Malaysian companies face a turning point. Environmental, Social and Governance (ESG) requirements are no longer optional extras for large corporations alone. They are becoming essential business practices that affect access to capital, supply chain partnerships and long-term growth. As regulations tighten and supply-chain due diligence spreads into Malaysia, a new role is emerging to bridge the gap between sustainability ambitions and credible reporting: the ESG Controller.
This finance-plus-sustainability role goes beyond traditional compliance. ESG Controllers own data quality, internal controls and investor-grade reporting whilst helping small and medium-sized enterprises (SMEs) and mid-sized firms integrate ESG into budgeting, procurement and supply-chain decisions. When done properly, this integration turns compliance obligations into cost savings, risk reduction and better access to capital.
Understanding the ESG Controller Role
The ESG Controller functions much like a financial controller but for sustainability data. Whilst financial controllers ensure the accuracy of a company’s financial information, ESG Controllers supervise sustainability reporting with the same rigour. This role brings structure and credibility to how companies track, validate and disclose their environmental and social impacts.
ESG Controllers manage sustainability data from collection through to reporting. They ensure all information meets strict standards of accuracy and compliance, strengthening governance and enhancing transparency. The role requires collaboration across departments including human resources, operations, compliance and procurement to gather reliable, auditable information.
Data accuracy sits at the heart of the role. ESG Controllers establish checks for consistency and completeness whilst monitoring non-financial metrics such as greenhouse gas emissions, workforce diversity and social impacts. They align these metrics with reporting frameworks like the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB) and Task Force on Climate-related Financial Disclosures (TCFD).
Why Malaysia Needs ESG Controllers Now
Malaysia’s regulatory landscape is evolving rapidly. Bursa Malaysia introduced enhanced sustainability reporting requirements in December 2024, aligning with global best practices. These requirements include mandatory climate-related disclosures based on International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards.
Starting with financial years ending 31 December 2025, Main Market issuers must include climate-related disclosures, three years of performance data, targets and statements of internal review or external assurance in their annual Sustainability Statements. Large-cap companies must comply by 2025, whilst smaller listed firms have until 2027.
The National Sustainability Reporting Framework (NSRF) represents another major development. This framework sets out a phased approach for ESG reporting across listed and large non-listed companies, with external assurance expected to become standard practice. By 2027, Malaysia’s largest publicly-listed companies must disclose their entire value chain’s greenhouse gas emissions, including Scope 3 emissions.
These regulatory shifts create mounting pressure on businesses throughout the supply chain. Malaysian SMEs that supply to large corporations increasingly face ESG data requests as part of vendor scorecards. Companies that cannot provide reliable ESG data risk losing key contracts and being sidelined from global supply chains.
Supply-Chain Due Diligence and the CSDDD Effect
Although Malaysia does not directly fall under the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD), the directive’s influence reaches Malaysian businesses through their European customers and partners. The CSDDD requires large EU and non-EU firms generating significant revenue within the EU market to conduct due diligence on human rights and environmental impacts throughout their value chains.
EU companies with over 5,000 employees and global turnover exceeding €1.5 billion (RM7.01 billion) must comply by 2027. For Malaysian businesses, this means European multinational counterparts will increasingly demand ESG compliance throughout their supply chains.
The trickle-down effect creates urgency for Malaysian companies to strengthen their ESG practices. Large corporations are embedding ESG criteria into procurement policies, making alignment with these standards essential for continued growth, competitive advantage and market relevance. ESG Controllers help companies navigate these requirements by establishing robust data collection systems and internal controls that meet international standards.
The Finance-Plus-Sustainability Skillset
ESG Controllers bring together financial rigour and sustainability expertise. Like financial reporting, ESG requires consistency, transparency, traceability and performance insight. Definitions and methods must remain stable over time, disclosures must show how results were calculated, and figures must be backed by audit-ready evidence.
This parallel between financial and sustainability reporting means finance teams are uniquely equipped to lead ESG management. Chief Financial Officers (CFOs) and controllers already operate with discipline, independence and a control mindset, exactly the qualities needed to ensure ESG data is credible, comparable and decision-useful.
ESG Controllers typically report to the CFO, a structure that aligns well with the role’s focus on data integrity and reporting accuracy. By positioning the ESG Controller within the finance department, companies leverage the financial team’s expertise in regulatory compliance and internal controls, which are equally critical to sustainability reporting.
The role demands specific competencies. Effective ESG Controllers need analytical skills to handle complex data sets, collaborative abilities to work across departments, regulatory expertise to navigate evolving standards, and commitment to sustainability principles. They must translate complex environmental and social metrics into structured formats that comply with both international and industry-specific standards.
Integrating ESG into Budgeting and Procurement
ESG Controllers help embed sustainability considerations directly into planning, budgeting and performance measurement. This integration enables capital allocation decisions that account for ESG factors such as carbon pricing, supply chain volatility and employee retention.
In procurement, ESG Controllers work with teams to prioritise ESG compliance from the beginning during supplier discovery. Choosing ESG-aligned suppliers early simplifies onboarding, shortens evaluation cycles and improves overall compliance rates. Companies looking to develop a comprehensive sustainable procurement strategy can benefit from structured frameworks that embed ESG criteria throughout the supply chain. This approach avoids the costly retrofitting of existing suppliers to meet new standards, which often requires repeated audits, rewritten contracts and consultant fees.
ESG Controllers also support scenario modelling, projecting future emissions, resource costs and workforce risks under multiple pathways. Just as finance teams forecast cash flow under different market scenarios, ESG scenario modelling helps businesses understand how sustainability factors affect long-term profitability.
By integrating ESG into forecasting, companies can model how changes in energy use, emissions or workforce metrics impact costs, margins and capital access. This approach treats ESG drivers with the same importance as foreign exchange rates or raw material costs in scenario planning.
Establishing Internal Controls for ESG Data
Internal controls form the foundation of credible ESG reporting. As stakeholders increasingly rely on ESG data and demand transparency, incorporating internal controls into ESG compliance and strategy becomes vital. These controls ensure data accuracy, build trust, facilitate compliance and help companies adapt to evolving regulations.
Maintaining data quality and consistency across multiple business units, departments and value chain operations presents challenges. ESG data can be complex, involving multiple metrics and indicators. Companies often struggle to manage the diverse range of data required for comprehensive ESG reporting.
ESG Controllers address these challenges by standardising data collection methods and investing in technologies that facilitate data governance. They establish clear processes with quality controls, including defined rules for handling disclosures, peer reviews and rule-based checks during collection.
Key elements of robust ESG data controls include defining clear key performance indicators (KPIs), standardising data collection processes, implementing data governance practices and integrating ESG controls with existing systems. ESG Controllers assign responsibility for each KPI, create data collection workflows with clear deadlines and require source files, calculation methodologies and version control for every figure.
This level of control ensures ESG data meets the same rigour as financial data. Every emissions disclosure needs documented sources, just as a profit and loss statement requires supporting ledgers.
Turning Compliance into Commercial Advantage
Whilst many companies view ESG as a regulatory burden, strategic implementation delivers tangible business benefits. Companies with strong ESG practices often experience lower costs of capital, as investors perceive them as less risky investments. Good ESG performance indicates better risk management, operational efficiency and stronger ability to adapt to changing regulations and societal expectations.
Research by Harvard Business School shows that firms with high ESG performance have lower borrowing costs and improved access to capital markets. Investors are willing to accept lower rates of return on investments in companies they believe are well-managed and sustainable for the long term. This translates into significant financial benefits including lower borrowing costs and higher stock valuations.
For Malaysian SMEs, strong ESG credentials open doors to sustainable financing. Banks such as CIMB, UOB Malaysia, OCBC Malaysia and Maybank offer green loans with lower interest rates for ESG-aligned initiatives. The Green Technology Financing Scheme (GTFS) provides subsidised loans up to RM100 million for companies adopting sustainable technologies.
UOB Malaysia’s U-Green Financing programme, launched in collaboration with Syarikat Jaminan Pembiayaan Perniagaan (SJPP), allocates RM1 billion with up to 80% of applied loans guaranteed through the PEMULIH Government Guarantee Scheme. This makes UOB Malaysia the first bank to partner with SJPP on a green financing programme.
ESG initiatives often lead to operational cost savings through improved resource management and reduced waste. General Electric’s Ecomagination initiative resulted in $300 million in savings by reducing greenhouse gas emissions and water usage. Retailers and e-commerce businesses, in particular, can implement targeted waste management strategies that reduce Scope 3 emissions whilst improving operational efficiency. Nike improved profit margins by replacing certain shoe components with more sustainable materials and improving supply chain sustainability practices.
Supporting SMEs and Mid-Sized Firms
ESG integration remains superficial for most Malaysian SMEs. Only 19% of Malaysian SMEs have adopted environmentally-friendly production processes, and just 12% run structured corporate social responsibility programmes, as stated from Malaysia SME. According to this Journal, About 1.2 million SMEs in Malaysia were not aware of sustainable business practices, viewing them as potential expense increases.
However, the absence of strict regulations and ESG adoption by SMEs hinders their ability to enter the global supply chain for sustainable products. This challenge limits their market access and hampers future growth prospects.
For SMEs with limited resources, appointing a fractional ESG Controller can be a practical solution. This approach offers specialised support without the full-time commitment, allowing SMEs to strengthen their sustainability reporting and compliance flexibly and cost-effectively.
SME Corp Malaysia introduced the ESG Quick Guide for Micro, Small and Medium Enterprises (MSMEs) in February 2024 to support ESG implementation. The guide consists of eight straightforward steps to help businesses grasp the significance of ESG in their operations, including understanding ESG importance, setting objectives, identifying relevant ESG indicators, creating sustainability action plans and utilising user-friendly templates for ESG reporting.
Capital Markets Malaysia launched the Simplified ESG Disclosure Guide (SEDG) for SMEs in Supply Chains in October 2023, making Malaysia the first country globally to provide SMEs within global supply chains with streamlined and standardised guidelines for ESG disclosures. The SEDG comprises 38 priority disclosures aligned with local and global sustainability guidelines, categorised into Basic, Intermediate and Advanced levels to cater to different sustainability maturity levels.
Major corporations including Petronas, Telekom Malaysia, Nestlé Malaysia and Sunway Group have adopted the SEDG to elevate sustainability within their supply chains. This effectively means thousands of Malaysian SMEs forming part of these companies’ supply chains benefit from the SEDG’s simple and structured disclosures, templates and additional guidance.
Measuring Scope 3 Emissions
Scope 3 emissions represent one of the most challenging aspects of ESG reporting for Malaysian companies. These indirect greenhouse gas emissions occur throughout a company’s entire value chain, from raw material extraction to product disposal. Understanding the differences between Scope 1, 2 and 3 emissions forms the foundation for developing comprehensive carbon reduction strategies. Scope 3 emissions can account for up to 90% of a company’s carbon footprint, making them critical for holistic sustainability strategies.
Under the NSRF, large Malaysian publicly-listed companies must report Scope 3 emissions starting from 2027. This requirement underscores mounting pressure on large businesses to address their environmental impact holistically and on SMEs to align with global reporting standards.
Only 21% of Malaysian publicly-listed companies disclosed their Scope 3 emissions in their 2023 reporting cycle, lagging behind the broader Asia Pacific region’s 39%. Ignoring Scope 3 emissions means leaving out 70% to 90% of a company’s total carbon footprint.
ESG Controllers play a crucial role in establishing systems to measure and report Scope 3 emissions. They work with suppliers to collect data, implement estimation methodologies and ensure calculations align with the Greenhouse Gas Protocol. Effective strategies for managing carbon emissions throughout supplier chains require collaboration between companies and their suppliers to identify reduction opportunities. For companies whose suppliers are predominantly SMEs, this often requires educating and supporting partners in sustainability reporting.
The SEDG Sector Guides provide enhanced ESG disclosure guidelines for SMEs in five significant sectors: Energy, Transport and Logistics, Construction and Real Estate, Agriculture and Manufacturing. These guides delve into environmental considerations specific to each sector, including biodiversity, nature-related and climate disclosures likely to impact high-emissions industries.
Building Audit-Ready ESG Systems
With the NSRF requiring external reasonable assurance over sustainability disclosures in phases beginning in 2027, early engagement with ESG audits positions companies to lead conversations rather than react to requirements. For Main Market listed issuers with market capitalisation of RM2 billion and above, external assurance takes effect in 2027, followed by other Main Market issuers in 2028 and ACE Market companies and large non-listed entities in 2029.
Read the related article here: “Getting ready for NSRF: Malaysia’s ISSB- aligned enhanced sustainability disclosures“
ESG Controllers ensure sustainability data collected from all sources beyond the general ledger is complete, accurate and auditable. They establish audit trails that track every data point from source to reported figure. This traceability satisfies assurance and audit requirements just as financial data requires supporting documentation.
Modern ESG Controllers rely on advanced tools and technology to manage extensive data required for effective sustainability reporting. The shift from spreadsheets to specialised data management software has been transformative, allowing ESG Controllers to handle complex data sets with improved efficiency and reliability. Dedicated platforms streamline data collection from various departments, ensuring accuracy and consistency whilst facilitating real-time tracking of ESG metrics.
Investment in ESG software is accelerating as businesses recognise its critical role in navigating regulatory challenges. Research by Verdantix found that 81% of firms planned to increase spending on ESG data management tools in 2024, driven by stricter regulations and the need to enhance sustainability performance.
The Strategic Value of the ESG Controller
The ESG Controller is evolving into one of the most strategically influential roles outside the C-suite. These professionals shape how capital is allocated, how risk is managed and how performance is measured. They advise on scenario modelling, carbon pricing and green capital expenditure whilst benchmarking ESG progress internally and against industry peers.
ESG Controllers identify efficiency opportunities previously invisible in traditional reporting. They help leadership understand how decarbonisation efforts impact the bottom line and calculate the potential cost of action versus inaction. This strategic perspective enables informed decision-making that balances sustainability goals with financial performance.
By translating sustainability data into financial language that boards, auditors and investors understand, ESG Controllers improve investor messaging with data that holds up under scrutiny. They strengthen risk oversight by integrating ESG exposures into enterprise risk frameworks and unlock capital access through credible disclosures tied to sustainable finance instruments.
Practical Steps for Implementation
Companies looking to establish or strengthen their ESG capabilities should consider several practical steps. Following a structured ESG implementation framework helps organisations move from initial assessment through to full integration of sustainability practices. First, conduct or refresh a double materiality assessment to determine which ESG issues matter most. This sets the foundation for ESG reporting, similar to establishing a chart of accounts for financial reporting.
Next, assign responsibility for each key performance indicator, creating data collection workflows with clear deadlines just as with monthly financial close processes. Require source files, calculation methodologies and version control for every figure, building the equivalent of a general ledger for ESG data.
Start integrating ESG into forecasting by modelling how changes in energy use, emissions or workforce metrics impact costs, margins and capital access. Use platforms designed for ESG data management to automate consolidation, enforce controls and maintain traceability rather than relying on spreadsheets that collapse under the weight of multi-entity ESG data.
Provide training and raise awareness by investing in programmes that enhance the ESG literacy of the workforce. Ensure employees involved in data collection and reporting understand the importance of ESG controls and their role in maintaining accurate and reliable data.
Looking Ahead
As Malaysia chairs ASEAN in 2025, the country stands at a pivotal moment to lead the region’s sustainability transition. ESG is no longer merely a compliance requirement, it is a competitive differentiator. Malaysian businesses, especially SMEs, must embrace ESG not as a barrier but as a benchmark of excellence.
The trends shaping ESG in 2025 bring both challenges and opportunities. Companies must adapt to evolving regulations, prioritise transparency and embrace innovation. The role of the ESG Controller will continue to gain importance as sustainability increasingly drives business strategy.
For forward-thinking Malaysian companies, now is the time to establish this critical role. By appointing an ESG Controller, organisations can stay ahead in sustainability compliance, reinforce governance and build a solid foundation for future growth in a sustainability-focused market. The ESG Controller brings structure, credibility and strategic value to sustainability efforts, transforming compliance obligations into commercial advantages.
Ready to Strengthen Your ESG Capabilities?
Elite Asia offers comprehensive ESG solutions tailored to Malaysian businesses. Whether you are just starting your sustainability journey or looking to enhance existing practices, our team can help you establish robust ESG frameworks, improve data quality and prepare for evolving regulatory requirements.
Visit our page to learn how we can support your ESG transformation and position your business for sustainable success.
