IFRS S2 Climate Reporting in Malaysia: What Your Company Needs to Know in 2026
Climate reporting in Malaysia is no longer optional for the majority of listed companies. As of 1 January 2026, all remaining Main Market-listed issuers on Bursa Malaysia must begin climate-first sustainability reporting under the National Sustainability Reporting Framework (NSRF). If your company falls within this cohort, the compliance clock is already ticking.
This guide breaks down exactly what IFRS S2 requires, the reporting timeline your company is on, and the practical steps you can take today to meet your obligations. We also explain how UN Global Compact Network Malaysia, Brunei and Cambodia (UNGCMBC) can support your company through this transition with hands-on programmes and expert guidance.
What Is IFRS S2 and Why Does It Matter?
IFRS S2 is a climate-related disclosure standard issued by the International Sustainability Standards Board (ISSB). It requires companies to disclose information about climate-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance, or cost of capital. Unlike earlier voluntary frameworks such as TCFD, IFRS S2 is now embedded directly into Malaysia's regulatory architecture through the NSRF, meaning compliance is a legal obligation, not a best-practice recommendation.
The standard covers four core pillars of disclosure: governance (how the board and management oversee climate-related matters), strategy (the actual and potential impacts of climate risks on business model and value chain), risk management (how the company identifies, assesses, and manages climate risks), and metrics and targets (the quantitative data including greenhouse gas emissions and climate-related performance indicators).
For Malaysian companies, this is not a standalone reporting exercise. IFRS S2 sits alongside IFRS S1 (general sustainability-related disclosures) as the dual backbone of the NSRF. Together, they replace the patchwork of voluntary frameworks that companies previously navigated.
The NSRF Phased Timeline: Where Does Your Company Sit?
The National Sustainability Reporting Framework, launched by the Securities Commission Malaysia in September 2024, introduces a phased compliance schedule based on company size and listing market. Understanding which phase your company falls into is the first step toward compliance.
Phase 1: Large-Cap Main Market Issuers (Above RM2 Billion Market Cap)
This cohort, representing approximately 130 companies and over 80% of Bursa Malaysia's total market capitalisation, began climate-first reporting for annual periods starting 1 January 2025. These companies are already in their first reporting cycle and must achieve full IFRS S1 and S2 compliance from 1 January 2027. If your company is in this group, you should already have systems in place for Scope 1 and Scope 2 emissions disclosure.
Phase 2: All Other Main Market-Listed Issuers
This is the cohort that has just entered the compliance window. Climate-first reporting begins for annual periods starting 1 January 2026, with full IFRS S1 and S2 compliance required from 1 January 2028. This phase brings the majority of listed companies into scope by headcount. For many of these companies, 2026 represents the first time they are required to report on climate-related risks in a structured, standardised format.
Phase 3: ACE Market Issuers and Large Non-Listed Companies
ACE Market listed corporations and large non-listed companies with annual revenue of RM2 billion and above begin climate-first reporting from 1 January 2027. Full compliance with IFRS S1 and S2 is required by 1 January 2030. Even if your company is not yet in scope, preparing early will save significant time and cost when obligations arrive.
What You Need to Report: The Practical Breakdown
Understanding the regulatory timeline is one thing. Knowing what data to collect and how to present it is another. Here is a practical breakdown of what climate-first reporting under IFRS S2 actually involves for your company.
Scope 1 and Scope 2 Emissions
All companies entering the 2026 compliance phase must disclose Scope 1 emissions (direct emissions from company-owned or controlled sources such as company vehicles, on-site fuel combustion, and manufacturing processes) and Scope 2 emissions (indirect emissions from purchased electricity, steam, heating, and cooling). This data must be measured, not estimated, wherever possible. Companies should begin installing monitoring systems and establishing data collection protocols with their energy providers if they have not already done so.
Limited Scope 3 Emissions
Phase 2 companies must also begin disclosing limited Scope 3 emissions, the indirect emissions that occur across the company's value chain, including both upstream (suppliers, raw materials, logistics) and downstream (product use, distribution, end-of-life treatment). At this stage, companies are not required to report all 15 categories of Scope 3 emissions. However, they must disclose emissions from the categories most material to their business. Full Scope 3 disclosure is required from 1 January 2029 for this cohort.
Materiality Assessment
Every issuer must conduct and document a materiality assessment aligned with the principles of IFRS S1. This means identifying sustainability-related risks and opportunities that could reasonably affect the entity's cash flows, access to finance, or cost of capital. The assessment must be reviewed and updated periodically, as it is not a one-time exercise.
Submission Through the CSI Platform
All ESG disclosure in Malaysia must now be submitted through the Centralised Sustainability Intelligence (CSI) Platform on Bursa LINK. The previous manual ESG Reporting Platform was decommissioned in December 2025. The CSI platform provides integrated tools for Scope 1 and 2 emissions calculations and assists in gathering data from supply chain partners. Companies should familiarise themselves with the platform early and ensure their internal data systems are compatible with its submission requirements.
Common Challenges Companies Face
Through our work with over 300 member companies across Malaysia, Brunei, and Cambodia, UNGCMBC has observed several recurring challenges that companies face when approaching IFRS S2 compliance for the first time.
The most frequent challenge is data readiness. Many companies, particularly those in Phase 2, do not have established systems for tracking greenhouse gas emissions. Energy consumption data may be scattered across departments, utility providers may not provide data in the format required, and Scope 3 data from suppliers is often incomplete or unavailable. Starting the data collection process now, even with imperfect data, is far better than waiting for perfect systems that may take years to build.
The second challenge is internal capability. Sustainability reporting requires cross-functional coordination between finance, operations, procurement, and sustainability teams. In many companies, this coordination does not exist yet. Appointing a dedicated sustainability reporting lead, even on a part-time basis, can dramatically improve the quality and timeliness of disclosures.
The third challenge is understanding what climate-first actually means in practice. It does not mean reporting only on environmental metrics. IFRS S2 requires companies to explain how climate-related risks affect their business strategy, financial planning, and risk management processes. This is a strategic exercise, not just a data exercise.
How UNGCMBC Can Help Your Company
UN Global Compact Network Malaysia, Brunei and Cambodia (UNGCMBC) is the official country network of the UN Global Compact, the world's largest corporate sustainability initiative. We provide practical, hands-on support to help companies navigate their sustainability reporting obligations.
UN Global Compact Network Malaysia, Brunei and Cambodia (UNGCMBC) is the official country network of the UN Global Compact, the world's largest corporate sustainability initiative. We provide practical, hands-on support to help companies navigate their sustainability reporting obligations.
IFRS S2 Accelerator Programme
Our IFRS S2 Accelerator 2026 programme is specifically designed to help companies understand and implement IFRS S2 requirements. Running through July and August 2026, this intensive programme walks participants through the standard's requirements, data collection methodologies, and disclosure best practices. Explore our programmes and register for upcoming sessions.
CoP Clinic Sessions
Our Communication on Progress (CoP) Clinic sessions provide one-on-one guidance for companies working through their sustainability reporting. Held regularly at our offices in Petaling Jaya, these sessions help participants troubleshoot specific reporting challenges, review draft disclosures, and ensure alignment with both UNGC and NSRF requirements. Book a CoP Clinic session for hands-on reporting guidance.
Sustainability Resources and Tools
UNGCMBC maintains a comprehensive knowledge hub with publications, templates, and practical tools to support sustainability reporting. From emissions calculation guides to materiality assessment templates, these resources are available to all participants. Access sustainability reporting resources and tools.
Membership and Network Support
As a UNGCMBC participant, your company gains access to a network of over 300 companies across Malaysia, Brunei, and Cambodia, along with training programmes, the UNGCMBC Academy, and recognition opportunities including the ESG Select List and Forward Faster Sustainability Awards. Join UNGCMBC to access sustainability compliance support.