In today’s world, greenhouse gas emissions are a pressing issue that all small and medium-sized enterprises (SMEs) must address. A company’s greenhouse gas disclosure is closely linked to its attractiveness to institutional investors and is now an integral part of risk assessment.
As regulations and stock exchange requirements drive multinational corporations and listed companies to disclose greenhouse gas emissions information, Malaysian SMEs in the supply chain are increasingly impacted and must also provide this data.
Under external pressure, Malaysian SMEs are turning their attention to greenhouse gas emissions. They are taking steps to understand and manage their corporate carbon footprint effectively, and ultimately disclose this information publicly. By effectively managing greenhouse gas emissions, companies can enhance their reputation, comply with regulations, and gain a competitive advantage.
Table of Contents
What are Greenhouse Gas Emissions?
Greenhouse gas emissions refer to the flow of carbon dioxide and other greenhouse gases produced by human activities into the atmosphere. Greenhouse gases recognized by the Kyoto Protocol include carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride ( SF₆) and nitrogen trifluoride (NF₃).
Major sources of greenhouse gas emissions include the burning of fossil fuels, industrial production and land-use changes. To develop the economy, human activities triggered by the Industrial Revolution inevitably increased global greenhouse gas emissions. The issue of greenhouse gas emissions has attracted much attention because it will lead to climate change and is one of the biggest environmental challenges facing the world.
How Should Companies Start to Effectively Manage Greenhouse Gas Emissions?
To deal with the issues of greenhouse gas emissions and climate change, everyone began to talk about ESG and sustainable development, which have evolved into must-answer questions for all major SMEs. In response to ESG and sustainable development, companies have begun choosing to transform into sustainable business models and integrate greenhouse gas emission reduction into business strategies.
Take a Malaysian steel product manufacturer (“Company C”) as an example. They followed the direction set by their Taiwanese parent company and set carbon neutrality as their corporate goal. To successfully achieve its goals, Company C must consider its impact on greenhouse gas emissions when making any decisions related to business operations. When making a choice, in addition to considering the benefits to the company’s profits, it must also be able to activate the effect of reducing greenhouse gas emissions.
With firm direction from top management, Company C’s engineers were able to actively engage in work to achieve the goal of carbon neutrality. This included raising employees’ awareness of greenhouse gas emissions and climate change, measuring corporate greenhouse gas emissions, implementing energy efficiency and renewable energy projects, and verifying carbon inventories.
After years of experience working with a variety of clients, we have observed and confirmed the three major steps to transforming a sustainable business model.
Learn more from our case study
Step One: Gain Clarity
Identify gaps and areas for improvement so you can target them and implement better ESG and sustainability programs. Why is this step important? Companies need to know where they are starting from to avoid spending double the time and resources redoing everything.
In order to let other relevant employees of the engineers understand their company’s greenhouse gas emissions, Company C arranged a full-day greenhouse gas emissions management workshop. They invited trainers with practical experience to help employees understand greenhouse gas emissions and how to measure and manage them. In a learning environment conducive to open discussion and interaction, employees gain inspiration. They not only learned how to reduce greenhouse gas emissions at work but most importantly, how to practice green actions starting with their clothing, food, housing, and transportation. Only environmental protection practices initiated from one’s own heart can be sustainable.
Step Two: Implementation
Design and implement innovative and cost-effective solutions based on the information gained during the clarity process. Implementation can be long-term (e.g., five years) or short-term (e.g., one year), depending on project requirements and complexity. This step is crucial because we must follow through on our commitments.
After measuring baseline greenhouse gas emissions, Company C formulated a carbon neutrality roadmap. This plan outlined how to significantly reduce greenhouse gas emissions and switch to renewable energy to achieve their carbon neutrality goal. The roadmap included optimizing production processes, improving machine energy efficiency, using low-carbon fuels, and installing solar battery systems. Company C took a step-by-step approach, starting with small changes that have culminated in their impressive achievements today.
Step Three: Verification
Verifying the company’s carbon inventory through an accredited verification agency will help companies reduce the risk of greenwashing and build confidence and credibility in their greenhouse gas emissions data and information. For example, companies can publish the successfully obtained verification opinion statement on the company’s website to inform stakeholders that the company’s greenhouse gas emission data is true and credible.
Company C saw the benefits of obtaining third-party verification and decided to use the ISO 14064-1:2018 greenhouse gas inventory standard to conduct greenhouse gas emissions inspections and request third-party verification. Although the process was not easy, under the guidance of the consultant, Company C completed the one-month verification process.
The Future Trend of Greenhouse Gas Emissions
All companies listed on the stock exchange cannot escape the fate of disclosing corporate greenhouse gas emission information. This listing requirement has spread to stock exchanges in various countries, and Bursa Malaysia is no exception. In addition, consumers are beginning to consider the negative impact of their choices on the environment when shopping and product carbon footprint is one of the indicators. Under this new trend, manufacturers have to meet customer requirements, measure product carbon footprints and disclose them on product labels, and more importantly, actively promote environmentally friendly actions on their websites and social media pages to reduce product carbon footprints.
As long as companies are willing to keep up with global business trends, they can firmly seize business opportunities. The best example is the Carbon Border Adjustment Mechanism (CBAM) implemented by the European Union on October 1, 2023. The move is a carbon pricing tool that would fairly price the greenhouse gas emitted during the production of carbon-intensive products entering the EU and encourage non-EU countries to clean up industrial production. As long as Malaysian exporters actively comply with this new regulation, it will surely open the door to the EU market for their own companies. If you are a company that is already active in the EU market, you have the opportunity to better stabilise your position.
Remember, sustainable development is a marathon, not a sprint. We hope that all companies will find the right direction, enjoy the process of transforming to a sustainable development business model, and gain the greatest harvest from it.
BBC comprises a team of passionate practitioners implementing solutions for sustainability. Our consultants have extensive knowledge and experience in greenhouse gas emissions management, ESG, and sustainability, helping you solve your problems with innovative, sustainable solutions. Book your free 30-minute discovery call and talk to our expert.
Workshop
BBC Academy – Greenhouse Gas Emissions Management
Our Greenhouse Gas (GHG) Emissions Management Workshop enhances awareness on climate change and the increasing demand for organisation to develop and implement GHG management strategies and plans. This workshop equips participants with the know-how of GHG quantification, monitoring, reporting, verification and validation.