Malaysia’s National Sustainability Reporting Framework (NSRF): How to understand and apply it correctly?

There’s a lot of talk about global sustainability reporting frameworks like GRI, IFRS, and the CSRD. But far less attention is paid to local, market-specific requirements. Many assume that aligning with a global standard automatically ensures compliance everywhere. That’s a dangerous oversimplification. Take Malaysia’s National Sustainability Reporting Framework (NSRF): while it uses IFRS S1 and S2 as its baseline, it isn’t a carbon copy. The NSRF adds layers of local implementation rules, phased timelines, and transition reliefs specifically designed for Malaysian companies.

NSRF vs IFRS S1/S2

To make sense of how NSRF relates to IFRS S1 and S2, it helps to think of IFRS S1/S2 as defining the “what”—the actual disclosure content—while the NSRF sets out the “who, when, and how” for companies in Malaysia.

As a baseline standard, the NSRF explicitly adopts the ISSB’s IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) “as issued,” without modifying the standards themselves.

Purpose of NSRF: It is a national implementation framework that specifies:

• Who must report: scope of entities
• When they must start: phased timelines by group
• What temporary reliefs are allowed
• How assurance will be introduced over time.

Image: Eco-business

1. Phased, entity-based rollout

To apply the NSRF alongside IFRS S1 and S2 correctly in Malaysia, it’s important to remember that while IFRS S1/S2 sets the global disclosure “what,” it does not prescribe national timelines. Each market decides its own rollout. In Malaysia, the NSRF introduces a phased, entity-based implementation schedule:

• Group 1: Main Market issuers with a market capitalisation of RM2 billion or more must begin reporting under the NSRF for financial years ending on or after 31 December 2025.
• Group 2: The remaining Main Market issuers follow a year later, with first reporting for financial years ending on or after 31 December 2026.
• ACE Market: All ACE Market issuers come in next, with first reporting for financial years ending on or after 31 December 2027.
• Large non-listed companies: Entities with annual revenue of RM2 billion or more are also brought into scope from 2027.

This staggered approach gives different segments of the market time to build capacity while still anchoring disclosures to the same IFRS S1/S2 baseline.

2. “Climate-first” transition relief

Under IFRS S1, companies are granted a temporary relief in their first year of adoption: they may report only on climate-related information using IFRS S2, rather than covering all sustainability topics immediately. The NSRF takes this one step further by extending and formalising the relief into a structured “climate-first” strategy tailored for Malaysian companies.

During the initial years of implementation, companies may:

• Apply IFRS S2 only, focusing on climate-related risks and opportunities, without having to apply the full IFRS S1 requirements across all sustainability topics.
• Limit disclosures to their principal business segments instead of the entire group right away.
• Defer Scope 3 GHG emissions disclosures, unless another regulator specifically requires them.

The duration of these reliefs differs by market segment:

• Main Market issuers (Groups 1 & 2): relief applies for the first two financial years of adoption.
• ACE Market issuers: relief can be used during the first three financial years.

3. Continued reporting on non-climate matters under existing rules

While IFRS S1 governs all material sustainability-related financial information, the NSRF’s transition design creates a distinct, Malaysia-specific pathway. During the “climate-first” phase, companies are still required to report on other material sustainability matters—such as labour practices, anti-corruption, and diversity—but these are disclosed under the existing Bursa Malaysia “Common Sustainability Matters” framework for the transition years, rather than under the full IFRS S1 methodology.

This hybrid approach—adopting IFRS S2 for climate-related disclosures while retaining legacy Bursa requirements for other topics—is a uniquely Malaysian construct. It shows how the market is aligning with global sustainability reporting trends, while preserving space for local priorities and regulatory characteristics during the transition.

4. Mandatory assurance roadmap

IFRS S1 sets out principles for sustainability-related disclosures and states that, if assurance is provided, it should follow certain standards—but it does not itself mandate assurance. The NSRF goes further by introducing a national timeline for mandatory reasonable assurance on Scope 1 and Scope 2 greenhouse gas (GHG) emissions in Malaysia.

The tentative assurance rollout schedule is as follows:

• Group 1 (Main Market, market cap ≥ RM2 billion): mandatory reasonable assurance from financial years ending on or after 31 December 2027.
• Group 2 (remaining Main Market issuers): from financial years ending on or after 31 December 2028.
• ACE Market issuers: from financial years ending on or after 31 December 2029.

This phased assurance requirement reinforces the credibility of emissions data over time, while giving companies a clear runway to build internal controls and assurance readiness.

5. Integration with other Malaysian policies

The NSRF is not a standalone reporting exercise; it is embedded within Malaysia’s broader sustainability and trade strategy. Key policy linkages include:

• Alignment with Malaysia’s net zero by 2050 target, ensuring that corporate disclosures feed into national climate planning and monitoring.
• Preparation for the EU Carbon Border Adjustment Mechanism (CBAM) and other cross-border climate measures, helping Malaysian exporters demonstrate climate performance in formats recognised internationally.
• Coordination with domestic carbon pricing initiatives, so that reported emissions data can support future carbon tax or trading schemes.

Other Malaysian sustainability trends

Beyond the technicalities of NSRF and IFRS, a few emerging trends and gaps are worth noting in the Malaysian context.

Some companies still treat ESG primarily as a compliance checkbox, rather than as a strategic management tool. This mindset risks undermining the core purpose of sustainability reporting: to surface material risks and opportunities that should inform business strategy, capital allocation, and long-term value creation.

At the same time, nature-related reporting is highly relevant for Malaysia. Nature-related risks, such as deforestation, biodiversity loss, soil degradation, and water stress, can be financially material for key sectors including plantations, agriculture, mining, property development, infrastructure, tourism, and the banks that finance these activities. While the NSRF (and IFRS S1/S2, even with transition reliefs) currently focuses mainly on climate-related issues, the relative lack of emphasis on nature could become a significant gap if it persists, especially as global frameworks like the TNFD gain traction and investors increasingly demand nature-related disclosures.

Reference

1. EsgAtlas Asia

2. The edge

3. Bernama

4. Orennow

5. Uhy

6. Terrascope