In recent years, Environmental, Social, and Governance (ESG) principles have gained significant traction globally, and Malaysia is no exception. As businesses and investors increasingly recognize the importance of sustainable practices, Malaysia has taken proactive steps to integrate ESG considerations into its corporate and financial sectors. This commitment is evident in the introduction of the National Sustainable Reporting Framework (NSRF) in 2024, a key initiative designed to enhance transparency and combat greenwashing.
The National Sustainable Reporting Framework (NSRF) marks a pivotal step in the fight against greenwashing in Malaysia. This new framework introduces comprehensive measures designed to enhance the reliability of sustainability disclosures, ensuring that companies are held accountable for their environmental claims. Here’s how the NSRF aims to make a difference:-
- 1. Standardized Sustainability Reporting
- At the core of the NSRF is the adoption of the IFRS Sustainability Disclosure Standards (S1 and S2) established by the International Sustainability Standards Board (ISSB). This standardization ensures that companies disclose sustainability information in a consistent, comparable, and reliable manner. By creating a uniform reporting framework, the NSRF makes it more difficult for businesses to exaggerate or fabricate their environmental claims.
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- 2. External Assurance Requirements
- To further bolster trust in sustainability reports, the NSRF mandates independent verification of claims. Starting in 2027, companies will need to have their greenhouse gas (GHG) emissions, particularly Scope 1 and Scope 2, independently verified. This external assurance enhances the credibility of disclosed data, significantly reducing the likelihood of greenwashing and ensuring that companies are held accountable for their environmental impacts.
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- 3. Focus on Climate-related Disclosures
- The NSRF emphasizes the importance of climate-related disclosures, encouraging companies to prioritize the most significant risks and opportunities within their business segments. This focus ensures that sustainability efforts reported by companies align with their actual operations and impacts, minimizing the risk of selective reporting that highlights only favorable information.
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- 4. Phased Adoption and Capacity Building
- Recognizing the challenges companies may face in adjusting to new reporting requirements, the NSRF adopts a phased approach to implementation. This gradual rollout provides businesses with the necessary time to align their operations and reporting processes. Additionally, the NSRF offers resources such as PACE (Policy, Assumptions, Calculators, and Education) to assist companies in making accurate and transparent disclosures, further discouraging greenwashing practices.
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Conclusion
By mandating transparency, accountability, and external verification, the NSRF establishes a framework where sustainability reports are rooted in genuine actions rather than mere marketing rhetoric. This comprehensive approach positions the NSRF as a vital tool in combating greenwashing and promoting authentic corporate sustainability efforts. As businesses embrace these new standards, the path toward a more sustainable future becomes increasingly credible and achievable.
Stay informed about how these developments unfold and their implications for sustainable practices in the corporate world!
About the author
Sharifa Nurliliyana binti Abd Karim
Senior Associate
Banking & Finance and Real Estate
Halim Hong & Quek
sharifa@hhq.com.my
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