This article first appeared in The Edge Malaysia Weekly on September 30, 2019 - October 6, 2019
Companies can achieve greater impact with corporate responsibility (CR) initiatives by making sure that the impact of their programmes is consistently tracked, say judges of the CR component of The Edge BRC Company of the Year award.
Just as financial performances are carefully tracked, companies should put more thought into measuring the effectiveness of their CR initiatives.
It is not just about spending money but making a difference to the community as a responsible corporate citizen, the judges say, noting that higher scores were given to BRC member companies whose sustainability framework and reporting of CR initiatives are better articulated when it comes to social, economic and environment impact outcomes over a period of time.
The better companies are able to demonstrate not only what was done that year but also how the impact of a particular programme has grown over the years and how the programme can continue to be impactful going forward due to the sustainability target pledges, responsible business practices and financial commitments to ensure meaningful change, judges say. This is important as responsible companies can help drive improvements in their ecosystems by setting higher standards for suppliers and business partners when it comes to environmental, human rights or supply chain issues.
The Edge Education Foundation CEO Dorothy Teoh notes how Heineken Malaysia Bhd’s 100% water sustainability road map through 2030 is being built based on data points collected from the high-impact projects under its three-year Water Stewardship Agenda (2018 to 2020).
“With water becoming a crucial issue as highlighted by droughts leading to forest fires in various places worldwide, I am glad to note that more companies are focusing on water, whether it is tracking water usage alongside energy usage to improve the efficiency of water use, harvesting rainwater for landscape use or, in the case of Heineken, moving from river rehabilitation to watershed protection focused on Sungei Selangor, the source of water supply for most Klang Valley residents,” says Dorothy.
The amount companies set aside to incorporate CR initiatives into their business models and be a better corporate citizen should correspond with the size of the company.
“The bigger the company, the larger the responsibility and impact to stakeholders,” says Dorothy. Malayan Banking Bhd, for instance, channels about 1% of its net profit to community programmes, to allow long-term strategic work to be carried out with its partners across the region.
While charitable giving is applauded, the judges say companies should go beyond handing out monetary contributions to actually making sure the money spent on CR enhances the welfare and well-being of the people and the community they operate in.
Former deputy CEO at the Securities Commission of Malaysia Datuk Dr Nik Ramlah Mahmood notes favourably companies whose sustainability efforts support the country’s development policy as well as make them better corporate citizens to the communities they are in as well as their own people.
An example is how Bermaz Auto Bhd upskills its managers as well as fresh graduates and recruits via technical, vocational, education and training programmes, says the career regulator who currently sits on the boards of the Malaysia Deposit Insurance Corporation, Securities Industry Development Corporation, Axiata Group Bhd, United Malacca Bhd and Amanah Saham Nasional Bhd.
In the same vein, Dorothy views favourably the linkages made with schools and universities in programmes such as Axiata’s leadership training, Inari Amertron Bhd’s internship and KLCCP Stapled Group’s apprenticeship efforts.
Giving the thumbs up for women in the workforce and emphasis on uplifiting family ties by providing longer maternity and paternity leave, she notes that two-thirds of KLCCP’s workforce is represented by women and Malaysia Airports Holdings Bhd gives grandparental leave.
Among the better companies, the bar of excellence is getting higher. “More companies seem to have gone beyond box-ticking in integrating economic, environmental and social components of sustainability into their operations,” says Dorothy.
“It is heartening to see companies going beyond mere compliance with laws and regulations to improve the sustainability of their businesses. We hope that next year, we will see more companies doing this. The quality of reporting, too, seems to have improved, with more companies adhering to Global Reporting Initiatives guidelines.”
“It has been always humbling for me to read through the annual reports and see that while the companies have to deal with a competitive environment and complex regulatory and compliance framework, they still invest in corporate responsibility projects,” says Philip Koh Tong Ngee, senior partner at Mah-Kamariyah & Philip Koh Advocates & Solicitors.
“While primacy must be given to financial governance, CR is not a PR (public relations) exercise to hide under financial performance or, worse still, corrupt practices — such as making donations to foundations that are related parties or merely seeking some moral legitimacy for quizzical products and/or services. While the ethical or green fund movements have never taken root in Malaysia, we can note that a new generation of investors are, in fact, very sensitive to issues of unethical or irresponsible corporate conduct.”
He reckons that there must be “a new model of responsible corporate governance decision-making”, taking into account the interest and claims of a wider circle of stakeholders, present and future shareholders, employees, suppliers, creditors, consumers, governments and the environment.
Bursa Malaysia chief commercial officer Selvarany Rasiah says the front-line regulators have observed a general trend of improvement in terms of uptake of environmental, social and governance (ESG)-related practices as well as disclosures among Malaysia-listed companies in recent years.
“Inculcating a strong ESG culture will undoubtedly enhance the overall resilience and attractiveness of our capital market ecosystem. ESG investing is becoming an increasingly core aspect of investors’ mandate, coupled with heightened expectations of various societal stakeholders regarding the contribution of business to sustainable development. As such, it bodes well for the companies to embrace ESG wholeheartedly to better manage both key risks and capitalise on emerging opportunities while maintaining their licence to operate,” she says.
“As an exchange, we have been a leading proponent of ESG, especially in terms of establishing a comprehensive sustainability disclosure framework to guide the companies and elevating their practices via our advocacy programmes/initiatives as well as supporting resources on BURSASUSTAIN. Overall, we are pleased to see a significant increase in the number of constituents that make up our FTSE4Good Bursa Malaysia Index, from 24 in 2014 to 71 currently.”
In recognition of the importance of CR, the component constitutes 30% of the score for The Edge BRC Company of the Year award. Judges abstained from the scoring and deliberations on BRC members where they are a board member of if there are potential conflicts of interest.
Selvarany rejoins The Edge BRC panel of CR judges this year after a two-year hiatus following her promotion from chief regulatory officer. Returning to the panel of judges this year are Dorothy, Nik Ramlah, Koh and Jeffrey Teoh, managing director and head of corporate and commercial banking of OCBC Bank (M) Bhd.
“A decade has come and gone since we at OCBC Bank first started sharing in the vision with The Edge to showcase both the head and heart of the country’s finest corporations,” says Jeffrey.
“The Edge Billion Ringgit Club remains as relevant today as it was then. Most heartening is the continuing shift in emphasis to a corporate responsibility posture that integrates to itself the advantages of digital solutions that help enhance the lives of every community out there. Inclusive access with relentlessness will remain the staple way of achieving the goals of becoming a skilled and high income country responsibly.”
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