MISC Integrated Annual Report 2020

ANCHORING SUSTAINABILITY @ MISC Our overall discussions were guided by the following: • • Material matters identified in the 2019 MISC Group Materiality Matrix; • • Gaps identified through benchmarks based on ESG ratings indices; • • IMO aspirations; and • • Commitment to align (our business goals) with the UNSDG goals. LONG TERM • Transition to decarbonised fuel SHORT - MEDIUM TERM • Energy Ef ciency SHORT - MEDIUM TERM • Collaboration on alternative fuel R&D SHORT - MEDIUM TERM • Transition to Low Carbon Fuel SHORT - MEDIUM TERM • Renewable energy mix Greater Renewable Resource Utilisation Ship Recycling 4R – Refuse, Reduce, Reuse & Recycle PROMOTING CIRCULAR ECONOMY TOWARDS DECARBONISATION ENVIRONMENT SOCIAL GOVERNANCE FINANCIAL Employee Safety, Health & Well-being Contractor Safety Process Safety STAKEHOLDER ENGAGEMENT BIODIVERSITY CONSERVATION Marine biodiversity conservation FINANCIAL GROWTH PLANS FINANCIAL GOVERNANCE FRAMEWORK (FRA/CFP) TALENT EXCELLENCE COMMUNITY INVESTMENT HEALTH & SAFETY Youth Entrepreneurship Education CSR on education Engaged Workforce Talent Development Collaboration Assurance Assurance Robust Culture Cybersecurity RESPONSIBLE SUPPLY CHAIN MANAGEMENT GOVERNANCE & BUSINESS ETHICS Based on the outcomes of all the sessions, we then identified nine strategic priorities within the three ESG pillars of environment, social and governance, and complemented by the fourth Stakeholder Engagement Pillar. In addition, we included Financial Pillar as part of our financial sustenance to complete the Sustainability Strategy. In coming up with the optimal sustainability governance structure that would support the execution of the Sustainability Strategy and to embed sustainability into our daily business operations, we decided that a custodian governance structure would best achieve our objective. Thus, while the Board and BGRC provides the highest oversight on the Sustainability Strategy, each business unit and subsidiary will now be expected to take ownership of their respective sustainability programmes and initiatives, cascading down to each individual employee. We believe the custodian approach to sustainability governance will enable us to internalise the shift towards a sustainability-centred business, where each member of the MISC Family proactively works towards achieving MISC’s sustainability targets, within their own jobs and functions. FINANCIAL PILLAR The aim of our Financial Pillar is to achieve growth in a predictable manner, and through recurring sources of cashflow. We have identified two key strategic priorities to drive our financial sustainability under this pillar as follows: • • Financial growth plans (a five-year rolling business plan) • • Financial governance framework, developed in line with the financial reporting accounting standards and certified financial planner More details on our strategic priorities in the Financial Pillar can be found in the Delivering Our Strategy section on page 90 of this Integrated Annual Report. ENVIRONMENT PILLAR MISC seeks to contribute to the global call for a sustainable future, to demonstrate our commitment to upholding the highest standards of environmental stewardship as a responsible corporate citizen. Considering our role as global energy movers, we are mindful of minimising the environmental impacts of our business operations, whilst at the same time giving back to the environment by contributing to efforts to preserve the planet for future generations. Our three strategic priorities within the Environment Pillar are as follows: Towards Decarbonisation This strategic priority demonstrates MISC’s commitment to transition towards decarbonised operations by 2050 and aligns MISC’s carbon emission reduction commitments with the IMO’s Initial Greenhouse Gas (GHG) Strategy. Our Towards Decarbonisation strategic priority consists of the following two phases: Short to medium-term carbon reduction targets comprising of: ‐‐ Five-year plan from 2021 until 2025 ‐‐ 10-year plan from 2021 until 2030 Long-term carbon reduction targets with a 20-year plan, from 2030 until 2050 MISC has put in place dedicated plans for both shipping and non-shipping operations. Within our shipping operations, we are looking at continually improving energy efficiency in the vessel designs and operations as we progressively renew our fleet to low- carbon fuel. We are also collaborating with strategic partners in developing a zero-carbon emission vessel to meet the Getting to Zero 2030 aspiration. As for the longer-term 2050 targets, our aim is to progressively decarbonise our newer vessels as part of the fleet renewal/rejuvenation programme. With regards to our non-shipping units and subsidiaries, the focus is on improving energy efficiency at the workplace and in operations, and increasing the mix of renewable energy use. Why Do We Need to Decarbonise? There is an urgent need to reduce GHG emissions from international shipping, and to phase them out within this century. The IMO has set the following aspirations for the shipping industry: • IMO 2050: Reduce total GHG emissions from shipping operations by at least 50% in 2050 compared to 2008; and • IMO 2030 & 2050: Reduce the average carbon intensity from shipping operations by 40% in 2030 and 70% in 2050 compared to 2008 To align with IMO aspiration for 2030 and 2050, MISC is currently developing carbon reduction targets aligned with IMO GHG aspiration timeframes for both the medium and long term in terms of total GHG and carbon intensity. 1 2 Task Force on Climate-related Financial Disclosures (TCFD) MISC Group is in support for the Task Force on Climate-related Financial Disclosure (TCFD) and for more details on the Group’s commitment towards climate change and our current initiatives aligned to the four basic recommendations of TCFD, please refer to Task Force on Climate-related Financial Disclosure section in this Integrated Annual Report on page 59. //// Highlights / Strategic Review / Sustainability / Financial Review / Business Review ///// MISC Berhad / Integrated Annual Report 2020 5 118 MISC Berhad / Integrated Annual Report 2020 5 119 ///// Business Review / Financial Review / Sustainability / Strategic Review / Highlights //// Section Section