Pre-Readiness Assessment for Sustainability Audit

Organisations are now faced with a new era of ESG accountability currently shaped by intensifying regulatory and stakeholder expectations. With the International Auditing and Assurance Standards Board (IAASB) approving ISSA 5000 in late 2025, together with the implementation of Malaysia’s National Sustainability Reporting Framework (NSRF), organisations must now prepare their ESG disclosures for a new level of scrutiny.

The introduction of ISSA 5000, effective for periods commencing 15 December 2026, establishes a global baseline for sustainability assurance engagements. It is applicable to both limited and reasonable assurance, across all ESG subject matters, and introduces principles such as double materiality, and further integration with ISAE 3000. Given the requirements of the standard’s implementation, firms and regulators will need to be globally prepared for its adoption.

In tandem with this, Malaysia’s NSRF further adopts IFRS S1 and S2 as foundational sustainability disclosure standards. Supported by Bursa Malaysia and the Companies Commission of Malaysia (SSM), the framework aims to enhance transparency and investor confidence. With phased implementation already underway, listed and large non-listed entities are expected to comply in the near term.

What Is a Pre-Readiness Assessment?

A pre-readiness assessment is a structured assessment that evaluates whether an organisation’s sustainability reporting processes, data, and controls are sufficiently adequate to support external assurance. Beyond just compliance, sustainability assurance further enables organisations to identify gaps, prioritise remediation, and strengthen the auditability of ESG disclosures.

Key areas typically assessed include:

• Governance and oversight: Clarity of roles, board involvement, and ESG accountability
• Materiality and scope: Alignment with stakeholder expectations and regulatory requirements
• Data integrity and methodology: Traceability of data sources, consistency of assumptions, and documentation of calculation methods
• Systems and controls: Presence of validation checks, audit trails, and segregation of duties
• Disclosure quality: Coherence, comparability, and alignment with recognised frameworks such as GRI, SASB, TCFD, and IFRS Sustainability Standards
   

Why It Matters Now

Recent developments underscore the urgency of conducting pre-readiness assessments due to evolving stakeholder and regulatory expectations. This is further supported by research published by ACCA and the Internal Audit Foundation which highlights that internal controls over sustainability data often lag behind those applied to financial reporting. As such, many ESG metrics tend to originate outside the finance function, where documentation and verification practices are still maturing thus necessitating the need to conduct pre-readiness assessments.

At the regional level, ASEAN’s commitment to sustainable finance standards is positioning Southeast Asia as a hub for responsible investment. This underscores the necessity for businesses to take action now with credible and reliable ESG disclosures no longer being an option, while proactive assessments provide a way to confidently meet growing expectations as ASEAN continues to rise within the global capital markets for responsible investment.

In Malaysia, the NSRF is accelerating this shift as regulators and investors demand more credible ESG disclosures. Early adopters are already embedding ESG goals into their core strategies while preparing for assurance requirements, signalling that expectations are rising quickly. The rollout of the country’s Sustainability Blueprint under the 13th Malaysia Plan further underscores that capacity building for accountants and assurance providers will be central to enabling this transition.

How Organisations Can Prepare

Organisations can prepare by taking measurable steps that build assurance readiness into their sustainability journey. The process begins with an internal assessment to understand the organisation’s current practices and the state of maturity for its internal controls. From there, ESG mapping of internal controls help identify where sustainability data originates and how it flows across functions. Additionally, engaging with stakeholders through interviews by clarifying on responsibilities helps to uncover practical challenges. Combining that with a gap analysis against relevant standards such as ISSA 5000 or NSRF requirements will also highlight areas that require remediation.

The use of practical tools, such as the IIA’s Sustainability Readiness Tool further provide benchmarks and structured pathways for improvement. By focusing on corrective actions and strengthening documentation, organisations can establish a credible foundation for assurance. This preparation ensures that when regulators, investors, or auditors demand sustainability disclosures, the organisation can respond confidently by providing credible data.

Strategic Benefits Beyond Compliance

Organisations that invest in pre-readiness assessments gain more than just audit preparedness. It enhances the reliability of their ESG disclosures, reduces assurance costs, and strengthens stakeholder trust. They also position themselves for leadership in a data-driven sustainability landscape, where transparency and accountability are increasingly linked to access to capital and long-term value creation.

With assurance rapidly becoming standard practice, the real challenge is no longer auditability but readiness.