Implementing Malaysia’s National Action Plan on Business and Human Rights (NAPBHR)

The International Court of Justice’s (ICJ) July 2025 advisory opinion marks a global legal landmark, affirming that climate change is an existential threat requiring binding international obligations for all nations. This ruling elevates the 1.5°C Paris Agreement goal to a legal benchmark and establishes that duties to prevent, mitigate, and remedy climate harms arise not only from treaties like this agreement but also from customary international law.

Interest in enforcing these obligations was reignited at COP30, where the call for full compliance with the ICJ climate ruling was a key demand from states and civil society. Additionally, the Belém Action Mechanism, launched at COP30, highlighted the crucial work needed to promote human rights, just transition, inclusion, and participation in climate action—reinforcing the idea that effective and fair climate solutions must be rooted in rights and equity.

Coinciding with this development, Malaysia launched its inaugural National Action Plan on Business and Human Rights (NAPBHR) 2025-2030 in August 2025 under the Legal Affairs Division of the Prime Minister’s Department, providing a framework and governance tool that complements these global obligations by guiding businesses on climate and human rights duties. This blog will share how businesses in Malaysia can put the NAPBHR into action in corporate strategy and risk management, in meeting both global and domestic expectations.

As a United Nations (UN) member state, we are automatically a party to the ICJ Statute, the UN's principal judicial organ. This legally obliges Malaysia to respect ICJ rulings and to adhere to stricter climate and environmental standards. It has significant implications for businesses, amid growing investor pressure for more disclosure.

Implications for Malaysia

Malaysia has integrated human rights considerations into its climate strategies and is progressing with its Nationally Determined Contributions (NDCs). The October 2025 NDC 3.0 target peaks emissions by 2030 and a reduction of 15-30 million tonnes of CO₂ by 2035, while safeguarding environmental and human rights protections. Key mitigation efforts supporting these objectives include expanding renewable energy capacity, enhancing energy efficiency, and encouraging sustainable land use practices.

As a dualist system, Malaysia will strengthen its climate commitments by formally incorporating these international agreements into national law, making them legally binding, enabling civil society and the courts to support more robust climate action and mitigate legal and reputational risks.

ICJ decisions in contentious cases are legally binding between nations, but they depend on inter-governmental cooperation for enforcement. Advisory opinions, including those on climate change like this ruling, have significant moral and legal influence, shaping international norms and national policies, despite lacking direct enforcement. Regardless of treaty ratification, all countries have a duty under customary international law to reduce emissions, prevent environmental harm, and protect climate-related human rights, as the ICJ ruling raises climate obligations to a global legal standard that cannot be avoided by non-membership or withdrawal from treaties. This expands accountability and strengthens the legal basis for global climate action.

Momentum created by the ICJ ruling

By affirming obligations from customary law beyond treaties, the 2025 ICJ ruling reinforces Malaysia’s responsibility to regulate corporate climate impacts, protect rights, and support vulnerable communities. Such legal clarity encourages both the government and business sectors to embed human rights and environmental standards into their laws and practices, positioning Malaysia’s NAPBHR as a vital framework for climate justice and sustainable development.

Malaysia already actively aligns itself with regional and global frameworks supporting sustainable development, human rights, and climate commitments. It participates in the ASEAN Climate Change Initiative and follows the UN Principles on Business and Human Rights, fostering regional cooperation and corporate accountability. Recent trade agreements with the US, EU, and Japan cover sustainable development and environmental protections, further encouraging Malaysian industries to boost sustainability practices and align with international climate justice.

Malaysia’s NAPBHR: Why implementation is even more critical post-ICJ ruling

The NAPBHR creates a framework to embed human rights into governance, labour, environment, and community rights. It aims to strengthen legal protections, boost corporate accountability, and provide remedies for human rights breaches. Key areas include:

• Governance: Align laws with international standards, set up oversight bodies, improve transparency and anti-corruption measures, consider new laws like a Supply Chain Act. 
• Labour: Eliminate unethical labour practices, improve protections and social security for migrants and gig workers, promote fair recruitment, union rights, gender equality, and implement minimum wages and living wages based on International Labour Organization (ILO) guidelines, along with family-friendly policies. 
• Environment: Protect environmental rights, strengthen constitutional safeguards, enforce climate commitments, combat greenwashing, and support indigenous and community rights via free, prior and informed consent (FPIC). Support societies adversely affected by environmental degradation and protect environmental defenders. 
• Access to remedy: Create tribunals, legal aid, robust grievance mechanisms, and Anti-SLAPP (Strategic Litigation Against Public Participation) laws to improve justice and protect vulnerable groups.

Strategic opportunity for businesses

The NAPBHR functions as a strategic guide that helps businesses to:

• Manage risks: Anticipate and minimise legal, operational, reputational and climate-related risks, around human rights and environmental issues that have been amplified by the ICJ ruling. 
• Enhance competitiveness and ensure compliance: Stay aligned with evolving global sustainability standards like the Corporate Sustainability Reporting Directive (CSRD). Improve access to funding and markets and build stakeholder trust by fulfilling regulatory requirements like the US Customs and Border Protection (CBP)’s Withhold Release Order—which previously withheld shipments over human rights concerns. 
• Foster sustainability: Embed human rights and environmental due diligence (HREDD) into operations to identify potential risks, challenges, boost resilience, and support ethical supply chains. This would include the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), which applies to relevant companies and their suppliers within the supply chain.

Implementing the NAPBHR in corporate strategy and risk management

These recommendations offer strategic ways to embed the NAPBHR into corporate strategy, enhancing resilience, compliance, and sustainable value for businesses:

a) Expand and integrate risk management frameworks

• Business leaders and investors should integrate climate and human rights risks into their risk management frameworks. Recognising the value-at-risk posed by environmental and social factors, including impacts on risks that are closely linked to health, livelihoods, and human rights, is essential for effective oversight. 
• Incorporating monitoring of social risks into existing risk registers facilitates early detection and mitigation, protecting financial performance and trust. This enhances resilience, safeguards shareholder value, and proactively prepares for regulatory, supply chain, and market changes driven by environmental and social issues. 
• Including the evaluation of risks related to international trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), which impose human rights and supply chain standards, should be part of comprehensive risk assessments. 
• Organisations should integrate the monitoring of sustainability risks into their existing risk management processes to identify, assess, measure, and report risks consistently across the organisation. Reporting on how organisations monitor sustainability risks in this manner supports the disclosure requirements of the IFRS S1 and S2, which aims to promote transparency and enhance stakeholder trust. 
• Using tools such as scenario analysis, human rights impact assessments, and digital analytics can facilitate dynamic risk identification and mitigation, enabling companies to better predict, prevent, and respond proactively to emerging risks. This approach leverages enhanced data capabilities and prepares organisations for the evolving regulatory landscape, reinforcing a holistic and resilient risk management strategy.

b) Embed environmental and social rights into business models and establish robust impact measurement

• Beyond risk management, businesses should integrate environmental and social rights, including the right to a clean environment outlined by the ICJ and the NAPBHR, into their core strategies. This alignment improves compliance, builds credibility, and fosters trust among ESG-focused stakeholders. 
• Incorporating decarbonisation and sustainability commitments into business models strategically positions companies for evolving legal and societal expectations, helping them stay ahead of regulatory and market demands. 
• Using impact measurement frameworks, such as Social Return on Investment (SROI), enables businesses and investors to assess, quantify, and transparently communicate their social, environmental, and financial impacts. 
• Demonstrating clear societal benefits strengthens stakeholder relations, enhances reputation, and facilitates access to innovative funding mechanisms like impact investing and blended finance.

c) Enhance corporate due diligence and transparency

• HREDD needs to be accelerated throughout supply chains to effectively identify, prevent, and mitigate adverse impacts. 
• Companies should also align their sustainability reports with internationally recognised standards, such as the IFRS’ S1 and S2, the Global Reporting Initiative (GRI), and sector-specific frameworks that offer tailored guidance based on industry risks and impacts. Examples include the Sustainability Accounting Standards Board (SASB), which provides industry-specific disclosure standards covering sectors from agriculture and apparel to technology and manufacturing; the Fairtrade Standard for ethical practices in agriculture and plantations; the Responsible Business Alliance (RBA) Code of Conduct for electronics manufacturing; and the Fair Wear Foundation (FWF) for the apparel and textile sectors. 
• Transparent reporting on climate, human rights, and social impacts meets rising regulatory and investor expectations and reduces capital costs by lowering perceived risks. 
• The National Sustainability Reporting Framework (NSRF) assists Malaysian companies in applying global standards consistently. It aligns with ISSB’s core disclosure requirements and GRI’s impact reporting approach, enabling credible reporting on risks, opportunities, and human rights. 
• For investors, credible disclosures are vital for sustainable investments and resilient portfolios.

d) Embed human rights and the social (S) pillar at the core of business strategy

• Businesses play a vital role in the S in ESG, connecting climate action and human rights beyond corporate social responsibility. They must ensure fair wages, manage labour impacts from decarbonisation, address community effects, and prioritise worker health and safety. Assessing equity risks throughout supply chains helps prevent disruptions, protect reputation, and generate long-term value. 
• The NAPBHR emphasises labour rights and includes targeted actions to promote equitable access to living wages for vulnerable workers. These aim to address barriers related to fair employment, non-discriminatory career progression, and work benefits through stakeholder engagement and collaboration with relevant partners. 
• The Belém Action Mechanism, launched at COP30 provides Malaysia¹ with an international platform to promote just transition, aligning strategies with its focus on fairness and inclusion, advancing social equity alongside environmental goals, and strengthening Malaysia’s leadership in a low-carbon, rights-based transition.

From policy to practice: Future-proofing Malaysian businesses

The 2025 ICJ ruling establishes climate governance as a legal obligation, while Malaysia’s NAPBHR provides a framework for businesses to meet both global and domestic expectations. By integrating human rights into strategy, risk management, and disclosures aligned with ICJ and NSRF standards, leaders can turn compliance into a competitive edge for sustainable growth, risk mitigation, and future-proofing. Transparent reporting and robust risk integration enhance investor confidence and resilience. Together, the ICJ ruling, the NAPBHR, and the NSRF create a strong roadmap connecting law, policy, and corporate strategy, ensuring Malaysia’s legal and corporate landscape remain resilient and adaptable to future climate and human rights challenges.