A company announces a target to reduce its carbon emissions by 2030. The board approves it, the commitment goes into the annual report, and the sustainability team starts tracking progress. Then the next budgeting cycle begins.

The operations team is asked to keep costs down. The facilities team is told to extend the life of existing equipment. Finance has other priorities for capital expenditure, and an energy-efficiency project that looked promising six months ago is pushed back another year.

Nobody has abandoned the sustainability target. But the decisions being made are not necessarily helping the company achieve it.

I think this is one of the more difficult issues Malaysian businesses will need to address as sustainability reporting becomes more demanding.

We spend a lot of time discussing what companies have committed to achieve by 2030 or 2050. Much less attention goes to whether their annual budgets and operating decisions are consistent with those commitments.

Malaysia’s National Sustainability Reporting Framework is bringing greater consistency to how companies disclose climate-related risks and emissions. Mandatory external assurance of Scope 1 and Scope 2 emissions is also being introduced in phases, beginning in 2028 for the first group of companies.

That will improve the scrutiny of reported information. But assurance of emissions figures does not, by itself, tell us whether a company is making the operational changes needed to reduce them.

A business could have accurate figures, a properly documented methodology and a target approved by the board, yet still be making investment decisions that leave its energy consumption largely unchanged. There is nothing necessarily dishonest about that. Businesses have competing priorities, and some investments cannot be made immediately.

The problem comes when the sustainability commitment is treated as a separate exercise from the decisions that determine how the business operates.

Consider how companies normally assess expenditure. A new production line may increase output. A hotel refurbishment may attract more guests. An expansion into another market may bring in new revenue. These projects have a business case that management can understand.

An energy-efficiency investment may be less straightforward. It does not necessarily produce more goods or attract more customers. Its value comes from reducing the cost of delivering the same service over time. That can make it easier to postpone, particularly when budgets are tight.

But delaying the decision also has a cost. If a facility continues consuming more electricity than it needs to, the business keeps paying for that additional consumption. The associated emissions also continue to be reflected in its reporting, subject to the company’s reporting boundary.

The company may have saved on capital expenditure this year, but it has not necessarily reduced its overall costs over the next five or ten years.

I would like to see more businesses assess these decisions over the period in which the equipment will actually be used, rather than looking only at what the upgrade costs in the next financial year.

There is another issue worth considering: who is responsible for delivering the sustainability target?

The sustainability team may be accountable for reporting progress, but it does not usually control the facilities budget. The facilities team may identify opportunities to improve energy performance, but it may not have the authority to approve the investment. Finance controls how capital is allocated, but an upgrade that reduces electricity consumption may be competing against projects with more immediate commercial returns.

Each team can make a reasonable decision within its own responsibilities. Taken together, those decisions may still leave the company short of its longer-term target.

This is where I think the board and senior management have a role beyond approving the sustainability report.

If a company has committed to reducing emissions, that commitment should be reflected in how projects are assessed, how budgets are prepared and how management reviews performance.

That does not mean approving every project labelled as green. Some upgrades will not deliver sufficient savings to justify their cost. Others may need to be phased to avoid disrupting operations. And in some cases, better maintenance or changes to operating practices may achieve worthwhile improvements without major investment. The point is to make those decisions with a clear understanding of their longer-term consequences.

At KJTS, we work with building owners on cooling infrastructure that may operate for 10 or 20 years. The decisions made at the beginning affect not only the initial investment but also electricity consumption, maintenance requirements and operating costs throughout that period. This is why I believe the financial and operational assessment needs to go beyond the first year’s budget.

The same principle applies more widely to businesses planning their sustainability investments.

It is useful to set a five-year emissions target. But management should also be able to explain what needs to happen in the next 12 months to move towards it. In practice, that means knowing which facilities offer the most practical chances to cut consumption, which investments are being considered, approved or deferred, and how this affects the company’s expected progress.

This can be discussed during normal business planning, rather than waiting until the next sustainability report is prepared.

My colleague Adrian Lim has written about the importance of measuring whether energy savings are real. That becomes even more useful when management is deciding where to allocate money. If a company can demonstrate what an earlier investment achieved, it has a stronger basis for evaluating the next one.

Malaysia’s move towards more consistent sustainability reporting is a positive development. Investors should have reliable information about what companies are doing and the progress they are making.

But I would judge the value of a sustainability commitment by more than what appears in the report.

If reducing emissions is genuinely a business priority, it should be visible in the decisions made when next year’s budget is approved.

Otherwise, we risk setting targets for 2030 while continuing to make decisions as though those targets belong to someone else’s department.