As of January 2025, Malaysia is undergoing a significant transformation in its approach to Environmental, Social, and Governance (“ESG”) and sustainability reporting. This shift is largely driven by the launch of the National Sustainability Reporting Framework (“NSRF”) and recent amendments introduced by Bursa Malaysia. These changes are designed to enhance transparency, accountability, and sustainability practices among corporates in the country.
This article outlines the key changes in reporting requirements that Malaysian companies need to be aware of as they prepare for compliance in the coming years.
Table of Contents
Overview of the National Sustainability Reporting Framework
The NSRF was officially launched on September 24, 2024, by the Securities Commission Malaysia (“SC”) and aims to align Malaysian sustainability reporting with international standards set by the International Sustainability Standards Board (“ISSB”). The framework is a response to the growing demand for consistent, comparable, and reliable sustainability disclosures from investors and stakeholders. It mandates that listed companies on Bursa Malaysia’s Main Market and ACE Market, as well as large non-listed companies (“NLCos”) with annual revenues exceeding RM2 billion, adhere to specific sustainability reporting standards.
Access the full NSRF here.
Key Changes in Bursa Malaysia Sustainability Reporting Requirements
The recent amendments to the Main Market Listing Requirements (“Main LR”) and ACE Market Listing Requirements (“ACE LR”) by Bursa Malaysia significantly enhance sustainability reporting obligations for listed companies. These changes are aligned with the NSRF and aim to improve transparency and accountability in how companies manage sustainability-related risks and opportunities (“SROs”). Here are the key changes:
1. Adoption of IFRS Sustainability Disclosure Standards
The amendments mandate that all listed issuers prepare their sustainability statements in accordance with the International Financial Reporting Standards (“IFRS”) S1 and S2. IFRS S1 pertains to general requirements for disclosing sustainability-related financial information, while IFRS S2 focuses specifically on climate-related disclosures. This alignment with globally recognised standards is intended to enhance the comparability and reliability of sustainability reports across different companies.
2. Phased Implementation
The implementation of these requirements will occur in phases:
- Large Main Market Issuers with a market capitalisation of RM2 billion or more (Group 1) will begin reporting under the new standards starting January 1, 2025.
- Other Main Market Issuers (Group 2) will follow suit on January 1, 2026.
- ACE Market Issuers (Group 3) will be required to comply by January 1, 2027.
3. Mandatory Climate-Related Disclosures
Companies must disclose information related to climate risks and opportunities, including governance structures, strategies, risk management processes, and metrics and targets for measuring performance over the past three financial years. This requirement emphasises the importance of understanding climate impacts on business operations and vice versa.
4. Internal Review or Assurance Requirement
Listed issuers are required to confirm whether their sustainability statements have undergone internal review by an internal auditor or independent assurance performed according to recognised assurance standards such as the ISAE 3000 (Revised) or ISSA 5000. This step is aimed at increasing the credibility of reported information.
5. Transition Reliefs
To accommodate varying levels of readiness among companies, Bursa Malaysia has introduced transition reliefs. For instance, issuers may focus initially on climate-related disclosures for their principal business segments before fully adopting all aspects of the IFRS standards.
How Can Companies Prepare for New Sustainability Reporting Requirements
With these changes coming into effect, companies in Malaysia need to take proactive steps to ensure compliance:
Assess Current Practices
Companies should evaluate their existing sustainability reporting practices against the new requirements outlined in the NSRF and Bursa Malaysia Main LR and ACE LR amendments. For example, conduct a gap analysis to identify areas for improvement.
Engage Stakeholders
Companies should maintain open lines of communication with stakeholders regarding their sustainability efforts and how they plan to meet new obligations. For instance, regularly disseminating information and engaging with suppliers on sustainability and climate change matters could help in collecting Scope 3 emissions.
Develop Transition Plans
Companies should create detailed plans for transitioning to these new reporting standards, particularly focusing on climate-related disclosures. For example, the company’s management and sustainability team could collaborate to integrate sustainability requirements into business operations and enhance employee awareness of sustainability.
What to Look Forward To
The landscape of ESG and sustainability reporting in Malaysia is evolving rapidly as we move into 2025. With the introduction of the National Sustainability Reporting Framework and amendments from Bursa Malaysia, corporates must adapt to new obligations that emphasise transparency and accountability. By understanding these key changes and seeking expert guidance, businesses can not only comply with regulations but also position themselves as leaders in sustainable practices.
As we look ahead, it is clear that robust sustainability reporting will play a crucial role in attracting investment and fostering long-term growth for Malaysian companies committed to responsible business practices.
Bernard Business Consulting offers specialised services in ESG and sustainability consulting and report proofreading. Our team can assist businesses to navigate the next phase of ESG and sustainability reporting in Malaysia, developing effective sustainability strategies, and ensuring compliance with reporting requirements.
Contact us now to elevate your ESG and Sustainability reporting practices.
Academy
March 14, 2025 @ 9:00AM to 5:00PM, MYT
IFRS Sustainability Disclosure Standards
Enhance your understanding on sustainability-related financial disclosures based on IFRS S1 and S2 standards with our tailored public workshop. This workshop is designed to equip you with the skills to develop innovative, sustainable solutions that drive business transformation and sustainability.