The biggest ESG reporting challenges in Malaysia are poor data quality, hard-to-reach Scope 3 and supplier information, shortages of skilled people, siloed teams, overlapping frameworks and readiness for assurance. Each can be managed with a staged plan: fix ownership and data first, use the transition reliefs deliberately, draw on available support and build controls before verification becomes mandatory.

The pressure is real. Under the National Sustainability Reporting Framework (NSRF), Bursa-listed and large non-listed companies must report using IFRS S1 and IFRS S2 in three phases from 2025 to 2027. The Advisory Committee on Sustainability Reporting (ACSR) has already deferred mandatory assurance after finding that disclosure quality in the first reporting cohort needed to improve.

This guide sets out the most common obstacles, explains why they arise, and offers practical responses, along with the different views stakeholders hold.

What Are the Main ESG Reporting Challenges in Malaysia?

The main challenges are data quality, Scope 3 measurement, skills and capacity, internal coordination, cost, framework complexity and assurance readiness. They are connected, so progress on one usually eases the others.

The NSRF, published on 24 September 2024, covers Main Market issuers, ACE Market issuers and non-listed companies with consolidated revenue of RM2 billion or more for two consecutive years. Group 1 started for financial years from 1 January 2025, Group 2 starts on 1 January 2026, and Group 3 starts on 1 January 2027. Each group meets these challenges at a different stage of readiness.

Why Are These Challenges Appearing Now?

They are appearing because the standard has shifted from flexible narrative to structured, quantified disclosure. Bursa Malaysia aligned its Main Market and ACE Market Listing Requirements with the NSRF in December 2024, which made the new expectations enforceable. Teams that once wrote a descriptive Sustainability Statement now need traceable numbers.

How Can Companies Overcome Poor ESG Data Quality?

Companies can overcome poor data quality by assigning named owners, writing down methods, keeping source evidence and adding review steps similar to financial reporting. The goal is that a third party could follow the calculation and reach the same number.

What Does Poor Data Quality Look Like?

Typical signs include numbers that cannot be reproduced, inconsistent reporting boundaries, undocumented estimates and differences between documents. These problems weaken comparability, which is the main reason regulators chose a global standard.

What Fixes Work Best?

Start with a metric inventory that lists each indicator, its definition, unit, boundary, source system and owner. Add a reviewer from another team and require sign-off before publication. Internal audit can test the process, which also helps the company answer honestly when the listing rules ask whether disclosures were internally reviewed or independently assured.

How Can Companies Overcome Scope 3 and Supplier Data Challenges?

Companies can overcome Scope 3 challenges by using the available reliefs wisely, prioritising the most significant categories and suppliers, and using standard templates to collect data. Scope 3 is not required immediately in most cases, but preparation should begin early.

Group 1 and Group 2 companies may postpone Scope 3 emissions, except for categories a regulator already requires. Bursa Main Market issuers, for example, already report Scope 3 emissions from business travel and employee commuting.

Why Is Scope 3 So Hard?

Scope 3 depends on data held by suppliers and customers. Commentators have noted that only about 11% of Malaysian listed companies disclosed any Scope 3 emissions in the 2023 reporting cycle, compared with 39% across Asia-Pacific. Readers should verify that figure against the original source, but the direction is clear: the market is still early.

How Can Companies Start Without Overreaching?

Begin by estimating which Scope 3 categories are largest, then target the suppliers that account for most spend or emissions. Explain why the data is needed and offer a simple template. Local reporting attributes to the Department of Statistics Malaysia the finding that SMEs make up 97% of businesses and 38% of GDP, so many suppliers will be small firms with no sustainability team, and patience and clear instructions help.

Are Standard Emission Factors Available?

Availability is improving but uneven. In the construction and property sector, the Construction Industry Development Board maintains an Embodied Carbon Inventory, and commentators argue that a standard Malaysia-specific database would improve consistency. Companies should document the factors they use and why, so a reviewer can follow the logic.

How Can Companies Overcome Skills and Capacity Shortages?

Companies can overcome shortages by training existing staff, using external advisers selectively and tapping national capacity-building programmes. A small, well-trained cross-functional team is often more effective than a large unfocused one.

Where Can Companies Find Support?

Support includes the Securities Commission's PACE initiative, Bursa Malaysia's Centralised Sustainability Intelligence (CSI) platform and, for banks and insurers, guidance from the Joint Committee on Climate Change issued after its meeting in August 2026, with capacity-building programmes scheduled from October 2026. Bursa states that the free CSI modules are for listed companies, so others should check access terms.

How Should Smaller Teams Prioritise?

Focus first on the mandatory items for your group, usually climate disclosures and Scope 1 and Scope 2 emissions. Defer wider topics until the foundations are stable. The climate-first relief exists precisely so that companies can build capability in stages.

How Can Companies Overcome Silos Between Finance and Sustainability?

Companies can overcome silos by building a joint working group, sharing definitions and aligning calendars. IFRS S1 expects sustainability information to connect with the financial statements, using the same reporting entity and period, so cooperation is not optional.

What Practical Steps Help?

Hold a single reporting calendar tied to the financial close, agree on common definitions for entities and periods, and give finance a formal review role over quantitative sustainability data. Include operations and procurement, since they hold much of the underlying activity data.

How Can Companies Manage the Cost of ESG Reporting?

Companies can manage cost by starting with a proportionate system, avoiding duplicate reports and investing in controls that serve several purposes. A controlled spreadsheet with clear ownership can be enough for early cycles, and dedicated platforms can follow as complexity grows.

How Do You Avoid Duplicating Effort?

Build one data foundation and draw every report from it. Many companies produce an IFRS-aligned disclosure for compliance and a GRI-based report for wider stakeholders. A shared data set keeps the numbers consistent and reduces the workload.

Is Spending on Systems Worth It?

It depends on scale. Sceptics argue that heavy infrastructure is premature before requirements settle, while others say weak systems create expensive rework later. A balanced approach is to fix ownership, methods and evidence first, then add technology when volume justifies it.

How Can Companies Get Ready for Assurance?

Companies can get ready by documenting methods, retaining evidence and running internal reviews well before an external provider arrives. The NSRF plans mandatory reasonable assurance of Scope 1 and Scope 2 emissions for Group 1 entities, and any independent assurance must follow ISSA 5000.

In September 2026 the ACSR deferred the start from annual periods beginning on or after 1 January 2027 to those beginning on or after 1 January 2028. A Sustainability Assurance Guide is planned, and listed issuers must continue to state whether disclosures were internally reviewed or independently assured.

What Should Be in the Evidence File?

Include source records, calculation files, emission factor references, boundary descriptions, control documentation and notes on estimates. A dry run with internal audit shows gaps while there is still time to fix them.

Does the Deferral Mean Companies Can Wait?

No. Reasonable assurance involves more extensive testing than limited assurance, and building reliable systems takes more than one reporting cycle. The extra year is best used as a build period.

How Can Companies Avoid Greenwashing Risks?

Companies can avoid greenwashing by disclosing estimates openly, keeping claims tied to evidence and ensuring consistency across documents. A modest report that is transparent about its limits is safer than a polished one that cannot be traced to data.

Bursa Malaysia's chief regulatory officer has said that specific penalties are expected to be introduced gradually through amendments to the Financial Reporting Act 1997, the Companies Act 2016 and the listing requirements. Companies should treat disclosure accuracy as a compliance matter, not only a reputational one.

What Are the Different Views on ESG Reporting Challenges?

Stakeholders agree that the challenges are real, but they differ on how fast companies should move and how much support is needed. The discussion has become more practical since the 2026 deferral.

What Do Regulators and Investors Say?

Regulators and investors say reliable data is the foundation of comparability and trust. They see the phased timeline and reliefs as a realistic path, and they read the deferral as putting quality before speed.

What Do Companies and SMEs Say?

Companies cite cost, skills gaps and supplier data difficulty. SMEs worry about being asked for emissions data they have never tracked. Both ask for standard templates, shared emission factor databases and practical training.

What Do Critics Say?

Some critics argue that a financially focused baseline can overlook significant impacts on people and the environment. Others say the deferral exposes a gap between ambition and readiness, and that assurance covers only part of a report. A further view holds that flexibility is healthy, because forcing assurance on weak data would reduce trust.

FAQ: Common Questions About ESG Reporting Challenges in Malaysia

What Is the Biggest ESG Reporting Challenge in Malaysia?

Data quality, especially for emissions and supplier information, is widely seen as the biggest challenge, and it was the reason assurance was deferred in 2026.

Do Companies Have to Report Scope 3 Immediately?

Not in most cases. Scope 3 can be postponed under the NSRF reliefs, except for categories a regulator already requires.

How Can Small Teams Cope?

Focus on mandatory climate disclosures first, assign clear owners, use available support and add complexity gradually.

When Does Mandatory Assurance Start?

Mandatory reasonable assurance of Scope 1 and Scope 2 emissions for Group 1 entities now applies to annual periods beginning on or after 1 January 2028.

Is Specialist Software Necessary?

Not always. A controlled spreadsheet can work for simpler reporters, while larger groups often benefit from a dedicated platform.

Where Can Companies Get Help?

The Securities Commission's PACE initiative, Bursa's CSI platform and sector guidance from the Joint Committee on Climate Change are good starting points.

Conclusion

The challenges are manageable when companies tackle them in order: ownership and data first, then Scope 3 preparation, skills, coordination and assurance readiness. The NSRF's reliefs and the 2028 assurance date give companies room to build, but that room is limited.

Companies that treat these challenges as a systems problem rather than a writing problem will find that ESG reporting becomes steadier and more credible each cycle. The organisations that start now will be better placed when expectations tighten.