BizWeek - The Star, November 17 2007
by Darshini M. Nathan

LET’S face it – gone are the days when companies just had to focus on the bottom line and everything else would fall into place quite neatly.
The truth is, it is becoming increasingly difficult for corporations to function effectively without weaving in elements of social responsibility in the day-to-day running of their businesses.

AirAsia CEO Datuk Tony Fernandes (left), Siemens president and CEO Tan Sri Rainer Althoff and Shahrizat having a light moment

Whereas in the past, investors’ decisions were guided primarily by the health of a company’s balance sheet, an assessment of how a corporate reacts and responds to the society in which it exists is now fast becoming a major criterion guiding investors’ decisions the world over.

If done correctly, a company’s social responsibility initiatives could lead to an enhanced brand image and the increased ability to attract and retain the best workforce. This will translate into better client satisfaction and improved customer loyalty.

In short, corporate social responsibility (CSR) can be a catalyst for improving a company’s profitability. Recent years have seen many of the big local corporations in Malaysia pay more heed to their corporate responsibility. But for those small and medium enterprises which account for more than two-thirds of registered companies in Malaysia and are a major source of employment in the country, CSR efforts more often than not take a backseat to concerns about company profits and cash flow and understandably so.

DiGi CEO Morten Lundal with the trophies won

Most of these companies are family-owned and run. For them, awareness about their responsibility to society would come more from the need to comply with certain standards, rather than any inherent value or belief system.

Observers say the emphasis in Malaysia on CSR concepts is timely particularly now that the country is going all out to entice foreigners to invest their monies in Malaysia. Indeed, foreign investors, particularly those from developed countries, tend to place a high importance on CSR.

In fact, in some of those countries, the CSR movement has advanced to a level where businesses think about how to be responsible in the ways in which they make their money, rather than emphasising how they can and should give back to society with the profits they have made. As a result, corporate responsibility has become fundamental to those businesses.

CSR milestones in Malaysia
In Malaysia, industry watchers say although it hasn’t quite reached that level, major advances have been made to correct the misconception that CSR and profits cannot go hand-in-hand.

Seven years ago, the Government introduced the code of corporate governance. Since then, CSR in the country has been gathering momentum.

Last year, the Government introduced the Silver Book, a mechanism to guide the government-linked companies (GLCs) in their efforts to create sustainable benefits to society. The book provides a structure for GLCs to organise their CSR activities and monitor the programmes more systematically.

It highlights seven core areas of contributions to society. These include human rights, employee welfare, customer service, supplier partnership, environmental protection, community involvement and ethical business behaviour.

Prior to that, Bursa Malaysia had made it a requirement for public-listed companies to submit annual updates on their CSR initiatives. The exchange has also come up with a framework to guide them in their CSR programmes.

Taking these initiatives a step further and to involve more companies in the private sector, Prime Minister Datuk Seri Abdullah Ahmad Badawi launched the Prime Minister’s CSR Awards 2007 last Wednesday. He said the country must have a culture of caring and that included companies in the private sector.

The awards attracted 316 entries from 161 companies, both large and small. Recognition was given for companies’ corporate responsibility initiatives in eight areas namely: community and social welfare; education, environment; culture and heritage; small company CSR; best workplace practices and special award for media reporting. DiGi Telecommunications Sdn Bhd took the top prize after bagging two other awards for Culture and Heritage and Best Workplace Practice.

Observers reckon that if the momentum is kept up, it is only a matter of time before CSR becomes an integral ingredient to businesses’ profitability rather than just a supplementary issue.

“It’s also an encouraging sign that as CSR develops in the country, people are increasingly able to differentiate between companies that are truly socially responsible and those that are merely paying lip service to CSR,” an observer comments.
But even then, some have cautioned that the changes taking place in developed economies is proof that CSR standards that are good enough today may no longer be up to the mark in the near future.

Still, at the end of the day, what determines the impact of a company’s CSR programme is a well-defined and comprehensive policy, preferably one whose success rate or impact can be measured.