How to Become a Top ESG Company in Malaysia: Criteria, Strategy & FAQs

Discover how to become one of the top ESG companies in Malaysia. Learn key ESG criteria, practical steps, and insights to lead in sustainability and corporate responsibility.

In today’s business landscape, Environmental, Social, and Governance (ESG) performance isn’t just a buzzword—it’s a critical part of long-term success. Malaysia, like many forward-thinking nations, is pushing hard for companies to embed sustainability into their core operations. Whether you’re a startup or a corporate giant, if you’re aiming to become one of the top ESG companies in Malaysia, understanding the framework, expectations, and standards is essential.

Here’s your comprehensive guide on what it takes to rank among the ESG elites in Malaysia.

1. Understanding What ESG Means in Malaysia

ESG stands for Environmental, Social, and Governance—a holistic framework assessing how a company performs as a steward of nature, treats people, and governs itself. In Malaysia, ESG has become a major benchmark for investment, with increasing pressure from Bursa Malaysia, institutional investors, and even consumers.

Environmental: Includes energy usage, carbon footprint, waste management, water efficiency, and biodiversity conservation.
Social: Covers labor practices, community involvement, human rights, and diversity and inclusion.
Governance: Focuses on transparency, board independence, ethics, compliance, and anti-corruption policies.

Malaysian companies are expected to integrate ESG not only because it’s good PR, but because it is increasingly tied to financial performance, investor trust, and regulatory expectations.

2. Why ESG Matters for Malaysian Companies

Why should businesses in Malaysia care about ESG? Because it’s more than just compliance—it’s a strategic move. Here’s why:

Investor Appeal: Global and local investors prioritize companies with strong ESG practices. They see it as a sign of lower risk and long-term value.
Market Access: ESG compliance opens doors to international markets where regulations and consumer expectations are high.
Brand Loyalty: In Malaysia, particularly among the younger generation, consumers prefer brands that demonstrate a genuine commitment to sustainability and social responsibility.
Operational Efficiency: Many ESG practices—such as energy savings or waste reduction—lead to cost efficiencies and improved bottom lines.
Regulatory Compliance: Malaysia’s regulators, including the Securities Commission Malaysia and Bursa Malaysia, are stepping up ESG disclosure requirements under initiatives such as the Malaysian Code on Corporate Governance (MCCG) and Bursa’s Sustainability Reporting Guide.

3. Key ESG Criteria to Become a Top Company in Malaysia

To become a top ESG company in Malaysia, your organization must excel across three core pillars. Below are the core ESG metrics and benchmarks to guide you:

Environmental Criteria:

Reduce greenhouse gas emissions in line with global targets
Implement sustainable sourcing practices
Conduct environmental impact assessments
Adopt renewable energy and energy-efficient technologies
Practice robust waste and water management systems

Social Criteria:

Ensure employee health, safety, and well-being
Promote diversity, equity, and inclusion at all levels
Maintain fair labor practices and supply chain transparency
Actively contribute to local community development
Respect human rights across all operations

Governance Criteria:

Maintain a diverse and independent board structure
Ensure transparency in disclosures and reporting
Establish anti-bribery and anti-corruption policies
Engage stakeholders regularly and honestly
Enforce ethical business practices across the organization

Each of these aspects should be documented, audited, and disclosed publicly via annual ESG or sustainability reports.

4. ESG Reporting & Disclosure Standards in Malaysia

In Malaysia, ESG disclosure is no longer optional, especially for public-listed companies (PLCs). Bursa Malaysia mandates sustainability reporting aligned with global standards. Here’s how companies can comply:

Follow Bursa Malaysia’s Sustainability Reporting Guide: This guide requires PLCs to report on material ESG issues that are important to stakeholders.
Use Global Frameworks: Align with international reporting frameworks like:
- GRI (Global Reporting Initiative)
- TCFD (Task Force on Climate-related Financial Disclosures)
- SASB (Sustainability Accounting Standards Board)
- CDP (Carbon Disclosure Project)
Conduct Materiality Assessments: Identify ESG issues most relevant to your stakeholders and your business model.
Ensure Transparency: Regularly publish ESG metrics and explain how they’re measured, tracked, and improved.
Third-party Auditing: Engage independent firms to validate ESG data, enhancing credibility with investors and stakeholders.

5. Step-by-Step Guide to Becoming a Top ESG Company in Malaysia

Getting to the top of ESG rankings in Malaysia doesn’t happen overnight. It requires a clear strategy, internal commitment, and measurable progress.

Here’s a proven roadmap to follow:

Step 1: Conduct an ESG Gap Assessment

Begin by assessing your current ESG position. Identify key strengths, weaknesses, and areas that need improvement.

Step 2: Set Measurable Goals

Develop short- and long-term ESG goals. Make sure they’re SMART—specific, measurable, achievable, relevant, and time-bound.

Step 3: Appoint a Sustainability Officer or Team

A dedicated ESG or sustainability team ensures continuous focus. Larger firms may need a Chief Sustainability Officer (CSO).

Step 4: Embed ESG in Corporate Strategy

ESG must be part of your business model. From supply chain decisions to hiring practices, every aspect of the organization should reflect its ESG values.

Step 5: Engage Stakeholders

From employees to customers and investors—get everyone involved. Transparency and communication are key.

Step 6: Monitor, Improve, and Report

Regularly review your ESG metrics and performance. Publish reports annually and ensure continuous improvements are being made.

6. ESG Integration Across the Value Chain

Embedding ESG into every part of your business operations isn’t just for the boardroom. It must be present across your entire value chain—from suppliers to customers.

Sourcing & Procurement:

Choose vendors with strong ESG commitments.
Include ESG criteria in supplier contracts.
Audit suppliers regularly for compliance.

Product Design & Development:

Use sustainable materials.
Design for durability, reusability, and minimal environmental impact.

Distribution & Logistics:

Opt for low-carbon transportation options.
Optimize routes to reduce emissions.

Customer Engagement:

Educate your customers about sustainable practices.
Offer take-back programs or eco-friendly packaging.

This holistic approach helps build a consistent ESG culture throughout your organization and supply chain.

7. Building an ESG Culture Internally

To truly become a top ESG company, your employees must embody and live by ESG values. Internal culture plays a pivotal role.

Training & Awareness:

Provide ESG training programs for all levels.
Promote sustainability champions within departments.

Employee Engagement:

Encourage green initiatives (e.g., recycling drives, carpooling).
Celebrate ESG achievements publicly.

Leadership Accountability:

Tie executive bonuses to ESG performance.
Include ESG KPIs in performance reviews.

When ESG becomes part of your organizational DNA, the transformation is organic, long-lasting, and impactful.

8. ESG Ratings and Benchmarking Agencies in Malaysia

If you’re aiming for top-tier ESG recognition, you’ll need to impress the right agencies. ESG ratings are assigned by independent organizations that assess companies based on public disclosures, governance practices, and sustainability performance.

Top ESG Rating Agencies:

FTSE4Good Bursa Malaysia Index: Evaluates companies listed on Bursa Malaysia for ESG performance.
Sustainalytics: Offers ESG risk ratings used by investors globally.
MSCI ESG Ratings: Measures resilience to long-term ESG risks.
ISS ESG: Focuses on responsible investment and governance issues.

These agencies look at:

ESG disclosures
Climate risk management
Gender diversity on the board
Carbon emissions and reduction plans
Anti-corruption policies

To score well, transparency and alignment with global frameworks are crucial.

9. Government Support & Incentives for ESG in Malaysia

The Malaysian government is actively promoting ESG development. Companies can take advantage of various incentives and policies.

Key Government Initiatives:

Sustainable and Responsible Investment (SRI) Sukuk Framework: Encourages Islamic bonds for green and social projects.
MyHijau Certification: Recognizes eco-friendly products and services.
Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE): Available to companies that adopt green technology.

Policy Support:

Malaysia’s 12th Malaysia Plan places a strong emphasis on sustainability.
The Ministry of Environment and Water (KASA) promotes climate-resilient policies.
BNM and the SC Malaysia promote climate-risk assessments and sustainable finance guidelines.

Leverage these supports to fund your ESG transition.

10. Case Studies: Top ESG Companies in Malaysia

PETRONAS

Malaysia’s national oil company has implemented rigorous ESG frameworks, with a focus on achieving net-zero goals by 2050. It publishes detailed sustainability reports and integrates climate risk assessments.

CIMB Group

CIMB ranks highly in ESG ratings due to its firm policies on sustainable finance, a net-zero roadmap, and inclusive hiring practices. It is part of the FTSE4Good Bursa Index.

Sime Darby Plantation

Recognized globally for its sustainable palm oil practices, Sime Darby has made significant strides in ESG through transparency, a focus on human rights, and commitments to deforestation-free operations.

These companies show that ESG excellence is possible—even in resource-intensive sectors.

Conclusion

Becoming one of the top ESG companies in Malaysia requires more than just box-ticking. It demands strategic alignment, transparency, stakeholder engagement, and cultural change. However, the payoff is worth it—improved brand trust, increased investor interest, enhanced market access, and long-term profitability.

Start small if needed, but start today. Conduct your ESG audit, set realistic goals, report transparently, and continue improving. Malaysia’s future is green, and your business can be a part of that transformation.

FAQs

1. What is ESG, and why is it important for Malaysian companies?

ESG stands for Environmental, Social, and Governance. It’s important in Malaysia as it builds investor confidence, meets regulatory demands, and enhances brand loyalty by promoting sustainability and ethical governance.

2. Are there mandatory ESG reporting requirements in Malaysia?

Yes, Bursa Malaysia requires all listed companies to publish annual sustainability reports. These must align with the Bursa Sustainability Reporting Guide and consider material ESG factors.

3. How can small businesses in Malaysia adopt ESG practices?

Begin with small steps, such as waste reduction, energy savings, fair labor practices, and transparent policies. Utilize government support programs, such as GITA/GITE, and pursue MyHijau certification.

4. What are the main ESG rating agencies in Malaysia?

Top ESG raters include FTSE4Good Bursa Malaysia Index, MSCI, Sustainalytics, and ISS ESG. These agencies evaluate companies based on publicly available ESG data, risk management, and governance.

5. What industries in Malaysia have the most ESG potential?

The finance, energy, palm oil, manufacturing, and technology sectors hold significant ESG opportunities. These industries face high environmental/social scrutiny but also receive strong investor support for sustainable transitions.