Malaysia’s ISSB consultations have revealed an urgent need for capacity in sustainability reporting.News | Eco Business

As Malaysia prepares to implement the latest sustainability reporting standards from the International Sustainability Standards Board (ISSB), companies are most concerned about their lack of capacity to meet these new global disclosure standards. He seems concerned.

The country’s Advisory Committee on Sustainability Reporting (ACSR), led by the Securities Commission Malaysia (SC) and comprising various financial regulators, will provide feedback on the proposed schedule and the adoption of ISSB standards by Malaysian companies. A public consultation was launched on February 15 to secure relief. .

A recent webinar hosted by ACSR brought together approximately 600 authors and stakeholders seeking clarity about ACSR. Consultation formI learned about eco-business from an interview with the committee chair.

“One of the more common questions was about capacity building,” said ACSR chairman and SC managing director Datuk Kamaluddin Hashim.

But the types of capabilities companies lack vary by sector and company size, he said. Larger publicly traded companies, especially those exposed to international markets and already subject to climate-related disclosure requirements, appear to be focused on aligning their current reporting practices with ISSB standards. However, small businesses may still need support in understanding the basics of sustainability reporting.

Mr Kamaluddin said about 1,400 Malaysian companies, including about 1,000 listed companies and about 400 private companies with sales of more than RM2 billion (about US$424 million), will be subject to the new disclosure requirements. .

In its consultation document, ACSR recommends that companies listed on Bursa Malaysia, the main market of Bursa Malaysia, adopt ISSB’s climate change disclosure standard, IFRS S2, by December 2025. did. The exchange’s smaller ACE market companies and larger unlisted companies must comply by the end of 2027.

Adoption of IFRS S1, a common sustainability reporting standard, will be mandatory for these companies in the following years, 2026 and 2028 respectively.

Malaysia is one of several countries in the Asia-Pacific region to hold a public consultation on the adoption of ISSB standards this year, after the standards body announced global disclosure standards in June last year. Countries are free to decide when and how to implement the standards. Earlier this month, Singapore’s regulator launched its own consultation to adopt both ISSB standards by 2025. The Australian Treasury is also seeking feedback on its regulations. bill Adopt standards.

Meanwhile, Hong Kong’s market regulator proposed in April last year that ISSB’s final climate standards be adopted from January 1, 2024. announced It said it would extend the reporting deadline for companies by one year to give issuers time to get used to the new standards.

Manohar Johnson, assurance and sustainability partner at advisory firm PwC Malaysia, said the Malaysian government can support climate-related disclosures by ensuring companies have access to relevant public data. .Image: PwC Malaysia

Business stakeholders have asked ACSR to extend the consultation period to provide feedback (the consultation was due to end on March 21), but have not seen any challenges to the proposed schedule. No, Kamaruddin said. “We have not [yet] “We did not receive any responses indicating that the authors needed more time than the consultation paper’s schedule,” he said.

Manohar Johnson, assurance and sustainability partner at advisory firm PwC Malaysia, offers a potential explanation for this. Unlike financial reporting, increasing awareness of climate change is a key driver for adopting sustainability-related disclosures sooner rather than later.

“There is a sense of urgency to combat the devastating effects of global warming,” he told EcoBusiness, referring to conversations he has had with his peers about implementing sustainability disclosures. Government efforts to reduce emissions to net zero by 2050 as part of Nationally Determined Contributions (NDCs) under the Paris Agreement are also putting pressure on companies to decarbonize their supply chains.

Malaysia’s biggest companies have already begun making climate-related disclosures. 2022, Bursa Malaysia mandated All companies listed on major markets will be required to make disclosures in line with the Task Force on Climate-related Disclosures (TCFD) by 2025. All listed companies will be required to produce an annual sustainability report from December 2023, but companies are free to choose which standards they use. This will serve as the basis for disclosure.

However, since this is the first time that companies have to report on the new mandatory metrics, many companies are finding it difficult to collect the necessary data, Manohar said. “While some of these companies may have collated such data in the past, they may not have collated it as rigorously as is currently required to meet current disclosure standards. ” he said.

Similar challenges are observed across the industry. “Based on our work with clients, we are observing talent gaps and capability limitations within organizations. [to meet upcoming sustainability reporting requirements]” said Megat Iskandar Shah, a partner at financial services consultancy Ernst & Young PLT.

He told Eco-Business that this includes some companies requiring existing departments to take on additional roles in sustainability reporting, and limited human resources allocated to reporting within sustainability teams. He said he would. “This will vary by sector, company and local factors such as the maturity of sustainability practices, awareness, training and institutional support,” Megat added.

Technical support

Some initiatives that could help companies meet new reporting requirements include comprehensive technical guidance, which could take the form of sustainability reporting guidelines, and That will include a training program, Megat said. “It is important to recognize that sustainability literacy needs to go beyond just the sustainability department and permeate all parts of the company,” he said. He added that collaboration between companies, assurance providers and academic institutions could also facilitate the reporting process.

Dato' Megat Iskandar Shah, Ernst & Partner Young PLT

Megat Iskandar Shah, partner at financial services advisory firm Ernst & Young PLT, said guidelines, training programs and collaborations will help Malaysian companies prepare to implement the new sustainability reporting standards. Image: Ernst & Young Consulting Sdn Bhd

Meanwhile, Manohar said governments could assist reporting companies by ensuring they have access to the relevant data needed to make general sustainability and climate-related disclosures. For example, a real estate company may need to secure information from the relevant land authority or water management agency to disclose whether its land levees overlap with his 100-year flood zone.

“These are numbers that government agencies and departments may hold, but it can be quite costly for businesses to commission their own assessments. We need to make some of the national data available,” Manohar said.

Another potential source of support is government incentives and resources, Megat said. Singapore recently announced that it will provide financial assistance of up to 30 percent to large companies preparing to comply with ISSB standards, and for small and medium-sized enterprises (SMEs) to shoulder 70 percent of the costs.

Given the Malaysian government’s current focus on fiscal consolidation, there are currently no plans to provide such financial support to local news companies, Kamardin said. However, ACSR is committed to establishing capacity development programs that cater to the various needs of Malaysian companies.

“prior to [drafting] Based on the consultation paper, we met with a consultative group consisting of several listed companies, guarantee providers, investors and other stakeholders.You can measure your understanding from there. [towards the ISSB standards]That way we know what to focus on when we do capacity development,” he said.

Discussions are still ongoing to determine the scope and structure of these programs, but there are plans to adapt them to the readiness of the various companies and sectors involved, Kamardin added. He said ACSR will leverage the technical expertise of ISSB, which already provides technical presentations to regulators and government officials.

“Although we started with a regulation-driven approach, we believe that alone is not enough when developing an ISSB implementation framework. Regulators can form the core, but they still We need a lot of input from stakeholders,” Kamaruddin said.

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