Malaysia's transition reliefs under IFRS S1 and S2 create a window that looks more generous than it actually is. Group 1 and Group 2 companies can disclose climate-related information only for their first two annual reporting periods, deferring the broader IFRS S1 topics and full Scope 3 emissions until later. But for Group 1 issuers, that relief runs out at financial year 2027, and the work needed to be ready for that expanded scope has to begin well before the relief expires, not after. ESG consultancy focused specifically on IFRS S1 and S2 readiness exists largely to help companies use this transition window productively rather than treating it as extra time to delay.

What Do IFRS S1 and S2 Actually Require Companies to Disclose?

IFRS S1 and S2 require companies to disclose sustainability-related and climate-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance, or cost of capital, structured around four pillars: governance, strategy, risk management, and metrics and targets. Both standards were issued together by the International Sustainability Standards Board in June 2023, with IFRS S1 covering sustainability disclosures broadly and IFRS S2 applying the same four-pillar structure specifically to climate.

This four-pillar architecture is borrowed directly from the Task Force on Climate-related Financial Disclosures, giving companies already familiar with TCFD reporting a running start, since the underlying logic, governance oversight, strategic integration, risk management processes, and measurable targets, carries over largely unchanged. IFRS S2 adds specific requirements on top of this shared structure, including climate scenario analysis, transition planning, and greenhouse gas emissions reporting across Scope 1, Scope 2, and Scope 3. ESG consultant in Malaysia supporting IFRS S1 and S2 readiness typically starts by mapping a company's existing TCFD or sustainability reporting against this four-pillar structure, identifying exactly which elements are already in place and which represent genuinely new disclosure obligations.

Why Does Malaysia's Adoption of IFRS S1 and S2 Differ From Other Markets?

Malaysia's adoption of IFRS S1 and S2 differs from other markets because the country has positioned itself as the only ASEAN jurisdiction adopting ISSB Standards through a "limited transition" approach, building directly on Bursa Malaysia's existing TCFD-aligned requirements rather than introducing the standards as an entirely new framework. This distinction matters because it shapes exactly how much of a Malaysian company's existing reporting infrastructure can be carried forward.

Group 1 entities, Main Market-listed issuers with a market capitalization exceeding RM2 billion, have been required to begin climate-first reporting for annual reporting periods from 1 January 2025, with Group 2 following in 2026 and Group 3, covering ACE Market issuers and large non-listed companies with consolidated revenue of RM2 billion or more, following from 1 January 2027. ESG consultancy focused on this Malaysian context needs to understand both the ISSB Standards themselves and the specific way Bursa Malaysia's National Sustainability Reporting Framework has layered its own transition reliefs and proportionality mechanisms on top of them, since Malaysia's approach is genuinely more structured than a straightforward global adoption of the standards.

What Transition Reliefs Are Available to Malaysian Companies Under IFRS S1 and S2?

Malaysian companies have access to several layered transition reliefs, including a climate-first sequencing that permits Group 1 and Group 2 companies to disclose only climate-related risks and opportunities under IFRS S2 for their first two annual reporting periods, an option to focus disclosures on principal business segments, and permission to defer most Scope 3 emissions reporting during this transition window. Understanding exactly which reliefs apply, and when each one expires, is one of the most practically important parts of IFRS S1 and S2 readiness work.

The specific reliefs available include the ability to disclose climate-related information only, deferring broader IFRS S1 sustainability topics for two years for Group 1 and Group 2 companies and three years for Group 3 companies, along with permission to omit Scope 3 emissions except for categories already required by other regulators, and an option to concentrate initial disclosures on a company's principal business segments rather than its full operational footprint. Large non-listed companies whose holding company already reports using ISSB-aligned standards, or equivalent frameworks such as the European Sustainability Reporting Standards, may also be able to leverage that parent-level disclosure rather than building an entirely separate reporting process. ESG consultancy supporting readiness work needs to map these reliefs precisely against a company's specific reporting group, since applying the wrong relief window, or assuming a relief extends further than it actually does, risks a company being caught unprepared once a specific transition period expires.

Why Does the Expiry of Transition Reliefs Matter More Than Their Initial Availability?

The expiry of transition reliefs matters more than their initial availability because the relief period is genuinely short relative to the scope of work required once it ends, and companies that treat the transition window purely as delayed urgency, rather than active preparation time, tend to find themselves under severe time pressure once the full disclosure requirements arrive. For Group 1 companies specifically, financial year 2027 marks the point when the full framework arrives, bringing IFRS S1 sustainability topics beyond climate, disclosure coverage extending past principal segments, and full Scope 3 emissions reporting all at once.

This means the preparation work for that 2027 expansion needs to begin during the current relief period, not after it ends, since building the data systems and processes needed for full Scope 3 emissions reporting, in particular, generally cannot be compressed into the months immediately before a reporting deadline. ESG consultancy focused on genuine readiness, rather than minimum compliance during the relief period, typically treats the transition window as the single most valuable planning resource a company has, using it specifically to build the infrastructure that will be needed once the reliefs are no longer available, rather than deferring that work until the relief period itself runs out.

How Does the Financial Materiality Lens Under IFRS S1 and S2 Change What Companies Report?

The financial materiality lens under IFRS S1 and S2 changes what companies report by narrowing disclosure to sustainability matters that could reasonably influence the decisions of investors, lenders, and other capital providers, a considerably narrower standard than the broader stakeholder-oriented materiality lens used by frameworks such as the Global Reporting Initiative. Companies that have previously built their sustainability reporting around GRI's broader materiality approach need to recalibrate that process specifically for IFRS S1 and S2 readiness.

This recalibration is not a minor technical adjustment; it can meaningfully change which topics a company treats as reporting priorities, since an issue that matters significantly to a company's local community or broader stakeholder group may not meet the financial materiality threshold that determines what IFRS S1 and S2 actually require. ESG consultancy supporting this transition generally needs to run a dedicated financial materiality assessment specifically for IFRS S1 and S2 purposes, rather than simply relabeling an existing GRI-based materiality assessment, since the underlying methodology and resulting priority list genuinely differ between the two approaches.

What Role Does Assurance Play in IFRS S1 and S2 Readiness?

Assurance plays a growing role in IFRS S1 and S2 readiness because listed issuers must state whether their sustainability statement underwent internal review or independent assurance against recognized standards such as ISAE 3000 (Revised) or ISSA 5000, with the conclusions from any independent assurance required to be disclosed alongside the statement itself. Building assurance-readiness into the reporting process from the outset, rather than treating it as a final check before submission, tends to produce considerably fewer surprises during the actual assurance engagement.

This assurance disclosure requirement means a company's data trail, not just its final reported figures, needs to hold up under scrutiny, since an assurance provider reviewing a sustainability statement will be testing whether specific numbers can be traced back to a defensible methodology and consistent source data. ESG consultancy focused on IFRS S1 and S2 readiness increasingly builds this assurance-readiness directly into the data collection and reporting processes established during the transition period, rather than leaving companies to discover data quality gaps for the first time when mandatory assurance requirements eventually apply.

How Should Companies Use Bursa Malaysia's Centralised Sustainability Intelligence Platform?

Companies should use Bursa Malaysia's Centralised Sustainability Intelligence platform as the official, mandatory submission channel for their sustainability disclosures, understanding that this platform makes disclosed information available for investor access and cross-company benchmarking, which raises the practical stakes of data accuracy and consistency beyond what a standalone annual report disclosure alone would carry. Readiness work increasingly needs to account for this platform specifically, not just the underlying disclosure content.

Since disclosures submitted through this platform become directly accessible for benchmarking against peer companies, inconsistencies or gaps in a company's reported data are more visible and more easily compared than they would be if the same information were simply buried within a lengthy annual report. ESG consultancy supporting IFRS S1 and S2 readiness increasingly treats the eventual CSI platform submission as a distinct checkpoint in the reporting process, reviewing how disclosed figures will read alongside sector peers before submission, rather than treating the platform upload as a purely administrative final step.

How Should Companies Structure Their IFRS S1 and S2 Readiness Program?

Companies should structure their IFRS S1 and S2 readiness program by first confirming their specific reporting group and the exact transition reliefs and expiry dates that apply to them, then running a financial materiality assessment calibrated specifically to the standards, and finally building the data and assurance-readiness infrastructure needed for the full disclosure requirements before their relief period actually expires.

What Should Be Confirmed First in an IFRS S1 and S2 Readiness Program?

The first thing to confirm should be the company's exact reporting group, Group 1, 2, or 3, and the specific transition reliefs and expiry timelines that apply to that group, since every subsequent step in the readiness program depends on an accurate understanding of exactly how much preparation time genuinely remains.

How Far in Advance Should Companies Prepare for Full Scope 3 Disclosure?

Companies should generally begin preparing for full Scope 3 disclosure at least one to two years before their applicable relief period expires, since building reliable supplier and value-chain emissions data collection processes typically takes considerably longer than preparing Scope 1 and Scope 2 data, which sits more directly within a company's own operational control.

What Are the Different Perspectives on How Aggressively Companies Should Use Malaysia's Transition Reliefs?

Perspectives differ on how aggressively companies should use Malaysia's IFRS S1 and S2 transition reliefs: some argue that companies should take full advantage of every available relief to minimize near-term disclosure burden and cost, while others, including much of the ESG consultancy profession, argue that companies should use the relief period primarily as preparation time rather than genuine delay, given how quickly the full requirements arrive once reliefs expire.

The case for maximizing use of the reliefs reflects genuine resource constraints, particularly for companies still building foundational ESG data capability, where minimizing near-term disclosure scope allows limited resources to be focused on getting the required elements right rather than spreading effort across the full eventual scope prematurely. The case for using the relief period as active preparation time rests on the practical reality that Scope 3 data collection, in particular, cannot be built quickly, and companies that wait until a relief expires to begin this work are considerably more likely to face rushed, lower-quality data exactly when assurance and market scrutiny are increasing. A reasonable middle path is for companies to use the relief-based narrowing of near-term disclosure scope to reduce reporting burden precisely where it is genuinely needed, while still using the underlying preparation time to build the data infrastructure for the fuller requirements that are coming regardless of how the relief itself is applied.

Conclusion

IFRS S1 and S2 readiness deserves dedicated attention now because Malaysia's transition reliefs, while genuinely useful, are time-limited in ways that create a hard deadline for companies to be prepared for the full disclosure requirements, particularly around Scope 3 emissions and materiality recalibration, both of which take considerably longer to build properly than the relief windows themselves might suggest. A company that treats the transition period purely as delayed obligation, rather than active preparation time, risks discovering the gap between its current readiness and the full requirements only once the relief has already expired.

As Group 1 companies approach the 2027 point where the full framework arrives, and Group 2 and Group 3 companies move through their own respective transition periods, ESG consultancy focused specifically on IFRS S1 and S2 readiness, understanding exactly which reliefs apply, when they expire, and what needs to be built during the window they provide, is what positions Malaysian companies to meet the full requirements as a natural continuation of steady preparation, rather than a last-minute scramble once the transition period runs out.

References

• MAICSA, Technical Announcements: Additional Transition Reliefs Under NSRF — https://maicsa.org.my/media/9643/technical_announcements_240925_2_3.pdf
• Securities Industry Development Corporation (SIDC), NSRF Programme Outline: Introduction to IFRS S1 and S2 — https://www.sidc.com.my/wp-content/uploads/2025/12/SIDC-PP-NSRF-1-EDM-feb-2026.pdf
• Accounting Academy, Transitional Relief to Support Companies Applying IFRS S1 & S2 — https://accountingacademy.co.za/news/read/transitional-relief-to-support-companies-applying-ifrs-s1-s2
• Wellkinetics, ESG Reporting in Malaysia: Regulatory Requirements, Reporting Standards & Frameworks — https://wellkinetics.com.my/esg-reporting-malaysia/
• OneStopESG, Malaysia NSRF 2026 Readiness — https://onestopesg.com/esg-resources/malaysia-nsrf-2026-readiness
• Model Diplomat, IFRS S1 Glossary Entry — https://modeldiplomat.com/learn/glossary/ifrs-s1
• Mesra Group, ISSB Statement — Integrated Report 2025 — https://www.mymesra.com.my/integrated-report-2025/downloads/ISSB_Statement.pdf