Sustainability reporting used to sit at a comfortable distance from the finance function. IFRS S1 and IFRS S2 close that distance. The standards are written for investors, structured like financial reporting, and expected to be prepared with the same discipline — which is why, in many organisations, responsibility for them is landing on the CFO's desk.
This guide explains what the two standards cover, where Malaysia stands on adoption, and — most practically — what information your organisation will need and how to strengthen the reporting system behind it.
What IFRS S1 and IFRS S2 actually are
IFRS S1 and IFRS S2 were issued by the International Sustainability Standards Board (ISSB) in June 2023. IFRS S1 sets the general requirements: organisations disclose the sustainability-related risks and opportunities that could reasonably be expected to affect their prospects — cash flows, access to finance or cost of capital — over the short, medium and long term. IFRS S2 applies the same architecture specifically to climate.
Both standards organise disclosure around four pillars, deliberately inherited from the TCFD framework: governance, strategy, risk management, and metrics and targets. If your board has seen TCFD reporting, the structure will feel familiar — but the expectations around data quality, connectivity and completeness are more demanding.
Two design choices matter especially for finance teams. First, sustainability disclosures are meant to be published at the same time as the financial statements, for the same reporting period, covering the same reporting entity. Second, the information is expected to be connected — the assumptions behind climate disclosures should not contradict the assumptions behind the financial statements.
Where Malaysia stands
Malaysia adopted the ISSB standards as the baseline of its National Sustainability Reporting Framework (NSRF), announced in September 2024. Implementation is phased: the largest Main Market listed issuers report first, with other listed issuers and large non-listed companies following in later annual cycles, and transitional reliefs — including a climate-first approach and relief periods for Scope 3 emissions and assurance — available in the early years.
The practical message is that the timeline is staggered but the direction is settled. Organisations in later groups have more runway, not a different destination — and the reliefs reward organisations that use the early years to build their data foundations rather than defer the work. Because phase-in dates and reliefs are refined over time, confirm your organisation's current obligations against the latest NSRF and Bursa Malaysia guidance.
Why finance teams are central
It is tempting to read 'sustainability reporting' and route the work to a sustainability or HSE function. The standards make that difficult, for a few structural reasons:
- Investor-grade disclosure. The audience is the same as for financial statements, and the disclosures sit alongside them — so the preparation process inherits expectations of accuracy, completeness and internal control that finance teams already understand.
- Same period, same entity, same time. Aligning sustainability reporting with the financial reporting calendar means the data collection, review and sign-off cycle has to run with financial-close discipline, not as a separate year-end scramble.
- Connected information. Climate assumptions, scenario considerations and financial-statement judgements need to be consistent. Someone has to own that consistency, and it is usually finance.
- Assurance is coming. As assurance expectations phase in — typically starting with greenhouse-gas disclosures — the evidence trail behind every figure becomes as important as the figure itself.
None of this means finance replaces the sustainability function. It means the two need a shared system: sustainability teams understand the subject matter; finance teams understand controls, evidence and reporting discipline. The organisations that struggle are the ones where each side assumes the other has it covered.
The information organisations typically need
The precise disclosures depend on your circumstances and materiality, but most organisations preparing for IFRS S1 and S2 need to assemble information across four areas:
- Governance: who oversees sustainability-related risks and opportunities — board committees, management roles, how often they meet, what they review, and how expertise is maintained.
- Strategy: the sustainability and climate-related risks and opportunities identified, over what time horizons, and their current and anticipated effects on business model, strategy and financial planning.
- Risk management: how these risks are identified, assessed, prioritised and monitored, and how that process integrates with enterprise risk management.
- Metrics and targets: the measures used to track performance — for IFRS S2, a greenhouse-gas inventory covering Scope 1 and Scope 2 (and, subject to reliefs, Scope 3) measured in line with the GHG Protocol, plus any targets and progress against them.
In practice, the metrics pillar carries the heaviest data burden. A defensible GHG inventory needs activity data from utility bills, fuel records, invoices and operational systems across every entity and site in the reporting boundary — each figure supported by a source document, a documented methodology and a responsible owner.
The gaps we see most often
Across the organisations we work with, the same weaknesses appear repeatedly during readiness reviews:
- Data lives in disconnected spreadsheets and inboxes, so nobody can say with confidence which version is current or complete.
- Ownership is implicit — data arrives because a coordinator chases it, not because responsibilities are defined and monitored.
- Evidence exists but is not linked to figures, so any review or assurance exercise starts with a reconstruction project.
- Methodologies and emission factors are undocumented, making prior-year figures difficult to explain or restate consistently.
- The reporting calendar ignores the financial close, leaving sustainability disclosures racing to catch up at year-end.
Strengthening the reporting system before the deadline
Preparation is less about writing a report and more about building the system that produces one. A practical sequence:
- Assess the gap: review current disclosures and data availability against the four pillars, and confirm which phase-in group and reliefs apply to you.
- Define the structure: reporting boundary, entities, sites, indicators, data owners and review responsibilities — agreed and written down.
- Build the inventory: establish Scope 1 and Scope 2 first with documented methodologies, then extend to the Scope 3 categories that are relevant and measurable.
- Centralise data and evidence: collect activity data and source documents into one controlled repository as they arise, not at year-end.
- Add review controls: submission, review and approval steps that mirror financial-close discipline, so assurance starts from an organised position.
Organisations that follow this sequence turn the transitional-relief years into an advantage: by the time full requirements apply, the reporting system has already run real cycles and the weak points have surfaced early, while the stakes are low.
How Scout360 supports the journey
Scout360 approaches IFRS readiness as a systems problem. The Scout360 Platform centralises ESG data, carbon accounting and supporting evidence — every reported figure linked to its source document, methodology, owner and review status — while our advisory, training and assurance-readiness services help teams close the capability gaps the standards expose.
If your organisation is working out where it stands, a structured gap assessment against the four pillars is usually the right first step.