Malaysian companies can get ready for ISSB by understanding which of the new sustainability disclosure standards apply to them and when, mapping their governance, risk processes and data against those requirements, and starting with a credible greenhouse gas inventory. Preparation takes time, because the information has to be reliable enough to sit alongside the financial statements.

This article takes a third-party view of ISSB ESG reporting in Malaysia: what the standards ask for, who is affected first, how existing management systems can help, and where the challenges and criticisms lie.

What Is ISSB, and How Does It Shape ESG Reporting in Malaysia?

The ISSB is the International Sustainability Standards Board, created under the IFRS Foundation, and its IFRS S1 and IFRS S2 standards set a global baseline for sustainability-related financial disclosures. Malaysia adopted them as its baseline through the National Sustainability Reporting Framework (NSRF), launched on 24 September 2024, so ISSB ESG reporting in Malaysia now follows these standards in phases.

What Do IFRS S1 and IFRS S2 Require?

IFRS S1 sets general requirements for disclosing sustainability-related risks and opportunities, while IFRS S2 covers climate-related disclosures. Both are organized around four areas: governance, strategy, risk management, and metrics and targets. The emphasis is on information that helps investors judge how sustainability matters affect the company's prospects. IFRS S2 adds climate-specific content such as scenario analysis, transition planning and greenhouse gas emissions across Scope 1, Scope 2 and Scope 3.

How Is Malaysia Phasing In the Standards?

The NSRF, developed by the Advisory Committee on Sustainability Reporting, applies in three groups

• Group 1: Main Market issuers with market capitalisation of RM2 billion or more, from annual periods beginning on or after 1 January 2025
• Group 2: all other Main Market issuers, from 1 January 2026
• Group 3: ACE Market issuers and non-listed companies with revenue of RM2 billion or more, from 2027

Bursa Malaysia amended its listing requirements in December 2024 to match. Malaysia also uses relief measures, including climate-first reporting and deferred Scope 3 disclosure, and a report on the IFRS Foundation's jurisdictional profile describes the approach as adoption with limited transition.

Which Malaysian Companies Need to Prepare First?

Large Main Market issuers were first, and other Main Market issuers are now in their first reporting year, but smaller companies feel the effect indirectly through customers, lenders and supply chains. In ISSB ESG reporting in Malaysia, readiness depends on which group a company sits in and how many reporters sit above it in its value chain.

Which Companies Are Already Reporting?

Group 1 began climate-first reporting for annual periods starting in 2025, and one commentary puts that group at roughly 130 issuers representing over 80 percent of Bursa Malaysia's market capitalisation. For the remaining Main Market issuers, financial year 2026 is the first year the framework applies. ACE Market issuers and large non-listed companies follow from 2027, so they still have time to build their processes properly.

How Are Smaller Companies Affected Indirectly?

Smaller companies are affected because reporters need data from outside their own walls. One commentator notes that once Scope 3 reporting starts, every significant supplier to a Malaysian listed group becomes a potential data source. Suppliers should therefore expect requests for emissions data, energy use and governance information. The ACSR's PACE initiative offers toolkits and capacity-building resources, including for medium and smaller companies, which is a practical place to start.

What Does Good ISSB Preparation Involve?

Good preparation involves a gap analysis against IFRS S1 and S2, clear board and management ownership, a risk process that covers sustainability, a credible greenhouse gas inventory and data controls that can withstand scrutiny. Companies new to ISSB ESG reporting in Malaysia usually find that data, not drafting, is the hardest part.

ISSB disclosure areas · 4 areas, 1 data foundation

What Are the Practical Steps?

A sensible sequence is:

1. Confirm which group the company belongs to and when its first reporting period begins.

2. Run a gap analysis against IFRS S1 and S2 and against existing Bursa disclosures.

3. Assign governance: board oversight and a named executive owner.

4. Build a greenhouse gas inventory, starting with Scope 1 and Scope 2, using GHG Protocol methods.

5. Set data owners, controls and evidence trails so figures can be traced and checked.

6. Draft the disclosure with the finance team and test it through an internal review.

Why Does the Finance Link Matter?

It matters because the standards treat sustainability information as connected to the financial statements. One commentary reports that Malaysia did not adopt the relief that would let sustainability disclosures follow the financial statements, so the two are published together. That puts sustainability data on the same timetable and under similar discipline as financial data, which is a significant change for teams used to a separate, later report.

How Do ISO Management Systems Support ISSB Readiness?

In ISSB ESG reporting in Malaysia, ISO management systems support readiness by supplying governance routines, documented processes, internal audits and data controls that sustainability reporting also needs, but they do not satisfy ISSB on their own. ISSB is a disclosure standard, and an ISO certificate is not proof of compliance with it.

Which ISO Standards Help Most?

• ISO 14001: environmental management routines, legal registers, monitoring, internal audit and management review
• ISO 50001: energy data collection that already supports Scope 1 and Scope 2 figures, though it does not require Scope 3 data
• ISO 14064-1: a structured greenhouse gas inventory covering boundaries, data collection, quality management and reporting
• ISO 9001: document control, corrective action and audit discipline that carry over to sustainability data

Companies that already run these systems often have processes and equipment for gathering activity data in place, which can save effort when building an inventory.

Where Do ISO Systems Fall Short?

They fall short on content that IFRS S1 and S2 specifically require, such as assessing sustainability risks that could affect enterprise value, climate scenario analysis, Scope 3 emissions and connection with the financial statements. IFRS S2 also expects emissions to be measured using the GHG Protocol unless a local authority specifies otherwise. For ISSB ESG reporting in Malaysia, ISO systems are best seen as a strong foundation for controls and evidence, not a substitute for the disclosure work.

What Are the Challenges and Criticisms of ISSB Reporting?

The main challenges are data quality, skills and capacity, Scope 3 information, cost for smaller firms and the coming assurance expectations. Critics also question whether an investor-focused standard captures everything stakeholders care about.

What Challenges Do Companies Report?

• Capacity: in the consultation on the framework, companies appeared most worried about lacking the capacity to meet the new standards
• Scope 3 data: emissions across the value chain depend on suppliers who may have no inventory of their own
• Assurance: the ACSR aims to introduce reasonable assurance over Scope 1 and Scope 2 emissions from 2027, subject to further consultation
• Timetable: sustainability data must now keep pace with the financial reporting calendar

What Do Critics Say, and What Do Supporters Reply?

Critics argue that the focus on information relevant to investors can narrow what counts as material, and that heavy disclosure obligations risk becoming a box-ticking exercise, especially for smaller issuers. Supporters reply that a common global baseline makes company information comparable and cheaper for investors to use. At the framework's launch, officials noted that more than 20 jurisdictions, representing about 55 percent of global GDP, had decided or were taking steps to use ISSB standards. Malaysia's relief measures and PACE support are meant to ease the burden while capability builds.

Final Takeaway

Preparation is mostly about data, ownership and timing, not drafting. Companies that confirm their reporting group early, assign board and executive responsibility, build a reliable emissions inventory and use their existing ISO systems for controls will be better placed. ISSB ESG reporting in Malaysia is phased and supported by relief measures, but those reliefs are temporary, so a company that starts now has time to build the process properly instead of rushing it.

References

• The Edge Malaysia, Malaysian Companies to Start Complying With Sustainability Reporting Framework in Phases From 2025, Says SC — https://theedgemalaysia.com/node/727797
• Securities Commission Malaysia, SC Release NSRF Guidance to Help Companies' Board of Directors Drive Sustainability Reporting — https://www.sc.com.my/resources/media/media-release/sc-release-nsrf-guidance-to-help-companies-board-of-directors-drive-sustainability-reporting
• Invest Malaysia, National Sustainability Reporting Framework to Enhance Sustainability Disclosures — https://www.investmalaysia.gov.my/resources/latest-announcements/national-sustainability-reporting-framework-to-enhance-sustainability-disclosures/
• PwC Malaysia, Spotlight on Sustainability: National Sustainability Reporting Framework — https://www.pwc.com/my/en/assets/publications/2024/pwc-my-national-sustainability-reporting-framework.pdf
• KPMG Malaysia, Prepare for NSRF (brochure) — https://assets.kpmg.com/content/dam/kpmg/my/pdf/kpmg-prepare-for-nsrf-brochure.pdf
• Bernama, Malaysia's Sustainability Reporting Earns Global Recognition in IFRS Profile — https://bernama.com/lite/news.php?id=2433681
• Eco-Business, Malaysia's ISSB Consultation Reveals Urgent Need for Capacity in Sustainability Reporting — https://www.eco-business.com/ms/news/malaysias-issb-consultation-reveals-urgent-need-for-capacity-in-sustainability-reporting/
• Wellkinetics, ESG Reporting in Malaysia: Regulatory Requirements, Reporting Standards & Frameworks — https://wellkinetics.com.my/esg-reporting-malaysia/
• OneStop ESG, Malaysia NSRF in 2026: How Companies Should Prepare for ISSB-Based Sustainability Reporting — https://onestopesg.com/esg-resources/malaysia-nsrf-2026-readiness
• Terrascope, Malaysia's Climate Disclosure Rules: What You Need to Know — https://www.terrascope.com/blog/malaysias-climate-disclosure-rules-what-you-need-to-know
• GHG Protocol, GHG Protocol Use Within ISSB's IFRS S2 Standard — https://ghgprotocol.org/index%2Ephp/blog/ghg-protocol-use-within-issbs-ifrs-s2-standard-enables-widespread-adoption-common-standard-ghg
• DQS, Climate Management: Utilizing Synergies Between ISO Standards — https://www.dqsglobal.com/en/explore/blog/climate-management-utilizing-synergies-iso-standards
• Quality Austria, ISO 14064: Motivation and Benefits — https://www.qualityaustria.com/en/product-groups/environment-and-energy/iso-14064/