The urgency surrounding climate risks has intensified globally, and ESG issues have become critical strategic and operational concerns for companies.

The increasing frequency and severity of extreme weather events, rising sea levels, and biodiversity loss exemplify the urgency. These phenomena pose significant risks to many business operations, supply chains, and asset valuations.

So, as governments, investors, and consumers become acquainted with climate-related issues, it’s mission-critical that companies integrate ESG considerations into their business strategies, operations, and decision-making processes.

What is an ESG reporting system?

ESG (Environmental, Social, and Governance) denotes a framework employed to evaluate an organisation’s business practices and performance on various sustainability and ethical criteria. 

Going beyond traditional financial metrics, the ESG framework evaluates, for example, how a company manages environmental risks, like climate change and resource depletion. 

It also assesses governance and social factors, such as labour practices, board diversity, human rights, executive compensation and community engagement. 

These considerations are becoming increasingly important in today’s investment decision-making and corporate strategy landscape. This is because more stakeholders are recognising the importance of sustainable business practices to drive long-term value creation, foster positive societal impact, and mitigate regulatory risks. 

ESG reporting is a relatively nascent corporate endeavour that gained traction in the early 2000s. It provides companies with a means to show qualitative and quantitative progress towards environmental, sustainability, and corporate governance goals.  

That being said, an ESG reporting system is essentially a specialised software product that orchestrates corporate disclosure. In practice, it allows organisations to disclose information about their operations relating to environmental impact, social initiatives, and governance practices. 

Overall, this reporting system helps users identify relevant metrics, choose appropriate standards, collect data, report it, and communicate the results effectively.

Why is ESG reporting important for companies?

ESG issues have evolved from mere corporate social responsibility initiatives to pivotal strategic and operational concerns for companies across industries. 

Recognising that environmental degradation, social inequities, and governance failures pose material risks to business continuity, more companies are increasingly seeking to embed ESG principles into their core business strategies. 

This demonstrates the growing importance of environmental, social and governance reporting in aligning corporate and auditing solutions with stakeholder and societal objectives.

This is now indispensable for demonstrating how a company’s purpose aligns with creating long-term value and building trust with stakeholders. 

Furthermore, by proactively addressing these challenges, companies can augment their resilience to market disruptions, regulatory changes, and reputational risks. All whilst positioning themselves for competitive advantage and sustainable growth.

Moreover, companies that prioritise it typically stand to attract greater investment flows, access to capital, and stakeholder support. 

Additionally, ESG reporting provides organisations the opportunity to showcase transparency in the fight against climate and other issues. 

Is ESG compulsory in Malaysia?

The heightened sense of urgency around climate risks globally has propelled ESG issues to the forefront of corporate priorities. Malaysia has not been left behind in this seismic paradigm shift towards more sustainable and responsible business practices.

So, yes, ESG is compulsory in Malaysia for public-listed companies, ensuring transparency in their activities and measuring sustainability. In fact, publicly listed companies in Malaysia have been required to comply with mandatory ESG reporting regulations since 2016. 

What are Bursa ESG guidelines?

Over the decade, investors’ attention to ESG considerations has skyrocketed, making them often a deal-breaker for an organisation’s success or failure. In Malaysia, Bursa Malaysia plays a significant role in orchestrating ESG compliance.

Bursa Malaysia regulates multi-asset exchanges, investments, capital raising, and similar facilities. Essentially, it provides a platform for companies to raise capital via the issuance of shares and bonds. 

Besides regulating the securities market in Malaysia, Bursa Malaysia champions initiatives like mandatory reporting to enhance sustainability disclosures amongst listed companies.

For the most part, the Bursa ESG guidelines dictate that publicly listed companies (PLCs) disclose Common Sustainability Matters with accompanying quantitative indicators, aligned with the Taskforce on Climate-related Financial Disclosure. 

How is Bursa Malaysia promoting good ESG practices in the business community?

Bursa Malaysia is promoting good ESG practices in the business community through various initiatives. For example, it provides video resources and guidebooks to help PLCs develop well-defined approaches.

Relatedly, it conducts educational initiatives and awareness campaigns to raise awareness amongst listed companies and investors about the significance of ESG. This helps to foster a culture of sustainability and responsible business practices within the Malaysian business community.

Furthermore, Bursa Malaysia has introduced enhanced sustainability reporting requirements, which are mandatory for all PLCs. These requirements are being programmatically orchestrated by the Bursa Malaysia reporting platform as we shall later see. 

Overall, Bursa Malaysia encourages companies to prioritise sustainability from the outset. This approach enhances the overall ESG performance of listed companies and provides investors with access to more sustainable investment opportunities.

Bursa Malaysia’s new ESG reporting mandates 

Bursa Malaysia continually seeks to reinforce its position as a catalyst for sustainable practices. Thereby, shaping sustainable actions in today’s markets where sustainability practices hold paramount importance. 

In line with this ethos, the exchange launched the Bursa Malaysia ESG Platform on 4 December 2023 as part of its new ESG reporting mandates. 

This groundbreaking platform was expressly designed to facilitate the submission of mandatory disclosures conforming to the prescribed format mandated under . It ensures standardised reporting and communication of sustainability information. 

Please note that these requirements are being executed in a phased approach to allow listed issuers time to familiarise themselves with the requirements. 

What is the Bursa Malaysia ESG platform?

The Bursa Malaysia ESG Reporting Platform is a free platform accessible through the Bursa LINK system. 

In practice, the platform requires listed issuers to generate a concise performance table, which must be disclosed in their respective sustainability statements. This performance table encompasses indicators and data relevant to the listed issuer’s material sustainability matters— guided by Bursa Malaysia’s Illustrative Sustainability Reporting Guide. 

Overall, the Bursa Malaysia platform plays a mission-critical role in orchestrating ESG reporting in Malaysia via a standardised format. This consequently ensures that PLCs are held accountable for their sustainability practices. 

It also gives stakeholders access to reliable and comparable information about ESG performance to make informed decisions about their investments and engagement with PLCs.

Step-by-step guide to ESG reporting for Bursa compliance

Bursa Malaysia’s reporting framework can be confusing and convoluted to navigate for new companies due to the depth of the guidelines. To effectively comply with Bursa’s enhanced ESG reporting requirements, consider the following steps:

Step 1: Data Collection and Management

Commence by gathering all relevant ESG data across disparate departments in your business. This may include data on environmental impacts like emissions and energy consumption. Or governance practices related to ethics policies and transparency.  

This data collection should be comprehensive, considering both quantitative and qualitative factors. Furthermore, ensure that the data is up-to-date, accurate and relevant to your organisation’s material sustainability matters.

Step 2: Data Analysis 

In the next step, iteratively analyse the collected ESG data for accuracy and insights. You can employ recommended software tools to assist in creating compliance reports that meet Bursa’s guidelines.

These tools should help you aggregate the data to accurately identify trends and benchmark performance against industry peers and ESG standards. These insights can later be employed to inform company initiatives and areas for improvement. 

Step 3: Submission and Verification

Subsequently, ensure to submit the report via Bursa Malaysia’s reporting platform, adhering to the specified deadlines and requirements. 

For example, ensure that the performance table includes indicators and data pertinent to the listed issuer’s material sustainability matters. The regulatory framework set by Bursa Malaysia may be overwhelming to interpret and implement effectively for some companies. 

The extensive nature of the reporting guidelines encompasses various aspects of corporate disclosure as well as financial and sustainability reporting. So, before submission, consider involving internal audits, reviews by ESG specialists, or third-party verification to validate the integrity and reliability of the reported information.

Step 4: Continuous Improvement and Monitoring 

Update the strategies and reporting processes regularly based on new guidelines and performance feedback. The ESG landscape is continually evolving, so it’s imperative to keep abreast of new policies, regulations, and best practices issued by Bursa Malaysia.

Additionally, solicit feedback from stakeholders, and incorporate lessons learned into future reporting cycles to drive positive impact over the long term.

Challenges faced by PLCs in Bursa ESG reporting

Public-listed companies face several challenges in relation to reporting, for example: 

1. Data collection: Companies often struggle to collect accurate and comprehensive data from various departments and operations. 
   
   Without robust data collection mechanisms, companies risk inaccuracies and inconsistencies in their ESG disclosures. This consequently might undermine stakeholder trust and confidence in their sustainability performance.
   
   This challenge is aggravated by the lack of standardisation in reporting, which leads to confusion and difficulty in comparing data across companies and sectors. For example, slight variations in ESG methodologies, terminology and disclosure formats can pose a challenge during benchmarking. 
   
2. Consistency: Ensuring consistent reporting across different departments, subsidiaries, and financial periods can be exceedingly sophisticated and time-consuming.
   
   This complication is especially pronounced for multinational corporations with complex operations being run by disparate software. This inconsistency can hinder meaningful ESG benchmarking and analysis.
   
3. Regulatory compliance: Keeping up with evolving ESG reporting requirements and regulations can be challenging— especially with limited resources and expertise. 

To address these challenges, companies can benefit from leveraging robust ESG reporting software. Such dedicated software streamlines data collection and validation, ensuring that the reports are consistent and accurate whilst facilitating compliance with regulatory requisites. 

For instance, some ESG reporting software features customisable dashboards, report templates, and automated data collection. These standardised frameworks and components make it easier for companies to generate compliant and error-free reports. It, thereby, improves efficiency, transparency, and accountability in their ESG disclosures.

Benefits of using ESG reporting software

Advanced ESG reporting software is indispensable in streamlining the compliance process and enhancing strategic decision-making through better data insights. 

By automating data collection, validation, and compilation from various sources, these reporting software reduces PLCs’ manual effort. This consequently ensures data accuracy, leading to more efficient compliance with standards. 

Additionally, advanced ESG software typically provides mechanisms for in-depth data analysis, trend identificatioZn, and performance benchmarking. This enables companies to programmatically identify risks, opportunities, and areas for improvement.  

Ultimately, these insights can be strategically exploited to make informed decisions that enhance overall ESG performance.

Mandrill’s Lestar  ESG reporting software boasts of the above mentioned features such as:

• Centralised ESG data platform: Mandrill’s Lestar ESG software centralises data collection to a single platform. Thus, facilitating easier management and access. This centralised approach reduces manual data entry, eliminates data silos. Thereby, minimising the risk of human error whilst ensuring data accuracy and comprehensiveness. 

• AI-Powered LLM chatbot: Lestar employs AI-powered language models (LLM) chatbots to help users efficiently query and retrieve data. Trained on vast amounts of publicly available data, these chatbots provide moderately accurate information on ESG performance indicators.
  
  Consequently, users can interact with the system using natural language queries. Thereby, making it easier to retrieve and analyse specific ESG data points, facilitating more efficient decision-making and reporting.
  
• Intelligent dashboards for forecasting: Mandrill’s ESG reporting features unique intelligent dashboards that provide an actionable and comprehensive view of the organisation’s sustainability efforts and performance.

In practice, these interactive displays constitute detailed graphs and charts of ESG performance indicators. These allow PLCs to analyse trends, identify anomalies, and compare performance against benchmarks. 

Furthermore, Lestar ESG Mandrill’s intelligent dashboards also incorporate predictive analytics and scenario modelling capabilities— powered by mechanisms that track ESG parameters in real-time. 

This feature empowers proactive decision-making by enabling corporations to forecast future trends and assess potential risks, based on data-driven insights. 

Conclusion

With escalating concerns about the impact of climate change on economies, businesses are under mounting pressure to address sustainability as a critical strategic imperative. 

Consequently, ESG reporting and compliance are becoming increasingly crucial for companies. It helps to demonstrate transparency, accountability, and responsible stewardship of environmental, social, and governance issues. 

By disclosing all the related information, organisations can provide stakeholders, including investors, customers, employees, and regulators, with insights into their sustainability performance, risk management practices, and ethical conduct. 

Furthermore, reporting enables companies to track progress towards sustainability goals, identify areas for improvement, and mitigate risks associated with ESG factors.

Additionally, adherence to these standards and regulations not only fosters trust with stakeholders but also enhances resilience to regulatory changes, reputational risks, and market disruptions. This ultimately drives long-term value creation and competitive advantage in an increasingly sustainability-conscious world.
By investing in Mandrill’s Lestar ESG Solution, tailored to Bursa Malaysia’s reporting needs, PLCs can mitigate risks, drive stakeholder engagement, and demonstrate their commitment to sustainable business practices.