As Malaysia prepares to undertake the most recent sustainability reporting requirements by the Worldwide Sustainability Requirements Board (ISSB), firms seem like most apprehensive about missing the capability to fulfill these new international disclosure requirements.
The nation’s Advisory Committee on Sustainability Reporting (ACSR), led by Securities Fee Malaysia (SC) and comprising varied monetary regulators, started its public session on 15 February to safe suggestions on its proposed timeline and aid for the adoption of ISSB requirements by Malaysian firms.
At a latest webinar hosted by the ACSR, some 600 preparers and stakeholders attended to hunt readability on the session paper, Eco-Enterprise realized in an interview with the committee’s chairman.
“One of many extra widespread questions was about capability constructing,” mentioned Datuk Kamarudin Hashim, ACSR chairman and managing director at SC.
The form of capability firms lack, nonetheless, varies throughout sectors and firm dimension, he mentioned. Greater publicly listed firms, particularly these which might be uncovered to worldwide markets and already topic to local weather-related disclosure necessities, seem extra targeted on attempting to align their present reporting practices with the ISSB requirements. Smaller firms, nonetheless, should want assist to know the fundamentals of sustainability reporting.
About 1,400 Malaysian corporations – comprising some 1,000 listed firms and round 400 personal firms with income ofRM2 billion (US$424 million) and above – are topic to the brand new disclosure necessities, mentioned Kamarudin.
The ACSR in its session paper proposed that firms listed on the principle market of Malaysia’s inventory trade, Bursa Malaysia, undertake the ISSB’s local weather disclosure requirements, the IFRS S2, by December 2025. Firms on the trade’s smaller ACE market and huge non-listed firms should comply by the top of 2027.
The adoption of the overall sustainability reporting requirements, IFRS S1, shall be necessary for these firms the next 12 months, that’s 2026 and 2028, respectively.
Malaysia is amongst a number of nations in Asia Pacific holding a public session on the adoption of the ISSB requirements this 12 months, following the requirements physique’s launch of its international disclosure requirements in June final 12 months. The nations are free to resolve on how and when to implement the requirements. Earlier this month, Singapore’s regulator started its personal session to undertake each ISSB requirements by 2025. Australia’s treasury has additionally sought suggestions for its draft laws to undertake the requirements.
In the meantime, Hong Kong’s market regulator, which proposed in April final 12 months to undertake the ISSB’s ultimate local weather customary starting 1 January 2024, introduced that it will prolong its deadline for firms to report by a 12 months to offer issuers extra time to familiarise themselves with the brand new requirements.
Malaysia’s authorities can assist firms in making climate-related disclosures by making certain that they’ve entry to related public information, mentioned Manohar Johnson, assurance and sustainability companion at advisory agency PwC Malaysia. Picture: PwC Malaysia
Whereas enterprise stakeholders have requested the ACSR for an extended session interval to supply suggestions (the session was meant to finish on 21 March) it has not seen any challenges to the proposed timeline, mentioned Kamarudin. “We have now not [yet] had any response indicating that preparers want any extra time past the schedule within the session paper,” he mentioned.
Manohar Johnson, assurance and sustainability companion at advisory agency PwC Malaysia affords a possible rationalization for this: in contrast to monetary reporting, rising consciousness of local weather change is a key driver in adopting sustainability-related disclosures sooner somewhat than later.
“There’s a sense of urgency in preventing the devastating results of worldwide warming,” he informed Eco-Enterprise, referencing conversations he has had about implementing sustainability disclosures with trade friends. The federal government’s dedication to net-zero emissions by 2050 as a part of its Nationally Decided Contribution (NDC) underneath the Paris settlement, has additionally pressured firms into decarbonising their provide chains.
Malaysia’s largest firms have already begun making climate-related disclosures. In 2022, Bursa Malaysia mandated that each one Principal Market-listed firms should make disclosures aligned with the Process Power on Local weather-related Disclosure (TCFD) by 2025. All listed firms have been required to supply annual sustainability stories from December 2023 onwards, however firms are free to decide on which requirements to base their disclosures on.
Nonetheless, Manohar noticed that many have discovered it difficult to collate the mandatory information, on condition that that is the primary time that firms have needed to report in opposition to new necessary metrics. “A few of these firms might have collated such information prior to now however perhaps not with as a lot rigour as is at the moment wanted to fulfill present disclosure requirements,” he mentioned.
Related challenges have been noticed throughout the trade. “Based mostly on our engagements with our purchasers, we do observe a expertise hole and restricted capability inside organisations [to meet upcoming sustainability reporting requirements],” mentioned Megat Iskandar Shah, companion at monetary providers consultancy Ernst & Younger PLT.
He informed Eco-Enterprise that this consists of some firms requiring present departments to tackle the extra function of sustainability reporting, in addition to restricted human assets being allotted to reporting inside sustainability groups. “This varies throughout sectors, firms, and regional components like maturity in sustainability practices, consciousness, coaching, and institutional assist,” Megat added.
Technical assist
A number of initiatives that would assist firms meet the brand new reporting necessities embrace complete technical steering, which might take the type of sustainability reporting tips, and coaching programmes for present or new workers, mentioned Megat. “It’s essential to acknowledge that sustainability literacy ought to permeate all departments in firms, extending past the sustainability division alone,” he mentioned. Collaboration between firms, assurance suppliers and educational establishments might additionally facilitate reporting processes, he added.
Tips, coaching programmes and collaborations may help Malaysian firms higher put together to undertake new sustainability resporting requirements, mentioned Megat Iskandar Shah, companion at monetary providers advisory agency Ernst & Younger PLT. Picture: Ernst & Younger Consulting Sdn Bhd
In the meantime, the federal government might assist reporting firms by making certain that they’ve entry to the related information wanted to make normal sustainability and local weather associated disclosures, mentioned Manohar. A property firm, for instance, would possibly must safe data from the related land workplace or water administration company to reveal whether or not their land banks overlap with 100-year flood zones.
“These are figures {that a} authorities company or division may need, however for firms to fee their very own assessments, it may very well be fairly costly. A few of this nationwide information must be made obtainable in order that firms can report accordingly,” Manohar mentioned.
One other potential supply of assist is authorities incentives or assets, mentioned Megat. Singapore lately introduced that it will present funding assist of as much as 30 per cent for big firms which might be getting ready to adjust to ISSB requirements, and defray 70 per cent of prices for small and medium enterprises (SMEs).
Given the Malaysian authorities’s present concentrate on fiscal consolidation, there are at the moment no plans to supply such monetary assist to native reporting firms, mentioned Kamaruddin. The ACSR is, nonetheless, working in the direction of establishing capability constructing programmes that tackle the various wants Malaysian firms.
“Previous to [drafting] the session paper, we met with a consultative group comprising a number of public listed firms, assurance suppliers, buyers and different stakeholders. From there, we might gauge the extent of understanding [towards the ISSB standards], in order that once we do the capability constructing, we all know what to concentrate on,” he mentioned.
Whereas discussions are nonetheless ongoing to find out the scope and construction of those programmes, there are plans to adapt it to the readiness of the varied firms and sectors concerned, Kamaruddin added. He mentioned that the ACSR would draw on the technical experience of the ISSB, which has already delivered a technical briefing for regulators and members of presidency.
“We’ve began off with a regulatory-led strategy, however I don’t suppose that shall be sufficient relating to formulating the implementation framework for ISSB. Regulatory companies can kind the core, however we nonetheless want loads of enter from stakeholders,” mentioned Kamarudin.
