Environmental, Social, and Governance (ESG) are three key areas used today to assess an organisation’s impact beyond the financial performance. These pillars reflect how a company manages its responsibilities to the planet, its surrounding communities, and the integrity of its governance practices.

Each pillar encompasses specific criteria that have become increasingly important to investors, regulators, and stakeholders who seek assurance that the organisations they support are truly sustainable and responsible.

In today’s corporate landscape, ESG has progressed well beyond commitments and reporting. Forward-looking companies are embedding ESG performance into their core strategies, with some linking ESG to executive remuneration. These companies ensure ESG performance is embedded directly into their strategic and operational objectives, holding leaders accountable not only for financial results, but also for measurable contributions to sustainability, social value creation, and sound governance.

And this trend is accelerating. Performance is no longer defined purely by profit margins, but also by the lasting environmental, social, and governance impact of leadership decisions - ensuring that value is created for both shareholders and society at large.

Leading global energy companies are driving progress by directly linking ESG objectives to executive performance indicators. By holding senior management accountable for ESG outcomes alongside financial performance, these organisations signal to stakeholders that sustainability and responsible governance are integral to long-term value creation. This reinforces the message that ESG is not a peripheral obligation, but a core business driver shaping strategic decisions, investment priorities, and leadership accountability.

At Tenaga Nasional Berhad (TNB), we are also moving in this direction by embedding ESG objectives into our executives’ performance goals - going beyond mere compliance checkboxes to drive meaningful impact. This alignment goes far beyond symbolic gestures - clear, measurable ESG targets are being embedded into the Key Performance Indicators (KPIs) of our senior leadership teams.

Metrics such as carbon reduction, renewable energy integration, and labour rights are now part of the framework that determines leadership accountability and organisational performance outcomes. They are aligned with TNB’s overall performance objectives, reinforcing that sustainability and governance are integral drivers of long-term value creation.

Putting the ESG KPI into action

To effectively embed ESG into leadership accountability, it is crucial to align objectives with the specific roles and Key Performance Indicators (KPIs) of our senior management. By integrating ESG metrics directly into executive performance, we establish a clear line of responsibility, ensuring that sustainability is not an abstract aspiration, but a tangible, actionable dimension of each leader’s tasks.

These measurable outcomes reinforce that ESG is more than a strategic ambition - it is trackable, actionable, and intrinsically linked to executive decision-making. By connecting TNB’s broader ESG commitments with leadership KPIs, we create transparency for employees and stakeholders, allowing them to see precisely where progress is being made and how value is being delivered.

Currently, 14 specific KPIs are mapped in accordance to strategic objectives across the three ESG pillars, covering areas from carbon intensity reduction and non-hazardous waste management to human capital development. For instance, our strategic objective of driving sustainability agenda through the delivery of ESG initiatives is linked to the TNB ESG Rating Score, applied consistently across the company’s C-suite.

These KPIs are more than just metrics - they reflect real priorities. Each chief officer carries a clear responsibility for the area most connected to their role, whether it is;

Driving Cleaner Generation

Ensuring Integrity in Procurement

Building Future-ready Talent, or

Enhancing Digital Resilience.

To ensure these ESG ambitions translate into concrete action, TNB also embeds ESG KPI into organization’s overall performance. This approach reflects TNB’s philosophy that true value creation is sustainable, requiring alignment between leadership incentives and long-term strategic objectives.

Why KPI's Matter

TNB’s top management is directly accountable for ESG performance, alongside traditional financial metrics. By linking ESG to organization’s strategic objectives, the company ensures that sustainability remains a central priority rather than a secondary consideration. Without such integration, ESG initiatives risk being sidelined, potentially exposing a company to reputational damage, regulatory penalties, or a loss of public trust.

Tying ESG to the overall performance of senior management is only the first step. For sustainability to truly become part of a company’s culture, it must be embedded into the organization’s DNA - reaching all levels, from leadership to rank-and-file employees. By aligning organization’s strategic objectives with actions that support ESG objectives, TNB encourages its workforce to view sustainability as a shared responsibility.

This approach ensures that what happens at the top cascades throughout the organization. Linking KPIs to leadership performance reinforces the idea that sustainability is not optional - it drives operational and cultural change across the company.

While there is always room for refinement, these measures position TNB to lead in a sustainable and responsible manner. They enable the company to advance its energy transition goals while continuing to power the nation, demonstrating that strong ESG governance at the top translates into meaningful action across the entire organization.

Abbreviations:
1. CEO – Chief Executive Officer
2. MD TPGSB – Managing Director TNB Power Generation Sdn. Bhd.
3. CGO – Chief Grid Officer
4. CDNO – Chief Distribution Network Officer
5. CReO – Chief Retail Officer
6. CNEO – Chief New Energy Officer
7. CFO – Chief Financial Officer
8. CSVO – Chief Strategy & Ventures Officer
9. CRSMO – Chief Regulatory & Stakeholder Management Officer
10. CPeO – Chief People Officer
11. CPO – Chief Procurement Officer
12. CIO – Chief Information Officer
13. CGBSO – Chief Global Business Solutions Officer
14. CSO – Chief Sustainability Officer
15. CoSec – Company Secretary
16. CRO – Chief Risk Officer
17. CIA – Chief Internal Audit
18. CIDO – Chief Integrity Development Officer

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