Sustainable Futures 10 (2025) 101052

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Development of an integrated ESG and climate risk assessment framework

for semiconductors industries in Malaysia
Ola Y. Mohamed a, Nabila F. Jamaludin a,b,*
a
Department of Chemical Engineering, Universiti Teknologi Petronas, 32610, Perak, Malaysia
b
Centre of Advanced Process Safety, Institute of Smart and Sustainable Living, Universiti Teknologi Petronas, 32610, Perak, Malaysia

A R T I C L E I N F O A B S T R A C T

Keywords: The semiconductor industry is an important sector of today’s world economy. Given its explosive growth, it is
Environmental social and governance (ESG) crucial for this industry to adopt an Environmental, Social, and Governance (ESG) approach in line with the
Semiconductors United Nations Sustainable Development Goals (UNSDG). Despite the recent movement of manufacturers to­
Proximity-to-target (PTT)
wards establishing their ESG data collection, a quantitative tool to compare their performance against standards
Task force on climate-related financial disclo­
sures (TCFD)
is limited. Noticing its significant contribution to climate change, semiconductor manufacturers also need to
Malaysia follow Task Force on Climate-related Financial Disclosures (TCFD) recommendations in their sustainability re­
ports. In Malaysia’s case, all public listed companies must perform this disclosure by 2025 according to the Bursa
Malaysia announcement, but this is still lacking. Thus, this study aims to develop a comprehensive framework for
ESG assessment of the semiconductor industry in Malaysia, following the TCFD recommendations in climate risk
regards. A framework comprising eight steps employing the proximity-to-target (PTT) approach is used to
measure indices performance level of two case studies located in Malaysia: Murata Manufacturing Co., Ltd. and
ViTrox Corporation Bhd. A zero-to-one rating is developed for certain vital indicators to be quantitatively re­
flected in the assessment. From the results, Murata topped ViTrox overall ESG index score. This result is
attributed to the parameter weightage concluded as the core influencer in the assessment. As a recommendation,
it is advised to conduct a more precise materiality assessment that incorporates relevant stakeholders’ input,
considers the sovereign ESG factors in metrics, and incorporates machine learning to improve the framework’s
adaptability to other industries.

1. Introduction are allocated to it [6]. Its main concept is that stakeholders can match
with companies that fit their criteria through ESG reporting trans­
The swift technological advancements of the 21st century, which parency [7]. This growing emphasis has increased the demand for
made electronics integral to the global economy, have coincided with companies to disclose their ESG data. However, the lack of a
significant environmental impacts caused by human activities [1,2]. The sector-specific framework to guide such disclosures has placed an
widespread use of technology, particularly post-COVID-19, has exacer­ additional burden on companies. Additionally, climate risk remains one
bated pollution, depleted natural resources, exploited labor, and harmed of the least considered factors in many ESG initiatives, hindering deci­
the natural environment [3]. The semiconductor industry, in particular, sion-makers’ ability to fully understand the potential business impacts of
is a significant contributor to climate change due to its high consump­ climate change [8].
tion of resources and greenhouse gas (GHG) emissions [4].To mitigate In Malaysia, all publicly listed companies are expected to disclose
these adverse effects and align with the United Nations Sustainable their sustainability practices following the Task Force on Climate-
Development Goals (UNSDG) and the Paris Agreement, the industry related Financial Disclosures (TCFD) recommendations by the end of
must adopt a holistic Environmental, Social, and Governance (ESG) 2025 [9,10]. However, a consistent reporting framework with perfor­
approach. ESG, which has gained significant attention since its intro­ mance assessments based on these recommendations has yet to be
duction in 2004 [5], has proven its positive impact on firms operational mandated. Furthermore, it is challenging to make definitive assessments
and financial performance when a threshold and substantial resources of companies’ performance due to the subjective nature of reports and

* Corresponding author.
E-mail address: [Link]@[Link] (N.F. Jamaludin).

[Link]
Received 27 November 2024; Received in revised form 3 June 2025; Accepted 24 July 2025
Available online 4 August 2025
2666-1888/© 2025 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC license ([Link]
nc/4.0/).
O.Y. Mohamed and N.F. Jamaludin Sustainable Futures 10 (2025) 101052

difficulties in deriving actionable insights from them. To address this 3. Literature review
gap, the present study aims to achieve two primary objectives: first, to
develop an integrated evaluation framework for ESG and climate 3.1. Semiconductors industry
risk—aligned with the TCFD recommendations and tailored to Malay­
sia’s semiconductor industry; second, to establish an ESG performance The semiconductor industry has experienced phenomenal growth
portfolio for the Malaysian semiconductor industry using the Proximity reaching a global value of approximately $500 billion in 2019 [14]. For
to Target (PTT) approach. The first objective will guide the industry in Malaysia, the semiconductors industry, and the agriculture sector are
meeting stakeholder disclosure requirements step-by-step, facilitating the major contributors to GDP growth, exportations income and
investor assessment and evaluation with adequate disclosure in reports. employment [15]. A threefold increase was witnessed from 2015 to
Additionally, the second objective will provide policymakers with an 2022 in Malaysian semiconductors production which has raised from
overview of the ESG reporting status of Malaysia’s semiconductor in­ RM 11.8 billion in 2015 to RM 32.64 billion in 2022 [16]. The term
dustry, identifying, and assessing gaps. “semiconductor” refers to a critical component in millions of electronic
To overcome the lack of quantitative, sector-specific frameworks devices employed in current daily lives [17]. Yet, its emergence came
designed specifically to the semiconductor industry, this study presents with the epoch of highest human impact on the environment as the
a novel proximity-to-target (PTT) based ESG valuation model that in­ ecological consequences of semiconductor chip manufacturing are the
corporates TCFD recommendations and aligns with Bursa Malaysia’s most predominant within the electronics industry [18]. Some of these
disclosure requirements. It proposes a transparent, data-driven consequences are seen in the polluting toxins, wastewater, and waste gas
approach to benchmarking ESG performance, the first of its kind [19]. When studying the manufacturing process of semiconductors, it
applied in Malaysia’s semiconductor area. The study will include case can be identified as one of the most intricate processes that takes place in
studies of two companies: Murata Manufacturing Co., Ltd., an interna­ a cleanroom in which temperature, barometric pressure and humidity
tional Japanese electronics manufacturer, and ViTrox Corporation Bhd, are controlled to avoid contamination. The four main manufacturing
a publicly listed Malaysian semiconductor company. ESG performance steps are comprised of wafer fabrication that has hundreds of processing
for the selected companies will be evaluated for the years 2020, 2021, steps, wafer probe, assembly, and final testing [20,21].
and 2022 using the PTT approach for data normalization. This approach
was chosen over existing methods because it inherently relates 3.2. ESG trend in the semiconductors industry
normalized values to defined goals [11], with all calculations stan­
dardized to 1 million USD. To be in line with consumers’ favoring of sustainably manufactured
products, investors have increased the requirement for ESG disclosures
2. Theoretical framework in the public listed companies [22]. Thus, in 2014 Bursa Malaysia and
the FTSE Group established the ESG Index which aims to promote ESG
Sustainability concept is a pivotal for this research, especially the practices to stakeholders [23]. The ESG three aspects are indicated by
integration of Environmental, Social, and Governance (ESG) aspects into the E which reflects a company’s effectiveness in environmental pro­
enterprise performance. Sustainability theories, principally Triple Bot­ tection, natural resources usage, and pollution management, the S which
tom Line Theory [12], set a foundation for attainment of balanced social, reflects the strength of stakeholder relationships in production opera­
environmental, and economic factors in corporate strategies. According tions and the G which refers to a company’s performance in its gover­
to the Triple Bottom Line, enterprises must measure their success based nance structure, risk management, and legal operations [24]. Besides
on their impact on people, planet, and profit aside from the financial the business dependency on sovereign ESG performance [25], the
terms. The second vital theory guiding this research is the Task Force on semiconductors industry has its own characteristics when considering
Climate-related Financial Disclosures (TCFD) recommendations. TCFD’s the ESG concept. In 2010, the semiconductor industry accounted for
framework suggests a structured approach for corporations to disclose 1.3–2.0 % of the total US electricity consumption in the manufacturing
climate-related risks and opportunities, which is critical for industries sector. An average semiconductor factory consumes around 20 000 tons
like semiconductors that largely contribute to climate change due to the of water a day mostly used during manufacturing [26]. Also, it is a toxic
energy-intensive manufacturing processes. The TCFD guidelines un­ waste producer with perfluoro-compounds (PFCs) that is one of its major
derline governance, strategy, risk management, and metrics as essential pollutants has a higher global warming potential (GWP) compared to
parameters for measuring climate risks. The framework also aligns with other GHGs [21,27]. The semiconductors industry’s value chain of
the Global Reporting Initiative (GRI), which standardizes ESG reporting partners is complicated in the upstream and downstream. Thus, it is one
and ensures comparability across sectors. These theories have been in­ of the most sensitive climate-related risks industries [28]. ESG has been
tegrated into the ESG framework in this study. grasping public and academic attention for a while, yet there is little
Building on the mentioned theories, the conceptual framework for academic work focusing on the development and effects of ESG on
this research integrates the ESG principles with the climate risk assess­ definite industries such as semiconductors [29]. From the literature, ESG
ment via the proximity-to-target (PTT) approach. The PTT approach standards - such as GRI- are set to some specific industries such as
implicates establishing clear targets for material ESG indicators and agriculture and oil and gas, however for the semiconductors industry,
assessing a company’s performance based on its contiguity to reaching which is a critical contributor to the Malaysian economy, there is a lack
these targets [13]. The framework is designed to quantitatively evaluate of such specific standards.
the semiconductor corporations’ ESG performance and their alignment
with the global sustainability goals and local policies, specifically the 3.3. ESG metrics selection
TCFD recommendations in Malaysia.
By employing this theoretical framework, this research offers a It refers to choosing ESG factors that may affect risks and opportu­
foundation for evaluating how the semiconductor industry can better nities at companies, depending on materiality while determining the
direct ESG factors focusing on climate risks and align their procedures stakeholders’ preference for sustainability disclosures [30]. The ESG
with global standards. The study’s goal is to provide a methodical, data- materiality is related to the firm’s industry and level of market devel­
driven tool for ESG comparison that can be utilized by semiconductor opment [31]. A rule of thumb used is to start with the averages in the
corporations in Malaysia and possibly globally. specific industry and compare oneself against that. Fig. 1 illustrates the
materiality matrix used to specify the critical topics.
Identifying indicators is crucial in monitoring the ESG impact of
semiconductor production activity. It starts by identifying the material

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O.Y. Mohamed and N.F. Jamaludin Sustainable Futures 10 (2025) 101052

Fig. 1. Materiality assessment matrix.

issues of the industry, followed by referring to the standards that offer literature for application of climate risk in semiconductors, only limited
the specific metrics of the selected topics [32]. Currently, research on qualitative assessment was recognized. In a study conducted by [28] to
classifying whether data are ESG-related is limited [33]. In the study assist semiconductors companies in implementing TCFD, the financial
conducted by F. Berg et al. [34] to investigate the divergence in the ESG related climate risk assessment was isolated from the ESG umbrella.
ratings, it was found that 56 % of the total divergence is due to Thus, this study aims to build a quantitative ESG framework considering
considering different indicators by different rating agencies for the same the climate change risk for semiconductors industry taking a case study
attribute. This divergence will imply a challenge in evaluating the from Malaysia.
company’s performance and will reduce the company’s motive to
improve its ESG actions. In the current study, this issue will be solved by
3.6. Gaps in ESG and climate risk assessment in the semiconductors
the selection and standardization of specific indicators matching the
industry
complexity of the semiconductors industry.
Existing studies on ESG and climate risk assessments in the semi­
3.4. Performance level of indicators conductor industry reveal significant gaps, including limited regional
focus, inadequate integration of climate risks, and a lack of quantifiable
Measuring the indicator’s performance levels can be conducted by metrics. For instance,B. Liu et al. [42] proposed a data-driven ESG
approaches such as composite indices, benchmarking, trend analysis and assessment approach, demonstrating its feasibility through practical
proximity to target [11]. The composite indices which combine multiple application. However, climate risk assessment was not considered as
indicators in a single index for assessment has a drawback of the lack of a part of the ESG aspects. A similar gap was identified in the study of J. B.
common baseline. Then again, the benchmarking methodology was Wang et al. [43] which evaluated sustainability reports in China’s
criticized by R. Kitchin et al. [35] and by D.A. McDonald [36] due to its semiconductor industry and highlighted influencing factors. And also in
assumption of a universal ideal situation neglecting its specificity the Murata’s 2022 financial report [44] with the latter lacking measures
compared to others. Also, S. Saha et al. [37] stated that outliers in trend to evaluate the gap between targets and actual performance. A recent
analysis hinder the ability to produce good predictions. Conversely, J. study conducted by P. D. Hoang et al. [45] to examines ESG performance
Jiang [11] has selected the proximity to target as the best approach to within the global electronics industry using a novel multi-criteria deci­
measure the performance level of indicators against its target as it pro­ sion-making (MCDM) approach based on spherical fuzzy sets to handle
vides a clear assessment of the distance between the indicators’ per­ uncertainty in ESG evaluation. However, its global perspective on
formance and the established target. electronics overlooked the unique regulatory and operational charac­
teristics of the country’s semiconductor industry. Neither of the
3.5. Climate risk assessment in the semiconductors industry mentioned studies aligned with the TCFD recommendations in their
assessment. Moreover, the absence of quantitative assessment was
Climate change is increasingly being seen as the most critical ESG identified in the studies conducted by T. Dai and C. Tang [8] to illustrate
issue by investors in company’s sustainability reports [38]. Yet, its the value of unifying ESG and end-to-end supply chain thinking. A
associated risks are likely to be the least understood [39]. Climate risks similar gap was identified in the Vitrox’s sustainability report 2022 [46]
include risks caused by climate change and those involving responses to in addition to the absence of measuring distance between target and
it. They refer to the potential for negative or positive outcomes for actual performance as in Murata case. Moreover, the study conducted by
human or ecological systems [40]. According to N. Greenwood and P. M. Zieliński and M. Adamska [47] to evaluate the ESG activities
Warren [41] climate risk management is still undefined in the ESG implemented by the power plant and their relation to the standards set
strategies and sustainability agendas. To oversee this, the Taskforce for at the corporation missed the use of quantifiable indicators, with the
Climate-Related Financial Disclosures (TCFD) was launched to results being exclusively relying on the questionnaires filled by workers
encourage “informed, efficient capital allocation decisions” among in­ and trade unions. The subjectivity gap is also seen in the Y. Standford
vestors by climate-related financial disclosures in existing reporting [48] to assess business ‘ESG exposure and performance’, both in terms of
process [39]. In its recommendations, it considered four thematic ru­ rating the impact likelihood of the scored entity on the external envi­
diments which are Governance, Strategy, Risk Management and Metrics ronment and the degree of this impact. The same gap is noticed in in­
and targets. The task force produced four inclusive recommendations, dicators’ scoring. Considering J. B. Wang et al. [49] study, it focused on
one for each of the thematic areas braced by recommended the semiconductor sector and with the exploration of sustainability
climate-related financial disclosures [39]. From a survey conducted by reporting, however it does not encompass a full ESG and climate risk
TCFD in 2018 and 2019, it was found that companies lack quantitative assessment framework, limiting its alignment with holistic ESG objec­
analysis of fiscal impact when implementing TCFD recommendations tives. This in addition to the limited geographic focus. On the other
which disqualify the information given to investors [28]. Searching the hand, the two studies conducted by J. Svanberg et al. [50] to predict

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O.Y. Mohamed and N.F. Jamaludin Sustainable Futures 10 (2025) 101052

governance controversies and to develop a measure of the governance The framework encompassing nine main stages as shown in Fig. 2 will be
component of the environmental, social, governance (ESG) metrics only adopted with the stages interpretation as follows.
emphasized the Governance pillar. In addition, the study conducted by
A. A. Fawole et al. [51] highlights the importance of sustainable man­ 4.1. Semiconductors plant familiarization
agement in mitigating the environmental impacts of electronic waste.
However, it falls short in providing a comprehensive, integrated The framework is developed to offer a quantitative and compre­
approach to ESG and climate risk tailored to industry-specific and hensive ESG assessment that considers climate risk as a major compo­
regional contexts. In summary, the reviewed literature reveals signifi­ nent for the semiconductors industry following the TCFD
cant gaps, including insufficient regional focus, an overreliance on recommendations. The industry’s operation is analyzed to specify its
subjective assessments missing comparative ESG performance assess­ components, operational data and possible ESG impact that will assist in
ments that use quantitative PTT approaches, and limited research on the selection of relevant indicators. The manufacturing process - that is
integrating climate-related financial disclosures (TCFD) with ESG describes in Appendix A- occurs in a cleanroom in which temperature,
frameworks explicitly tailored to the semiconductor industry in barometric pressure and humidity are controlled to avoid contamina­
Malaysia. Thus, this research seeks to address these limitations by tion. It comprises wafer fabrication, wafer probe, assembly (packaging),
developing an integrated evaluation framework tailored for the Malay­ and final testing [20]. The fabrication step often involves hundreds of
sian semiconductor industry. Aligned with TCFD recommendations and processing steps being executed layer by layer onto a bare wafer where
incorporating the Proximity to Target (PTT) approach, it will offer the wafer visits each machine several times. The entire process is
actionable, quantitative insights. This will enhance accountability and composed of a few repeating unit processes: thin film in which the
advance sustainable practices in the sector. crystalline silicon ingot is produced, and the wafers are cut, the elec­
trical circuits are created by photolithography, chemical mechanical
3.7. Core hypothesis rational planarization, diffusion, ion implantation and etching. Appendix 1 gives
an illustration of the process ([53,17]). In terms of the risks associated
Based on the specified gap and guided by the Triple Bottom Line with a semiconductors plant, Villard et al. [54] identified five most
theory, this research assumes that ESG performance, especially gover­ significant environmental risks associated with the full life cycle of the
nance and environmental aspects, are the most critical in sustainability product. These risks are global warming being the first, resource
ranks within the semiconductor sector. As highlighted by J. B. Wang depletion, eutrophication, toxicity, and summer smog. Moreover, Wang
et al. [43], governance aspect in particular, is pivotal in shaping ESG et al. [55] carried one of the initiatives to identify the social impact of
reporting practices. This claim matches with the findings of S. Mondal the semiconductors industry and recognized forced labor, child labor,
and T. N. Sahu [52] that governance aspect has a positive impact on the fair salary, working hours, equal opportunity/discrimination, and
corporate social responsibility (CSR) and firm performance (FP) nexus. health and safety as the main social risks linked to this industry.
Thus, the hypothesis statement of this research is: In the semiconductor Nevertheless, the semiconductors industry holds a great social oppor­
industry’s ESG performance, the governance factors are the most critical tunity. Consumerization of electronics, globalization of markets and the
in ESG performance variation compared to the other factors. human aspiration for a better quality of life open wide prospects that
only semiconductors can realize [56].
4. Methodology
4.2. Scope definition and categorizing climate risks
The framework of an ESG and climate risk assessment for the semi­
conductors industry in Malaysia will be designed referring to the Global It will be carried in two steps. First step is categorizing the climate
Reporting Initiative (GRI) sustainability reporting standards and the related risks for the industry, which is the process for selecting TCFD
TCFD recommendations. All the three ESG aspects will be considered. aligned climate risks indicators as a core part of an organization’s ESG

Fig. 2. Overall framework for the ESG and climate risk assessment.

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O.Y. Mohamed and N.F. Jamaludin Sustainable Futures 10 (2025) 101052

assessment. Guided by HKEX [57], in this study, this process is broken For some of the indicators that need to be quantitatively revealed
into three main stages tailored for the electronic industry. It starts by following the TCFD recommendations, a rating between zero to one will
determining the governance structure wither build in integrated be assigned following the explanation in Appendix D.
approach where sustainability issues are assigned to an existing board or
by dedicating the issues to a dedicated committee. The second stage is 4.6. Setting baseline and targets
identifying climate related risks by reviewing the industry level risks.
The final step is the indicators selection in response to identified risks. In This step is to enable tracking progress over time. The standard
the second step, the indicators for all the three ESG aspects considering values are obtained from relevant authorities such as DOE or the in­
the indicators selected in first step as part of the Environmental aspect dustry target. When standards are unavailable in these two sources, they
will be identified. While acknowledging the possible effect of sovereign are set as the best practice from the industry data. For the benchmark or
ESG factors, this research focuses on developing a corporate-level ESG baseline, it is obtained from what the industry set and in unavailability
evaluation framework tailored to Malaysia’s semiconductor industry. case the poorest reported performance is set instead. Appendix B shows
Incorporating sovereign ESG factors was deemed beyond the current the standard and baseline values set for this study.
research’s scope.
4.7. ESG and climate risk assessment
4.3. Materiality assessment
It is conducted by calculating the index of each ESG aspect then
The framework aims to assess the ESG considering climate risks using generating an overall ESG index score for both case studies using the
an index score. It is composed of four assessment layers that are the following calculation steps:
indicator, parameter, aspect, and index layer. Calculating the index re­
quires the consideration of three aspects that are Environment, Social 4.7.1. Proximity to Target (PTT) approach is applied to normalize the
and Governance. The parameters layer is the division of aspects for the indicators units. Each indicator is categorized into type A or type B,
specific group of evaluation, and the indicators layer contains the where in type A, a high value indicates good performance, and in
components to be measured. The parameters and indicators are set by type B a high value indicates poor performance. All variables are
identifying the ESG material topics to the industry against two condi­ normalized from zero to 100 as in Appendix E, indicating poorest
tions. First is the impact on the company’s value creation and the second performances to best performance. PTT uses Eqs. (1) and (2) to
is the impact on external stakeholders. This will ensure that the right normalize data against the set targets. The term PTTij refers to the
kind and amount of information is disclosed. It is employed by listing normalized value for the jth company and ith indicator, where
indicators based on literature review and global raters reporting and the mij represents the data value for the same. The maximum (max(mij ) )
final list of indicators is based on the data availability in the company’s and minimum (min(mij ) ) values are derived from the dataset of mij ,
sustainability reports. For this study, five parameters for the Environ­
ment aspect have been selected which are boards description of climate establishing the lowest benchmark. Essentially, type A uses the
risks, GHG Emissions, renewable energy consumption, water manage­ minimum value (min(mij ) ) while type B uses the maximum value
ment, and pollution and waste management. These parameters covering (max(mij ) ). The variable(ti ) denotes the standard or target value for
the 6th, 7th, 9th, 11th,12th, 13th, and 17th SDG goals building on the P. the ith indicator.
X. Hoa et al. [58] framework that emphasized the critical role of aligning [( ) )
organizational efforts with global sustainability targets. Three parame­ ti − min(mij ) − (ti − mij ]X 100
ters are considered for social aspects which are diversity and inclusion, PTTij = ( ) (1)
community relations, and health and safety that are directly aligning ti − min(mij )
with the 3rd, 5th, 8th, 10th, and 17th SDG goals. While for the gover­ [( ) )
nance aspect, corporate governance was the considered parameter max(mij ) − ti − (mij − ti ]X 100
aligning with the 16th and 17th SDG goals. The governance and social PTTij = ( ) (2)
aspects are lacking some important indicators highlighted by Mac­ max(mij ) − ti
Naughton and Fery [59] as a critical gaps in social and governance in­
dicators aligned with SDG targets. These indicators are forced labor,
child labor, fair salary and working hours for the social aspect and the 4.7.2. Index calculation using Equations (3) to obtain the parameter
company’s behavior for the governance aspect due to the difficulty in scores Pj,k by total up PTTk(i,j) for the kth parameter in relation to the
accessing them in case study reports. Thus, future studies are recom­ jth semiconductors plant, PTTi,j indicator, divided
mended to cover this limitation. by No. of indicatork , and the kth parameter. To calculate the Param­
eter Aggregation Score, PASj.k for the jth year and kth parameter, Eq.
4.4. Assigning weightages (4) below requires multiplying the value, Pj,k by Weightagek for the
kth parameter.
Weightage is assigned to parameters aligned to identified risks and ∑ PTTi,j
opportunities. This is important to indicate the different impact, rank, Pj,k = (3)
No. of indicatork
and policy reasons relevant to each parameter. Some parameters deserve
greater weightage considering the aspect of interest [60]. In this study, a
PASj.k = Pj,k X Weightagek (4)
similar weightage is assumed for all the parameters. As in Appendix B,
the Environmental, Social and Governance aspects have 5, 3, 1 param­
eter, respectively. By dividing 100 % by 9, each parameter holds 11.11 4.7.3. Ai,j for the jth semiconductor plant, lth aspect, is calculated
% of the weightage as illustrated in Appendix C. based on the Eq. (5) below by averaging the PASj,k . The index score Ij
for the jth semiconductor plant will be calculated using the below Eq.
4.5. Data collection (6), Aj,l for the jth semiconductor production plant, which aggregates
the lth aspect.
Data is collected from the industry documents of the two companies ∑
considered for case study. This step will pave the way for conducting the Ai,j = PASj,k (5)
sustainability performance assessment through the index calculation.

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∑ Table 1
Ij = Aj,l (6)
List of selected parameters and indicators for climate related risks in the semi­
conductors industry.
Parameters Indicators

Following that in this stage, index, aspect, and parameter scores are Boards description of climate Description of identified climate related risks and
risks opportunities
analyzed through a bar chart to show the case-studies’ performance.
GHG emissions scope 1 GHG emissions per unit of product
Subsequently, the reasons for the results will be analyzed. GHG emissions scope 2 GHG emissions per unit of product
Water management Water consumption (m3)
4.8. Framework evaluation Renewable energy Renewable energy Consumption rate
consumption
Pollution and waste Total waste disposed
The established framework will be validated by employing it to two
case studies within the semiconductor industry in Malaysia. The vali­
dation means will imply comparing the results through the two cases, of climate risks, the greenhouse gas (GHG) emissions, water security,
directing on the consistency of trends and insights developed from the pollution and waste, renewable energy consumption.
use of similar indicators. C. A list of parameters and indicators selected to reflect the climate
related risks in ESG assessment following [61] for the semi­
4.9. Reporting and findings communication conductors industry case is shown in Table 1 below.

The ESG index score will be a core part of the sustainability report to 5.2. Index and aspect scores of the semiconductor industries
reflect the company’s performance. Later, findings are communicated,
and actionable recommendations are provided to improve future ESG The sustainability index score, Ij, as calculated using Eq. 6 and out­
and climate risk measures for the Semiconductors industry in Malaysia. lined in Table 2 below, together with the aspect scores, are presented in
the Fig. 3 bar chart for ranking and in-depth analysis.
4.10. Variable definition and measurement In Fig. 3, the index score, Ij, of the two semiconductor companies is
presented considering the three studied years 2020, 2021 and 2022. On
This study encompasses the development of a quantitative ESG and average, Murata has the best index score for all the years compared to
climate-related risk assessment framework for semiconductor industry ViTrox company performance. The year 2020 witnessed the highest
in Malaysia. The dependent variable is defined as the combined ESG index score for all the studied years in which Murata achieved 45.06 %.
index score and the three — Environmental, Social, and Governance — On the other hand, the lowest indicated index score was marked in the
aspects scores derived from the proximity-to-target (PTT) scoring year 2021 by Murata company which is 36.23 %. Further breakdown
method applied across selected ESG indicators. analysis by aspect and parameter to identify the weakness leading to
The independent variables contain the three ESG — Environmental, each company’s performance is shown in Fig. 4 with further discussion.
Social, and Governance— indicators. From Fig. 4 it can be noticed that even though Murata scored 0 % in
To guarantee comparability between the case companies, the control all three years for the Governance aspect, its overall index score has
variables considered: company size (total revenue), and industry topped the ranking compared to ViTrox company. This is attributed to
segment (product type, market served). Setting control variables is the weightage of the Governance aspect which is only one-nineth of the
needed to ensure that differences in ESG performance scores are due to whole score. Moreover, Murata has achieved a higher aspect score for
the ESG and climate-related factors studied, rather than external struc­ the social pillar in all years. For the third pillar, which is the Environ­
tural characteristics of the businesses. Specifically: ment, both companies showed similar performance on average.
Breaking the results at the parameter score will help develop a better
• Company revenue may affect ESG performance, as bigger firms often understanding of the most impacting parameters as in Table 3 and Fig. 5.
have more resources to allocate for sustainability initiatives and
reporting compliance. 5.3. Performance breakdown of each parameter
• Industry segment may impact the environmental footprint and
governance complexity, manipulating the comparative weight of Fig. 5 provides a deeper breakdown of performance across parame­
ESG indicators. ters within each aspect. It can be noticed that the good performance of
Murata’s social aspect is mainly due to its high performance in the di­
By controlling these variables, the framework ensures that the versity and inclusion parameter and the better performance in the health
calculated ESG scores indicate genuine performance differences instead and safety parameter compared to ViTrox performance. Despite Mur­
of company-specific structural advantages or limitations. ata’s weak performance in the community relations parameter, it was
able to compensate through these other factors.
5. Results and discussion In contrast, ViTrox demonstrated better performance in the GHG
emissions parameter across the study period, indicating that the com­
Following the methodology elaborated in the previous section and pany has placed more emphasis on climate-related initiatives. However,
according to the data of both case studies that is elaborated in Appendix ViTrox’s environmental scores were adversely affected by missing data
2. The findings are summarized below. on pollution, waste, and water management for certain years. For
instance, ViTrox did not report water management data for 2020 and
5.1. Categorizing climate risks skipped pollution and waste data in 2022. This highlights the need for
more comprehensive data collection and transparency, as incomplete
A. The governance structure follows the integrated approach as the data can obscure true performance in the environmental aspect. Mur­
management of climate related issues is part of the existing board ata’s environmental performance was relatively stable, though it also
job. experienced fluctuations, particularly in water management and pollu­
B. Climate related risks of the semiconductors industry are identified by tion control. Notably, ViTrox outperformed Murata in water manage­
industry review and companies’ publications review. The critical ment during all years when data was available.
Environmental climate related risks identified are Boards description For the governance aspect, Murata recorded a 0 % score for the

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O.Y. Mohamed and N.F. Jamaludin Sustainable Futures 10 (2025) 101052

Table 2
Aspect score and index value.
ViTrox Murata

2020 2021 2022 2020 2021 2022

Aspect Score Environmental (Climate related risks) 24.1 21.5 17.2 22.8 14.6 21.2
Social 7.3 17.0 13.7 22.2 21.6 21.1
Governance 7.5 3.9 5.7 0.0 0.0 0.0
Index score 39.02 42.42 36.60 45.06 36.23 42.22

Fig. 3. Sustainability index score for ViTrox and Murata companies in the studied years.

aspect parameters due to missing data in other sub-parameters, Mean­ businesses. For example, Taiwan Semiconductor Manufacturing Com­
while, ViTrox exhibited a fluctuating governance performance, with pany (TSMC) reports a high S&P Global ESG Score of 85/100 indicating
corporate governance parameters scores ranging from 35.12 % to 67.9 its strong sustainability practices and comprehensive disclosures. In
%. contrast, Semiconductor Manufacturing International Corporation
(SMIC) reports a higher ESG risk rating of 36.1 via Sustainalytics,
placing it in the "High Risk" category. These comparisons show that
5.4. Analysis of pandemic impact on ESG performance
while Malaysian semiconductor corporates like Murata and ViTrox are
making improvements in ESG performance, there is room for enhance­
The year 2020 stands out due to the influence of the COVID-19
ment, specifically in governance disclosures and thorough environ­
pandemic. Both companies experienced heightened environmental
mental reporting. Aligning with global best practices and expanding
scores, which can be attributed to the reduced industrial activity during
transparency can boost their ESG standings on the international stage. It
the lockdown period, as the shutdowns led to lower emissions and
is essential to note that these global ESG evaluations often rely on
reduced waste generation. This trend was observed globally across in­
exclusive scoring methodologies and bigger indicator sets that may
dustries, which suggests that the environmental improvements seen in
differ from those employed in this study. However, the emphasis on
that year were more a reflection of external circumstances than a direct
governance transparency, environmental disclosure inclusiveness, and
result of long-term ESG strategies. Similarly, in the social aspect, both
social inclusion stays unswerving across methodologies. Thus, while
companies experienced disruptions, particularly in the community re­
direct numerical comparisons are not possible due to variances in rating
lations parameter, that reached its lowest score during the lockdown
criteria and weighting schemes, the thematic verdicts — such as the
period.
importance of governance disclosure and inclusiveness of environ­
This pandemic-induced anomaly underscores the importance of
mental data — display convergence with global assessments. This sup­
distinguishing between temporary improvements in sustainability per­
ports the legitimacy of the core ESG dimensions used in this study, and
formance due to external factors and long-term sustainable practices. It
highlights aspects (like governance) where Malaysian companies may
also highlights the need for continuous ESG efforts that are resilient to
ally further with global standards.
external shocks such as pandemics or economic downturns.

6. Conclusion
5.5. International comparison and methodological considerations
This study profiles an integrated framework for ESG and climate risk
Although this research applies a tailored ESG framework based on assessment tailored to the characteristics of the semiconductors industry
the proximity-to-target (PTT) approach using chosen indicators that in Malaysia. The TCFD recommendations are followed in the framework
align with GRI and TCFD, the general ESG performance results can be to align with Bursa Malaysia requirements. Moreover, a performance
contextualized against international benchmarks for semiconductor

7
O.Y. Mohamed and N.F. Jamaludin Sustainable Futures 10 (2025) 101052

Fig. 4. Aspect score for ViTrox and Murata companies for the years (a) 2020, (b) 2021, and (c) 2022.

Table 3
Parameter score, parameter aggregation score, and weightage value.
Parameter Parameter score (Pj,k) Weightage Parameter aggregation score (PASj,k)

ViTrox Murata ViTrox Murata

2020 2021 2022 2020 2021 2022 2020 2021 2022 2020 2021 2022

Boards description of climate risks 0.00 0.00 33.33 0.00 0.00 0.00 11.11 0.00 0.00 3.70 0.00 0.00 0.00
GHG Emissions 96.15 100.0 97.66 13.97 0.00 9.48 11.11 10.7 11.11 10.85 1.55 0.00 1.05
Renewable energy consumption 21.05 3.51 0.00 27.19 78.95 100.0 11.11 2.34 0.39 0.00 3.02 8.77 11.11
Water management 0.00 42.65 23.65 100.0 33.31 20.68 11.11 0.000 4.739 2.628 11.111 3.701 2.298
Pollution and waste 100.0 47.63 0.00 64.33 19.09 60.32 11.11 11.111 5.292 0.000 7.148 2.121 6.702
Diversity and inclusion 0.00 0.56 7.82 100.0 97.77 85.47 11.11 0.00 0.06 0.87 11.11 10.86 9.50
Health and safety 0.00 52.30 23.50 100.0 96.72 97.02 11.11 0.00 5.81 2.61 11.11 10.75 10.78
Community relations 66.05 100.0 92.37 0.00 0.24 6.99 11.11 7.34 11.11 10.26 0.00 0.03 0.78
Corporate governance 67.90 35.12 51.02 0.00 0.00 0.00 11.11 7.55 3.90 5.67 0.00 0.00 0.00

portfolio is established to bridge the subjectivity gap in sustainability in overall sustainability index score, which is attributed to the weightage
reports using the PTT approach. This approach was selected to assigned to the considered parameters. Although ViTrox has achieved
normalize the indicators units favoring the other approaches in governance highest scores in all studied period, its impact on the index
providing a direct link between the evaluation results and the desired score results was negligible due to the aspect’s lower weight compared
outcomes. Applying the framework on data from Murata Manufacturing to the environmental and social aspects.
Co., Ltd. and ViTrox Corporation Bhd. for the years 2020–2022 has
shown the framework applicability. Murata has topped ViTrox company

8
O.Y. Mohamed and N.F. Jamaludin Sustainable Futures 10 (2025) 101052

Fig. 5. Parameters Aggregation Score.

• Practical and Policy Implications: The developed framework of­ order to generate sentences in some parts of the manuscript. After using
fers a practical tool for semiconductor companies in Malaysia to scale this tool/service, the author(s) reviewed and edited the content as
and improve their ESG performance, principally in preparation for needed and take(s) full responsibility for the content of the publication.
the mandatory climate disclosures commanded by Bursa Malaysia
from 2025. For practitioners, it presents a pathway to quantify and CRediT authorship contribution statement
trace ESG progress over time. For policymakers, this framework can
act as a foundational template for developing industry specific ESG Ola Y. Mohamed: Methodology, Data curation, Writing – original
disclosure strategy. It also stresses the critical need for balanced draft, Formal analysis. Nabila F. Jamaludin: Supervision, Writing –
metric weighting in addition to enhancing data transparency and review & editing.
completeness, which is essential for achieving more accurate and
actionable assessments. Declaration of competing interest
• Recommendations for Future Studies: Future research can expand
this framework through the inclusion of expert-driven materiality The authors declare the following financial interests/personal re­
assessments, that will improve the weighting accuracy, making it lationships which may be considered as potential competing interests:
more relevant to industry realities. Moreover, considering the factors Nabila Farhana binti Jamaludin reports financial support was provided
of Malaysian ESG initiatives on semiconductors firms ESG perfor­ by Universiti Teknologi PETRONAS Department of Chemical Engineer­
mance can give more accurate results. Additionally, it is recom­ ing. Nabila Farhana binti Jamaludin reports financial support was pro­
mended to incorporate machine learning or AI-driven analytics that vided by The Murata Science Foundation Grant. Nabila Farhana binti
can improve the framework’s predictive potentials and adaptability Jamaludin reports a relationship with Universiti Teknologi PETRONAS
across industries beyond semiconductors. Department of Chemical Engineering that includes: employment. Nabila
Farhana binti Jamaludin reports a relationship with The Murata Science
Statements and declarations Foundation Grant that includes: funding grants. If there are other au­
thors, they declare that they have no known competing financial in­
“This work was supported by Universiti Teknologi PETRONAS and terests or personal relationships that could have appeared to influence
The Murata Science Foundation Grant, 015ME0–346. Author A.B. has the work reported in this paper.
received research support from The Murata Science Foundation Grant.”
Acknowledgements
Data availability
This work was supported by Universiti Teknologi PETRONAS and
The datasets analyzed during the current study are available in the The Murata Science Foundation Grant, 015ME0–346. This assistance
following links: [Link] has been instrumental in the successful completion of our work, and we
[Link] sincerely appreciate the contribution to our research endeavors.

Declaration

During the preparation of this work the author(s) used CHATGPT in

9
O.Y. Mohamed and N.F. Jamaludin Sustainable Futures 10 (2025) 101052

Appendices

Appendix A. Semiconductors manufacturing process.

10
 O.Y. Mohamed and N.F. Jamaludin
Appendix B
Collected semiconductors industry data and standard values.
Aspect Parameter Indicator Unit Standard Standard Low Benchmark Company data per unit sales (per 1 Mil USD)
Value
Type Value ViTrox Murata
(A/B)
2020 2021 2022 2020 2021 2022

Sustainability Environment GHG Emissions GHG Emission Scope 1 t-CO2e 0.062 BP B 20.677 0.11 0.06 0.08 18.71 20.68 19.76
Index for GHG Emission Scope 2 t-CO2e 21.227 BP B 90.662 26.41 21.23 24.43 77.88 90.66 80.60
Semiconductors Boards description of Description of identified climate NA 1.000 BP A 0.250 ​ ​ 0.50 ​ ​ ​
industry climate risks related risks and opportunities
Renewable energy Renewable energy Consumption rate % 23.70 BP A 12.30 14.70 12.70 12.30 15.40 21.30 23.70
Consumption
Water Management Volume of Water consumed 1000 m3 0.155 BP B 0.280 0.28 0.23 0.25 0.15 0.24 0.25
Pollution and Waste Total waste disposed t 0.001 BP B 0.432 0.00 0.23 0.43 0.15 0.35 0.17
Social Diversity and inclusion Percentage of women inclusion % 47.80 BP A 29.90 29.90 30.00 31.30 47.80 47.40 45.20
Health and Safety Number of incidents resulting in lost cases 0.003 BP B 0.040 0.040 0.021 0.032 0.003 0.004 0.004
time
Community relations Total donations Million 0.0029 BP A 0.0001 0.0019 0.0029 0.0026 0.0001 0.0001 0.0003
11

USD
Governance Corporate governance R&D expenditures Million 0.1061 BP A 0.0860 0.1061 0.0860 0.0900 ​ ​ ​
USD
Board’s oversight on climate related NA 1.0000 BP A 0.2500 ​ ​ 0.5000 ​ ​ ​
risks and opportunities
Women in top management % 26.32 BP A 0.90 10.00 18.75 26.32 ​ ​ 0.90

Sustainable Futures 10 (2025) 101052

O.Y. Mohamed and N.F. Jamaludin Sustainable Futures 10 (2025) 101052

Appendix C. Summary of parameter weightage distribution.

Appendix D
Rating denotation of TCFD recommended disclosures.

Rating Denotation

0.00 The indictor is not mentioned in sustainability report

0.25 The indictor is mentioned in sustainability report without degree of specification set by TCFD
0.50 The indicator is mentioned according to TCFD recommendation without quantitative measurement
1.00 The indicator is mentioned according to TCFD recommendation and measured quantitatively

Appendix E
The normalization results based on the PTT method.

Aspect Parameter Indicator (i) PTT

ViTrox Murata

2020 2021 2022 2020 2021 2022

Sustainability Index for Environment Climate Change GHG Emission Scope 1 99.8 100.0 99.9 9.5 0.0 4.5
Semiconductors industry GHG Emission Scope 2 92.5 100.0 95.4 18.4 0.0 14.5
Description of identified climate related ​ ​ 33.3 ​ ​ ​
risks and opportunities
Renewable energy Consumption rate 21.1 3.5 0.0 27.2 78.9 100.0
Water Volume of Water consumed 0.0 42.7 23.7 100.0 33.3 20.7
Management
Pollution and Total waste disposed 100.0 47.6 0.0 64.3 19.1 60.3
Waste
Social Diversity and Percentage of women inclusion 0.0 0.6 7.8 100.0 97.8 85.5
inclusion
Health and Safety Number of incidents resulting in lost time 0.0 52.3 23.5 100.0 96.7 97.0
Community Total donations 66.0 100.0 92.4 0.0 0.2 7.0
relations
Governance Corporate R&D expenditures 100.0 0.0 19.7 ​ ​ ​
governance Board’s oversight on climate related risks ​ ​ 33.3 ​ ​ ​
and opportunities
Women in top management 35.8 70.2 100.0 ​ ​ 0.0

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