As sustainability takes centre stage in boardroom discussions across Malaysia, Environmental, Social, and Governance (ESG) reporting has evolved from a compliance exercise to a strategic imperative. Beyond glossy sustainability reports, the critical role of internal auditors — the silent guardians of governance — ensures that ESG disclosures reflect true organizational commitment to responsible practices.
In a landscape shaped by Bursa Malaysia’s enhanced sustainability reporting guidelines (2022) and Bank Negara Malaysia’s climate risk management policies, internal auditors have emerged as vital enablers of ESG success for Malaysian publicly listed companies (PLCs). These professionals are becoming strategic partners, driving transparency, risk management, and stakeholder trust.
In Malaysia, ESG reporting is no longer optional. Investors, regulators, and the public expect organizations to demonstrate real commitment rather than mere rhetoric. However, ensuring credible ESG data requires rigorous oversight of internal auditors.
Research by Lenz and Enslin in 2025 underscores the need for internal auditors to transition from traditional gatekeepers to “gardeners of governance”, cultivating ethical practices, and sustainable strategies. This transformation is underway in Malaysia.
Interviews with internal auditors and senior management from Malaysian listed companies, conducted between July 2023 and February 2024 as part of an academic research study on ESG assurance practices in Malaysia, revealed that internal auditors play an indispensable role in ESG assurance, from setting ESG goals to monitoring compliance and verifying disclosures.
The 5Ps model — Planet, Public, Profession, Prosperity, and People — invented by Lenz and Jeppesen in 2022 offers a useful lens to appreciate the expanding role of internal auditors in ESG governance.
Internal auditors are working closely with management to ensure that ESG goals, particularly environmental targets, are specific, measurable, and aligned with regulatory frameworks. Their involvement is crucial in preventing “greenwashing”, the unethical misrepresentation of sustainability efforts.
However, this remains a key challenge. As highlighted by Soh & Martinov-Bennie in 2015, many internal auditors lack expertise in environmental risk assessment. Addressing this skill gap is urgent, especially given Malaysia’s increasing vulnerability to climate risks such as floods and deforestation.
The work of PwC in 2020 claimed that internal auditors reinforce good governance practices and ensure that organizations comply with ESG regulations and standards. Their role supports transparent disclosures, which foster investor confidence and maintain public trust.
In Malaysia, where governance practices are still evolving in some sectors, internal auditors advocate for stronger enforcement of audit requirements. They play a key role in maintaining ESG reporting integrity.
While their responsibilities for ESG assurance are growing, internal auditors must continuously upskill, particularly in leveraging technology and data analytics for ESG audits. Resistance to new technologies, especially among older auditors, is a barrier. Modern ESG reporting relies heavily on digital tools for data collection and analysis. Organizations must prioritize ESG-specific training and foster technological literacy within their audit teams.
Internal auditors contribute directly to organizational prosperity by identifying operational inefficiencies, recommending cost-saving measures, and strengthening risk management frameworks. As ESG performance is linked to financial sustainability, their role in integrating ESG reporting with financial reporting is pivotal.
However, cybersecurity threats add complexity. As digital transactions and remote work become the norm, internal auditors must rigorously audit cybersecurity practices to safeguard ESG data integrity.
Internal auditors collaborate with the management, board members, and regulators to nurture a culture of accountability and transparency. Their ability to communicate ESG risks and opportunities helps organizations navigate regulatory landscapes.
Despite their expanding roles, internal auditors in Malaysia face several hurdles. Regulatory clarity regarding ESG assurance remains limited. While Bursa Malaysia has strengthened its sustainability reporting requirements, it persists in ESG verification standards.
Moreover, confusion persists regarding the distinct roles of internal and external auditors. Clear communication is essential to highlight the unique value that internal auditors bring: their deep organizational knowledge, risk assessment expertise, and independence from operational management.
Resource constraints also pose a challenge. Internal audit functions in smaller Malaysian PLCs often operate with limited staff and budgets, making it difficult to prioritize ESG audits along with traditional responsibilities.
To strengthen internal auditors’ roles in ESG governance, several strategies must be prioritized: continuous ESG-specific training, adoption of advanced technologies, regulatory reforms to standardize ESG assurance frameworks, organizational commitment to positioning internal audit as a strategic partner, and communication strategies to distinguish and promote the role of internal auditors.
As Lenz and Jeppesen’s 2022 work from developed countries argues, internal auditors must act as gardeners of governance, cultivating ethical and sustainable practices while adapting to the evolving corporate environment.
As Malaysia (a developing country) progresses towards a sustainable future, internal auditors are at the forefront of this transformation. Their role transcends compliance: they are stewards of responsible governance, enablers of transparency, and champions of sustainable growth.
By embracing the 5Ps model and committing to continuous learning, internal auditors can reinforce their organizations’ ESG narratives, foster investor trust, and drive long-term prosperity. The future of ESG reporting is not just about what companies say but what internal auditors help them do.
Malaysia’s journey towards ESG excellence is shaped not only by policies and regulations but also by the dedication, integrity, and foresight of its internal auditors — the true guardians of sustainability governance.
Dr Suhaily is a Senior Lecturer at the Department of Accounting, Faculty of Business and Economics at Universiti Malaya.
- Dr Suhaily binti Suhaimi
