Corporate Social Responsibility (CSR) - Malaysia
The focus on CSR in Malaysia has in line with international trends increased. Even though some companies have CSR programs which date back many years, even decades, it seems to have been an increased awareness and activity of CSR initiatives in Malaysia.
CSR Framework
Malaysian government's increasing focus on CSR has resulted in the development of new frameworks for implementation of CSR initiatives for the country's businesses. The most significant of these is still the "The Silver Book", published by the Putrajaya Committee for GLC Transformation (PCG) in September 2006. The framework contains guidelines for Government Linked Companies (GLCs). Khazanah Nasional Berhad, a management authority for state investments, has the responsibility for monitoring that the GLCs implement CSR measures in accordance with the framework. There is, however, no information on what possibilities for sanctions that Khazanah holds if the guidelines are not followed. Moreover, in September 2006 Bursa Malaysia, the country's stock exchange, launched a framework for the implementation and reporting of CSR activities of listed companies. In accordance with this, all listed companies are required to disclose their CSR activities, but it is stressed that all activity occurs on a voluntary basis.
In the above framework the CSR concept is used to describe actions that go beyond philanthropy or compliance with applicable laws. CSR describes the activities that safeguard the environment, communities, employees, shareholders and other affected parties’ interests as an integral part of the operation, to the extent that it lays the foundation for long-term, sustainable value creation. Such an understanding of CSR corresponds largely with the Norwegian definition, as it emerges from Stortingsmelding (White Paper) No. 10 (2008-2009).
Human Rights
Malaysia has ratified the UN Human Rights Conventions no. 8 and 11, which deal with the Elimination of Discrimination against Women, and Children's Rights, respectively. The country has, however, opposed ratifying conventions such as:
• 3. Abolition of all Forms of Racial Discrimination
• 4. Covenant on Economic, Social and Cultural Rights
• 5. Covenant on Civil and Political Rights
• 9. Combating Torture and Other Forms of Inhuman Punishment
The authorities' commitment to safeguarding human rights in some areas may be questioned. There are clear limitations on freedom of speech and freedom of association. The situation for refugees is difficult, because the Malaysian authorities do not distinguish between refugees and illegal immigrants. Exemption legislation such as the Internal Security Act (ISA) have given the police the right to imprison indefinitely without charge or trial, an upcoming revising of the ISA (will be replaced by a new Security Act) and similar exemption legislation was however announced September 2011.
Labour relations
Malaysia has ratified five of the ILO core conventions. The following three conventions are not ratified:
• 87. Freedom of Association and the Right to Organize
• 105. Abolition of Forced Labor
• 111. Abolition of Discrimination on the Basis of Occupation
There are many restrictions which influence the right to organize, both in legislation and in practice. In principle, workers have the right to strike, but certain restrictions apply. Discrimination of women in employment is prohibited by law, but women are underrepresented in jobs with decision-making authority. Child labor is not widespread, but occurs among small family firms. Forced labor is prohibited by law, but does occur, often in connection with illegal employment and trafficking.
Environment
The past decades of rapid economic growth in Malaysia has caused environmental challenges like air and water pollution, solid waste management, long term water supply and energy efficiency. Internationally, problems regarding deforestation, and connected challenges like corruption and indigenous people’s rights, have received special attention. In this connection, the EUs FLEGT (Forest Law Enforcement, Governance and Trade) initiative is working to establish certification for Malaysian timber to be sold in the European market. The Malaysian government has also shown interest in sustainable forest governance through Reduced Emissions from Deforestation and Degradation (REDD) mechanisms.
Malaysia has been a member of United Nations Framework Conventions on Climate Change (UNFCCC) since 1994, and ratified the Kyoto Protocol as a non-annex 1 country in 2002. Malaysia has therefore not committed to specific greenhouse gas (GHG) reductions, but can participate in the development of Clean Development Mechanisms (CDM). The Prime Minister announced a target of 40% reductions in GHG emissions according to GDP by year 2020. As a step to combat greenhouse emissions, the government is currently working on a”National Policy on Climate Change”. The government has shown some support for CDM activities and has implemented an institutional framework.
The past years, there have been a steadily increase in companies involved in the usage and development of green technology. The government supports this trend and in 2010, federal level ministries dedicated to promoting green technology were established. Also in 2010 the government launched a RM 1.5 billion (about 2.5 billion NOK) fund to promote green technology development in Malaysia. Sustainable growth is also one of three goals highlighted in the Malaysian New economic Model (NEM), which aims to make Malaysia a high-income country by 2020.
Corruption
One of the biggest problems related to fighting corruption is the lack of public disclosure, as law permits a high degree of secrecy in government agencies. Furthermore, it is a problem that the media is largely controlled by a small group of companies with strong ties to the government, limiting the press' role in uncovering corruption. According to Transparency International's "Corruption Perceptions Index", Malaysia fell 28 spots, from 32nd to 60th place, in the period 1999-2011. With a score of 4.3, Malaysia scored significantly lower than the government’s own target which is 4.9. The CPI revealed that 50% of its respondents were confident that the Malaysian government is effective in fighting corruption; additionally the survey suggested a decrease in the number of respondents which had paid bribes, from 9% in 2010 to 1.2% this year. Transparency International Malaysia indicated that the results from this year’s CPI suggest that day-to-day briberies and petty corruption seems to have been more effectively addressed, whereas grand corruption still remains prevalent. Nevertheless the government is aware of the issue, and the fight against corruption is among the key elements of the “Government Transformation Programme” which has been given a lot of attention. However, it is still uncertainty linked to the effect of the initiatives launched.
CSR-Related Initiatives from the Authorities
The government of Malaysia has introduced tax incentives to businesses that implement broad CSR programs. This could, for example, apply to support for arts and cultural programs, reduction in greenhouse gas emissions and investing in local communities. In addition, the government has established a fund of 100 million RM (about 180 million NOK) to promote CSR activities. Moreover, the Malaysian government has announced that state-owned investment funds will include CSR as a criterion in connection with future investments.
Emphasis on Various CSR Dimensions
The focus on CSR may vary a lot depending on the company's character. The Malaysian Institute of Management (MIM) found in a survey conducted in 2009 that 85-90% of multinational companies, large local companies and GLCs engage in CSR activities, while the corresponding proportion for small and medium-sized enterprises is 58%. Total ¾ of the respondents had some form of CSR programs, and about half of the remaining fourth part was planning to initiate a program in the near future. However, it is worth noting that the above survey was sent out to 2000 companies, of which only 110 responded.
Furthermore, there is considerable variation across different dimensions associated with CSR. Programs aimed at the employees of the enterprises are widespread, and often come in the form of education and training in HES. Provisions of education grants are common among the larger companies. Bursa Malaysia found in a survey that measures aimed at employees is the CSR aspect with the highest priority among listed companies. This can in particular be attributed to HES-related measures.
Market-oriented CSR activities have been given increasing awareness among companies in Malaysia as consumers have become more aware of how business activities affect society and the environment. This applies especially to companies that are active in European markets, as European consumers have shown willingness to punish companies that ignore social and environmental considerations. Among the listed companies, it is especially those operating in the so-called "high risk" sectors that are active in the market-oriented CSR activities. This includes companies working on the extraction of natural resources and those with a special need to justify their own business; companies involved in tobacco, alcohol, gambling, etc.
When it comes to activities aimed at local communities Malaysian CSR programs have a long tradition of burden sharing between businesses and communities, which is an integral part of the country's cultures. Initiatives from the business side, however, often bear signs of philanthropy rather than real interaction. EUMCCI calls for more focused activities aimed at local communities, with fewer and larger donations directed to very specific projects. Bursa Malaysia point to the same problems in connection with listed companies, and calls for long-term programs with increased levels of performance measurement rather than individual donations.
Activities aimed at preserving the environment as much as possible, is perhaps the CSR aspect given the highest priority among European companies. This aspect, however, is given less weight among companies in Malaysia, where the environment has for many years come secondary compared to the economic benefit of the businesses. In Bursa Malaysia's survey of listed companies, a quarter of the respondents lack data as they do not register data about how the business affects the environment. The general trend among the remaining companies shows very low scores for the environmental dimension. This is due to lack of awareness among companies about how their activities affect the environment, and what tools are available to reduce the burden. Crafts, plantation and the industrial sectors are slightly better than average, while the construction sector ends up in the other end of the scale. The EUMCCI reports, however, that the focus on the environment is on the increase among companies in Malaysia and points to new initiatives to reduce energy consumption and cut emission of greenhouse gases, also in the construction industry.
Other Initiatives
The Global Compact Network Malaysia (GCNM) is a network that works to promote the United Nations Global Compact (UNGC) ten principles concerning human rights, rights of workers, the preservation of the environment and anti-corruption among companies in Malaysia. By connecting to the network, businesses are given the opportunity to showcase their CSR activities internationally as well as an arena for interaction with organizations and other businesses. By August 2010, 62 companies and organizations had joined the GCNM, of which the majority of the companies were multinational companies. DiGi Communications, in which Telenor has a controlling stake, is one of the companies that are affiliated with the network. As emphasized by GCNM, DiGi is the only Malaysian company that has signed the "Caring for Climate" initiative.
The consulting firm OWW has, in cooperation with the newspaper Malaysia Reserve, created a Socially Responsible Investment (SRI) index, with the aim of attracting investors which include CSR in their selection criteria for new investments. The index consists of companies with CSR programs that stand out as particularly good. The 100 most valuable companies listed on Bursa Malaysia are given scores for engagement in relation to different dimensions of CSR, as well as corporate governance and the respect of human rights. The scores are prepared in accordance with the CSR policy, how this is being implemented and what effect it has. The share prices of companies with comprehensive CSR activities are monitored and compared with other listed companies in order to create a picture of how CSR activities affect companies' market value. The index shows that from June 2006 to June 2009 companies with good CSR programs give 19.3% higher dividends than other companies. This shows that focusing on CSR is not necessarily an obstacle to companies' core business in Malaysia.
Bursa Malaysia launched its Business Sustainability Programme in November 2010, in order to have the Malaysian public-listed companies integrate sustainability into their business strategies. The program includes the publication of a sustainability guide for company directors and the introduction of a Sustainability Knowledge Portal on Bursa Malaysia’s website. In addition, they have announced that an Economic and Social Governance index should be ready by 2012.
Of others involved in the implementation of CSR in Malaysia, Caux Round Table Malaysia, CSR Asia, BCSR and EUMCCI are worth noting.
Initiatives from Norwegian Companies in Malaysia
DiGi Communications (Telenor) integrates CSR into its business through the focus areas Empowering Communities Through Connectivity; Climate Change; and Responsible and Safe Business Practices. The company has set a goal to reduce its "carbon footprint" by 50% by 2012. The company launched "Deep Green Challenge", a program in which teams from Malaysian universities are competing to design the best program for the use of renewable energy in rural areas with limited energy supply. The company has also implemented several initiatives that utilize mobile communications to empower local communities, including establishing Community Broadband Centers in rural areas and carrying out SMS donation drives for charitable causes. According to the Asian Sustainability Rating (ASR), which rate sustainable business with parameters including social responsibility, DiGi was the leading company in Malaysia with regards to social responsibility and sustainability.
Other major Norwegian companies that is active in Malaysia, such as Aker Solutions, DNV, Jotun and Wilhemsen, have also developed CSR policies that integrate into their respective businesses. Norwegian companies in general seem to be CSR-conscious and operate on the basis of guidelines from their headquarters in Norway.
Initiatives from the Royal Norwegian Embassy in Kuala Lumpur
January 2011 the embassy hosted a CSR-seminar for Norwegian businesses in Malaysia. The seminar was in collaboration with Innovation Norway and Malaysia Norway Business Council (MNBC). Throughout the seminar several companies participated with presentations of their CSR-practices and the Institute for Corporate Responsibility (now known as BCSR – Business Council on Sustainability and Responsibility) gave an introduction to CSR and its current trends. An issue which was raised at the seminar was that small and medium sized company considered launching of CSR initiatives as unwise from an economical perspective. For larger multi-national companies however, CSR was perceived as a great way of doing branding.
Who to contact for further information
BCSR – Business Council on Sustainability and Responsibility [info@bcsrmalaysia.org]
Bursa Malaysia - Mohd Yazman Yuhana [yazman@bursamalaysia.com]
Caux Round Table – Tunku Abdul Aziz [tunkua@gmail.com]
CSR Asia – Malaysia Office [enquiry@csrasia.com]
EUMCCI – EU-Malaysia Chamber of Commerce and Industry [eumcci@eumcci.com]
Malaysia Norway Business Council – [malaysianorwaybc@gmail.com]