ESG is mandatory in Malaysia only in part: sustainability reporting is compulsory for companies listed on Bursa Malaysia and, from 2027, for large non-listed companies with consolidated revenue of RM2 billion or more, while most private companies and SMEs have no direct legal duty to publish an ESG report. However, every business must still comply with environmental, labour, safety and anti-corruption laws, and customers or lenders may require ESG data in practice.
The confusion comes from two different questions being asked at once: whether ESG reporting is required, and whether ESG-related conduct is regulated. The first is governed mainly by the National Sustainability Reporting Framework (NSRF), launched by the Securities Commission in September 2024 and implemented through Bursa Malaysia’s listing requirements and, for non-listed companies, forthcoming company law changes. The second is covered by many existing statutes. This article sets out who must report, when, what is not mandatory, which legal duties apply to everyone, where indirect pressure comes from, when an ESG consultant is worth hiring and where views differ.
Who Has to Report on ESG in Malaysia?
Companies listed on Bursa Malaysia’s Main Market and ACE Market must report, as must large non-listed companies that meet the revenue threshold. The NSRF divides them into three groups with different start dates.
What Are the Three NSRF Groups?
Group 1 covers Main Market issuers with a market capitalisation of RM2 billion or more, roughly 130 companies representing over 80% of the market’s value. Group 2 covers the remaining Main Market issuers. Group 3 covers ACE Market issuers and large non-listed companies with consolidated group revenue of RM2 billion or more for two consecutive preceding financial years, or company-level revenue where group figures are not available.
When Does Each Group Start?
Most sources report that Group 1 begins for annual periods starting on or after 1 January 2025, Group 2 from 1 January 2026 and Group 3 from 1 January 2027. Each group begins with climate-related disclosures under IFRS S2 and moves to the full IFRS S1 requirements later, with transition reliefs available.
Does the Scope 3 Requirement Start at the Same Time?
No. Scope 3 emissions disclosure is phased later than Scope 1 and 2. Reported dates are FY2027 for Group 1, FY2028 for Group 2 and FY2030 for Group 3, although these may be refined. Scope 1 and 2 emissions are expected from the start of each group’s climate reporting.
What About Listed Companies Before the NSRF?
Listed issuers have had to publish a sustainability statement in their annual reports under Bursa Malaysia’s listing requirements for several years. The NSRF builds on this by aligning disclosures with the ISSB standards, so the shift is from a locally guided approach to a standardised global baseline.
| Entity | Must report under NSRF? | Typical start | Notes |
| Main Market issuer, market cap RM2 billion or more (Group 1) | Yes | Annual periods from 1 January 2025 | Climate-first, then fuller S1 |
| Other Main Market issuer (Group 2) | Yes | From 1 January 2026 | Reliefs available |
| ACE Market issuer (Group 3) | Yes | From 1 January 2027 | Reliefs available |
| Large non-listed company, revenue RM2 billion or more (Group 3) | Yes | From 1 January 2027 | Disclosure location to be set through company law changes |
| Other private companies and SMEs | Not directly | Not applicable | Indirect pressure from customers and lenders |
Who Does Not Have to Report on ESG in Malaysia?
Most private companies, including the vast majority of SMEs, are not directly required to publish an ESG or sustainability report under the NSRF, because the large non-listed threshold is RM2 billion in consolidated revenue. Their obligations arise from other laws and from commercial relationships.
Are SMEs Exempt From ESG Reporting?
SMEs below the thresholds are not required to report under the NSRF, and the framework itself recognises that non-listed companies sit within wider supply chains. There is no general legal duty for them to publish ESG reports, though they may choose to do so voluntarily using resources such as the Simplified ESG Disclosure Guide.
Are Mid-Sized Private Companies Exempt Too?
Generally yes, unless their consolidated group revenue crosses the RM2 billion threshold. Companies close to the threshold should monitor their revenue because the test looks at two consecutive years, and regulators may refine the scope over time. Consultations by the Companies Commission of Malaysia in 2026 concerning sustainability reporting under the Companies Act 2016 indicate that the legal framework for non-listed companies is still developing.
Which ESG-Related Laws Apply to Every Malaysian Business?
Every business must comply with environmental, occupational safety, labour and anti-corruption laws, whether or not it publishes an ESG report. These legal duties are mandatory even where reporting is not.
What Environmental Duties Apply?
Businesses must follow environmental legislation such as the Environmental Quality Act 1974 and related regulations on emissions, effluent, scheduled waste and approvals. Non-compliance can lead to penalties, closure orders or loss of licences. Sector-specific rules may apply, for example in palm oil, manufacturing and construction.
What Social and Labour Duties Apply?
Businesses must comply with employment law, minimum wage rules, statutory contributions, occupational safety and health requirements and standards for worker accommodation where applicable. These duties directly overlap with the social pillar of ESG, and breaches can affect licences, customer relationships and financing.
What Governance Duties Apply?
Companies must follow the Companies Act 2016 on directors’ duties and record-keeping, and corporate liability provisions under the anti-corruption law mean organisations can be held liable for corruption by associated persons unless they have adequate procedures. Good governance practices therefore have a legal as well as an ESG dimension.
How Do Customers, Banks and Investors Create Indirect ESG Pressure?
Customers, banks and investors create indirect pressure by asking for ESG data as a condition of business, financing or investment. This can make ESG practices effectively mandatory for companies that are not legally required to report.
How Does the Supply Chain Transmit Requirements?
Large reporting companies must gather data from across their value chains over time, including Scope 3 emissions, so they send questionnaires and codes of conduct to suppliers. A supplier that cannot respond may risk losing business. Exporters may also face requirements from foreign customers and markets, such as carbon or deforestation-related rules.
How Do Banks and Investors Use ESG Information?
Banks increasingly consider ESG risks when assessing loans and may offer green or sustainability-linked facilities that require specific data. Investors and private equity firms examine ESG during due diligence. While credit decisions still rest mainly on financial strength, ESG evidence can influence access, terms and speed.
What Should Different Types of Company Do Now?
Listed and large non-listed companies should plan for their NSRF group, while SMEs should focus on legal compliance, basic data and customer requests. The right response depends on legal status and commercial exposure.
What Should In-Scope Companies Do?
In-scope companies should confirm their group, build an emissions inventory, set up data governance and prepare for assurance expectations, which are being developed and are expected to become mandatory in stages. They should also coordinate with finance teams, since sustainability information will sit alongside financial reporting.
What Should SMEs Do?
SMEs should ensure compliance with applicable laws, keep organised records of energy, waste, workforce and safety, map the ESG requests they receive and consider simplified frameworks. Proportionate preparation, such as a basic Scope 1 and 2 estimate, makes it easier to respond to customers and lenders.
When Does a Company Need an ESG Consultant?
A company needs an experienced ESG consultant such as Wellkinetics when it is in scope of the NSRF, when it must interpret overlapping requirements, build data systems or prepare for assurance, or when major customers and lenders request technical outputs. Many SMEs can start internally.
What Can an ESG Consultant Do for Reporting Obligations?
An environmental, social and governance consultant can confirm which obligations apply, run a gap analysis against IFRS S1 and S2, design the emissions inventory, prepare disclosures, train staff and support readiness for assurance. A good ESG consultant will also say when a company is out of scope and a lighter approach is enough.
How Can Costs Be Controlled?
Define the scope in writing, keep routine data collection in-house and request itemised quotes with clear deliverables. Ask which templates and models you will own after the engagement so that future updates do not require repeat fees.
Do Experts Agree on Whether ESG Should Be Mandatory?
No. Views differ on how widely mandatory reporting should apply and how quickly. Each position reflects genuine concerns.
What Do Supporters of Mandatory Reporting Argue?
Supporters argue that mandatory standards improve comparability and trust, give investors consistent information and push companies to manage climate and social risks. They also point out that aligning with the ISSB helps Malaysian companies access international capital.
What Do Critics and Cautious Voices Argue?
Critics argue that compliance costs and data demands can be heavy, especially for mid-sized firms and suppliers who face indirect requests, and that phased reliefs are needed. Some also worry about duplication across overlapping frameworks and the risk of box-ticking.
What Is the Balanced View?
The balanced view is that mandatory reporting is sensible for large and listed companies, where the public interest is greatest, while smaller companies are better served by proportionate guidance and support. The direction of travel, however, is toward more disclosure over time.
See also: The Rise of Brushless Electric Motors Revolutionizing Manufacturing Sustainability
Frequently Asked Questions About Mandatory ESG in Malaysia
Is ESG reporting mandatory for private companies in Malaysia?
Not for most. It is mandatory for large non-listed companies with consolidated revenue of RM2 billion or more, from 2027. Other private companies are not directly required to report.
Do SMEs need to follow the NSRF?
No, unless they are listed or meet the large non-listed threshold. They may still receive ESG requests from customers and banks.
Is Scope 3 reporting mandatory now?
Not yet for most. Scope 3 is phased in later than Scope 1 and 2, with reported start years of FY2027 for Group 1, FY2028 for Group 2 and FY2030 for Group 3.
Is assurance of sustainability reports mandatory?
Assurance is being developed and is expected to be phased in by group. Check the latest guidance from the Securities Commission and the Audit Oversight Board.
Do I need an ESG consultant to comply?
Not always. Companies with strong finance and sustainability teams may comply internally, but an ESG consultant helps with technical requirements, tight timelines or limited capacity.
Conclusion
ESG reporting is mandatory for listed and large non-listed companies on a phased timeline, but not for most SMEs, while ESG-related legal compliance applies to everyone. Confirm your NSRF group, comply with existing laws, prepare basic data and use an ESG consultant where the requirement is technical or time-critical.
The debate over scope and speed will continue, and both advocates of broader mandates and those urging proportionality make fair points. A company that keeps accurate records, follows the rules that apply to it, avoids overstated claims and engages an ESG consultant selectively will be ready whichever way the requirements evolve.
This article is for general information only and is not legal, financial or regulatory advice. Reporting requirements, thresholds and timelines are being refined, so verify current details with the Securities Commission, Bursa Malaysia and the Companies Commission of Malaysia.