Assalamualaikum Warahmatullahi Wabarakatuh
Good evening ladies and gentlemen.
It is my pleasure to join this distinguished gathering of Malaysian corporate leaders and address you on the topic of Corporate Social Responsibility. While I am myself not a corporate practitioner, I take a keen personal interest in business dynamics, its imperatives and its impacts. When it comes to issues of sustainability, whether economic, social or environmental, I believe that while it is the concern of everyone, leaders, both corporate and political, have a bigger role and responsibility simply by virtue of the power and influence they can wield.
- Corporate Social Responsibility or CSR is understood to be the consideration given by businesses to social, environmental or ethical concerns alongside their quest for profit and wealth. It is perceived as a voluntary initiative by business enterprises that go beyond conventional stakeholder expectations. CSR is not without its detractors. There are many who believe businesses should focus on what they do best, that is to contribute to the economy simply by generating wealth and employment. They believe that economic and social objectives are and should be kept distinct.
- But I believe this is a false dichotomy. Organisations do not exist in isolation from the society in which they operate. In fact, their ability to compete depends heavily upon it. For example, improving access to education is a social issue, but a more educated population provides a company with the workforce it needs to flourish. Similarly, eradicating poverty is a social issue, but businesses prosper in societies that are prosperous.
- Under today’s business climate, people’s trust in corporations and those who run them is in a highly precarious state. Businesses are now under the constant watchful public eye. Many look beyond the products and services of a company and at what the company has done, good or bad, in terms of its impact on the community and the environment, and in terms of how it treats and develops its workforce. The corporate world recognises this all too well, which is why terms such as “corporate social responsibility” “corporate citizenship” and “triple bottom-line” have become very much management buzz-phrases.
- Numerous studies have found that businesses are wasting no time in jumping on the CSR bandwagon. The question organisations face is no longer if they practice CSR, but more so how they practice it. According to an article by Harvard’s Michael Porter and Mark Kramer, there are four motivations for a company to embrace CSR. They are:
- Reputation; that is, CSR initiatives are in place to improve the company’s image, strengthen its brand, and even raise the value of its stock;
- Licence-to-operate; that is, a company adopts the appropriate CSR programmes that will ensure the approval of governments, local communities and stakeholders for its continued operation;
- Moral obligation; that is, the company pursues commercial success in ways that honour ethical values and respect people, communities and the environment, and
- Sustainability; that is, the company strives to meet the needs of the present without compromising in any way the ability of future generations to meet their needs.
- Some may ask the question, as long as good work is being done, does the motivation behind it matter? I for one believe it does. The first two motivations, reputation and licence-to-operate, focus on painting a picture of oneself to satisfy external audiences. In controversial industries such as land development, chemicals, tobacco and energy, CSR initiatives may be pursued as forms of insurance against public criticism.
- I do not doubt that these motivations are pragmatic. However, such interpretations of CSR tend to limit initiatives to a few acts of philanthropy that are usually public relations-driven exercises. Because they lie on the periphery of the main business, they are likely to be the first things to go when times are tough. It is also difficult to ascertain how genuine or how significant their effects are. Philanthropic acts, if used as an image-booster, could be looked upon with suspicion as smoke screens to conceal controversial practices or products. Take Enron for example. Enron gave millions to local charities and won many awards for its philanthropy. However, once it was revealed that the company had orchestrated a massive fraud, all its CSR work was reduced to a mockery.
- I think the third and fourth motivations – moral obligation and sustainability – are more tenable. Moral obligation prompts a company to reconcile profit-making with the greater good of society and the environment. All parts of the company are steered along this virtuous path. The Body Shop is a fine example. The Body Shop was established upon the founder, Anita Roddick’s strong personal feelings about issues such as animal testing, violation of human rights and objectification of women in the cosmetics industry. Part of the company’s mission statement is to act in clear opposition of such practices and to address these issues in ways that would create widespread public awareness of them. Till today, the company maintains a reputation for supporting social and environmental causes through their products.
- The fourth motivation, sustainability, aims to secure long-term economic performance by avoiding short-term behaviour that is socially detrimental or environmentally wasteful. A fitting example is that of Faber-Castell. The company’s social activities had been in place since the 19th century, mostly geared towards employees and the local community. More recently, in response to the increased environmental consciousness of its stakeholders, the company went a step further. It created its own supply of ‘home grown’ wood by artificially creating forests in Brazil spanning 10,000 hectares of neglected land. The forests not only provide the company with renewable raw material for its pencils, but also provide a safe habitat to a large number of animals and absorb five times the carbon emitted by the company’s production sites.
- In the latter two motivations, it is clear that CSR does not refer to one-off initiatives nor is it used as a cloaking device, but are intrinsic to the purpose of the business. And the purpose of the business goes beyond profits.
- However, to make CSR embedded into corporate strategy in this manner is something that cannot and should not be coerced. It is a voluntary decision that the leadership of every corporation must make on its own. I do not think I am being overly idealistic in believing that we all have an innate desire to do good, to improve the human condition and protect our environment. I believe that none of us want to leave our children and their children a world where poverty, disease, climate change, increased carbon dioxide levels, diminished fresh water supply and the risk of natural disaster threaten their very existence.
- But these issues are indeed very real threats, and corporate Malaysia is in the best position and is the best equipped to make the needful contribution. Only businesses can produce the technological innovations and deliver the means for genuine progress in sustainable development. When a well-run business applies its vast resources, expertise and talents to problems that it understands, feels strongly about and have a stake in, it can make a greater impact than any other institution.
- It is very encouraging to note that many Malaysian companies are demonstrating increasing environmental and social consciousness. In CSR Asia’s 2009 Asian Sustainability Rating, Malaysia ranked sixth among the top ten countries in the Asia Pacific that adhere to CSR disclosure. 55 Malaysian companies have become signatories to the United Nations Global Compact since the launch of the Global Compact Network in Malaysia in 2008. The CSR Framework issued by Bursa Malaysia in 2006 lays down clear and comprehensive guidelines for CSR adoption. However, there is evidence most CSR work in Malaysia is relegated to corporate communications departments. We have not yet reached a stage where CSR cuts across every function, job and role in an organisation. But if it is to be effective, the principles that underpin corporate social responsibility should become entrenched as company-wide culture. And this must begin with the top leadership.
- The fact that so many key members of the Malaysian corporate circle are gathered here this evening is a clear testimony to the commitment to corporate social responsibility. I ask that you look beyond CSR as an ‘add-on’, but instead as an intrinsic part of your business. This would entail identifying personal values as well as stakeholder values and incorporating them within your strategies and decision-making processes. It would entail a re-examination of consumption practices, sourcing policies, business processes and investment beneficiaries to determine if they are environmentally and socially friendly.
- Indeed, all these demand significant long-term commitment. But its effects would be far-reaching both for the business as well as for the society in which it operates. As leaders, you play a crucial role in serving as role models and champions by behaving in a manner that is consistent with your company’s stated principles and values. You are also uniquely placed to persuade your organisation of the benefits of CSR. It will earn you and your organisation respect and credibility in the marketplace; it will enhance your brand; it will increase customer loyalty; it will improve your relationship with the community; it will spur innovation; it will motivate your workforce.
- In a knowledge economy, people are at the centre. Businesses are not inanimate constructs but a community of people. Many studies have shown that employees tend to stay with an organisation where they feel they are contributing to a greater good. Such a community can help repair the present image of business by insisting that its purpose is not just to make a profit, but to make a profit as a means to more meaningful ends.
- I commend WWF Malaysia for their on-going efforts to raise awareness of CSR in Malaysia, especially environmental CSR, and encourage the adoption of true corporate social responsibility.
- To all participants, I wish you a pleasant evening of sharing and networking.
- Porter, M.E. and Kramer, M.R. (2006), Strategy & Society – The Link Between Competitive Advantage and Corporate Social Responsibility in “Harvard Business Review”, December 2006 ↑