Sustainability reporting is a comprehensive report that not only discloses a company's economic worth but also provides information on its impact on the environment and society. By engaging in sustainability reporting, companies can establish objectives and measure the implementation of their environmental, social, and governance (ESG) strategies in achieving both short and long-term goals. The growing global trend of sustainability reporting has been prominently highlighted in recent KPMG's Survey of Sustainability Reporting 2022, where an impressive 96% of the world's 250 largest companies prepared a sustainability report. Whereas, in Malaysia, sustainability reporting is gaining traction, driven by heightened expectations from various stakeholders for greater accountability on ESG matters.

In early 2000s, a growing number of Malaysian companies were already proactively disclosing on ESG, despite the absence of a statutory regulation mandating the reporting of sustainability. Then, Bursa Malaysia introduced a set of Listing Requirements in 2006 that required listed companies to include corporate social responsibility (CSR) initiatives in their annual reports. Regardless of this effort, the extent and quality of sustainability reporting remained relatively low. Most companies tend to focus primarily on the social aspects of their business, often overlooking the crucial element of value creation and its alignment with their core business strategies. To address this gap, Bursa Malaysia introduced a new Sustainability Framework in 2015. This comprehensive framework included changes to the Listing Requirements and the publication of a Sustainable Reporting Guide and Toolkit that required all listed companies in Malaysia, with a market capitalisation of RM2 billion and above to incorporate a Sustainability Statement in their annual reports.

In 2018, Bursa Malaysia published the revised second edition of Sustainability Framework, which incorporated references to the United Nations' 17 Sustainable Development Goals (SDGs) and recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and provided guidelines on integrated reporting. Despite Bursa Malaysia's commendable efforts, there haven't been any strict rules based on international standards that Malaysian companies must follow for sustainability reporting. As a result, sustainability reporting practices varied significantly from one company to another. Many companies preferred to adhere to established standards like TCFD or Global Reporting Initiative (GRI), while others choose not to refer to any specific standards at all. This lack of standardisation has made it challenging for investors to effectively compare the sustainability initiatives of Malaysian companies.

Hence, last year, Bursa Malaysia took a significant step forward by releasing its upgraded third edition of Sustainability Framework. This updated framework introduced stricter disclosure requirements for sustainability matters, mandated climate change-related disclosures, and strengthened quantitative information by necessitating the inclusion of data from at least three financial years. The Sustainability Framework also required additional disclosure of a Statement of Assurance. Bursa Malaysia's decisive move clearly signals its commitment to enforcing rigorous standards and bolstering Malaysia's sustainability reporting practices. Moreover, this aligns with the initiatives of the International Sustainability Standards Board (ISSB), which has released two exposure drafts (IFRS S1 and S2) on setting the global standardised standards for disclosure of sustainability. This alignment with ISSB underscores Bursa Malaysia's commitment to ensuring consistency and reliability in sustainability reporting practices, bringing the country's reporting in line with global best practices.

The introduction of these new rules indeed poses challenges for Malaysian companies that have yet to implement sustainability reporting or align with both internationally recognised sustainability and Bursa Malaysia frameworks. One of the main challenges faced is the lack of awareness and understanding of sustainability reporting. Many Malaysian companies remain focused on financial reporting and are not familiar with the sustainability frameworks and requirements for reporting. To address this challenge effectively, companies must invest in training their management and employees to recognise the value of sustainability. Additionally, setting up a dedicated sustainability committee and seeking guidance from sustainability consulting firms or Big 4 accounting firms can help companies fully comprehend the new reporting guidelines implemented by Bursa Malaysia and ISSB.

The second challenge is lack of data and information on sustainability. Many Malaysian companies find it challenging to report on their sustainability performance due to the absence of a systematic method for gathering and assessing sustainability data. To resolve this issue, companies can implement big data analytics. Leveraging on big data analytics and AI enable companies to develop a robust sustainability data management system. This system includes establishing strategic ESG initiatives, roadmaps, documenting processes, and testing controls to measure sustainability performance. Additionally, it can help management to gain a clearer understanding of key stakeholders’ expectations on material ESG topics.

In conclusion, addressing sustainability priorities for Malaysian companies has never been more critical. Although implementing sustainability reporting presents certain challenges, companies that adopt a systematic approach to sustainability reporting stand to benefit greatly. Through consistent engagement in ESG, companies can demonstrate their commitment to responsible practices, enhance transparency, and align themselves with the global movement towards a sustainable future. The time has come for Malaysian companies to fully embrace sustainability reporting and drive sustainable growth in the country and internationally.