Environmental, Social and Governance (ESG) practices have rapidly evolved from voluntary commitments into structured disclosure requirements in Malaysia. For listed companies, ESG reporting is now a regulated obligation aligned with international standards. For SMEs, while not mandatory, strong ESG practices are becoming increasingly important for competitiveness, supply-chain access and financing.
This article summarises what companies need to know: who must comply, what must be reported, key timelines, and the support available, especially for SMEs.
1. ESG Disclosure Requirements for Listed Companies
In Malaysia, ESG reporting for listed issuers is regulated through Bursa Malaysia’s Listing Requirements. Recent amendments effective from January 2025 require companies to adopt the International Sustainability Standards Board (ISSB): IFRS S1 (general sustainability disclosures) and IFRS S2 (climate-related disclosures).
1.1 What has changed?
In September 2024, Malaysia adopted the National Sustainability Reporting Framework (NSRF), which established IFRS S1 and S2 as the national baseline for sustainability reporting.
Bursa Malaysia subsequently amended both the Main Market and ACE Market Listing Requirements to require listed companies to prepare a Sustainability Statement in accordance with IFRS S1 and S2.
1.2 What listed companies must disclose
Under IFRS S1 and S2, listed issuers must include the following in their annual Sustainability Statement:
a) Material sustainability-related risks and opportunities
Companies must identify material sustainability issues and explain:
- how they impact the business,
- how they are managed, and
- their financial implications.
b) Climate-related disclosures (IFRS S2)
Mandatory disclosures include:
- climate risks and opportunities,
- greenhouse gas (GHG) emissions (Scope 1 & 2; Scope 3 if material),
- transition plans,
- climate strategy and targets,
- scenario analysis for climate risks (where material).
c) Metrics and targets
Companies must show performance across sustainability indicators for the past three years (rolling basis), alongside targets and progress.
d) Governance
Disclosure of the board’s and management’s roles in overseeing sustainability and climate-related risks.
e) Assurance
Issuers must disclose whether the Sustainability Statement has undergone:
- internal review,
- independent limited assurance, or
- reasonable assurance under recognised assurance standards.
1.3 Timeline for compliance
Bursa has introduced a phased approach:
Company Category | IFRS S1/S2 Compliance Begins |
Main Market – Large issuers (≥ RM2 billion market cap) | 1 January 2025 |
All other Main Market issuers | 1 January 2026 |
ACE Market issuers | 1 January 2027 |
For more information, please refer to Bursa Malaysia Sustainability Reporting Guide and Sustainability Reporting using the IFRS Sustainability Disclosure Standards.
2. ESG Expectations for SMEs (MSMEs)
SMEs in Malaysia are not legally required to follow Bursa’s sustainability reporting requirements. However, market forces increasingly push SMEs to adopt ESG practices:
- Multinational and public-listed customers now request ESG data from their suppliers.
- Banks and investors use ESG criteria in financing decisions.
- Export markets (EU, US, ASEAN) increasingly require supply-chain sustainability disclosures.
To support SMEs, Malaysian regulators and industry bodies have introduced simplified frameworks.
2.1 ESG frameworks and tools for SMEs
a) SME Corp’s ESG Quick Guide for MSMEs (2024)
Provides an 8-step roadmap for SMEs to begin ESG adoption, including:
- identifying priority ESG issues,
- setting objectives,
- selecting 13 recommended ESG indicators, and
- preparing a simple ESG statement or report.
b) ASEAN Simplified ESG Disclosure Guide (ASEDG) for SMEs (2025)
Developed under the ASEAN Capital Markets Forum (ACMF), the ASEDG:
- consolidates global standards (IFRS S1/S2, GRI, SASB), and
- simplifies them into 38 essential disclosures suited for SMEs in regional supply chains.
c) Tools to support SMEs
- SME GHG Emissions Calculator (CMM), aligned with the GHG Protocol.
- ESG playbooks and training programmes (e.g., GreenBizReady by CIMB).
- Sector-specific ESG templates for suppliers.
Conclusion
Malaysia’s ESG landscape is entering a new phase with the adoption of ISSB’s IFRS S1 and S2 standards. Listed companies, whether on the Main Market or ACE Market, must comply within the next two years, depending on their category. This means stronger governance, better data systems, clearer targets, and more robust climate-related disclosures.
For SMEs, ESG is not yet mandatory, but it is becoming essential for competitiveness. With practical guides and tools now in place, SMEs can adopt ESG practices step-by-step, positioning themselves for supply-chain access, financial incentives, and long-term business resilience.