In today’s world, sustainability is no longer just a buzzword - it’s a responsibility. Companies that treat sustainability reporting as a mere compliance exercise risk missing out on the bigger picture: enhanced investor confidence, competitive edge and long-term success.
Companies across the globe are recognising that their impact on the environment, society and economy goes far beyond profits. Companies with strong sustainability practices also tend to outperform their peers financially as they better manage risks and identify new opportunities.
Within this context, the terms greenwashing and greenhushing have emerged. Greenwashing refers to the misleading portrayal of a company’s environmental initiatives, often exaggerating or fabricating eco-friendly claims to attract consumers and investors.
On the other hand, greenhushing reflects the growing tendency of businesses to downplay or conceal their sustainability efforts for fear of scrutiny or backlash. Both practices undermine the true purpose of sustainability reporting – allowing investors to understand how companies are addressing challenges and making meaningful progress toward a more sustainable future.
In Malaysia, the urgency to integrate environmental, social and governance considerations into corporate practices has never been greater, as investors and stakeholders increasingly seek consistent, comparable and reliable disclosures to help in their decision making.
To meet this demand and elevate corporate sustainability practices, the Advisory Committee on Sustainability Reporting (ACSR), chaired by the Securities Commission Malaysia (SC), introduced the National Sustainability Reporting Framework (NSRF) in September last year.
The NSRF adopts the International Sustainability Standards Board (ISSB) Standards as the baseline for sustainability disclosures in Malaysia, specifically IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2 Climate-related Disclosures.
A phased approach to implementation
The NSRF recognises the varying levels of maturity in sustainability practices and reporting of companies. Therefore, its implementation is designed to be phased based on the size of companies (Table 1).
The framework follows a climate-first approach and provides additional transitional reliefs, including allowing companies to focus their disclosures on principal business segments during the transition period and deferring the disclosure of Scope 3 GHG emissions.
The aim is to encourage companies to build robust internal systems and processes that will support high quality sustainability reporting over time.
Equipping companies for the transition
We also understand that transitioning to a new reporting framework requires capacity building and guidance. The ACSR is committed to providing companies with the necessary tools and support provided through PACE (Policy, Assumptions, Calculators and Education):
Interoperability module between the Global Reporting Initiative (GRI) Standards and the ISSB Standards:
Enables companies familiar with the GRI Standards to leverage existing reporting practices for ISSB compliance.
Industry Specific Illustrative Reports:
Later this year, we will release illustrative sustainability reports for the plantation and construction sectors to provide practical guidance on preparing disclosures aligned ISSB Standards, GRI Standards and Bursa’s Listing Requirements.
NSRF Preparers’ Programme:
In collaboration with the SC’s training arm, the Securities and Industry Development Corporation (SIDC), we will roll out targeted modules covering critical topics such as Scope 3 GHG emissions calculation and reporting, sustainability-related risk assessments and climate scenario analysis.
The role of boards in sustainability disclosure and corporate accountability
The NSRF represents more than a shift in reporting requirements. It is a catalyst for embedding sustainability into corporate strategy and decision making.
Boards of directors play an important role in ensuring that sustainability-related risks and opportunities are integrated into their governance, risk management and financial planning.
Understanding and addressing sustainability risks, whether climate-related, supply chain disruptions, or evolving regulatory landscape, requires boards to move beyond traditional oversight roles. They must go beyond surface-level discussions and embed sustainability at the core of strategic decision making.
Boards must be able to understand, assess and address these risks as part of the company’s overall risk management framework, ensuring they are embedded into the governance structure and business strategies.
Sustainability-related disclosures should be viewed not as an afterthought, but as a crucial component of financial statements. It is critical for boards to ensure that sustainability is reflected in the company’s long-term financial planning, and that climate- related risks and opportunities are factored into valuation, investment decisions and capital allocation.
To support this, we recently issued Navigating the Transition: A Guide for Boards, a resource to help boards take a leadership role in sustainability reporting. Effective sustainability governance requires dedicated oversight, and this is where the roles of chief sustainability officers, chief risk officers and chief financial officers become critical.
Boards must be ready to engage actively with these offices and demand regular updates on sustainability performance in line with the NSRF.
A call to action
Regulators, including the SC, are committed to supporting companies in this transition. However, the ultimate responsibility lies with the boards of directors and corporate leaders to embed sustainability into their companies’ DNA.
By embracing the NSRF and prioritising sustainability at the highest levels of decision making, companies can unlock new growth opportunities, build investor confidence and contribute to a more resilient and sustainable economy.
The real challenge is not just reporting on sustainability but embedding it into the business strategy to drive real impact. The question is – will companies seize this opportunity or risk falling behind?
Neetasha Rauf is the Securities Commission Malaysia’s Chief Sustainability Officer
