Petaling Jaya, 13 July 2023 - The traditional role of internal auditors is expanding to encompass Environmental, Social and Governance (ESG) practices and disclosures, particularly as companies integrate ESG into their operations.

“The increasing scrutiny on how ESG requirements are managed and the integrity of disclosures provides an opportunity for internal auditors to carve their position in their respective organisations,” said Suhailah Mohamed Abdulla, Sime Darby Plantation Berhad’s (SDP) Chief Integrity and Assurance Officer. “It is therefore important for internal auditors to equip themselves with the necessary skills and knowledge in this space to add credibility to the internal audit function and create a bigger impact.”

Suhailah was speaking at a Breakfast Talk organised by SDP and the Malaysian Institute of Corporate Governance (MICG) yesterday on: “Stepping up to the role: Objective Assurance & Advisory on ESG”. Devanesan Evanson, Chief Executive Officer of Minority Shareholders Watch Group moderated the discussion. Other panellists were MICG’s Governor, Marina Yong Poh Nyuk, and Permodalan Nasional Berhad’s Senior Vice President & Head of Investment Stewardship, Muazzam Mohamad.

Panellists discussed the role of objective and independent assurance to establish trust and credibility in companies’ Environmental, Social & Governance (ESG) practices and disclosures. They also highlighted emerging trends and common challenges faced in ESG assurance and advisory, and the best practices to address them.

MICG Governor Marina Yong said that with greater scrutiny from regulators and investors, it is critical that boards are provided the full picture of the company’s ESG performance and ambitions to be confident that their ESG reporting is fair and sufficiently ambitious.

“Independent and thorough internal and external audits play a significant role in providing this assurance to the boards. However, internal auditors face huge challenges in upskilling to undertake ESG audits as the subject is not only vast, but also complex. Companies must therefore be strategic in accelerating the building of ESG audit competencies internally, not just for reporting purposes, but to transition to ESG compliance as rapidly as possible. While the additional cost of developing the ESG knowledge and capabilities is the primary concern of most companies, being left behind while others leap ahead in ESG strengths would ultimately be more costly,” she said.

Suhailah added that companies are increasingly recognising the importance of integrating ESG considerations into their operations, not just as a moral imperative, but also as a strategic advantage. In this context, the role of audit professionals in providing objective assurance and advisory on ESG matters has gained significant importance.

“Their expertise and guidance can help to ensure that real positive impact on ESG is delivered, enabling companies to meet stakeholder expectations on ESG which is important in enhancing companies’ long-term viability and resilience,” she said.

The Breakfast Talk was attended by MICG Chairman and the Board of Governors, as well as Chairman, Board Members, Senior Management and Executives from several GLC and MNCs including Sime Darby Plantation, Petronas, FGV Holdings, Telekom Malaysia, TNB, MTDC, Dutch Lady, KPJ Healthcare, IOI Global Service, SP Setia and UEM Sunrise.