Petronas Chemicals Group Bhd

The implementation of our sustainability decisions is supported by other councils and committees: [...] A robust governance system drives the successful execution of our sustainability ambitions. Spearheaded by the Board and Executive Leadership Team, we adopt a top-down approach to sustainability, clearly delineating roles and responsibilities for improved accountability and integrity. The Board plays an active role in the governance and oversight of sustainability matters, with ongoing efforts to embed sustainability into the Board's scopes. This is part of our continuous effort in strengthening sustainability governance for efficient decision-making and execution of sustainability-related matters. [...] This year, we appointed our first Vice President and Chief Sustainability Officer (CSO), who reports directly to the President and Group Chief Executive Officer (GCEO), to provide a dedicated focus on managing sustainability strategically in the company. We have also established a dedicated Sustainability Council, in line with the recent reorganisation of the Group. Chaired by the CSO, the Sustainability Council cascades decisions from the Board and Executive Leadership Team into implementation and deliberates bottom-up recommendations to the Executive Leadership Team and Board.

To ensure accountability and integrity, we have established a dedicated governance structure with clear reporting lines that drives our sustainability strategies, action plans, and initiatives. This structure ensures that our sustainability principles and priorities are fully integrated across the organisation, embedded in decision-making and execution of our sustainability-related matters. With this structure, we delineate roles and responsibilities clearly, enabling effective oversight, decision-making and efficient execution. [...] Our board has been taking an active role in climate-related matters discussion. We recognise that climate change is a critical business issue, contributing to a set of risks and opportunities. We are taking more deliberate actions to elevate sustainability, especially climate-related discussions at the Board, to shape the long-term strategic direction of the company. [...] The Risk Committee reviewed the PETRONAS Corporate Risk Profile with consideration of climate-related risks and mitigation actions on a quarterly basis. The full Board approved the subsequent PETRONAS Corporate Risk Profile. [...] Management-level corporate committees supported the ELT in the formulation of strategy relating to climate change and other sustainability themes, as well as in driving systemic change and ensuring operationalisation throughout the organisation. Key corporate committees include: [...] Review PETRONAS Corporate Risk Profile considering climate-related risk and mitigation and make recommendations to the ELT, Risk Committee and Board.

At PCG we strive to always uphold the highest level of integrity and accountability while promoting a solid sustainability mindset across the Board and leadership team. In 2021 we introduced sustainability key performance indicators (KPIs) in top management performance appraisals. Additionally we also included PCG's sustainability performance as a permanent agenda item in quarterly Board meetings. This includes deliberations on climate-related performance such as GHG emissions reductions and low carbon portfolio status. [...] PCG's sustainability governance prioritises transparency and accountability when delivering our sustainability strategies. PCG's Sustainable Development Working Committee drives our sustainability agenda, which is then reviewed and approved by the Sustainability and Risk Management Committee and the Board Sustainability and Risk Committee and subsequently reported to the Board. The clear delineation of roles and responsibilities enables us to uphold the highest level of integrity and efficiency in implementing our sustainability agenda. [...] Below are the key components of PCG's climate governance structure and their respective responsibilities: Decision making - The Board is ultimately responsible for monitoring the implementation of climate-related initiatives and overseeing PCG's progress toward climate-related goals and targets; and - The Group considers the integration of economic, environmental, and social (EES) factors as a component of the Board's fiduciary responsibilities. A comprehensive description of PCG's sustainability agenda is available in its standalone Sustainability Report. - Oversee the review of changes in the low carbon transition, the Group's sustainability commitments and goals, the risks as well as opportunities, and - Provide guidance in forming the Group's policies, strategies, and practices with regards to climate change; and - Ensure alignment between the Board, management, and business strategy on sustainability and climate change matters including review of PCG Net Zero Carbon Emissions 2050 Roadmap. - Chaired by Managing Director (MD)/Chief Executive Officer (CEO), the committee provides support to the BSRC in managing risks and guiding management on sustainability matters impacting the business. [...] Board Sustainability and Risk Committee (BSRC) The BSRC is chaired by a Board member and comprises Independent Directors who deliberate on risks and opportunities for high-impact business decisions. The duties of the BSRC include: (i) Overseeing the review of changes in the low carbon transition, sustainability megatrends, and social expectations that might impact the Group's license to operate; (ii) Overseeing the review of the Group's sustainability commitments and goals, the risks and opportunities. For example, risks associated with a potential carbon tax impacting business cost, technological options that support business decarbonisation as well as new products and services; (iii) Guidance in forming the Group's policies, strategies, and practices with regard to climate change and sustainability; and (iv) Ensuring alignment between the Board, management, and business strategy on sustainability and climate change matters. Topics of discussion include the review of PCG's NZCE 2050 Roadmap and progress towards achieving its targets. During the year, the BSRC (formerly known as Board Risk Committee) endorsed eleven risks to the Board. Six of these are critical risks that require continuous monitoring, which includes a new risk (i.e., Sustainability Risk) that encompasses environmental issues such as climate change, which has become significant due to increasingly stringent regulations and expectations from both external and internal stakeholders. [...] Sustainability and Risk Management Committee (SRMC) The SRMC was established in May 2022 to deliberate sustainability matters, including climate change, at the groupwide level, especially those considered to have a high impact on the Group's strategic objectives and business portfolios. The committee is chaired by the MD/CEO and supports the Board in managing risks and guiding management on sustainability matters impacting the business. [...] Sustainable Development Working Committee (SDWC) The SDWC is chaired by the Head of Health, Safety and Environment, who reports to the MD/CEO. The SDWC strategises our sustainability agenda, which is then reviewed and approved by the Sustainability and Risk Management Committee and reported to the Board. The responsibilities of the committee include: (i) Reviewing quarterly information that will be reported to the Management Committee; (ii) Monitoring quarterly climate-related performance indicators against targets such as GHG performance on a quarterly basis; (iii) Coordinating cross-departmental enhancements and initiatives; (iv) Conducting an annual materiality review to determine PCG's sustainability focus areas and formulate sustainability strategies; (v) Reviewing data related to each material matter that will be publicly reported; and (vi) Implementing initiatives that are required to support each material matter. [...] Evaluating The Effectiveness Of PCG's Climate Governance The annual Board's effectiveness evaluation assesses the performance of the Board on sustainability. The Board also ensures that performance evaluations of Senior Management include a review of their performance in addressing the PCG's material sustainability risks, including climate-related risks. The Board considers how well they have performed their respective EES roles, which may include progress against achieving sustainability targets set by the Board. To further drive effective climate governance, monetary rewards are provided to the MD/CEO and key leaderships based on performance against a set of sustainability KPIs that encompass climate-related indicators. The sustainability KPIs contribute to a percentage of the overall performance evaluation and is reflected in their performance bonuses. One of the climate-related indicators that is incorporated into the overall performance evaluation is the absolute emissions reduction against the set target. In addition to the emissions reduction target, the CEO is also evaluated for governance alignment with the TCFD recommendations.