KPMG: Data quality is essential for Malaysian businesses to get ahead of mandatory sustainability reporting rules

  • Sustainability reporting is now business-as-usual for Malaysia’s top 100 companies
  • At least 80% of top 100 companies in Malaysia have a dedicated sustainability leader, while 95% are publishing carbon reduction targets

 

Petaling Jaya, 17 December 2024 – Globally, sustainability reporting has become part of business-as-usual for almost all of the top 100 companies in each country, territory or jurisdiction surveyed, including Malaysia, according to the latest Survey of Sustainability Reporting 2024 report by KPMG International. However, for Malaysian companies, it is no longer just about meeting regulatory obligations — it is now about effectively integrating financial and sustainability reporting to fully realize their Environmental, Social, and Governance (ESG) strategies and sustainability goals.

KPMG’s report reveals that all of the top 100 Malaysian companies surveyed have now incorporated sustainability into their reporting. While a positive progress, the impending implementation of the National Sustainable Reporting Framework (NSRF) demands the integration of sustainability-related disclosures to financial statements, which underlines the importance for quality in reported data.

The NSRF, introduced in September 2024, provides guidelines for adoption of the International Sustainability Standards Board (ISSB) IFRS S1 and S2 standards as the baseline sustainability disclosure standards for Malaysian companies, to be implemented through a phased and developmental approach as well as the assurance framework for Scope 1 and Scope 2 GHG emissions.

The ISSB IFRS S1 and S2 standards mandate a holistic integration between financial and sustainability reporting, underscoring the financial impact of sustainable practices. This significant connectivity allows for revealing insights into how sustainability initiatives can drive and impact financial performance and stability. Additionally, under the NSRF guidelines, reasonable assurance for Scope 1 and Scope 2 greenhouse gas (GHG) emissions will be mandatory for Main Market listed issuers with a market capitalization of over RM2 billion, starting January 1, 2027 (subject to further consultation and engagement with relevant stakeholders). This requirement will eventually be expanded to other Main Market listed issuers, Ace Market listed issuers and large non-listed companies (with annual revenue of over RM2 billion).

“The introduction of NSRF is a bold step by the government towards ensuring a more sustainable future for Malaysia. Going forward, integrating financial and materiality impact assessment into sustainability reporting will become a necessity, rather than a differentiator,” said Ms. Phang Oy Cheng, Head of ESG at KPMG in Malaysia, “Finance and sustainability teams must work closely together to ensure the information disclosed is consistent and reliable. To achieve that, robust measures are needed for precise data collection to effectively measure and report. This is not just about compliance, but about building trust among investors and stakeholders.”

To prepare for the upcoming ESG assurance requirements, Ms. Phang recommends that Malaysian businesses focus on several key areas:

  1. Understanding of ESG Standards and Frameworks: Companies must familiarize themselves with relevant ESG standards and ensure compliance with applicable regulations.
  2. Early planning of ESG targets and metrics: As ESG metrics are often qualitative and multifaceted, this makes them difficult to be quantified and assessed, which underscores the critical need for early planning.
  3. Data collection and management: Implementation of systems for accurate data collection, tracking, and reporting on ESG metrics.
  4. Availability of audit trail: Maintain a robust audit trail for ESG data to facilitate external assurance and ensure reliability.
  5. Governance structure: Establish clear governance for ESG initiatives, including roles and responsibilities across all levels of the organization.

“As sustainability reporting now becomes mandatory across a broader spectrum of companies, we anticipate that assurance of ESG data will also be mandated in a similar manner in the near future,” added Ms. Phang, “Companies should prepare early to adapt effectively to upcoming regulatory requirements. By doing so, they can thrive in a competitive environment where sustainability is increasingly tied to long-term growth.”

Global perspectives

KPMG’s report found that carbon reduction target reporting has become nearly ubiquitous among the world’s 250 largest companies – a trend mirrored in Malaysia, where 95% of the country’s top companies surveyed are now publishing carbon reduction targets. 
 
Further, more than half of world’s 250 largest companies have a dedicated sustainability leader in their boards. In Malaysia, at least 80% of companies in Malaysia have dedicated sustainability leaders, and 75% link sustainability goals with leadership compensation—the highest proportion among all countries in the research. This reflects an increasing corporate focus to integrate ESG into core business strategies and then incentivizing leaders to act on it by linking their pay to sustainability objectives.
 
This latest edition of Survey of Sustainability Reporting report is based on detailed research that draws insights from 5,800 companies across 58 countries. For each country, territory or jurisdiction, the survey has reviewed annual financial, integrated and ESG or sustainability reports published by the largest 100 companies.
 
KPMG’s Survey of Sustainability Reporting 2024 report can be downloaded at kpmg.com.my/esg  

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