What Does ESG Mean for Directors and Senior Management of PLCs?

The Malaysian Code of Corporate Governance (MCCG) recognises that sustainability and its underlying environmental, social as well as governance (ESG) issues are becoming increasingly material to the ability of companies to create durable and sustainable value and maintain confidence of their stakeholders.

Directors and senior management of public listed companies should pay attention to the following best practices in the MCCG in respect of sustainability in the strategy and operations of companies:

1. The board and management are responsible for the governance of sustainability in the companies including setting the companies’ sustainability strategies, priorities and targets.
2. The board takes into account sustainability considerations when exercising its duties.
3. Senior management to drive strategic management of material sustainability matters.
4. The board ensures that the companies’ sustainability strategies, priorities, targets and performance against these targets are communicated to their stakeholders.
5. The board takes appropriate action to stay abreast with and understand the sustainability issues relevant to the companies and their business, including climate-related risks and opportunities.
6. Performance evaluations of the board and senior management include a review of their performance in addressing the companies’ material sustainability risks and opportunities.

The intended outcome is for companies to address sustainability risks and opportunities in an integrated and strategic manner to support long term strategy and success.

Why Should Listed Companies Care?

From compliance perspective, Paragraph 15.25 of the Main Market Listing Requirements and Rule 15.25 of the ACE Market Listing Requirements require listed companies to ensure that their board of directors provide an overview statement of the application of the principles set out in the MCCG, in their annual reports. Listed companies must also disclose the application of each practice set out in the MCCG during the financial year, to Bursa Malaysia in Corporate Governance Reports and announce the same together with the announcement of their annual reports.

The Listing Requirements require listed companies which do not apply any practice in the MCCG to explain the non-application, and disclose the alternative practice adopted and how such alternative practice achieves the intended outcomes as set out in the MCCG. If a company fails to do so, it is in breach of the Listing Requirements.

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This post was first posted on LinkedIn on 13 January 2025.