By Dalilawati Zainal
ESG is no longer just about compliance. It is Malaysia’s opportunity to lead. With Bursa Malaysia mandating sustainability disclosures and global investors demanding greater accountability, Malaysian companies now stand at a critical turning point.
Those that weave ESG into the fabric of their strategies, rather than treating it as paperwork, can unlock new markets, attract international capital and build long-term resilience in a rapidly changing world.
Malaysia has already laid important groundwork. Since 2016, all public-listed companies have been required to issue sustainability statements under Bursa Malaysia’s listing rules, placing the country ahead of many ASEAN peers.
The commitment goes beyond reporting. The Securities Commission has prioritised sustainable and responsible investment, and by 2023 Malaysia’s SRI sukuk issuance had exceeded RM26 billion, underscoring its leadership in Islamic sustainable finance.
National policies such as the Twelfth and Thirteenth Malaysia Plans, alongside the National Energy Transition Roadmap, have further embedded ambitious goals in renewable energy, green jobs and climate resilience. Collectively, these efforts point to a growing ecosystem of sustainability.
Yet progress has not been without challenges. For too many companies, ESG remains a compliance-driven exercise. Reports are often designed to satisfy regulators, heavy on glossy narratives and images but light on substance.
Data gaps persist, with companies making broad claims about reducing emissions or improving diversity without providing baselines or measurable targets.
According to PwC Malaysia, only 38 percent of the top 100 listed companies currently subject their sustainability data to independent assurance, a figure far behind advanced markets. Without reliable data and external validation, stakeholders remain unconvinced and reports risk being dismissed as symbolic gestures.
This credibility gap has real consequences. Investors are increasingly discerning, directing capital toward companies with clear and verifiable ESG strategies.
Globally, sustainable investment assets are projected to reach US$53 trillion by 2025. To tap into this flow of capital, Malaysian companies must demonstrate that their commitments extend beyond words.
Export markets are also tightening. The European Union’s Corporate Sustainability Reporting Directive and deforestation regulation demand rigorous supply chain transparency.
For industries such as palm oil, rubber and timber, which are cornerstones of Malaysia’s trade profile, the risk of exclusion is real if ESG practices fail to meet global standards.
The implications extend beyond large corporations. Malaysia’s 1.2 million SMEs account for 97% of businesses, 38% of GDP and more than half the workforce. For many, ESG is still viewed as an unnecessary cost rather than a strategic priority. But this perception is becoming untenable.
Multinational buyers are embedding ESG requirements into procurement contracts, meaning SMEs without credible practices risk exclusion from global supply chains. The way forward lies in capacity building through training, digital tools and collaborative initiatives.
Affordable platforms can help SMEs monitor energy use and workforce practices, while universities and business associations can provide the knowledge and skills to integrate sustainability. Empowering SMEs in this way would make ESG an inclusive growth engine across the economy.
The shift from compliance to value creation will hinge on corporate governance. Boards of directors can no longer treat ESG as a peripheral matter. They must embed sustainability into business strategy, risk management and performance measurement.
This includes forming dedicated sustainability committees, appointing independent directors with ESG expertise and ensuring senior management is trained to integrate ESG into daily decision-making.
Independent assurance will also be critical to rebuilding trust. Just as audited financial statements underpin investor confidence, verified ESG data will soon become a non-negotiable expectation.
Stakeholder engagement must also deepen. Too often, ESG reports are written with investors as the primary audience, overlooking employees, local communities and consumers. Yet credibility requires inclusivity.
Employees care about safe conditions and fair pay, communities want environmental safeguards and consumers increasingly demand ethically sourced products. By incorporating these perspectives, companies can demonstrate that their ESG practices are grounded in reality rather than rhetoric.
Malaysia holds strategic advantages that should not be underestimated. Its global leadership in Islamic finance offers a distinctive platform to align ESG with ethical investment principles.
Its resource-based industries, while under scrutiny, have the opportunity to reposition themselves as models of sustainability through innovation and traceability. By aligning early with international standards such as the International Sustainability Standards Board’s IFRS S1 and S2, Malaysian companies can build credibility and compete on equal terms with global peers.
The benefits of this transformation are tangible. Companies that adopt energy efficiency and resource management practices reduce operating costs, while those that foster purpose-driven cultures attract and retain talent, especially younger workers who want to contribute to responsible organisations.
Transparent supply chains build consumer trust, while investors reward companies with credible ESG data through lower financing costs and stronger shareholder support.
At the national level, robust ESG practices safeguard international reputation, protect export markets and promote inclusive growth. They ensure that Malaysia’s economic progress does not come at the expense of environmental degradation or social inequality but instead contributes to a sustainable and equitable future.
The road ahead will not be easy, but the direction is clear. Malaysia already has the frameworks, policies and momentum. What is needed now is conviction. Companies must move beyond seeing ESG as a report to be filed and start treating it as a lived strategy.
Regulators must continue refining standards and closing data gaps. Investors must reward transparency and penalise box-ticking, while SMEs must be supported so that no segment of the economy is left behind.
If done right, ESG can be far more than a compliance obligation. It can be Malaysia’s next growth engine, fuelling investment, innovation and resilience. The companies that act with courage and credibility will not only withstand global pressures but help shape the nation’s sustainable future.
Dr Dalilawati Zainal is a senior lecturer at the Department of Accounting, Faculty of Business and Economics, Universiti Malaya, and may be reached at dalilawati@um.edu.my