Addressing sustainability challenges as part of director’s duty in Malaysia

Abstract

Purpose

The development of successful Sustainable Development Goals realization cannot be divorced from regulations governing sustainability information. Therefore, limited research on the regulatory environment regarding sustainability reporting in the Malaysian context requires further examination to ascertain the current framework. This study aims to critically assess the Malaysian Companies Act 2016 and Malaysian Code on Corporate Governance (MCCG) to examine the regulatory environment regarding the sustainability reporting framework. The examination is done to determine the extent of support provided under the Malaysian regulatory environment for the said practice.

Design/methodology/approach

A doctrinal methodology that relies on the extant literature, statutory instruments and case laws complemented by content analysis is adopted to explore the current regulatory environment regarding sustainability reporting.

Findings

The findings indicate that the Companies Act 2016 has already paved the way for the integration of corporate sustainability through the Business Review Report (BRR). However, the application is voluntary and hence could lead to inconsistent implementation. The MCCG has introduced the integrated reporting practice, but the application is limited to large companies on “apply and report” approach. This practice is voluntary to other types of companies, which diminishes the importance of sustainability reporting and gives rise to doubt about its efficiency in addressing sustainability in the long term. The current framework for sustainability reporting cannot be considered satisfactory, given the significance of sustainable development to the Malaysian economy and society, due to a lack of appropriate legal obligations.

Originality/value

This study is presently amongst the available legal literature on sustainability reporting practice in Malaysia, adding to its originality. This paper hopes to stimulate discussion among academicians on incorporating sustainability principles in the Companies Act 2016 and expanding directors’ duties.

Citation

Mustafa Khan, N.J., Mohd Ali, H. and Md Noor Alam, H.S. (2023), "Addressing sustainability challenges as part of director’s duty in Malaysia", International Journal of Law and Management, Vol. 65 No. 6, pp. 538-559. https://doi.org/10.1108/IJLMA-03-2023-0044