Last week, I was invited to participate in a focused working discussion at the Malaysian Parliament, hosted by YB Wong Chen and his team, together with Dr Renard Siew and Fiona Lee.
It was a timely discussion centred on a question that regulators, institutions, and enterprises across ASEAN are increasingly addressing:
How do we build trust in sustainability disclosures, particularly Scope 3, as regulatory expectations tighten and cross-border accountability increases?
Scope 3 Disclosure Is No Longer a Voluntary Exercise
Across ASEAN, sustainability reporting is accelerating, particularly in Malaysia following the introduction of the
National Sustainability Reporting Framework (NSRF). Sustainability disclosures are shifting away from voluntary narratives toward sustainability data that regulators, investors, and financial institutions are expected to rely on.
Yet Scope 3 emissions remain the weakest link.
In practice, most Scope 3 data today is still estimated, and many public listed companies rely on suppliers that are unable to produce credible emissions data. This creates ambiguity and risk, precisely the conditions regulators seek to reduce. Companies are expected to disclose, regulators are expected to enforce, and capital providers are expected to rely on the information. But the underlying systems were never designed for scrutiny at this level.
Under the NSRF, Malaysia is transitioning toward
ISSB-aligned disclosures under IFRS S1 and S2, with larger Main Market issuers expected to adopt earlier and move toward full climate disclosures and assurance on Scope 1 and Scope 2 emissions, while Scope 3 is phased in with transitional reliefs. The direction is clear: sustainability reporting is moving closer to the discipline of financial reporting, where credibility, traceability, and governance matter.
Without credible MRV foundations, sustainability disclosures risk becoming compliance artefacts rather than tools for decision-making, capital allocation, and risk assessment.
Article 6 and the Challenge of Cross-Border Trust
The discussion also touched on Article 6 of the Paris Agreement and its implications for cross-border emissions accounting.
ASEAN is at a structural inflection point. Its role in global manufacturing, combined with rapidly rising energy demand driven by AI, data centres, and electrification, is exposing deep gaps in emissions visibility across regional supply chains. As global buyers, regulators, and financiers harden their requirements, climate disclosure covering Scope 1, Scope 2, and Scope 3 emissions, transition plans, and carbon credit use is no longer a reporting exercise. It is becoming a gatekeeper of capital, contracts, and competitiveness.
This is where initiatives such as the
ASEAN Common Carbon Framework (ACCF) matter. High-quality, interoperable carbon markets only function when anchored in robust, decision-useful disclosures: defensible emissions baselines, transparent accounting of carbon credit use, credible methodologies, and verification that can withstand scrutiny across borders and value chains. Without this foundation, carbon markets risk becoming peripheral to real decarbonisation, and disclosures devolve into compliance theatre rather than instruments of capital allocation and risk management.
As countries and institutions move toward internationally transferable mitigation outcomes, the demand for interoperable and defensible emissions data will only increase. Without trusted verification mechanisms, cross-border frameworks risk inheriting the same credibility challenges that have historically affected carbon markets.
This reinforces a simple but uncomfortable truth:
Trust cannot be legislated into existence. It must be engineered into the data layer.
The Role of AI in Verification
AI featured prominently in the conversation, not as a productivity tool, but as an enabler of verification at scale.
Applied correctly, AI can ingest large volumes of unstructured documents, identify inconsistencies and anomalies, establish data lineage across fragmented supply chains, and support continuous verification rather than periodic estimation.
This is particularly relevant for ASEAN, where SMEs form the backbone of the economy and supply chains are highly distributed. Manual verification will not scale. What is needed are systems that lower the cost of credibility, allowing emissions data to be structured, classified, and validated without imposing unsustainable burdens on smaller businesses.
At Carbon AI, our focus is on building the trust layer beneath sustainability reporting, ensuring that climate data is not only disclosed, but fit for regulatory oversight, financial decision-making, and long-term accountability.
I am grateful to YB Wong Chen and his team for hosting the discussion, and to Dr Renard Siew and Fiona Lee for the depth and clarity they brought to the exchange. I also appreciate the invitation to return for a future Parliament session on AI and ESG frameworks, as these dialogues will shape how climate accountability evolves across the region.
