Malaysia Sets Out Enforcement Path for Sustainability Reporting Non-Compliance

Key Takeaways

• Non-Compliance Approach: Malaysia’s ACSR has set out how regulators will address non-compliance with sustainability reporting obligations under the NSRF.
• Transition Support: Authorities will take a phased and practical approach while companies adopt ISSB-aligned sustainability disclosure standards.
• Capacity Building First: Engagement, skills development, and corrective actions will be prioritized to ensure consistent and reliable disclosures.
• Enforcement for Inaction: Companies that fail to remedy identified deficiencies may face enforcement measures.
• Serious Breaches Trigger Action: Fraudulent, misleading, or other willful non-compliance will be met with firm enforcement to protect the public interest.

Deep Dive

Malaysia’s Advisory Committee on Sustainability Reporting (ACSR) has mapped out how it plans to address non-compliance with the country’s emerging sustainability disclosure rules, signaling a balanced approach that supports corporate readiness while keeping formal enforcement tools within reach.

Announced Monday in Kuala Lumpur, the approach focuses on guiding companies through the early phases of adopting the IFRS Sustainability Disclosure Standards, better known as ISSB Standards, which underpin Malaysia’s National Sustainability Reporting Framework (NSRF).

The Securities Commission Malaysia (SC), which chairs the ACSR, is working alongside Bank Negara Malaysia, Bursa Malaysia, the Companies Commission of Malaysia, and the Audit Oversight Board to review disclosures gradually and pragmatically, acknowledging what SC Chair Dato’ Mohammad Faiz Azmi called “a period of transition” for reporting entities.

“We recognise the challenges companies face in meeting the new sustainability reporting standards due to, among others, a lack of resources, the quality of external data or the difficulty in obtaining necessary expertise,” Faiz said. “Our approach is to balance the need for compliance with the varied levels of readiness across reporting entities.”

Launched in September 2024, the NSRF applies to listed issuers across Bursa Malaysia’s Main and ACE markets, alongside large non-listed companies generating $480 million (RM2 billion) or more in annual revenue. It represents one of the country’s most significant steps toward corporate transparency on environmental, social, and governance (ESG) performance.

Capacity Building Before Crackdowns

For now, the focus remains on helping companies build capabilities to deliver disclosures that are consistent, comparable, and reliable. Active engagement and corrective action, rather than penalties, will be the primary tools to address deficiencies during the early adoption period.

But the regulators also made clear that cooperation is not optional.

If companies refuse to correct gaps in their reporting or demonstrate little progress, authorities may escalate to enforcement measures. And in cases of “willful or serious non-compliance” (including fraudulent, misleading, or material omissions) enforcement action will be used to protect the market and public interest.

Malaysia’s approach mirrors challenges faced globally as sustainability reporting shifts from best practice to mandatory obligation. It also signals the regulator’s expectation that companies treat the transition seriously, particularly those with the resources and scale to comply.

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