NEVER JUDGE A BOOK BY ITS COVER

(not the real photo - for illustrative purposes only)

I've seen many social experiments in many episodes that reveal how people treat those they perceive as low-profile, and how eye-opening it can be when roles are reversed. I experienced something similar in real life.

In 1999, I was invited to give a two-day course on QHSE management systems. Naturally, as a consultant, I wore a full suit, and the course was a success. About a week later, it was time to receive my payment. This time, because it was 1/2 day, I arrived casually in a short-sleeve t-shirt and jeans, having made an appointment in advance with the Secretary to the boss.

At the entrance, a man who I assumed was the Secretary’s driver questioned who I was and why I was there. I took a deep breath, remained patient, and calmly explained that I had business to attend to and had already scheduled an appointment. Suddenly, I noticed his expression change, as if he was seeing someone behind me. When I turned, I saw a manager who had attended the course. The manager seemed to signal “no,” shaking his head, but quickly returned to a neutral demeanor. I greeted the manager, and when I turned back, the driver had disappeared.

I met with the Secretary, who asked how the driver had treated me. I reassured her not to take any action, the driver was simply doing his job. Later, near my car, a guard commented, “Serves him right for not recognizing who you were.” I smiled and told the guard not to worry. He then remarked that I was very considerate for not causing trouble.

The lesson from that day is clear: people can be quick to judge based on appearances. But patience, humility, and understanding go a long way. Often, those we overlook or underestimate are simply performing their roles, and treating them with respect even when they don’t recognize us reflects true character.

Projected vs Actual Carbon Emissions, CEMS, and ESG Integrity in Malaysia - 2023-2025

 

1. Core Principle: Intent Is Not Impact

Projected carbon emission data represents strategic intent, not actual environmental performance. While projections are a legitimate component of ESG planning and transition pathways, they are inherently dependent on assumptions, modelling choices, and future actions. They do not constitute empirical evidence.

Actual ESG credibility rests on measured, verifiable, and repeatable emissions data.

In Malaysia, this distinction is especially clear due to the mandatory requirement for Continuous Emission Monitoring Systems (CEMS) in selected industries. CEMS involves physical devices installed at emission stacks or chimneys, generating continuous, real-time, tamper-resistant emissions data, accessible simultaneously by regulators and operators. This data reflects what is actually emitted, not what is expected or promised.

Where such measured data exists, ESG disclosures that elevate projections to the level of performance risk substituting aspiration for accountability.

2. Mapping to GHG Protocol and ISO 14064

a) GHG Protocol (Corporate Accounting and Reporting Standard)

Relevant principles and requirements:

• Relevance and Faithful Representation Emissions data must reflect the entity’s actual GHG profile, not hypothetical future states.

• Accuracy Material errors must be reduced as far as practicable. Continuous measurement (e.g. CEMS) clearly ranks higher than estimates or generic emission factors.

• Consistency & Transparency Changes in methodology and use of projections must be clearly disclosed and distinguished from historical data.

Critical alignment point: GHG Protocol allows estimation where direct measurement is not feasible. However, where direct measurement exists (such as CEMS), reliance on projections without reconciliation violates the spirit of faithful representation, even if not explicitly prohibited.

b) ISO 14064-1 (Organisation-Level Quantification and Reporting)

Key clauses:

• Clause 5 – GHG Quantification Requires identification and quantification of GHG emissions using methodologies that ensure accuracy and completeness.

• Clause 6 – GHG Reporting Requires transparent disclosure of:

• Clause 7 – Verification (where applied) Emphasises traceability and auditability of emissions data.

Critical alignment point: Where CEMS data exists:

• It qualifies as primary data

• It has higher verifiability and traceability than modelled projections Presenting projected reductions without explicit linkage to measured CEMS baselines weakens ISO 14064 conformity, even if verification is voluntary.

3. "Stock Exchange Centre" : ESG Disclosure: Structural Weakness

The "Stock Exchange Centre"’s sustainability reporting framework emphasises:

• Transparency

• Comparability

• Decision-useful information

However, current disclosure practices reveal three structural gaps:

1. No mandatory hierarchy of data quality Companies may disclose projections alongside actual data without clearly prioritising measured emissions.

2. No explicit requirement to reconcile ESG emissions data with regulated CEMS data ESG disclosures and environmental compliance reporting operate in parallel, not in integration.

3. Limited enforcement differentiation between “targets”, “estimates”, and “measured performance” This allows projections to visually dominate ESG narratives.

As a result, investors may unknowingly rely on forward-looking claims while actual emissions trends already measured by regulators remain under-emphasised.

4. Malaysia-Specific Enforcement and Disclosure Gaps

Despite strong technical regulation, several gaps persist:

• Regulatory–ESG Disconnect Enforcement compliance; ESG reporting is largely self-curated. There is no systematic requirement to embed CEMS datasets into sustainability reports.

• Disclosure Selectivity Exceedances, fluctuations, or non-improving trends in CEMS data are rarely reflected proportionately in ESG disclosures.

• Verification Asymmetry Environmental compliance data is regulator-verified, while ESG emissions narratives often rely on internal modelling with limited external assurance.

This creates a paradox:

The most reliable emissions data in Malaysia is often the least visible in ESG communication.

5. Case-Based Examples (Anonymised)

Case Example 1: Energy-Intensive Facility

A large industrial facility publicly reports a “planned 35% carbon reduction by 2030” based on:

• Anticipated fuel switching

• Efficiency upgrades

• Renewable offsets

However:

• Five years of CEMS data show flat or marginally increasing stack emissions

• ESG disclosures summarise emissions using annualised estimates

• No reconciliation is provided between CEMS trends and projected reductions

Outcome: Projections dominate perception, while measured emissions tell a different story. This is not non-compliance, but it is misleading ESG framing.

Case Example 2: Multi-Plant Operator

A company operates several regulated facilities, each with CEMS installed. In ESG disclosures:

• Emissions are aggregated at group level

• Year-to-year reductions are attributed to “operational optimisation”

• Individual plant-level CEMS variability is not disclosed

Outcome: Aggregation obscures site-specific performance, diluting accountability and masking underperforming assets.

REMEMBER

Where measured, regulator-observable emissions data exists, ESG reporting that relies primarily on projected reductions without explicit reconciliation crosses the line from strategic communication into structural greenwashing.

This is not about malicious intent. It is about data hierarchy discipline.

Measured emissions data such as mandated CEMS must form the foundation of ESG environmental disclosures. Projections should support strategy, not replace evidence. Without this hierarchy, ESG risks becoming a language of reassurance rather than a mechanism for climate accountability.

Here's a summary :

Below I integrate sample data, calculations, and interpretation so it aligns cleanly with:

• GHG Protocol

• ISO 14064

• CEMS reality

• "Stock Exchange Centre's" ESG disclosures

• Your climate-change article narrative

Everything below is illustrative but technically realistic.

1. Sample Data Set (Illustrative, Anonymised)

Scenario: An energy-intensive industrial facility in Malaysia with mandated CEMS.

Annual CO₂ Emissions (tonnes)

Key observation:

• CEMS data shows flat to slightly increasing emissions

• ESG projections show a smooth, continuous decline

This divergence is the core greenwashing risk.

2. Sample Calculation (GHG Protocol / ISO 14064–Aligned)

A. Actual Emissions (CEMS-based)

Typical CEMS calculation logic:

Example (simplified):

• Average CO₂ concentration = 9.5%

• Flue gas flow = 120,000 Nm³/hr

• Operating hours = 8,000 hr/year

• Conversion factor applied per ISO / Environmental method

Result: ~532,000 tonnes CO₂ (2024) This value is:

• Site-specific

• Continuous

• Regulator-observable

• Verifiable

B. ESG Projected Reduction (Model-Based)

Typical ESG projection logic:

Baseline (2020):

Assumptions:

• 2% efficiency improvement per year

• 10% fuel switching by 2023

• No production increase

Projected 2024:

Critical issue: These reductions are assumed, not measured.

3. Graph Interpretation (What the Chart Shows)

The chart you see illustrates:

• Upper line: Measured emissions from CEMS → Reflects real operations, production variability, and combustion reality

• Lower line: ESG projected emissions → Reflects modelling assumptions, not operational truth

Why this matters:

• ESG readers may intuitively trust the downward trend

• Actual emissions reality moves in the opposite direction

• Without reconciliation, the projection becomes implied performance

4. Standards-Based Analysis

GHG Protocol

Allows estimation only where direct measurement is not feasible BUT Does not support replacing measured data with projections

Issue shown by data: Measured Scope 1 emissions exist (CEMS), yet projections dominate disclosure → breach of faithful representation principle

ISO 14064-1

Relevant failures illustrated:

• Clause 6.4 – Transparency of data sources

• Clause 6.5 – Disclosure of assumptions and uncertainties

If ESG reports show only the projected line:

• Primary data (CEMS) is suppressed

• Secondary data (models) is elevated = Methodological imbalance

5. "Stock Exchange Centre's" ESG Disclosure Implication

From an investor’s perspective:

• ESG report suggests ~19% reduction (520k → 420k)

• Actual regulated data shows ~2% increase (520k → 532k)

This creates:

• Mispricing of transition risk

• False confidence in decarbonisation progress

• Reputational exposure once discrepancies surface

6. Case-Based Critique (Without Naming Companies)

Case Pattern Observed in Malaysia

“Companies comply with using CEMS, but communicate ESG using projections.”

This results in:

• Compliance data staying with regulators

• Optimistic narratives going to investors

• Two parallel truths, never reconciled

This is structural greenwashing, not necessarily intentional deception.

7. How This Should Be Reported (Correct Practice)

A compliant ESG disclosure would show:

1. Measured CEMS emissions (primary line)

2. Projected pathway (dashed or secondary line)

3. Explicit reconciliation statement, e.g.:

“Despite projected reductions, actual emissions have remained flat due to increased throughput and operational constraints. Transition measures have not yet translated into measurable reductions.”

That single paragraph restores ESG credibility.

SO

When real-time, regulator-observed CEMS data shows rising or stagnant emissions, ESG projections of decline, if presented without reconciliation do not represent transition progress, but narrative optimisation.