Malaysia has entered a pivotal era of corporate transparency with the Securities Commission Malaysia's rollout of the National Sustainability Reporting Framework (NSRF). The framework establishes a unified and standardised approach to sustainability and climate-related financial disclosures. By aligning local practices with global baselines, the NSRF aims to enhance the international competitiveness of Malaysian companies and simplify the regulatory hurdles associated with environmental, social and governance (ESG) adoption.
Mandated Groups and Timeline
To ensure a systematic and manageable transition, the NSRF mandates adoption across three distinct groups of companies, staggering the compliance deadlines based on market capitalisation and revenue:
- Group 1: Large Main Market listed issuers with a market capitalisation exceeding RM2 billion. This cohort is mandated to adopt the framework starting from the financial year ending (FYE) 31 December 2025.
- Group 2: All other Main Market listed issuers, which are required to comply beginning in FYE 2026.
- Group 3: ACE Market listed issuers and large non-listed companies (those with annual revenues exceeding RM2 billion), mandated to begin compliance in FYE 2027.
Transition Reliefs During the Adoption Period
Regulators recognise the data collection constraints and technical challenges inherent in producing robust sustainability disclosures. Consequently, the NSRF provides specific adoption allowances, or transition reliefs, to ease the reporting burden. During their first year of adoption, companies are permitted to take a "climate-first" approach. This allows them to disclose only climate-related risks and opportunities while deferring the broader non-climate sustainability requirements. Furthermore, entities are granted relief from presenting comparative historical data in their first year and are given a delayed timeline (ranging from one to two years, depending on their group) for the complex task of reporting Scope 3 greenhouse gas (GHG) emissions.
IFRS S1 and S2: The Global Baseline
The NSRF is anchored by the International Sustainability Standards Board (ISSB) standards, specifically focusing on two core pillars:
- IFRS S1: Outlines the General Requirements for Disclosure of Sustainability-related Financial Information. It requires entities to disclose all material sustainability risks and opportunities across their value chain that could reasonably affect cash flows, access to finance, or cost of capital.
- IFRS S2: Details Climate-related Disclosures, requiring companies to identify physical and transition climate risks and to comprehensively measure and disclose their Scope 1, Scope 2 and Scope 3 GHG emissions.
Linkage to MCCG and SORMIC 2025
The NSRF integrates deeply with Malaysia's existing corporate governance ecosystem. Under the Malaysian Code on Corporate Governance (MCCG), boards of directors hold the ultimate responsibility for embedding sustainability into the corporate strategy. Empirical research demonstrates that corporate governance mechanisms—particularly the proportion of directors with sustainability-related experience and their participation in relevant training—have a significant positive influence on the quality of a company's sustainability reporting.
Furthermore, sustainability is no longer viewed solely as a reporting exercise, but as a critical business risk. Under the Statement on Risk Management and Internal Control (SORMIC), specifically guided by 2025 regulatory expectations, companies must formally embed climate and sustainability risks into their Enterprise Risk Management (ERM) frameworks. This linkage ensures that the disclosures mandated by IFRS S1 and S2 are systematically supported by internal audits, robust data governance and strategic risk oversight.
