Beyond Compliance: ESG Disclosure Quality, Greenwashing Risk, Sustainability Assurance and Firm Value in Malaysia Under National Sustainability Reporting Framework

Abstract

Environmental, social and governance (ESG) reporting in Malaysia is entering a new phase in which sustainability information is increasingly expected to meet standards of comparability, connectivity, governance and reliability that resemble the discipline long associated with financial reporting. This paper critically examines the relationship between ESG disclosure quality, greenwashing risk, sustainability assurance and firm value in Malaysia, with particular emphasis on the National Sustainability Reporting Framework (NSRF), the International Sustainability Standards Board (ISSB) standards, Bursa Malaysia's sustainability requirements and Malaysia's broader climate-transition architecture. The paper adopts a critical literature-review and conceptual-analysis approach drawing on Malaysian regulatory documents, international sustainability standards and empirical studies on Malaysian listed companies. The review demonstrates that the Malaysian evidence on ESG and corporate performance is not uniformly positive. Earlier studies reported insignificant relationships between aggregate ESG measures and firm performance, whereas subsequent research found that ESG disclosure, ESG certification and material sustainability practices can support market value, profitability or competitive advantage. More recent evidence suggests that the effect remains conditional on factors such as firm size, leverage, free cash flow, external sustainability recognition, Shariah status, board characteristics and controversy exposure. This variation makes disclosure quality and credibility more important than disclosure volume alone. The paper argues that Malaysia's NSRF can reduce information asymmetry and improve capital-market usefulness by shifting reporting from broad sustainability narratives toward financially material, decision-useful sustainability-related information. However, the transition also creates new challenges involving data systems, Scope 3 emissions, supply-chain readiness, internal controls, skills, assurance capacity and the risk of symbolic compliance. The September 2026 decision to defer mandatory reasonable assurance over Scope 1 and Scope 2 greenhouse-gas disclosures reinforces the importance of building a mature sustainability-reporting ecosystem rather than treating assurance as a final-stage verification exercise. A conceptual framework is proposed in which ESG disclosure quality influences firm value through information asymmetry, stakeholder trust and risk perception, while sustainability assurance, governance quality and greenwashing risk shape the strength and credibility of this relationship. The study contributes a Malaysia-specific synthesis suitable for future empirical testing during the country's transition to ISSB-aligned reporting.