SUSTAINABILITY STATEMENT

Coastal Contracts Bhd. (“Coastal”) is pleased to present its Sustainability Statement which covers its corporate office, shipyards and business operations. This report has been prepared in accordance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”). The contents of this statement and the identified material economic, environmental and social risks were identified by referring to the Sustainability Reporting Guide issued by Bursa Malaysia.

GOVERNANCE STRUCTURE

The Board of Directors oversees the development of the sustainability performance of the organisation. The senior management and Heads of divisions will give recommendations and convey the material matters identified to the Board. The Board is kept informed and regularly updated on the progress of sustainability matters and any issues arising therefrom.

KEY SUSTAINABILITY MATTERS

The materiality assessment was conducted by taking into consideration the view and responses from the Group’s stakeholders on significant economic, environment and social risks and opportunities which are crucial for the success and continued growth of the Group. The key sustainability matters identified are discussed below.

ECONOMIC

Procurement

As a key consideration to conducting a sustainable business, a proper management of the Group’s procurement practice is required. In order to support domestic economy, the Group’s local Purchasing team sources significant portion of products and services for its business from local domestic suppliers. Should the local domestic suppliers be unable to provide such products or services, the team shall then source from international suppliers.

The Group’s local shipyards maintain an appropriate Procurement Policy to ensure that the procured products and services are fit for purpose and represent value for money. The Procurement Policy ensures a standard of ethical conducts with fair assessment of quotations or proposals submitted by vendors. During the financial period, the proportion of spending on local suppliers for Coastal’s Malaysian business operation is approximately 58%.

Whistleblowing Policies and Procedures

Coastal maintains Whistleblowing Policies and Procedures which provide a platform for all employees to disclose any improper conduct which affect the Group. Any Director, officer or employee of the Group can report any improper conduct by writing to the Audit Committee Chairman, Mr. Jacob O Pang Su Yin at jacob.pang@coastalcontracts.com. Alternatively, should there be any report of improper conduct to be made against the Audit Committee Chairman, the report can be channelled to the Executive Chairman, Mr. Ng Chin Heng at ncheng@coastalcontracts.com.

 Anti-Bribery and Corruption Policy

Coastal has established an Anti-Bribery and Corruption Policy (“ABC Policy”) to set out the Group’s zero-tolerance approach against all forms of corruption and bribery. The Group is committed to conducting its business activities in an ethical and transparent manner, as well as to acting professionally and integrity in all business dealings and relationships.

Any Director, officer or employee of the Group who has any concern about suspected contravention of the ABC Policy, is encouraged to report the violations as per the procedures as provided under the Group’s Whistleblowing Policies and Procedures.

During the financial period, the common indicators were reported as follows :

Code of Conduct

The Group maintains a Code of Conduct for all its employees to preserve business integrity and accountability. The Code of Conduct lists out the Group’s expectations of its employees, outlining acceptable behaviour throughout the organisation during the tenure of their employment. To ensure that the entire workforce is aware of this code, all new employees are presented with the Employees Handbook on joining the Group.

ENVIRONMENTAL

Sustainable Business Operations
Greenhouse Gas (GHG) Inventory

In preparation to meet the latest Bursa Malaysia Sustainability Reporting Guidelines, the Group is currently conducting a GHG inventory exercise for all operations under the Group’s operational control. The exercise covers the Group’s Scope 1, Scope 2, and Scope 3 Category 6 and 7 emissions, and is conducted based on the internationally recognised GHG Protocol Corporate Accounting and Reporting Standard (GHG Protocol). As the Group is still in the midst of undergoing this exercise, the Group’s GHG emissions will be reported on in the next upcoming financial year (FY2024).

Gas Processing Division
Jack-Up Gas Compression Service Unit

The Jack-Up Gas Compression Service Unit (“JUGCSU”) is operated at the Cantarell field, Gulf of Mexico, which is one of the largest oil fields in the world. JUGCSU uses state-of-the-art turbo compressors to compress natural gas, which is either transported to other processing centres or re-injected into mature fields for enhancement in oil recovery. The compressed gas is commercialised as an alternative useful energy source instead of the traditional method of flaring from which the noxious emissions contribute to environmental pollution.

In addition, the design of the gas compressors is optimised in order to achieve the most desirable energy efficient performance for daily compression needs. The Group frequently assesses the need to change components and parts of the equipment during the operation regime in order to reduce the carbon released to the environment.

Onshore Gas Conditioning Plants

As the world prepares and transitions itself towards Net Zero Carbon goal by 2050, natural gas being the cleanest burning fossil fuel available and more environmentally friendly shall play an important role during the energy transition period.

With the recent significant discovery of gas at the Ixachi field at Veracruz, Mexico, associated gas extracted with its high content of hydrogen sulfide, water and heavy hydrocarbons, would need to undergo a sweetening process in order to be ready for the market. Hence the erection and operation, on a joint venture basis, the Group’s first onshore gas conditioning plant, known as the Perdiz Plant.

The Group’s second onshore gas conditioning plant, EMC Papan Plant has commenced its commercial operations in February 2023.  This gas conditioning plant with a larger capacity compared to the Perdiz with extra gas processing features including the production of sweetened gas and recovery of liquefied petroleum gas and oil condensate. Both the EMC Papan Plant and Perdiz Plant will play a strategically important role for Ixachi field in the aspects of energy savings and Co2 reduction, as well as supply sustainable, affordable and accessible energy to everyone in Mexico.

Vessel Chartering Division

Offshore Vessels

International Maritime Organization (IMO) is a global standard-setting authority that is responsible to enhance safety, security and environmental performance of international shipping. As climate change becomes a more recognised global environmental issue, the implementation of new regulation, known as IMO 2020, aimed at cleaning up shipping emissions with the setting of a new limit on the sulphur content in ship’s fuel oil in order to reduce greenhouse gas emissions.

In line with such drive and effort by the IMO, the Group is committed to ensuring all offshore vessels in operation are using low sulphur fuels as well as source from suppliers’ fuel-efficient marine engines that comply with the nitrogen oxide emission level requirements set by the governing IMO. The Group also maintains vessels periodic inspection with conducting various Aspect and Impact assessment on the offshore vessels in operation to avoid possible cause of pollution.

In complying with IMO regulations, our offshore vessels must possess the required certification of International Air Pollution Prevention (IAPP) and Engine International Air Pollution Prevention (EIAPP) to safeguard the environment. Likewise, all offshore vessels also possess the International Energy Efficiency Certificates (IEEC) which complies to the minimum requirement set by the convention.

Under CSR-conscious industrial practices, the Group has actively reduced its environmental footprint by using non-toxic and non-polluting tin-free antifouling paints in the coating of ship hulls. Onboard, our manned ships are equipped with energy-efficient bulbs and sewerage treatment systems which cut down effluent discharge into waterways and the sea, as well as refrigeration systems with more eco-friendly refrigerants that sharply reduce emissions of ozone-depleting substances and greenhouse gas into the atmosphere. With the exception of certain vanes, joints and insulations, we do not use asbestos as this is known to cause very serious, often life-threatening illnesses such as mesothelioma and lung cancer.

Liftboat

The Liftboat is a self-propelled, multi-functional, self-elevating platform-based vessel with a large open deck suitable for carrying equipment, materials, supplies to support various offshore oil and gas installation and maintenance. It is efficiently designed to optimise space and weight in which the energy can be used optimally in all operations on board.

In addition, the liftboat is able to accommodate up to 150 personnel thus reducing the need for the operation of additional platforms or accommodation vessels. Being self-propelled, it offers greater flexibility allowing the liftboat to move from one location to the other within a specific zone without the need for tugs, reducing the greenhouse gas emissions to the environment that would have been produced from the use of additional vessels.

Apart from its service capabilities related to the offshore oil and gas industry activities, liftboats are also an alternative solution in the support of offshore wind farm installation and maintenance works. Considering the offshore wind is one of renewable and infinite energy source in the world, it becomes an important role in our future electricity generation in order to tackle climate change and global warming.

The liftboats are increasingly being recognised as more flexible and cost-efficient options in the market with its diverse range of advantages. In view of the above, the Group has been actively looking for offshore windfarm maintenance projects to expand its business areas.

Energy Efficient Practices in Office

The Group recognises that reducing environmental impact will not only lessen our unnecessary costs, but will also decrease additional carbon in the environment. Our employees are reminded to switch off all printers and lights when not in use. The same policy extends to the pantry, reception area and meeting rooms. Employees also encouraged to print documents only when necessary to not only reduce paper wastage but also reduce energy costs and increase the lifespan of printers. All emails from the Company contain the footnote, “Please consider the environment before printing this email”. During the financial period, the total energy consumption is 27,296.9 MWh.

Water

While many parts of the world are facing water scarcity, Coastal encourages its employees to conserve water usage by taking simple actions such as turning off the water tap while washing dishes in pantry or when applying soap while washing hands, fixing leaking taps or pipes immediately and other related water conservation steps. During the financial period, the total volume of water used is 24.2 megalitres.

SOCIAL

Employees Development

Coastal acknowledges the importance of training in ensuring that employees can do their jobs correctly and efficiently. Training is also important to keep employees up-to-date with the latest trends and best practices for their roles. During the financial period, the total hours of training by employee categories are as follows :

Employee Benefits and Retention

In order to mitigate high employee turnover, the Group provides a competitive compensation and benefits packages to its employees, which are aligned with industry practices. The Group also provides training, personal development and a healthy workplace environment. During the financial period, there were no employees that are contractors or temporary staff and the total number of employees turnover by employee categories are as follows :

Diversity and Equal Employment Opportunities

Recognising that our people are the lifeblood and core to the success of Coastal Group, we are resolute in creating a conducive environment, by introducing educational and self-development programmes thus enriching our personnel with career development prospects. It is the policy of the Group to provide equal employment opportunities for all qualified persons regardless of race, religion, sex, age, nationality, veteran status and disability. This policy applies to recruitment, placement, promotion, training, transfer, retention, salary rate and other terms and conditions of employment.

The common indicators for diversity are as follows:

Human Rights

The employers at Coastal recognises the human rights of each of its employees regardless of race, sex, nationality, ethnicity, language, religion, or any other status, which are based on important principles such as dignity, fairness, respect and equality. Coastal shall not tolerate, engage in or support human trafficking, forced labour or child labour of any kind in its business activities. During the financial period, there were no substantiated complaints concerning human rights violations received or reported.

Data privacy and security

During the financial period, there were no substantiated complaints concerning breaches of customer privacy and losses of customer data reported.

Safety and Health in workplace

Coastal Group recognises the importance of safety and health in workplace which are essential to the well-being of the employees and employer. In order to reduce employee illnesses and injuries in workplace, Coastal has provided employees with a safe and healthy environment. During the financial period, the followings were recorded :

Safety Measures to the Covid-19 Pandemic

To mitigate the impact of Covid-19 pandemic in the workplace environment, Coastal Group has implemented a set of standard operating procedures which are aligned to the government guidelines. The Group is committed to encourage the practice of good personal hygiene and maintain social distancing, which is in line with the new normal concept of 3W (wash, wear and warn) and 3C (crowded places, confined space and close conversation) in order to promote health awareness among employees upon their return to the workplace.

The Group strives to maintain a safe and healthy working environment by implementing various preventive measures such as distribution of personal protective equipment including face masks, availability of hand sanitizers placed at strategic locations, printable posters regarding Covid-19 adhered at bulletin boards, routine disinfection and cleaning activities within the office premises.

Local Community

Coastal Group fully subscribes to the concept of giving back to the community and remains active in providing financial assistance towards worthy causes such as schools, sport and leisure bodies as well as the community and other charitable organisations in support of education, children and youth development.

During the financial period, Coastal Group made monetary donations to:

The above monetary donations are expected to benefit approximately 2,900 communities. Coastal Group will continuously adhere to its principle of performing social responsibility and contribute to the local community with concrete action by taking part in campaigns such as public charity and educational support.

Coastal Group has and will continue to operate in accordance with business practices of the highest standard so as to discharge its responsibilities to its shareholders while playing a meaningful role in the economic, environment and social risks and opportunities.

Program of Support to the Community and the Environment (“PACMA”)

PACMA is an initiative by Petróleos Mexicanos (“PEMEX”) the Mexican national oil company, to discharge its corporate social responsibility. It is designed to promote sustainable development and strengthen relations between the communities and oil and gas companies. Coastal Group, as a PEMEX contractor, we are responsible to provide financial contribution to PACMA and work alongside our strategic partner, PEMEX in order to give back to the communities located in areas where we operate.

The objective of PACMA is create a group of projects, works or actions, which contribute to obtain and extend the Social License to Operate, fostering human development, generating productive capacities and forging long-term sustainable development projects. PACMA offers support in seven basic areas such as health, safety, infrastructure, equity, environmental protection, education and productive projects.

Through the implementation of PACMA projects, it will build a climate of cooperation and mutual understanding with residents, authorities, institutions and organisations within the areas of influences of PEMEX. In addition, it allows for harnessing the potential of the oil and gas industry to facilitate social development as well as avoiding effects that could conflict with environmental stakeholders.

As part of PACMA, Coastal’s joint venture company, Coastoil Dynamic SA De CV made the following donations during the financial period :

MXN1 equivalent to approximately RM0.2474

OUR SUSTAINABILITY GOALS

Year 2022: Setting Decarbonisation Plan

Since its establishment in 1976, the Coastal Group has not stopped in transforming itself towards its sustainability goals.  Over the last few decades, Coastal Group has transformed itself from a marine transportation company to a shipbuilder for marine transportation vessels, and thereafter diversified further into “build-then-sell” of Offshore Support Vessels (“OSVs”). As of to date, the Group has successfully transformed itself into an energy infrastructure company.

In order to be aligned with Goal 7 (Affordable and Clean Energy) and Goal 13 (Climate Action) of the United Nations Sustainable Development Goals, the Group’s focus shall be on the investments into cleaner energy infrastructure projects, such as natural gas related infrastructure projects which promotes energy savings, reduction of Co2 emissions, deliver widely accessible and affordable energy to everyone.

Other than focusing on cleaner energy as mentioned in the above, the Group intends to dispose its OSVs gradually to further reduce its Co2 emissions footprint. In FP2023, the Group has disposed 3 units of its OSV fleet.

From now till 2030, the Group shall strive to establish its medium to long term strategic plans for diversification into green energy sector such as solar power plant, windfarm, carbon capture and storage, etc.

Year 2030s: Accelerating Actions

In light of natural gas being the most important lower-carbon energy source in the world, Coastal Group will scale up its investments within the natural gas sector, which in turn will continue to provide sustainable recurring earnings for the Group to build up its reserves for next phase of transformation.

During this phase, Coastal Group would be actively pursuing opportunities within the green energy sector. The Group will maintain its prudent business strategy to invest in greener projects with greater sustainability and earnings visibility.

Year 2040s: Scaling Solutions

In line with the United Nations’ strong emphasis on the “Net Zero Carbon Emissions”, the Group aspires to transform its core business from natural gas sector to greener energy sector. During this phase, the Group would accelerate and increase its investments into greener energy sector.

Year 2050s: Net Zero Carbon Emission

The Group endeavours to maintain its business operation in full compliance with Paris Agreement as well as facilitate positive social and environmental impact in pursuit of overall net zero emissions to achieve a sustainable low carbon future.