Corporate reporting in Malaysia is changing. For many businesses, publishing financial results and company updates is no longer the only reporting consideration. Investors, regulators, customers, and other stakeholders increasingly want to understand how companies manage sustainability-related risks and opportunities as well.
This has made two documents particularly important: the Annual Report and the Sustainability Report or Sustainability Statement.
Although they may contain related information, they serve different purposes. An annual report provides a broader picture of a company’s financial performance, governance, operations, and business direction, while sustainability reporting focuses more closely on sustainability-related risks, opportunities, governance, strategy, metrics, and performance.
In Malaysia, this distinction is becoming especially important in 2026 as the country’s National Sustainability Reporting Framework (NSRF) continues its phased implementation.
In this guide, we’ll explain the difference between annual and sustainability reporting, what Malaysian companies should understand in 2026, and how businesses can prepare.
What Is an Annual Report?
An annual report is a comprehensive document that provides shareholders and other stakeholders with information about a company’s activities and performance during its financial year.
For listed companies, annual reports also form an important part of regulatory and investor communication.
An annual report commonly contains information such as:
- Company overview
- Chairman’s or leadership statements
- Business and operational review
- Financial performance
- Corporate governance information
- Risk management
- Directors’ information
- Audited financial statements
- Shareholding information
- Sustainability-related disclosures where applicable
The purpose is to give stakeholders a broad understanding of how the company performed, how it is governed, and its position moving forward.
What Is a Sustainability Report?
A sustainability report focuses on how a company identifies, manages, measures, and communicates sustainability-related matters.
Depending on the applicable framework and company, this can include areas such as:
- Climate-related risks and opportunities
- Greenhouse gas emissions
- Energy consumption
- Resource management
- Workforce matters
- Supply-chain considerations
- Governance of sustainability matters
- Sustainability targets and performance
- Sustainability-related financial risks and opportunities
Sustainability reporting is increasingly connected to business strategy and financial decision-making rather than being treated simply as a record of corporate social responsibility activities.
Malaysia’s NSRF uses the IFRS Sustainability Disclosure Standards—IFRS S1 and IFRS S2—as the baseline sustainability disclosure standards for companies within its scope.
Annual Report vs Sustainability Report
| Annual Report | Sustainability Report |
|---|---|
| Provides an overall view of company performance | Focuses on sustainability-related information |
| Strong emphasis on financial and operational performance | Strong emphasis on sustainability risks, opportunities and performance |
| Includes audited financial statements | May contain sustainability metrics and related disclosures |
| Covers governance, strategy and business activities | Covers governance and strategy in relation to sustainability matters |
| Primarily serves shareholders and investors, while also informing wider stakeholders | Serves investors and other stakeholders seeking sustainability information |
| Produced according to applicable corporate and listing requirements | Prepared according to applicable sustainability reporting requirements and frameworks |
You don’t need to think of these as competing reports.
Instead, they increasingly complement one another, giving stakeholders different perspectives on the company’s performance, risks, strategy, and long-term prospects.
Can Sustainability Reporting Be Part of the Annual Report?
Yes.
For Bursa Malaysia listed issuers, sustainability information can form part of the annual reporting package.
Bursa Malaysia also permits an eligible listed issuer to issue its Sustainability Statement as a standalone document, provided it complies with the applicable listing requirements and is issued concurrently with the annual report. The standalone Sustainability Statement is still considered part of the annual report for these purposes.
This gives companies two common presentation approaches:
Integrated approach:
Sustainability information appears within the annual report.
Standalone approach:
A separate Sustainability Statement is produced alongside the annual report.
Which approach makes more sense will depend on the company’s applicable requirements, reporting strategy, and the amount and complexity of sustainability information being disclosed.
What Is Changing in Malaysia?
One of the most important developments is Malaysia’s National Sustainability Reporting Framework (NSRF).
The NSRF was launched in 2024 and establishes the ISSB Standards—particularly IFRS S1 and IFRS S2—as Malaysia’s baseline for sustainability-related financial disclosures.
IFRS S1
IFRS S1 addresses general requirements for disclosure of sustainability-related financial information.
It is designed to help companies communicate sustainability-related risks and opportunities that could affect their prospects.
IFRS S2
IFRS S2 focuses specifically on climate-related disclosures.
This includes areas such as:
- Climate governance
- Climate-related risks and opportunities
- Strategy
- Risk management
- Metrics and targets
- Greenhouse gas emissions
The objective is to make sustainability information more consistent, comparable, and useful to investors.
Who Is Affected in 2026?
Malaysia is implementing the NSRF progressively rather than requiring every company to adopt the same requirements at once.
The framework groups companies into different implementation stages.
| Group | Companies | NSRF Starting Point |
| Group 1 | Main Market listed issuers with market capitalisation of RM2 billion and above | 2025 |
| Group 2 | Other Main Market listed issuers | 2026 |
| Group 3 | ACE Market listed issuers and non-listed companies with annual revenue of RM2 billion and above | 2027 |
This makes 2026 particularly important for Group 2 companies, as other Main Market listed issuers enter the NSRF implementation timetable.
Group 1 companies began earlier, while ACE Market issuers and large non-listed companies within the stated threshold follow from 2027.
Does This Apply to Every Malaysian SME?
No.
The NSRF’s mandatory phased scope currently focuses on:
- Main Market listed issuers
- ACE Market listed issuers
- Large non-listed companies with annual revenue of RM2 billion and above
Other companies, including SMEs outside the applicable regulatory scope, may still choose to use sustainability reporting frameworks voluntarily unless another regulator or requirement applies to them.
That doesn’t mean smaller businesses should completely ignore sustainability reporting, though.
Large customers, multinational companies, investors, banks, or supply-chain partners may increasingly ask suppliers for sustainability information even when those suppliers aren’t directly required to report under the NSRF.
What Information May Be Needed for Sustainability Reporting?
If your company is preparing for more structured sustainability reporting, you’ll likely need information from several different parts of the organization.
Examples include:
Environmental Information
- Electricity and energy consumption
- Greenhouse gas emissions
- Waste
- Water consumption
- Climate-related risks
Business and Financial Information
- Financial impact of sustainability-related risks
- Business opportunities associated with sustainability
- Capital expenditure
- Risk management information
Governance Information
- Board oversight
- Management responsibilities
- Internal sustainability policies
- Risk management processes
Strategy
Companies may also need to explain how sustainability-related risks and opportunities affect their strategy, decision-making, and future prospects.
Sustainability Reporting Is More Than an ESG Marketing Document
A common mistake is treating a sustainability report as a marketing publication filled mainly with environmental photographs, CSR activities, and broad sustainability statements.
Modern sustainability reporting is moving toward decision-useful information supported by evidence and measurable data.
A strong report should therefore explain:
- What sustainability risks exist
- Why those risks matter
- How management responds
- Who is responsible
- What metrics are being measured
- What targets have been established
- How sustainability matters connect with business performance
That means sustainability reporting shouldn’t sit entirely with the marketing team. Finance, operations, risk, governance, HR, and management may all need to contribute.
Who Should Be Involved?
Preparing an annual or sustainability report can involve multiple departments.
These may include:
- Board of Directors
- Senior management
- Finance
- Sustainability or ESG team
- Risk management
- Human resources
- Operations
- Legal and compliance
- Investor relations
- Corporate communications
- Internal and external assurance professionals
The Securities Commission’s NSRF guidance specifically highlights board responsibilities in areas including governance, sustainability data boundaries, financial impact assessments, and integration with enterprise risk management.
Annual Reporting and Sustainability Reporting Should Work Together
Financial performance and sustainability performance are becoming increasingly connected.
For example, climate-related risks could affect:
- Operating costs
- Supply chains
- Insurance costs
- Assets
- Financing
- Regulatory exposure
- Future investments
Sustainability information therefore shouldn’t exist completely separately from financial and strategic discussions.
A stronger reporting process connects:
Financial Performance → Business Strategy → Risk → Sustainability → Long-Term Value
This gives investors and stakeholders a more complete picture of the company.
Common Reporting Mistakes
| Mistake | Better Approach |
| Treating sustainability reporting purely as marketing | Build disclosures around reliable information and applicable standards |
| Starting report preparation too late | Collect relevant data throughout the reporting period |
| Sustainability and finance teams working separately | Establish cross-functional reporting processes |
| Making broad sustainability claims without evidence | Support claims with appropriate metrics and explanations |
| Copying another company’s sustainability report | Identify sustainability matters relevant to your own business |
| Focusing only on attractive report design | Prioritise accurate, useful and understandable information |
| Ignoring changing requirements | Regularly review Bursa Malaysia, SC and other applicable regulatory guidance |
How Malaysian Companies Can Prepare
Companies affected by the changing reporting environment should start early rather than waiting until it’s time to design the report.
1. Determine Which Requirements Apply
Identify whether your company falls under Main Market, ACE Market, large non-listed company requirements, or another regulatory framework.
2. Conduct a Reporting Gap Assessment
Compare your current sustainability disclosures with the information expected under the applicable requirements.
3. Identify Data Owners
Determine which departments are responsible for collecting each type of sustainability information.
4. Strengthen Data Collection
Create consistent processes for collecting, reviewing, and maintaining sustainability data.
5. Establish Governance
Define the roles of management and the board in overseeing sustainability-related risks and disclosures.
6. Connect Sustainability With Risk Management
Sustainability shouldn’t operate as an isolated initiative. Relevant risks should be considered alongside the company’s broader risk-management processes.
7. Prepare for Greater Scrutiny of Data
As sustainability reporting matures, reliable evidence and controls around reported information will become increasingly important.
The NSRF currently aims for reasonable assurance over Scope 1 and Scope 2 greenhouse-gas emissions on a phased timeline, beginning with Group 1 from 2027 and subsequently extending to other groups.
What Should Companies Focus on in 2026?
For Malaysian companies, 2026 should be viewed as a year of preparation, integration, and improving reporting quality.
Businesses should focus on:
- Understanding their reporting obligations
- Improving sustainability data quality
- Establishing clear governance
- Connecting sustainability and financial information
- Training relevant employees
- Reviewing climate-related risks
- Creating reliable internal reporting processes
- Monitoring regulatory updates
For companies entering the NSRF timetable, waiting until the report is being designed is too late. Sustainability reporting starts with data, governance, processes, and accountability long before the final document is produced.
Frequently Asked Questions (FAQ)
1. What is the main difference between an annual report and a sustainability report?
An annual report provides a broad overview of a company’s financial performance, operations, governance, and business activities. Sustainability reporting focuses specifically on sustainability-related risks, opportunities, strategy, governance, metrics, and performance.
2. Are sustainability reports mandatory in Malaysia?
Requirements depend on the type and size of the company. Malaysia’s NSRF is being implemented progressively for Main Market listed issuers, ACE Market listed issuers, and large non-listed companies with annual revenue of RM2 billion and above. Other businesses may report voluntarily unless another applicable requirement mandates disclosure.
3. What are IFRS S1 and IFRS S2?
IFRS S1 establishes general requirements for sustainability-related financial disclosures, while IFRS S2 focuses specifically on climate-related disclosures. Malaysia’s NSRF uses these ISSB Standards as its baseline.
4. Can a Malaysian listed company publish sustainability information separately from its annual report?
Yes. Bursa Malaysia permits a qualifying listed issuer to issue its Sustainability Statement separately, provided the standalone statement complies with the applicable requirements and is issued concurrently with the annual report. It is still treated as part of the annual report for the relevant listing requirements.
5. Do Malaysian SMEs need sustainability reports in 2026?
Not every SME is directly subject to the NSRF’s mandatory scope. However, SMEs may increasingly be asked for sustainability information by larger customers, investors, financial institutions, or supply-chain partners. Voluntary preparation can therefore still be valuable.
Final Thoughts
Annual reports and sustainability reports serve different purposes, but the gap between them is becoming smaller.
The annual report gives stakeholders a broad view of a company’s financial performance, governance, operations, and strategy. Sustainability reporting goes deeper into sustainability-related risks, opportunities, governance, strategy, metrics, and performance.
For Malaysian companies in 2026, the key change is that sustainability reporting is increasingly becoming part of mainstream corporate reporting rather than simply a separate CSR exercise.
The best place to start is by understanding which requirements actually apply to your company and then building reliable reporting processes early.
Companies that treat sustainability reporting as part of business strategy—not simply another document that needs to be published—will be better prepared for Malaysia’s evolving corporate reporting environment.
