Takeaways
- SSM’s proposed amendments signal Malaysia’s shift from voluntary sustainability disclosure towards a more structured and eventually mandatory reporting regime.
- Non-listed companies may be increasingly affected as the proposed requirements are expected to apply in phases based on revenue and number of employees.
- Scope 1 and Scope 2 GHG emissions will be the starting point, making emissions data collection and calculation a key priority for companies.
- Directors’ accountability will become more important as sustainability reporting moves closer to board-level governance and financial reporting discipline.
- Early preparation through gap assessments, GHG inventories, sustainability risk assessments and assurance readiness can help companies reduce future compliance pressure.
Malaysia’s sustainability reporting landscape is entering a new phase.
On 30 April 2026, the Companies Commission of Malaysia, also known as Suruhanjaya Syarikat Malaysia (SSM), issued a consultative document on the proposed amendments to the Companies Act 2016 [Act 777] relating to sustainability reporting. This public consultation marks an important step in strengthening corporate sustainability disclosures, enhancing directors’ accountability and aligning Malaysian corporate reporting practices with international sustainability reporting standards.
For many Malaysian companies, particularly non-listed companies, sustainability reporting has traditionally been voluntary or limited to basic non-financial disclosures in the directors’ report. However, the proposed amendments signal a shift towards a more structured and eventually mandatory sustainability reporting regime.
This article outlines the key proposals by SSM and explains what they may mean for Malaysian companies, directors, finance teams, sustainability teams and business leaders.
Table of Contents
Why Is SSM Proposing Sustainability Reporting Amendments?
The proposed amendments form part of Malaysia’s broader move towards stronger sustainability governance and greater corporate transparency.
Globally, investors, lenders, regulators, customers and supply chain partners are increasingly asking companies to explain how sustainability-related risks and opportunities may affect business performance, strategy, access to finance and long-term resilience.
Climate change, greenhouse gas emissions, resource management, labour practices, governance, ethical conduct and human rights are no longer viewed only as corporate responsibility matters. They are increasingly becoming business, financial and compliance issues.
In Malaysia, this development also aligns with the National Sustainability Reporting Framework (NSRF), IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.
For businesses preparing for climate-related disclosures, you may also read our article: Preparing for Climate-Related Financial Disclosures in Malaysia: A Practical Guide for Businesses.
Key Proposal 1: Mandatory “Comply or Explain” Sustainability Reporting
One of the most important proposals is the introduction of a mandatory “comply or explain” approach for sustainability and non-financial information disclosures.
Under this approach, companies within the prescribed thresholds would be expected to disclose sustainability information.
If they are unable to comply fully, they must provide a clear and meaningful explanation. This may include data gaps, internal capacity constraints, methodology limitations, reporting challenges, or transition issues.
This approach is practical because many companies, especially non-listed companies, may still be at an early stage of sustainability reporting maturity.
Instead of requiring immediate full compliance, the “comply or explain” model gives companies time to build internal systems, improve ESG data collection and develop reporting capabilities.
However, companies should not treat “explain” as an easy opt-out. A weak or generic explanation may not be sufficient. Companies will need to show that they understand the requirements, have identified their gaps and are taking steps to improve over time.
Key Proposal 2: A Phased Sustainability Reporting Framework
SSM proposes a phased sustainability reporting framework covering:
- reporting contents;
- company thresholds;
- implementation timelines; and
- assurance requirements.
The proposed approach begins with climate disclosures, before expanding into broader sustainability disclosures and eventually IFRS S2-aligned climate-related financial disclosures.
Phase 1: Climate Disclosures
The first phase focuses on greenhouse gas emissions, specifically Scope 1 and Scope 2 emissions.
This phase is important because GHG emissions data forms the foundation of climate reporting. Starting with Scope 1 and Scope 2 allows companies to establish a reliable emissions baseline before moving into more complex disclosures.
For companies preparing GHG data, our article on What Malaysian Companies Need to Prepare Before a GHG Verification explains the key data, documentation and internal controls required.
Phase 2: Simplified Sustainability Disclosures
The second phase introduces simplified sustainability disclosures.
These may include:
- governance and oversight of sustainability matters;
- identification of material sustainability risks and opportunities; and
- selected environmental, social and governance indicators.
Examples may include waste management, labour practices, ethical business practices, anti-bribery and anti-corruption policies, and other sustainability matters relevant to the company’s business.
This phase moves sustainability reporting beyond emissions data. It requires companies to understand how sustainability matters affect their operations, stakeholders, business model and risk profile.
Phase 3: IFRS S2 Climate-related Financial Disclosures
The third phase involves the adoption of IFRS S2 Climate-related Disclosures, with transition reliefs.
IFRS S2 requires companies to disclose climate-related risks and opportunities that could reasonably be expected to affect cash flows, access to finance or cost of capital.
The disclosures are structured around:
- governance;
- strategy;
- risk management; and
- metrics and targets.
This means companies will eventually need to consider more advanced areas, such as climate risk and opportunity assessment, climate scenario analysis, transition risks, physical risks, climate-related targets and the financial implications of climate change.
For leadership teams, climate scenario analysis should not be treated only as a reporting exercise. It is also a strategic planning tool. Read more in our article: What CEOs and CFOs Should Know About Climate Scenario Analysis under IFRS S2.
Key Proposal 3: Sustainability Reporting Thresholds for Non-Listed Companies
The proposed framework does not apply to all companies at the same time.
Instead, SSM proposes thresholds based on:
- revenue; and
- number of employees.
Companies with higher revenue or larger employee numbers would be expected to comply earlier. Smaller companies would be given more time, or may not be subject to mandatory requirements unless they voluntarily opt in.
| Company Threshold | Phase 1: Climate Disclosures | Phase 2: Simplified Sustainability Disclosures | Phase 3: IFRS S2 |
|---|---|---|---|
| RM1 billion to RM2 billion revenue, or 500 or more employees | 2028 | 2029 | 2032 |
| RM100 million to RM1 billion revenue, or 250 to 499 employees | 2030 | 2031 | Not specified |
| RM15 million to RM100 million revenue, or 100 to 249 employees | 2032 | 2033 | Not specified |
| Below RM15 million revenue or below 100 employees | Not mandatory, but may voluntarily opt in | Not mandatory | Not mandatory |
This phased approach balances the need for transparency with the practical readiness of companies.
Larger companies are expected to lead the transition, while smaller companies are given more time to prepare.
However, companies currently below the threshold should not ignore this development. Even if they are not immediately required to report, they may still receive ESG data requests from customers, banks, investors, government agencies or multinational supply chain partners.
Key Proposal 4: Directors’ Accountability for Sustainability Disclosures
Another major implication is the proposed strengthening of directors’ accountability.
Currently, sustainability-related disclosures in the directors’ report are generally optional under the Companies Act 2016.
Under the proposed amendments, sustainability and non-financial information disclosures may become part of directors’ statutory reporting responsibilities.
This means sustainability reporting will no longer be solely the responsibility of the sustainability department. It will become a board-level governance matter.
Directors may need to ensure that the company has:
- proper oversight;
- internal controls;
- reporting processes;
- reliable sustainability data; and
- evidence to support the information disclosed.
The implication is clear: sustainability reporting is moving closer to the discipline of financial reporting. Accuracy, completeness, accountability and governance will become increasingly important.
Key Proposal 5: Sustainability Assurance Framework
SSM also proposes to introduce an assurance framework for sustainability reporting.
Assurance enhances the reliability and credibility of sustainability information. As sustainability disclosures become more important to investors, regulators, customers and lenders, companies will need to ensure that their data can withstand review.
The proposed framework introduces Sustainability Assurance Providers, or SAPs, under the Companies Act 2016.
These assurance providers may be required to review sustainability information, particularly GHG emissions data and other disclosures.
The proposed assurance timeline is also phased, with internal assurance and limited assurance expected before any move towards reasonable assurance. Reasonable assurance is deferred at this stage to allow companies and assurance providers to build capability.
This means companies should begin preparing their sustainability data as if it may eventually be reviewed by an independent party.
Key areas to strengthen include:
- documentation;
- calculation methodologies;
- data ownership;
- evidence files;
- approval processes; and
- internal review procedures.
For further reading, see our article on Preparing for Sustainability Reporting Assurance in Malaysia. Companies that are building a structured GHG reporting system may also refer to our guide on How to Implement ISO 14064 for Verification in Malaysia.
What Are the Implications for Malaysian Companies?
The proposed amendments have several practical implications for businesses in Malaysia.
1. Sustainability reporting will become a compliance requirement
Companies within the prescribed thresholds will need to move away from ad hoc ESG narratives and towards structured, evidence-based reporting.
2. GHG emissions data will become a priority
The framework begins with Scope 1 and Scope 2 GHG emissions.
Companies should start identifying emission sources, collecting activity data, applying appropriate emission factors and maintaining calculation records.
3. Climate risk assessment will become more important
As Malaysia moves towards IFRS S2-aligned climate disclosures, companies will need to assess how physical and transition risks may affect their business.
A qualitative climate scenario analysis can be a practical starting point for companies that are not yet ready for advanced financial modelling.
4. Sustainability risks should be integrated into ERM
Sustainability reporting should not be treated as a standalone exercise.
Sustainability risks and opportunities should be linked to the company’s enterprise risk management framework, risk register, internal controls and strategic planning process.
5. Internal controls and documentation will be critical
Reliable sustainability reporting requires clear data owners, reporting boundaries, calculation methodologies, approval processes and supporting evidence.
6. Board and management oversight must strengthen
Directors and senior management should understand the company’s sustainability reporting obligations and ensure that appropriate governance structures, resources and responsibilities are in place.
What Should Companies Do Now?
Although the proposed amendments are still part of a consultation process, companies should begin preparing early. Waiting until the requirements become mandatory may create unnecessary pressure and compliance risk.
Here are practical steps companies can take now:
- Assess whether the company may fall within the proposed thresholds based on revenue and employee count.
- Conduct a sustainability reporting gap assessment against SSM’s proposed framework, NSRF, IFRS S1 and IFRS S2.
- Develop a Scope 1 and Scope 2 GHG emissions inventory.
- Identify relevant Scope 3 categories, especially business travel, employee commuting, purchased goods and services, logistics and waste.
- Conduct a sustainability risk and opportunity assessment.
- Begin climate risk and opportunity assessment, including qualitative climate scenario analysis.
- Strengthen ESG governance, Board oversight and internal reporting responsibilities.
- Build internal controls and documentation for sustainability data.
- Prepare for future internal and external assurance.
- Train directors, management and operational teams on sustainability reporting requirements.
Conclusion
SSM’s public consultation on the proposed sustainability reporting amendments to the Companies Act 2016 is an important signal for Malaysian companies.
Sustainability reporting is moving from voluntary disclosure towards a structured compliance and governance requirement.
The proposed framework begins with Scope 1 and Scope 2 GHG emissions, then expands into simplified sustainability disclosures and eventually IFRS S2-aligned climate-related financial disclosures.
For companies, the implication is clear: sustainability reporting should no longer be treated as a year-end documentation exercise. It requires governance, data systems, risk assessment, internal controls, Board oversight and strategic planning.
Companies that act early will be better prepared for future regulatory requirements and better positioned to meet the expectations of customers, investors, lenders and stakeholders.
Need help preparing for sustainability reporting compliance in Malaysia?
Bernard Business Consulting helps Malaysian companies prepare for sustainability reporting, climate risk disclosure and ESG compliance in a practical and business-focused manner. Contact us to assess your company’s readiness for SSM’s proposed sustainability reporting framework, NSRF, IFRS S1, IFRS S2 and GHG emissions reporting.
References:
1. Companies Commission of Malaysia (SSM). Consultative Document on the Proposed Amendments to the Companies Act 2016 [Act 777] on Sustainability Reporting, 30 April 2026. Available at: https://media.licdn.com/dms/document/media/v2/D561FAQEUmLeBT_WpWA/feedshare-document-pdf-analyzed/B56Z3xtzjKKMAY-/0/1777876813487?e=1783555200&v=beta&t=dRupg2NFcqypsSB0F7SdZM2uZSM1qtCTR-aISYBPh54
eBook
The C-Suite Guide to Malaysia’s National Sustainability Reporting Framework (NSRF)
Developed by BBC’s ESG and sustainability consultants, this practical roadmap guide helps leaders understand, plan and apply the NSRF effectively. It provides a clear roadmap to strengthen governance, enhance reporting and create business value.