Greenhouse gas (GHG) reporting has increasingly become a priority for businesses around the world and for Malaysian companies should be no different. Environmental regulations are getting stricter, and there’s increasing pressure to practice sustainability.
Today, reporting greenhouse gas emissions isn’t just about compliance, it’s a fundamental business practice. It helps companies to start by quantifying their environmental footprint, highlighting areas of inefficiency, and optimising energy consumption.
As for Malaysia, businesses need to take the lead in following global trends to stay competitive and to fulfill stakeholders’ expectations. Beyond trust, accurate reporting provides companies access to green financing and partnerships.
The world is moving towards a low-carbon economy. Malaysian companies that take action now with GHG reporting will be well positioned for sustained success in this fast-evolving marketplace.
What Is Greenhouse Gas Reporting
Definition of Greenhouse Gas Reporting
Greenhouse gas (GHG) reporting is the practice of accounting for emissions generated from an organization’s activities and operations. This accounts for emissions from energy use, transportation, industrial processes, and even indirect sources such as in supply chains. By pinpointing these sources, companies are empowered to take action to truly minimize their environmental footprint.
To make sure the reporting is done correctly, organizations look to standardized methodologies, like those provided by the Greenhouse Gas Protocol. These approaches offer robust protocols with detailed instructions for how to measure and quantify emissions that lead to uniformity across sectors.
For example, if a company is calculating scope 2 emissions from purchased electricity, it would use accepted conversion factors to ensure accuracy and comparability. Consistency of terminology is just as important when it comes to GHG reporting.
Terms like “Scope 1,” “Scope 2,” and “Scope 3” emissions are widely accepted, referring to direct emissions, indirect emissions from electricity, and emissions from the supply chain, respectively. This standardization allows stakeholders—both internal and external—to quickly and easily grasp the story behind the data without tedious examination.
Purpose of Greenhouse Gas Reporting
The overarching purpose of GHG reporting should be to facilitate effective emissions tracking and management. In doing so, companies can better determine realistic reduction targets and monitor progress over time.
For example, a manufacturing company could report emissions from its factories. This allows them to detect energy inefficiencies and proactively address issues before they become major problems. Additionally, GHG reporting supports organizations in meeting environmental regulatory requirements.
In Malaysia, this means compliance with legislation such as the Environmental Quality Act 1974. Accurate reporting shows real accountability and keeps companies in compliance with the law.
Beyond being a compliance measure, GHG reporting is an integral part of corporate sustainability initiatives. Thousands of businesses use this data to develop and implement strategies that reduce their carbon footprint.
In doing so, they are joining the national and global fight against climate change. For example, transitioning to renewable energy or improving logistics efficiency are impactful, long-term ways to reduce emissions and demonstrate a company’s leadership on sustainability.
Importance of GHG Reporting for Companies
Enhancing Corporate Accountability
Greenhouse gas (GHG) reporting is becoming increasingly important for companies that want to prove their commitment to responsible business practices. By providing transparent emissions data through a GHG report, companies are demonstrating that they are committed to mitigating their environmental impact. Responsible, ethical practices speak to every stakeholder, from investors to consumers, and build strong trust among all your stakeholders.
For example, a company that is transparent about its emissions and provides a plan to reduce them is in a better position to appeal to socially responsible investors. In addition to accountability, governance is bolstered through GHG reporting. It pushes companies to align both short-term and long-term goals towards a more sustainable future.
For companies in Malaysia, aligning GHG reporting with established governance frameworks such as the Greenhouse Gas Protocol helps companies maintain consistent and credible practices.
Reducing Environmental Impact
Once a company begins GHG reporting, they can use that information to identify areas where they can reduce emissions. Take transport, for instance, which represented 16.9% of global GHG emissions in 2019—an area where logistics companies can lead by example. Knowing their emission sources enables firms to determine the most practical targets that are easily measurable, like reducing emissions in a fleet by switching to hybrids.
When used as part of a larger strategy, incorporating GHG reporting helps drive more sustainable practices. Companies can perform waste audits to better understand store waste and find ways to reduce it and save emissions. Proactive measures such as these prevent negative environmental impacts and take meaningful action on climate change, the impacts of which are already endangering ecosystems and communities.
Meeting Stakeholder Expectations
Increased transparency of GHG reporting meets the growing call from stakeholders. Regulators, stock exchanges, and investors are placing greater emphasis on companies making this data publicly available. In Malaysia, the stock exchange, Bursa Malaysia, strictly enforces these reporting requirements, with companies that fail to comply facing delisting.
By proactively sharing emissions data, organizations are building better stakeholder relations, demonstrating their commitment to sustainability. Adopting frameworks such as ISO standards guarantee consistent and comparable reporting, aiding companies in remaining competitive in global markets that are increasingly prioritizing sustainability.
Also read: Discover the Best Carbon Footprint Calculator for Your Sustainability Goals
Legal Requirements for GHG Reporting
Current Legal Requirements in Malaysia
In Malaysia, companies that meet certain thresholds are legally required to report their GHG emissions, a direct reflection of the nation’s commitment to sustainability. Guided by The Environmental Quality Act 1974 and its amendments, Malaysia has established a legal ground for environmental accountability such as emissions reporting.
Sustainability disclosures have already been made mandatory for publicly listed companies in Malaysia by Bursa Malaysia, the country’s stock exchange, via its Sustainability Reporting Guide. These legal requirements mean that Fortune 500 companies are obligated to disclose their GHG emissions and other environmental impacts in their annual 10-K reports.
The Securities Commission is critical to enforcement of these standards. By establishing standards and ensuring adherence, they play a critical role in reconciling corporate activity with Malaysia’s goals for sustainable development. Firms traded on the Main Market are required to disclose measurable environmental information.
This information can include key data points, including CO2e emissions. Failure to comply also poses legal and reputational risks. Civil and criminal enforcement penalties can vary from monetary fines to possible criminal actions, based on the gravity of the offense.
Not meeting these legal requirements can result in regulatory action. It can expose a company to reputational damage with investors and other stakeholders who place a premium on transparency in companies’ environmental practices.
Emerging Regulatory Changes and Trends
Recent regulatory developments in GHG reporting have been leading toward more stringent requirements. Similarly, Malaysia is seeking to strengthen its reporting framework. The key aim is to ensure consistency with leading international practices including the Task Force on Climate-related Financial Disclosures (TCFD).
These changes would greatly increase the legal requirement that companies disclose more granular, more detailed, more forward-looking emissions information. Internationally, agreements like the Paris Accord are having an impact at the local level.
Malaysia has pledged to reduce carbon intensity by 45% by 2030. Accordingly, businesses must expect increased enforcement of sustainability disclosures. This is part of a global trend of governments holding corporations to stricter accountability standards on their impacts on the environment.
Carbon Accounting Frameworks and Approaches
The starting point for Malaysian companies is to find a strong framework. This will help them to better measure, manage and report their greenhouse gas (GHG) emissions. Equipped with the proper resources, businesses of all sizes can position their efforts to be in line with both global expectations and local needs. Below, we dive into the frameworks, measurement approaches, and benefits of carbon accounting.
Common Carbon Accounting Frameworks
As such, there are a number of well-established frameworks that help companies measure their emissions. Of these, the Greenhouse Gas Protocol is the most widely adopted carbon accounting standard. It offers a comprehensive, rigorous methodology for measuring both direct and indirect emissions.
Likewise, ISO 14064-1 offers a clear framework for organizations to quantify, monitor, and report their GHG emissions and removals. This standard provides an important baseline of consistency and transparency, and is a strong fit with analogous international best practices.
While each framework has its strengths, their very differences make them complementary. Take for instance the GHG Protocol, which is very detailed and thorough, but can come across as overwhelming for smaller businesses. Conversely, ISO 14064-1 is more flexible and applicable across industries.
Businesses such as Petronas have successfully used these frameworks to align with global reporting expectations. In turn, they have earned better market confidence and greater investor trust.
Key Approaches to Measure Emissions
To get an accurate view of emissions, it’s important to distinguish between direct emissions (e.g., emissions from burning fuel) and indirect emissions (e.g., emissions from using electricity). Using standardized emission factors, like those established by Malaysia’s Green Technology and Climate Change Centre (MGTC), ensures calculations reflect local realities.
Technology adoption, like software that enables real-time emissions impact tracking, drives efficiencies. Measuring Malaysia’s 2022 CO2 emissions at 272.9 million metric tons, precise measurement is crucial to address these challenges successfully.
Benefits of Carbon Accounting for Businesses
Beyond theoretical interest, carbon accounting provides real-world benefits to the public and private sectors. Forward-looking companies usually realize tremendous bottom line benefits from increasing energy efficiency.
Transparent and standardized reporting goes a long way in improving stakeholder trust, providing businesses a first-mover advantage in increasingly sustainable markets. Proactive Environmental, Health, and Safety (EHS) program enhances corporate reputation.
It supports ESG initiatives, which are quickly becoming critical to investors.
Steps to Start GHG Reporting
1. Assess Current Emission Levels
The first step for any company is to complete a comprehensive emissions inventory. This means taking stock of operations to understand the sources of emissions – such as energy consumption, transportation, and waste – and scope them out accordingly.
Calculating baseline emissions is important as this serves as the benchmark from which progress can be measured. For instance, a heavy manufacturing firm could look at energy use across different phases of production to identify emissions-intensive efforts.
Data collection approaches may involve using utility bills, fuel purchase records, or directly measuring equipment emissions. Once gathered, this data needs to be crunched to give an accurate representation of the company’s existing carbon footprint.
2. Identify Suitable Accounting Frameworks
Choosing the right carbon accounting framework from the start helps maintain integrity and consistency throughout the process. Depending on a company’s needs and industry, they should consider frameworks such as the Greenhouse Gas Protocol or ISO 14064.
Aligning your reporting with widely accepted standards does more than make reporting easier, it increases trust among stakeholders. For instance, companies operating in the energy sector may prefer to use frameworks specifically designed for their industry.
Working with an experienced environmental consultant can ensure that the framework you choose meets regulatory needs and the objectives of your company.
3. Develop a Reporting Process
Establishing a formalized process starts with outlining who will do what. Whether you are using basic spreadsheets or more specialized software, a clear documentation and review system is crucial to track your data.
For example, a national retail chain may have internal quality assurance processes where it establishes quarterly reviews to maintain consistent reporting among various facilities. Ongoing checks help companies get better with GHG reporting, ensuring a more robust and consistent data set year after year.
4. Set Goals for Emission Reduction
Creating SMART goals is essential for making measurable progress. A logistics company resolves to reduce emissions by 10% over three years. They intend to do this in part by moving to EVs.
Aligning these goals with the company’s broader strategy makes them more practical and more widely supported. Bringing stakeholders—like employees and investors—into the process of setting goals ensures greater buy-in and accountability.
5. Monitor and Update Regularly
Continuing evaluation helps to keep emissions reporting current and useful. For instance, a large technology company might implement automated monitoring systems to measure and report electricity consumption in near real-time.
Adapting processes in anticipation of trends or forthcoming regulations helps to ensure that reporting stays relevant and effective. Communication of any changes made to stakeholders helps to build transparency and accountability, building stakeholder trust in the company’s actions.
Challenges in GHG Reporting
Greenhouse gas (GHG) reporting is an important practice for all businesses that seek to understand and improve their sustainability efforts. Companies encounter a number of key challenges in this arduous process. Most of these challenges stem from lack of knowledge or understanding.
On top of that, lack of access to consistently reliable data and high initial costs add to the challenge.
Lack of Awareness and Expertise
In fact, one of the greatest impediments is the lack of internal capacity, knowledge and expertise. Most planning and engineering teams are not intimately familiar with the technicalities of GHG reporting, underscoring the importance of well-structured training programs.
Workshops or online training can prepare staff to familiarize themselves with the methods of reporting and requirements for compliance. Beyond technical skills, raising awareness about the benefits of GHG reporting, such as improved reputation and access to green financing, can motivate companies to take it seriously.
Whether investing in internal or external expertise, it’s incredibly important. Hiring consultants or hiring sustainability teams greatly improves the quality of GHG reports.
Limited Access to Reliable Data
Reporting GHG emissions isn’t that simple. Gathering reliable emissions data is another challenge.
Companies cite frequent challenges with incomplete or inconsistent data, particularly when data is collected from various internal departments or external suppliers. To overcome this, businesses should work with other companies in their industry to pool resources and set best practices.
For example, when agencies share their data collection methodologies, it can mutually save both agencies money and produce superior results. By leveraging technology, such as data management systems or internet-of-things (IoT) sensors, reporting can be streamlined and data precision can be enhanced.
High Initial Costs of Implementation
The high capital outlay needed to initiate GHG reporting can be a disincentive for companies. Costs for modeling tools, expert consultants, and system upgrades can be intimidating.
By considering government grants, industry incentives, or partnerships, the financial burden can be alleviated. Long-term planning is essential.
Efficiency improvements, such as avoiding the need for waste, typically save more money than they cost in the long run, repaying the investment.
Benefits of Proactive GHG Reporting
Improved Regulatory Compliance
Proactive GHG reporting provides an obvious route for continued compliance with Malaysia’s ever-changing environmental regulatory landscape. By regularly tracking and documenting emissions, companies can ensure they meet the requirements set by authorities like the Department of Environment, reducing the chance of non-compliance.
For example, companies that proactively track their carbon dioxide-equivalent (CO2e) emissions find themselves in a strong position when new reporting initiatives pop up. Being proactive about these shifts reduces the impact of disruptions and provides companies with enough time to make adjustments with less pressure.
By being proactive with reporting, the risk of non-compliance penalties—such as large monetary fines or limitations on operations—are greatly reduced. This proactive approach not only protects the business from future repercussions, but it shows good faith to regulators that trust is being built.
Increased Investor Confidence
Sustainability issues have quickly risen to the top of investors’ priorities, with many investors increasingly incorporating environmental performance into their investment processes. Further, transparent GHG reporting shows a level of accountability that makes companies more appealing to investors that increasingly consider ESG (Environmental, Social, and Governance) criteria.
For example, a company that proactively reports its emissions data could be rewarded by international development funds that are increasingly prioritizing investment in climate-friendly projects. Beyond financial gains, this transparency signals a commitment to long-term sustainability, reassuring stakeholders that the company is prepared for future challenges.
Enhanced Brand Reputation
Being proactive in GHG reporting enhances a company’s reputation as a responsible corporate citizen. Consumers and business partners are more and more attracted to companies that proactively showcase their environmental goals.
Making proactive measures, such as setting emission-reduction targets, a part of operations can make companies more attractive in competitive markets. Sharing these efforts through annual reports or social media amplifies their impact, fostering loyalty and trust among stakeholders.
Contribution to Global Sustainability Goals
In fact, GHG reporting directly supports international goals such as those outlined in the Paris Agreement. Companies that proactively document and reduce their emissions are instrumental in the fight to keep global temperature rise well below 2 degrees Celsius.
This push isn’t only about avoiding regulations—it’s about playing a part in the overall health of our planet while positioning themselves alongside global sustainability trends.
Conclusion
Companies in Malaysia can no longer ignore ghg reporting. It is a critical step toward continued compliance with emerging regulations, improved brand reputation, and sustainable long-term growth. Moving beyond reactive reporting allows companies to find new ways to lower emissions, save money, and create a more positive impression among stakeholders. Moreover, it helps put businesses ahead of the curve in a quickly evolving market that increasingly values sustainability.
Addressing these issues now makes future compliance easier and provides Malaysian businesses the advantage of leading the way in adjusting to the rising tide of global standards. By making investments in tested, trusted frameworks and tackling challenges at the outset, companies position themselves for sustainable success moving forward.
The earlier you get going, the quicker you will be able to realize these benefits. Integrate greenhouse gas reporting into your strategy today, and lead the way in creating a sustainable future.
