How to Do a Materiality Assessment: A Practical Guide for Malaysian Companies

Author : Rebecca Piumal123@ | Published On : 04 Nov 2026

A materiality assessment is a structured process for identifying which sustainability topics matter most to your business and your stakeholders, then ranking them so that strategy, data collection and reporting focus on those topics. Malaysian companies can complete one in six steps: set the scope, build a long list of topics, engage stakeholders, score and prioritise, validate with leadership, and link the results to disclosures.

For Malaysian companies, the exercise is no longer optional for listed issuers. Bursa Malaysia's sustainability reporting guidance has long expected listed companies to identify material sustainability matters, and the National Sustainability Reporting Framework (NSRF) now bases disclosure on the ISSB standards (IFRS S1 and S2), which are built around information that could influence investor decisions. Non-listed companies increasingly face the same question from banks and customers. This guide explains the concept, the steps, how to score topics, how to avoid common mistakes, where an ESG consultant adds value and where experts disagree. Requirements and guidance change, so confirm current expectations with Bursa Malaysia and the Securities Commission.

What Is a Materiality Assessment and Why Does It Matter?

A materiality assessment identifies the environmental, social and governance topics with the greatest effect on your business value and on the people and environment you affect. It matters because it prevents wasted effort on minor issues and gives reports, targets and budgets a clear focus.

What Does Material Mean in ESG?

Material means significant enough to influence decisions, either by affecting the company's financial performance and prospects or by reflecting significant impacts on society and the environment. The word has legal and reporting weight, so companies should define it explicitly in their methodology and apply it consistently.

What Is the Difference Between Financial and Impact Materiality?

Financial materiality, used by the ISSB standards, asks which sustainability matters could reasonably affect the company's cash flows, access to finance or cost of capital. Impact materiality, used by GRI, asks where the company has significant effects on people and the environment. Some organisations combine both, often called double materiality. Malaysian listed companies must meet the ISSB-based requirements, and may add an impact lens if stakeholders expect it.

Is a Materiality Assessment Required in Malaysia?

For listed companies, yes in practice: Bursa Malaysia's sustainability reporting requirements and guidance expect issuers to identify and report on their material sustainability matters, and the NSRF applies ISSB concepts in phases. For other companies, it is not generally mandatory but is a sensible first step when preparing for customer, bank or investor requests.

How Do You Start a Materiality Assessment?

Start by defining the scope, the purpose and the team. Decide which entities and period are covered, which framework you are following and who is responsible. A clear scope keeps the process manageable and defensible.

Who Should Be Involved Internally?

Include people from finance, operations, human resources, risk, procurement and sales, with a senior sponsor such as a director or the chief executive. Cross-functional input improves the quality of topic identification and scoring, and it builds ownership of the outcome.

What Should the Scope and Timeframe Be?

Typically the scope covers the group's main operations and supply chain for a defined time horizon, such as short term (one year), medium term (three to five years) and long term. Write down boundaries and assumptions so the assessment can be repeated and audited.

How Do You Build a Long List of Sustainability Topics?

Build the long list by combining sector-specific topic lists, regulatory guidance, peer reports, customer and lender requests and internal risk registers. The aim is a comprehensive set of candidate topics, typically twenty to forty, before prioritisation.

Which Sources Should You Use?

Useful sources include Bursa Malaysia's list of common sustainability matters, the ISSB's industry-based guidance, GRI sector information, peer sustainability statements, media coverage, customer questionnaires and internal incident or complaint records. Combining sources reduces the risk of missing a sector-specific issue.

What Topics Do Malaysian Companies Commonly Consider?

Typical topics include energy and greenhouse gas emissions, water, waste, anti-corruption, occupational health and safety, labour practices including migrant workers, diversity and inclusion, community impact, supply chain management, data privacy and cybersecurity, and product quality and safety. Sector-specific topics may include biodiversity and deforestation for plantations or worker accommodation for construction.

How Do You Engage Stakeholders?

Engage stakeholders by identifying the groups who affect or are affected by the business, then gathering their views through surveys, interviews and workshops. The goal is a balanced picture, not a popularity contest.

Which Stakeholders Matter Most?

Common groups include investors and lenders, customers, employees, suppliers, regulators, local communities and non-governmental organisations. Prioritise by influence and dependency, and include at least a sample from each key group. For smaller companies, a short list of major customers, the main bank and a cross-section of employees may be enough.

What Methods Work Without a Large Budget?

Short online surveys, structured calls with key customers and lenders, employee focus groups and review of existing correspondence are cost-effective. Ask people to rank topics and explain the reasons, since the reasoning is as useful as the score. An ESG consultant can facilitate this if the company lacks capacity.

How Do You Score and Prioritise Topics?

Score each topic on two dimensions, the significance to the business or its financial outlook and the significance to stakeholders or the wider impact, then plot or rank them. Topics scoring high on both are the priority.

What Does a Simple Scoring Method Look Like?

A common approach uses a one-to-five scale for each dimension and defines each level with criteria, such as the likely financial effect, likelihood and time horizon. The table shows a simplified example.

Topic	Business or financial significance (1–5)	Stakeholder or impact significance (1–5)	Priority
Energy and emissions	5	4	High
Occupational health and safety	4	5	High
Anti-corruption	4	4	High
Water use	2	3	Medium
Community investment	2	2	Monitor

How Do You Set the Cut-Off?

Decide in advance the threshold for a topic to be treated as material, for example a combined score above a set level, and document the reasoning. The cut-off should be consistent from year to year, and borderline topics may be reviewed by management. Typically a company ends up with a short list of roughly eight to fifteen material topics.

What Is a Materiality Matrix?

A materiality matrix is a chart that plots topics on two axes, usually importance to stakeholders and importance to the business, with the most significant topics in the upper right. It is a communication tool, but the methodology and evidence behind it matter more than the chart itself.

How Do You Validate and Use the Results?

Validate by presenting the results to senior management and the board, adjust for context, record the decision and then connect each material topic to policies, targets, data and disclosures. The assessment is only useful if it changes what the company manages and reports.

Who Should Approve the Results?

The board or its sustainability or audit committee should review and approve the material topics, since they underpin the sustainability statement. Recording the decision and reasoning also helps if investors, assurers or regulators ask how the topics were chosen.

How Do Results Link to Reporting and Targets?

For each material topic, define the metrics, owners, baseline and targets, and map them to the disclosures required under IFRS S1, IFRS S2 or other frameworks you use. Topics outside the material set can be covered briefly or omitted, provided there is a clear rationale.

How Often Should You Update It?

Review annually for significant changes and refresh more fully every two to three years, or sooner after major events such as a new business line, acquisition, regulation or serious incident. Keep a log of changes so the story is consistent over time.

What Common Mistakes Should Malaysian Companies Avoid?

Common mistakes include treating the exercise as a survey with no analysis, relying only on internal views, copying peers without checking relevance, ignoring financial significance and failing to link results to action. Each can produce a list that looks credible but does not guide decisions.

Why Is Copying Peers Risky?

Peers may have different operations, geographies and risk profiles, so a copied list may miss issues specific to your business. Peer reports are a useful input, not a substitute for your own analysis.

Why Should the Process Be Documented?

Documentation allows the assessment to be repeated, explained and reviewed by assurers or investors. Record sources, participants, scoring criteria, results and approvals. Incomplete records are a common weakness when external reviewers ask questions.

When Does a Company Need an ESG Consultant for a Materiality Assessment?

A company needs a reliable ESG consultant such as Wellkinetics when it lacks the capacity to run stakeholder engagement, when the business is complex or multi-sector, when the assessment must stand up to assurance or when it needs to align ISSB and GRI perspectives. For smaller companies with a clear sector focus, a lean internal process may be enough.

What Can an ESG Consultant Do?

An ESG consultant can design the methodology, facilitate workshops, run stakeholder surveys, benchmark against peers, build the scoring model, prepare documentation and link the results to reporting. A good ESG consultant will keep the process proportionate to the size of the business.

How Can Costs Be Controlled?

Define a narrow scope, use internal staff for data gathering, limit stakeholder groups to the most important and request a fixed fee with clear deliverables. Ask for the scoring model and templates so that the company can update the assessment itself in future years.

Do Experts Agree on How Materiality Should Be Assessed?

No. Views differ on whether financial materiality is enough, how many stakeholders to consult and how formal the process needs to be. Each position reflects genuine considerations.

What Do Supporters of Financial Materiality Argue?

Supporters argue that a financial lens produces decision-useful information for investors, matches the ISSB standards adopted in Malaysia and keeps reports focused. They say it is more practical for companies with limited resources.

What Do Supporters of Impact or Double Materiality Argue?

Supporters argue that companies should also report on their effects on people and the environment, because those effects can later become financial risks and because stakeholders expect transparency. They point to sectors where social and environmental impacts are central.

What Is the Practical Middle Ground?

The practical middle ground is to use financial materiality for mandatory reporting and consider significant impacts as a second lens where stakeholder expectations or sector risks justify it. Keeping both views in one documented process avoids duplication.

Frequently Asked Questions About Materiality Assessments in Malaysia

How long does a materiality assessment take?

A lean assessment for a small or mid-sized company can take a few weeks, while a complex group with extensive stakeholder engagement may take several months.

Do SMEs need a materiality assessment?

Not formally in most cases, but a simplified version helps focus limited resources and respond to customer and bank requests efficiently.

How many material topics should a company have?

There is no fixed number. Many companies end up with roughly eight to fifteen, but the right number depends on the business and the criteria used.

Can the same assessment be used for ISSB and GRI?

Often yes, if it records both financial significance and impact significance. Map the results to each framework's requirements and explain any differences.

Do I need an ESG consultant to do this?

Not always. A capable internal team can run a proportionate assessment, but an ESG consultant helps with complexity, independence or tight timelines.

Conclusion

The bottom line is to run a documented, proportionate process: define scope, identify topics, engage the right stakeholders, score with clear criteria, secure board approval and link results to data and targets, using an ESG consultant where capacity or complexity requires it.

The debate over financial versus impact materiality will continue, and both views offer useful perspectives. A Malaysian company that keeps clear records, revisits its assessment regularly and engages an ESG consultant selectively will have a stronger foundation for reporting, lending conversations and strategic decisions, whatever the exact framework requirements become.

This article is for general information only and is not legal, financial or regulatory advice. Reporting requirements and guidance are evolving, so verify current details with Bursa Malaysia, the Securities Commission and the relevant standard-setters.