Sustainability meets finance: The CFO’s role in driving ESG success

• Less than one-quarter (23%) of SEA CFOs have incorporated ESG into operating models.
• Difficulties in measuring ESG impact is one of the major barriers against implementing ESG strategies according to nearly 8 in 10 (78%) SEA CFOs.

KUALA LUMPUR, 23 APRIL 2025 – With sustainability becoming a financial imperative, CFOs in Malaysia are gradually recognising the urgency of incorporating Environmental, Social, and Governance (ESG) considerations into their strategies. Despite this growing awareness, actual ESG integration remains in its early stages. The latest edition of Deloitte’s SEA CFO Agenda 2025 report reveals that only 23% of financial leaders have incorporated climate and ESG factors into their operating models, with the overwhelming majority currently only in exploratory or experimentation phases.

The survey revealed that CFOs face several challenges in implementing ESG strategies, including barriers relating to talent resources and capabilities (80%) – a well-established challenge previously identified in Deloitte’s CFO Agenda 2023. Quantifying difficulties also pose a hurdle – the report revealed that nearly 8 in 10 (78%) of SEA CFOs face challenges in measuring ESG impact in financial terms.

According to 69% of SEA CFOs polled, one of the most pressing issues is aligning ESG efforts with financial performance. Additionally, competing priorities are another obstacle in encouraging ESG initiatives among CFOs. In balancing ESG commitments with cost-optimisation strategies, businesses are then required to navigate trade-offs between sustainability goals and financial performance, e.g. how more sustainable procurement often leads to higher costs.

"Corporate Malaysia has seen how ESG is reshaping financial statements in tangible ways – fair value measurements, for instance, are increasingly influenced by sustainability factors as industries transition toward greener operations, but SEA CFOs continue to face obstacles in making this a reality," shared Joshua Yan, CFO Program Leader, Deloitte Malaysia, at a CFO Forum on Navigating ISSB Standards which was held recently.

“In the everyday motions of achieving financial success, CFOs must ensure that their long-term ESG goals are not overshadowed in its process, as focusing solely on short-term financial performance could undermine the long-term viability of the business,” he added.

Amidst these challenges, Deloitte’s report revealed that some of the key actions SEA CFOs are taking include conducting ESG risk assessments (40%) and reporting on ESG initiatives to stakeholders (40%). However, only 16% are aligning capital allocation with ESG goals, highlighting the ongoing difficulty of integrating sustainability into financial planning.

As businesses navigate the evolving landscape of ESG, it is evident that sustainability is no longer optional but an essential component of long-term financial resilience and value creation. With the International Sustainability Standards Board’s (ISSB) introduction of IFRS S1 and IFRS S2, the increased number of compliance requirements is a significant step toward global alignment and transparent financial reporting.

Hosted by Deloitte and ACCA Malaysia, the 'Navigating ISSB standards: Strategies to optimise financial and accounting efficiency’ forum further elaborated on the implications of the International Sustainability Standards Board (ISSB) standards on businesses’ financial and accounting practices attended by more than 30 CFOs and finance leaders. Having also discussed how businesses can adapt to the evolving landscape of sustainability reporting, the forum featured insights from distinguished speakers, including Joshua Yan; Josette Soh, Sustainability & Emerging Assurance Partner, Deloitte Singapore; Nusaybah Mohamad Sofian, Senior General Manager in Financial Management & ESG Compliance of PETRONAS; and Doris Cheng, Accounting & Reporting Assurance Partner, Deloitte Singapore.

Methodology

Between August and October 2024, Deloitte Southeast Asia surveyed 190 CFOs across seven geographies (Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam) to better understand their challenges and priorities. A significant majority, or 62%, of this sample was composed of CFOs from companies with annual revenues of more than US$100 million, with broad coverage across the consumer; energy and resources; financial services; life sciences and health care; manufacturing and industrial products; public sector; and technology, media and telecommunications sectors. A series of one-on-one interviews was also conducted with 11 SEA CFOs between September and November 2024 to obtain a more granular understanding of the unique nuances and perspectives of SEA CFOs