Malaysia: CSR Report Card 2008 – Part 1 (Marketplace)

Quite a number of corporate social corporate social responsibility (CSR) issues were highlighted in the press in 2008. However, they might have slipped past readers as the CSR angle in the news was not explored.

This editorial, the CSR Digest’s inaugural piece, puts together a report card on how businesses fared on the CSR front in 2008, based on press clippings and news reported during the year.

But first,

What is CSR?

In Malaysia, there is a growing understanding that CSR is no longer just an option, but a necessity (for example, see the International Business Report (IBR) 2008 compiled by Grant Thornton International). Furthermore, to spur businesses into action, the government has set aside RM100 million in the recent Budget to go towards CSR through the Amal Jariah program, which was launched in 2007 in a bid to repair the homes of the hardcore poor.

Construction by Leonard Clagett

Some suggest that the usual charity drives and philanthropy initiatives are not exactly what CSR is all about. The World Business Council for Sustainable Development describes CSR as

The continuing commitment to behave ethically and contribute to economic development while improving the quality of life of the work force and their families as well as local community and the society at large.

For a local definition, Time Engineering Berhad’s Managing Director, Amiruddin Abdul Aziz, was reported to have described CSR as

A tacit social contract between the two parties. When the company helps to improve the conditions of the community it operates in, the community becomes more prosperous, and this ensures the company’s survival.

On this basis, there are a number of instances where Malaysian businesses have come under scrutiny in 2008 for either not having measured up, or faltered, in their CSR duties.

Marketplace

This year, several companies came under criticism for lack of transparency, and in some cases, integrity as well.

Fuel

The issue began in the first quarter when the government withdrew some of the petrol subsidy, leaving consumers with a hole in their pocket when it came to their spending on fuel. The public directed their discontent to Petronas. The rationale was that since Malaysia was an oil producing nation, Malaysians should not be as affected by the increase in the world fuel price. As such, the public called for detailed accounts from the Malaysia oil giant.

Petronas president, Mohd Hassan Merican, was reported to have countered these calls by stating that Petronas’ annual accounts were made public, with 5,000 printed copies disseminated to various bodies, including members of Parliament, and a digital copy available for download on its website.

Rembau MP, Khairy Jamaluddin, was reported to have said that this was not enough. Khairy stated that the company was tasked with safeguarding the nation’s most important natural resource on behalf of the people and, “therefore, should be held to a higher level of scrutiny.”

Meanwhile, members of the opposition also called on Petronas to make itself more transparent. Anil Netto, treasurer of reform movement, Aliran, was reported to have said, “Petronas belongs to the Malaysian people… We should not be treated like corporate shareholders entitled only to the bare minimum information about a company.”

However, a few stood in defence of Petronas, including Transparency International president, Ramon Navaratnam. Ramon was reported to have said that the company had been practising accountability, and it was up to the people to scrutinize the reports before criticizing.

Since 2006, Petronas’ accountability has been under heavy scrutiny due to its low ranking in the the World’s Most Sustainable and Ethical Companies survey. To date, it is not clear whether Petronas will reveal more detailed accounts.

Tolls

Tolls came under public siege when fuel prices went up. The Malaysian public, faced with increasing costs, wanted to know why the total profits of toll operators were RM20.77billion,  said to be at the expense of the people. Many wanted to the toll concessionaires’ contracts declassified under the Official Secrets Act 1972, as the general feeling was that the agreements were lopsided and profited the toll operators.

The good news is that Works Minister, Datuk Mohd Zin Mohamed, announced in November that the documents had indeed been declassified under the Official Secrets Act 1972. All but one of the concessionaires agreed to making the documents public, beginning Jan 1 of next year.

On a related matter, the stand-off between Bandar Mahkota Cheras (BCM) residents and toll operator, Grand Saga Sdn Bhd, reached a head in May of 2008. In 2006, Grand Saga built a three-feet high concrete barrier to block an access road to the BCM township, forcing residents and commuters to travel an additional six kilometers to the toll plaza, and paying Grand Saga RM0.90 toll per trip.

The barricade was destroyed by residents and commuters, with reports stating that Grand Saga rebuilt the barricade no less than three times. Again, news reports did not highlight Grand Saga’s CSR duties in this situation. Instead, the role of the court (which threw out the BCM resident’s application for an injunction), government intervention, and allegations of the police brutality made the headlines.

Toll concessionaires were not oblivious to the public perception on their corporate social responsibilities. To counter this, Plus Expressway Bhd announced a toll rebate incentive for motorists using the North-South Expressway (NSE) and North-South Expressway Central Link (Elite) Highway from midnight until 7am.

Liew Ching Wen  of the Oriental Daily reported that only 10% of car owners would be able to enjoy the rebate incentive, and felt that it was a publicity stunt. The journalist also reported that the public might view the measure negatively, as it might appear to be a cosmetic exercise.

Liew also noted that that the government is the largest shareholder of Plus, with Khazanah Nasional and the Employees Provident Fund (EPF) directly or indirectly control about 74% of Plus.

Fraud?

Newspapers have highlighted the scandal surrounding Pempena Sdn Bhd. In November this year, independent audit firm, Price Waterhouse Coopers (PWC), released to the press a report revealing that the company had invested RM54.4 million into 24 companies, including five ‘non-functional companies’. PWC recommended that Pempena pull out of these investments, which would incur a loss of about RM20 million to the company.

The reason that Pempena created headlines was the relationship between this private limited company to the Tourism Ministry. Losses by Pempena were reported to amount to RM20 million in June 2008. Former Pempena chairperson, Kee Phaik Cheen, was reported to have said that the company made a profit of RM50 million from 2004 to 2006.

The Oriental Daily’s Lim Sue Goan asked what had happened from 2006 to 2008 to cause Pempena such a tremendous loss.  Lim also questioned who in Pempena approved all the failed investment projects, and whether proper professional evaluation and procedure had been followed.

These questions are important, although Pempena is not a public listed company, and therefore not subject to the Malaysian Bursa requirement, obliging listed companies to include a CSR statement in their annual reports.

Melamine

In terms of businesses’ responsibility towards consumers, Malaysia, like the rest of the world also experienced the melamine poisoning scare. The Health Ministry took swift steps to ensure the safety of the public, while products from local biscuit manufacturers, Khong Guan and Kian Guan, were identified to be tainted with the toxin.

Khong Guan responded admirably to the alert. The contaminant in the biscuits was found to be from ammonium bicarbonate, sourced from China, used to bake the products. Khong Guan’s factory in Sabah stopped production, while the company recalled its products from the retail shelf. In the meantime, biscuit manufacturers in the country agreed to send in their products for voluntary testing.

Next week

CSR Report Card 2008 – Part 2 (Workplace)

• Deaths at construction sites
• Malaysian Nike contract factory not reaching Nike’s global standards
• Malaysian companies upgrading employees so that they are ineligible to join unions

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