements for sustainability matters, mandated climate change-related disclosures that are aligned with TCFD recommendations, strengthened quantitative information by necessitating the inclusion of data from at least three financial years and additional disclosure of a Statement of Assurance. 

The enhanced sustainability reporting requirements for Main Market listed issuers will be implemented in a phased manner, beginning with the disclosure of the common sustainability matters for financial year ending (“FYE”) on or after 31 December 2023, and culminating with the TCFD-aligned disclosures for FYE on or after 31 December 2025. Furthermore, this is in accordance with the efforts of the International Sustainability Standards Board (ISSB), which has issued its first two IFRS Sustainability Disclosure Standards (IFRS S1 and S2) aimed at establishing globally standardised sustainability disclosure standards. This alignment with the ISSB highlights Bursa Malaysia's dedication to promoting uniformity and trustworthiness in sustainability reporting methods, thereby aligning the country's reporting practices with international standards.

Malaysia and The International Sustainability Standards Board (ISSB), (IFRS S1 and S2)

As Malaysia prepares to embrace the latest sustainability reporting standards established by the International Sustainability Standards Board (ISSB), companies have expressed their concerns about lacking the capability to adhere to these new global disclosure requirements.

The Advisory Committee on Sustainability Reporting (ACSR), overseen by Securities Commission Malaysia (SC) and comprising various financial regulators, initiated a public consultation on February 2024, to gather feedback on its proposed timeline and measures for the adoption of ISSB standards by Malaysian firms.

Datuk Kamarudin Hashim, ACSR chairman and managing director at SC, estimates that approximately 1,400 Malaysian companies—comprising roughly 1,000 listed firms and around 400 private enterprises with revenues exceeding RM2 billion (equivalent to US$424 million) — are subject to the new disclosure regulations.

Overcoming The Challenges Of Sustainability Reporting

Malaysian listed companies who want to kick start their sustainability reporting process have often highlighted their main challenges which include the lack of awareness and understanding of sustainability reporting, talent gap and limited capacity within organisations, challenges to collate the necessary data and gaining credibility of the disclosed information and data.

In response to these concerns, Bureau Veritas has stepped in to support affected companies in navigating these challenges effectively with clarity and transparency.

Recognising the complexity and challenges associated with aligning with new global disclosure standards, Bureau Veritas has tailored its expertise to assist Malaysian firms in meeting these requirements efficiently and seamlessly. 

Firstly, Bureau Veritas provides comprehensive training and capacity-building programs designed to equip companies with the necessary knowledge and skills to comply with the new sustainability reporting standards. These programs cover various aspects of sustainability reporting, including data collection and analysis, disclosure requirements, and best practices in ESG reporting.

Moreover, Bureau Veritas offers customised advisory services to help companies assess their current sustainability practices, identify areas for improvement, and develop tailored strategies for enhancing their sustainability reporting frameworks. By conducting gap analyses and providing actionable recommendations, Bureau Veritas enables companies to strengthen their sustainability performance and meet the evolving expectations of stakeholders.

Furthermore, Bureau Veritas offers independent verification and assurance services to validate the accuracy and reliability of companies' sustainability disclosures. Through rigorous audits and assessments, Bureau Veritas helps companies build trust and credibility with investors, regulators, and other stakeholders, thereby enhancing transparency and accountability in their reporting processes. By partnering with Bureau Veritas, Malaysian companies can leverage the expertise and support needed to navigate the complexities of sustainability reporting and ensure compliance with the latest global standards.

The Journey Has Just Started

Sustainability reporting holds paramount importance for Malaysia-listed companies, serving as a critical avenue for transparency, accountability, and long-term value creation. As stakeholders increasingly prioritise environmental, social, and governance (ESG) considerations, robust sustainability reporting not only enhances corporate reputation but also mitigates risks, attracts investment, and fosters stakeholder trust. For Malaysia-listed companies, sustainability reporting represents a strategic imperative in navigating regulatory requirements, meeting investor expectations, and driving sustainable growth in a dynamic business landscape.

Bureau Veritas stands out as a trusted partner in sustainability reporting for businesses in Malaysia through its unwavering commitment to rigorous standards, comprehensive expertise, and global recognition. By leveraging its extensive experience and proficiency in sustainability assessments, Bureau Veritas will continue to empower businesses in Malaysia to navigate the complex landscape of sustainability reporting with confidence and credibility.