The power, transportation, and industry sectors are three of the largest contributors to emissions in the world. As climate change impact drums across the globe, businesses are becoming more aware that these climate risks pose important questions to the future sustainability of their operations.

At the recent Malaysia Climate Action Week, business leaders gathered to discuss how climate governance is reshaping their businesses. MISC Group, one of the largest Liquefied Natural Gas (LNG) shippers in the world, explained how a carbon-free future would impact business decisions.

“We have two threats to our business model because of the need to get to net zero. Number one, we rely heavily on fossil fuel powered assets. With that, there is a need to decarbonise and switch to low emission vessels.” said Yee Yang Chien, President and Group Chief Executive Officer of MISC Group.

“Number two, MISC is a group which is heavily focused on the supply chain. The entire line is going into a massive paradigm shift, as all of us in the oil and gas supply chain need to transition to the natural carbon era. So, if we continue doing things the way they are, our own survival is at risk,” he continued.

Leaders in the power and oil and gas industries have already begun investing into cleaner, greener technologies. That commitment includes an expansion into renewable energy, as well as the development of new, innovative fuel alternatives to power the future.

“We are moving towards a zero-emission fuel, with things like ammonia, and hydrogen fuel cells. This technology is being worked on right now and is being developed fairly rapidly. There are also greenhouse gas (GHG) removal technologies that removes carbon dioxide from emissions and removes Sulphur Oxide (SOx) and Nitrogen Oxide (NOx). We think the technology will mature in this decade,” said Yee.

The cement industry is another key player within the global ecosystem that is grappling with the evolving climate crisis landscape. YTL Corporation Berhad, a Malaysian infrastructure conglomerate, shares how leveraging innovation similarly forms a large part of its carbon reducing efforts.

“Concrete is the second largest material used after water globally, and represents around 8% of global emissions,” said Ralph Dixon, Director of Environmental Investments, YTL Corporation Berhad.

“It’s very much an industry issue rather than a company issue. So we engage with various associations globally and tackle it on that basis.”

According to Ralph, there is no silver bullet that can immediately resolve the carbon production in the cement industry. Up to 60% of the emissions from cement making is caused by a chemical reaction called calcination, a mandatory component of cement’s production. As a solution, the industry looks to alternative methods to reduce its emissions.

“Traditionally, one tonne of cement would produce one tonne of carbon dioxide. However, we’ve reduced that by about 30% by using fly ash, ground granulated blast furnace slag, copper slag, and other aggregates which go into the concrete production. So that’s very important to mitigate the calcination process emissions, which as I said, are very hard to abate because that’s the chemical process,” said Ralph.

He stresses as well that stakeholder engagement is an important part of its carbon reducing efforts, given the multiple players involved in the industry. “It’s very much an industry issue rather than a company issue. So we engage with various associations globally and tackle it on that basis. Our governance structure is very important in this regard, because it represents the way we deal with climate governance issues,” he said.

Present at the panel session to shed light on the topic of governance was Tan Sri Abdul Wahid Omar, chairman of Bursa Malaysia. Today, the Malaysian stock exchange claims more than 4,000 fund managers and asset owners are signatories to the United Nations (UN) principles for responsible investment. This includes major global banks and insurance companies.

“What this means is that businesses that have no ESG will not be sustainable, as they will not be able to secure both equity and debt funding to fund their projects, they will not be able to secure underwriters or they must pay a huge premium for it,” shared Tan Sri Wahid.

“What this means is that businesses that have no ESG will not be sustainable, as they will not be able to secure both equity and debt funding to fund their projects, they will not be able to secure underwriters or they must pay a huge premium for it,”

As companies and regulators align on a future that is both profitable and sustainable, tools such as carbon pricing mechanisms are increasingly being explored. Malaysia recently announced plans to introduce such a policy in the near future as part of the country’s race-to-zero journey.

“The transition will require a comprehensive approach, combining carbon pricing mechanisms with green infrastructure investments and supportive macroeconomic policies. To me, the case for businesses to embrace (Environmental, Social, and Governance) ESG practices, including the Environmental part of it in (business) strategy operations is clear,” Tan Sri Wahid added.

As a regulator, Bursa requires strong disclosures on sustainability and climate achievements, from their own operations as well as their value chains. This requires consistently documenting data, clear frameworks and timelines in a comparable way to track progress towards their return reduction targets, according to Tan Sri Wahid. As part of its own education efforts, the regulator has conducted several climate change advocacy programmes in recent years including the development of sectoral guides to assist businesses in identifying and resolving climate risks across their business chain.

Arina Kok, Partner, Climate Change & Sustainability Services (CCaSS), Ernst & Young Consulting Sdn Bhd, shared how businesses range in terms of their performance to climate-related risks and readiness. “We have 900 listed companies who have got on the bandwagon to report on their sustainability reporting. Now over the past six years, we have seen different organisations mature at a different pace.”

A common thread across the session was the clear prioritisation of ESG matters across an organisation. Leadership is crucial to ensure climate action within organisations is implemented effectively according to not just organisational targets, but also global targets such as Race to Zero that are adopted by corporations, governments, investors and financiers.

“We need to communicate, educate everybody else on what we’re doing so that we can cross the finishing line together, hands together. That’s how we prepare ourselves for the next 30 years moving towards a zero-carbon future.”

“The tone must be set at the top, the board must demonstrate a strong stewardship in measuring the company’s climate-related risks and opportunities. And next we need to ensure programmes and plans contribute to a scheme of decarbonisation of business activities and develop a sensible offsetting approach. Companies, of course, should focus on reducing their own intensities before they start to think about leveraging on our carbon credits or offsets,” shared Tan Sri Wahid.

Agreeing with the panelists, Yee concluded, “We need to communicate, educate everybody else on what we’re doing so that we can cross the finishing line together, hands together. That’s how we prepare ourselves for the next 30 years moving towards a zero-carbon future.”