Accountability gaps in climate pledges and plans

SINCE January 2025, around 130 large Malaysian companies have been required to publish climate- related disclosures and transition plans under Bursa Malaysia’s National Sustainability Reporting Framework (NSRF).

The early disclosures make for uncomfortable reading.

Companies are identifying “material climate risks” while simultaneously classifying every single one of them as “low to medium” severity. They are publishing net-zero commitments without interim targets. They are acknowledging transition risks to their business models without explaining how they actually intend to transition those business models.

Almost none are linking executive compensation to credible climate performance metrics.

This isn’t compliance failure.

The reports are polished, professionally structured and fully formatted to the IFRS (Interna-tional Financial Reporting Stan-dards) Scope 2 standards. The failure is more fundamental: companies have learned to produce the document without internalising the discipline behind it.

The NSRF’s Scope 3 relief provision, which allows companies to delay supply chain emissions reporting until 2027, was design-ed as transition support for genuine capacity-building. It is being used as something else entirely.

For most Malaysian companies, Scope 3 emissions represent 70% to 90% of their total climate footprint. These are the emissions embedded in what a company buys, produces and sells – the full value chain.

Deferring this disclosure doesn’t simplify reporting. It defers the central question of whether a company’s business model is actually compatible with a net-zero trajectory.

Scope 3 isn’t the hardest part of climate disclosure. It is the whole story.

Some will argue that Malaysia’s climate commitments are long term, and therefore, the urgency

is overstated. The numbers suggest otherwise.

Malaysia’s carbon tax – expected to take effect this year for heavy emitters – will create

immediate cost pressures.

The EU’s Carbon Border Adjustment Mechanism is already affecting Malaysian exporters in steel and cement.

The National Energy Transition Roadmap commits Malaysia to specific coal phase-down timelines that are not optional.

These are policy realities showing up in operating environments today. Yet, companies are still approving expenditure that assumes carbon-intensive operations well past 2035. Executive incentives continue to reward short-term extraction over long-term transition readiness.

The disconnect between what is disclosed and what is decided reveals where genuine commitment ends and performative compliance begins.

When climate risk is described as low in a report, but capital is deployed as if the transition will never arrive, investors are seeing one picture and funding another.

So, who actually has the power to change this?

The accountability infrastructure exists. The NSRF provides the disclosure framework and the National Climate Change Act, passed this year, provides legal architecture. The carbon tax

introduces economic consequences. What is missing is the will to use these tools.

Regulators should start by tightening enforcement. Companies claiming they are “working towards” climate disclosure while providing no meaningful pathway detail should face scrutiny.

A company that cannot articulate its transition plan with specific capital allocation and milestones should not be making public net-zero commitments.

Malaysia’s institutional investors hold the most direct lever.

EPF, PNB (Permodalan Nasional Berhad) and major insurance companies collectively control voting blocks that could shift the outcome of any annual general meeting.

They should be systematically voting against remuneration reports where executive pay carries no credible climate linkage; against board appointments where climate governance competence is absent; and against capital expenditure proposals that lock in carbon-intensive operations without documented transition justification.

Audit firms also have a role.

When a carbon-intensive company describes all climate risks as uniformly low, that warrants a challenge, not a sign-off.

Malaysian companies are sophisticated enough to produce world-class reports.

The real test – and the one that will matter to investors, regulators and trading partners over the next five years – is whether those reports reflect world-class strategies.

ISSAC LIEW

Kuala Lumpur

(The writer focuses on advancing corporate ESG accountability and promoting responsible investment practices across diverse markets.)