This concept paper aims to provide a foundational understanding of Environmental, Social and Governance

(ESG) practices in Malaysia by analysing recent industry reports, policy updates and expert commentaries. With

ESG gaining importance as a strategic driver for sustainable corporate growth and the Malaysian companies are

navigating to developing compliance requirements, stakeholder expectations and market opportunities. Using

secondary sources including government initiatives, corporate reporting guidelines and media analyses, this

Keywords: Environmental, Social and Governance (ESG), Corporate Sustainability, Corporate Governance,

Strategic Corporate Management, Sustainable Business Strategies, Malaysia

In recent years, Environmental, Social and Governance (ESG) practices have shifted from being a voluntary

corporate responsibility initiative to a critical strategic imperative for businesses worldwide. According to The

Star (2024, February 28), the global move towards mandatory ESG reporting is reshaping corporate priorities,

with Malaysia being no exception. This transformation is driven by increasing investor expectations, stakeholder

pressure and evolving regulatory frameworks that demand greater transparency and accountability in corporate

operations. In Malaysia, the sustainability agenda has been pushed by regulatory developments, especially the

enhancement of Bursa Malaysia’s sustainability reporting framework. As reported by The Star (2022, September

challenge, Bursa Malaysia has introduced an ESG reporting platform as stated at The Star, 2023, December 4.

The platform develops to help businesses modernize their disclosure processes and improve the consistency of

their sustainability data. Despite these advancements, the ESG journey in Malaysia is not without challenges.

Zaid Ibrahim & Co. (2024, March 22) observes that many businesses still treat ESG as a compliance exercise

rather than a strategic enabler. This approach risks limiting the transformative potential of ESG integration,

which should ideally extend beyond regulatory adherence to include embedding sustainability within core

business strategies and corporate governance structures.

This concept paper produces existing literature, industry reports and policy updates to provide a consolidated

understanding of ESG developments in Malaysia. It examines the country’s progress, identifies key

implementation challenges and highlights opportunities for leveraging ESG as a driver of strategic corporate

The term ESG (Environmental, Social, Governance) has been increasingly used in both academic and

professional contexts to refer to a framework for assessing non-financial performance of companies. It builds on

but is different from the older concepts such as Corporate Social Responsibility (CSR). Unlike Corporate Social

Responsibility (CSR) which is often voluntary and qualitative, ESG is associated with measurable disclosure

criteria and is increasingly tied to investment decisions (Eden, Lopez & Hererra, 2025). Seow (2024) highlighted

that while CSR reflects a broader, normative commitment to societal expectations, ESG represents a more

formalised system of assessment and reporting, particularly attractive to investors and regulators. Similarly,

Sahin, Bax & Paterlini (2021) argued that ESG provides a systematic framework for understanding risks and

opportunities across three dimensions, though challenges such as missing data and inconsistent measurement

assessing corporate sustainability and ethical performance. According to the International Sustainability

Standards Board (ISSB), the aim is to create a unified set of sustainability reporting standards that enable

consistent, comparable, and decision-useful information for investors worldwide (ISSB, 2023). Countries across

Asia, including Malaysia, have begun aligning with these frameworks to remain competitive in global capital

markets.

The shift towards mandatory ESG reporting has accelerated in recent years, with governments and stock

exchanges requiring companies to disclose sustainability metrics as part of their annual reporting. As highlighted

by The Star (2024, February 28), this global momentum has placed pressure on Malaysian companies to adopt

comprehensive ESG frameworks, particularly in anticipation of stricter international compliance requirements.

companies in standardising and streamlining sustainability data collection (The Star, 2023, December 4). Bursa

Malaysia introduced this digital platform and can be accessible through the Bursa LINK system at no additional

cost and to assist listed companies in enhancing their sustainability reporting. Through this platform, issuers are

required to generate a summary performance table, which must be incorporated into their Sustainability

Statements. The table is intended to disclose key indicators and data relevant to each company’s material

sustainability issues, thereby promoting transparency and comparability in reporting practices (Bursa Malaysia,

2023). To ensure a seamless transition to the updated standards, Bursa Malaysia has also developed a set of

support materials, including detailed user guides and instructional videos, which are available to registered Bursa

ESG reports.

Additionally, the Malaysia Digital Economy Corporation (MDEC) has played a key role in promoting ESG

integration especially within the technology and digital sectors. According to MDEC (2023), ESG is not only a

digital economy landscape (MDEC, 2023).

Challenges in ESG Implementation in Malaysia

Despite notable progress, ESG adoption in Malaysia faces several barriers. A report by Zaid Ibrahim & Co.

(2024, March 22) points out that many companies still perceive ESG as a regulatory obligation rather than a

value-creating business strategy. This compliance was driven mindset that can result in superficial adoption that

lacks genuine integration into corporate strategy. Another critical challenge is in the data quality and

transparency. KPMG Malaysia (2024, December 5) emphasises that robust, verifiable and high quality ESG data

is essential for effective reporting and decision-making process. However, many Malaysian companies such as

SMEs still lack on the infrastructure and expertise needed to meet these data requirements which undermining

the credibility of their disclosures.

ICMR:

Table 1: The Six main challenges of ESG in Malaysia by ICMR

Multiple frameworks (GRI, TCFD, Science Based

inconsistency.

Reduces comparability,

raises risk of greenwashing.

Firms and investors prioritise quarterly results and

Limits willingness to invest in

delayed payoffs.

access to green financing, and pressure from supply chain partners are the most significant barriers. Many

Malaysian micro, small, and medium enterprises (MSMEs) struggle to comply with evolving ESG standards that

are often designed with larger firms in mind, while also facing financial constraints that limit their ability to

invest in sustainability initiatives. In addition, supply chain requirements from larger corporations create pressure

that smaller firms may not have the resources or capacity to meet. Ong et al. (2025) also added, beyond these

structural constraints, MSMEs also face internal limitations such as a lack of ESG knowledge, insufficient

technical expertise, and limited access to facilitators or government support. Low awareness, cultural resistance,

and doubts about market demand for ESG compliant products further hinder motivation to adopt sustainable

practices. These challenges suggest that without tailored support, MSMEs risk being left behind in Malaysia’s

sustainability transition, underscoring the need for differentiated regulatory approaches, financial incentives and

Furthermore, the Wellkinetics Sdn Bhd (2025) highlights that firms can gain strategic advantages by conducting

reporting and governance advisory provide companies with tools to differentiate themselves in competitive

sustainability reports, ESG disclosures and sector-specific guidelines were analysed to capture organisational

These materials were examined through a qualitative thematic analysis, allowing the identification of recurring

trends, implementation challenges and emerging priorities within the Malaysian ESG landscape. The synthesis

of these themes facilitated the development of a conceptual framework that illustrates how ESG principles

influence corporate strategy, enhance transparency, and align organisational objectives with the Sustainable

Development Goals (SDGs). By adopting this narrative and integrative approach, the study provides a holistic

The second dimension is strategies ESG integration that represents the internal mechanisms through which

sustainability metrics. This dimension functions as a mediating process, consistent with the Resource-Based

supply chains not only mitigate risks but also create new value propositions that appeal to conscious consumers

and investors alike. Moreover, ESG adoption enhances corporate resilience by enabling companies to better

Aligning ESG practices with national sustainability agendas such as Malaysia’s Twelfth Malaysia Plan and the

National Energy Transition Roadmap creates synergies between corporate objectives and national priorities. This

alignment not only boosts corporate reputation but also contributes to Malaysia’s broader development goals,

such as decarbonisation, sustainable economic growth, and social equity. In the future, companies that

successfully integrate ESG into their core business strategies will be better positioned to thrive in a rapidly

evolving marketplace. The ability to balance financial growth with social and environmental responsibility will

define corporate resilience in the 21st century.

Below is the findings summary of this paper:

Table 2: The key findings of ESG in Malaysia

From the table above is highlight the ESG of country’s progress, the key implementation challenges and the

opportunities for leveraging ESG as a driver of strategic corporate growth. ESG is emerging as a transformative

driver of corporate strategy in Malaysia, bridging the gap between regulatory compliance and sustainable value

lies in how organisations internalise ESG as part of their core value creation processes. This concept paper has

highlighted that ESG adoption offers more than reputational benefits which are it can serve as a strategic lever

for innovation, risk mitigation and long-term profitability. For Malaysian companies, the path forward requires

moving beyond a compliance mindset to embrace ESG as a source of strategic differentiation. By embedding

sustainability into corporate culture, aligning with national priorities such as the Twelfth Malaysia Plan and the

National Energy Transition Roadmap, and actively engaging with stakeholders, businesses can position

themselves as leaders in sustainable growth.

As ESG reporting and accountability become global norms, early adopters in Malaysia stand to benefit from

enhanced market credibility, investor confidence and resilience in the face of economic and environmental

uncertainty. At the end, the integration of ESG principles into corporate strategy is not simply a trend but an