Malaysia’s Tenaga Nasional Berhad Sustainability Report 2025 Signals Deeper Integration of Energy Transition, Resilience and ESG Governance

Tenaga Nasional Berhad (TNB) is Malaysia’s national electricity utility and one of the country’s largest energy companies, with activities spanning power generation, electricity transmission, distribution and retail. The Group operates primarily in Malaysia while also maintaining an international presence in markets including the United Kingdom, Ireland, Türkiye, Australia and Saudi Arabia. TNB is a major power producer in Peninsular Malaysia, where its generation business represents 52.4% of installed generation capacity, while total installed renewable energy capacity reached 4,681 MW in 2025.

Its role extends well beyond electricity generation. TNB operates extensive transmission and distribution infrastructure and serves more than 10 million customers, placing the company at the centre of Malaysia’s energy security, economic development and energy transition. This position also creates material ESG exposure, particularly in relation to greenhouse gas emissions, coal transition, renewable energy integration, grid resilience, affordability, workforce safety, supply-chain management and climate-related physical risks.

TNB has released its Sustainability Report 2025, covering the financial year ended 31 December 2025 and framing the Group’s sustainability agenda around the theme “Delivering Tomorrow’s Energy Transition.” The report is prepared in accordance with the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB), in line with Bursa Malaysia’s Main Market Listing Requirements. It also references the GRI Standards, the UN Sustainable Development Goals and relevant SASB disclosure topics for Electric Utilities and Power Generators.

The report matters because TNB is navigating the energy trilemma of decarbonisation, security of supply and affordability at national scale. The company defines short-, medium- and long-term sustainability horizons extending from 2026 to 2050, while applying permitted transition reliefs under IFRS S2, including limited Scope 3 disclosure. Physical climate scenario analysis is included, while transition-risk scenario analysis is still being developed for future reporting periods.

Key Sustainability Themes and Disclosures

Decarbonisation remains one of the report’s most material themes. TNB maintains a Net Zero 2050 aspiration, targets a 35% reduction in Scope 1 emissions intensity by 2035 and aims to reduce coal capacity by 50% by 2035 and 100% by 2050 compared with a 2020 baseline. Its short-term target is to reduce Scope 1 emissions intensity by 5% annually, supported by fuel transition, renewable capacity expansion and technology deployment.

The 2025 emissions result demonstrates the operational complexity of that transition. TNB reports that identified emissions-reduction measures would have reduced emissions intensity to around 0.53 tCO2e/MWh, but actual emissions intensity increased by 1.4% from the 2024 baseline to 0.565 tCO2e/MWh. The company attributes this mainly to gas supply disruptions that required increased coal-fired generation to maintain grid stability and electricity supply.

This is an important signal for stakeholders because it shows that decarbonisation in the utility sector may not progress in a straight line. TNB’s disclosures suggest that emissions performance will continue to be influenced by fuel availability, grid stability, rising electricity demand and the speed at which cleaner generation and storage capacity can be integrated into the system.

TNB is also investing heavily in the infrastructure needed to support the transition. The report highlights deployment of large-scale battery energy storage systems, 47 MWp of newly commissioned rooftop solar capacity bringing cumulative installed capacity to 216 MWp, and a 500 MWac renewable energy supply agreement under the Corporate Renewable Energy Supply Scheme to support data-centre demand. The Group has also approved RM43 billion in grid investments for 2025–2027 to strengthen reliability and enable higher levels of renewable integration.

Beyond carbon, TNB’s environmental disclosures increasingly cover water, biodiversity and waste. The company reports water savings of 2,181 cubic metres, 8.37 megalitres of harvested rainwater and a target to reduce water consumption by 15% by 2035. Its Biodiversity Framework is aligned with the Kunming-Montreal Global Biodiversity Framework and Malaysia’s National Policy on Biological Diversity, while approximately RM3.4 million was invested in biodiversity-related initiatives.

Waste and circularity are also becoming more visible. TNB reports that 547,444 metric tonnes of waste were diverted from disposal during the year and established an e-waste collection centre at its headquarters. These disclosures suggest a broader move from carbon-focused reporting toward more integrated environmental management.

On the social side, workforce capability-building stands out as a major priority. TNB invested RM203.9 million in 1,988,642 training hours during 2025, compared with RM197 million and 1,346,477 hours in 2024. The scale of this investment indicates that reskilling and energy-transition capability are becoming central to how TNB prepares its workforce for future technologies and operational requirements.

Diversity indicators also show gradual movement. Women represented 33% of the Board of Directors, above TNB’s 30% target, while women accounted for 27.47% of senior management, with the company progressing toward a 30% target by 2026. The report also describes human-rights, anti-harassment and disability-inclusion programmes as part of its broader DEI approach.

Safety performance is more mixed. TNB reports that employee LTIFR improved to 0.83 in 2025 from 0.86 in 2024 and remained below its target of 1.0. However, three fatalities were recorded during the year, and the company says it is responding through enhanced risk controls, targeted training, stricter enforcement of Life Saving Rules and further digitalisation of incident reporting and predictive safety management.

Supply-chain sustainability is another area where the report points to more structured ESG integration. TNB conducted a Vendor Sustainability Assessment involving 935 suppliers representing RM5.4 billion in procurement spend, covering environmental performance, labour and human rights, governance systems and readiness for the energy transition. The findings are being used to identify higher-risk suppliers and develop targeted corrective actions and capability-building programmes.

TNB’s Sustainable Supply Chain Framework, approved at the end of 2025 and scheduled for broader rollout in the second half of 2026, is intended to embed ESG considerations across sourcing, logistics, operations, maintenance and lifecycle management. The framework also aims to improve Scope 3 emissions management through supplier declarations and capability development, suggesting that value-chain emissions and supplier performance are likely to become more prominent areas of future disclosure.

Governance and Strategic Signals

TNB’s governance structure indicates that sustainability is increasingly being treated as a business-management issue rather than simply a reporting requirement. The Board oversees the sustainability pathway and strategy, supported by the Board Sustainability and Risk Committee, which monitors strategy, risk, performance, investment and disclosure. At management level, the Sustainability and Energy Transition Committee is chaired by the President and Chief Executive Officer and meets monthly to review sustainability strategies, targets and implementation progress.

A notable feature is the connection between ESG performance and management remuneration. At least 15% of management KPIs are linked to ESG priorities depending on role, with metrics covering carbon intensity, Scope 2 emissions, biodiversity, waste reduction, renewable-energy growth, safety, labour rights and sustainable supply chains. This linkage suggests that sustainability accountability is becoming embedded more directly into executive performance management.

The Group has also strengthened its ESG data architecture through an in-house dashboard covering more than 400 indicators. The system is intended to improve source-data visibility, consistency and performance monitoring across business entities, while supporting TNB’s phased adoption of IFRS S1 and IFRS S2. This may become increasingly important as regulators and investors demand more decision-useful and financially connected sustainability information.

Governance disclosures also highlight integrity and anti-corruption controls. In 2025, 99.78% of employees received ethics and anti-corruption training, while TNB continued to apply structured risk assessments, integrity programmes and monitoring mechanisms across the organisation. The company’s broader sustainability risk-management approach follows the principles of ISO 31000:2018.

What This Report Suggests About Future Direction

The overall direction of travel suggests that TNB’s next phase of sustainability development will increasingly connect decarbonisation with grid resilience, climate adaptation, digitalisation and supply-chain capability. The RM139 million Climate Adaptation Plan covering 180 identified assets, particularly those exposed to flooding and soil movement, indicates that physical climate resilience is moving closer to core asset-management and capital-allocation decisions.

The same pattern is visible in grid investment and storage. Large-scale BESS, expanded smart-meter deployment and major grid investment may position TNB to integrate more variable renewable energy while preserving reliability and affordability. This is strategically important because future emissions reductions will depend not only on adding renewable capacity, but also on whether the electricity system can absorb and manage that capacity efficiently.

Disclosure maturity is another area likely to develop further. Current Scope 3 reporting covers business travel and employee commuting rather than a comprehensive inventory across the value chain, while transition-risk scenario analysis has not yet been included. TNB states that it is strengthening internal methodologies and data processes, suggesting these areas may become more developed in future reporting cycles.

Stakeholders should also watch implementation of the Sustainable Supply Chain Framework. As ESG criteria are embedded more deeply into supplier screening, procurement and lifecycle management, TNB may increasingly influence sustainability practices across its vendor ecosystem. This could become particularly important as energy-transition projects increase demand for equipment, infrastructure, technology and critical materials.

Pacifica ESG View

TNB’s 2025 Sustainability Report signals a broader shift from ESG disclosure toward operational integration, particularly through board oversight, ESG-linked remuneration, climate adaptation, grid investment and more structured supply-chain management. The key areas to monitor are whether emissions intensity begins moving consistently toward long-term targets, how quickly Scope 3 and transition-risk disclosures mature, implementation of the sustainable supply-chain framework, and progress in reducing serious safety incidents. These areas will help determine whether stronger ESG governance translates into sustained performance improvements.

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