Companies in Malaysia are finding themselves faced with growing expectations on sustainability from stakeholders – not least their employees

The corporate responsibility agenda in Malaysia is moving beyond philanthropy. A number of local, regional and international drivers are shaping the responsibility movement. Corruption and wider issues of governance are gaining prominence.  

Observers say there is a growing focus on employees being treated fairly in the workplace, especially in terms of pay.

“Fair-pricing in the marketplace is very important and companies that are able to display a general attitude to fair practices, fair-pricing and honest business approaches are well regarded,” says Geoffrey Williams, chief executive of OWW Consulting in Kuala Lumpur.

Companies in the telecom, manufacturing, environmental services and infrastructure sectors are taking the lead to adopt progressive practices, responding to stakeholder expectations. Some companies have the ambitions to become international players and they understand the importance of building good reputation.

Infrastructure and agri-businesses have their own challenges, though. “Balancing the need for development and the need to conserve biodiversity is a challenge for companies as well as the government,” says Rikke Netterstrom, CSR Asia country director for Malaysia.

For example, there is an urgent need to develop infrastructure in some of the remote regions such as Sabah and Sarawak. But that development will come at some cost to biodiversity. “This is an issue that companies have to grapple with,” Netterstrom says.

Malaysian companies with international operations have shown more openness to embracing corporate responsibility. YTL Corporation, one of the largest companies listed on Bursa Malaysia, runs businesses in several countries, including Wessex Water, a regional water and sewage treatment company in the UK. YTL has set a target for Wessex Water to become carbon-neutral by 2020.

“We have also developed a VW Beetle vehicle that is powered by methane gas derived from human waste, the first such test done in the UK,” says Ruth Yeoh, head of environmental initiatives for YTL. Waste from just 70 homes in Bristol is enough to power the Bio-Bug, based on driving 10,000 miles a year.

Who is reporting?

A five-country study of sustainability reporting trends in the Asean region by the Association of Chartered Certified Accountants (ACCA) in 2010 revealed that Malaysian companies were far ahead of their counterparts in Singapore, Thailand, Indonesia and the Philippines.

According to the ACCA report, 49 Malaysian companies published sustainability reports in 2009 followed by Indonesia with 25, Thailand with 22, Singapore with 21 and the Philippines with 11. However, only 15% of companies in Malaysia followed the Global Reporting Initiative framework for reporting, and only 10% of the reporting companies opted for independent assurance of their reports. And the proportion of Malaysian companies publishing sustainability reports remains tiny in light of Bursa Malaysia rules that the listed companies must disclose their sustainability activities.

Interestingly, 82% reports were in English, with 18% companies reporting in both English and Malay.

Diversified industrial companies accounted for 14% of the all reports published followed by oil and gas and agri-business (8% each), and telecom, electronics, media and support services (6% each).

“We made the decision to publish sustainability reports way back in 2007 to combine transparency and responsibility, demonstrating a long-term commitment to our stakeholders, both external and internal, that the YTL Group is socially responsible,” Yeoh says.

Netterstrom says companies should take note of emerging issues to inform their corporate responsibility strategy. For example, workers are showing a growing preference for employers they can be proud of.

Balanced workforce

Similarly, work-life balance is becoming an important issue for companies to retain women employees. Women make up the majority of graduates from Malaysian universities, and they tend to be more inclined to work for responsible employers.

Companies including Mabank and Telekom Malaysia have taken the lead in these areas. Both companies won the prime minister’s CSR Award last year in the Workplace Practices category.

Companies also need to pay attention to other issues to climb the corporate responsibility ladder.

“Board level engagement remains a big challenge,” Netterstrom says. “The investor community is still conservative and does not have much interest in sustainability. Without investors’ interest, it is difficult to push sustainability.”

According to Netterstrom, companies need to see broader engagement with stakeholders as crucial to developing sustainability strategies. They should focus on finding opportunities through sustainability and start reporting on what they are doing, she adds.

“Companies should also be training their staff in professional CR management programmes,” Williams says.

However, there is optimism about the future of sustainability in Malaysia.

“Malaysian companies today are slowly recognising the benefits of CR practice, especially with regard to its huge boost in terms of corporate strategy,” YTL’s Yeoh says.

Renuka Indrarajah, corporate communications and legal director for Guinness Anchor, a leading Malaysian drinks company, says: “I think there is great potential for sustainability in this country, especially with Bursa introducing an ESG Index in the next few years.”

She adds: “In this world where we are faced with depleting resources, people expect companies to operate in a sustainable manner. Companies have no choice.”

DiGi – ringing true

The sustainability lead taken by DiGi, the third largest mobile operator in Malaysia, is an example of how a multinational company can set a new benchmark for the local companies.

DiGi, 49% owned by the Norwegian telecom giant Telenor and listed on Malaysia’s stock exchange, became the first mobile operator in the country to publish a sustainability report in 2008.

DiGi was among the first companies to come up with a well-articulated sustainability strategy and targets. The company has identified three broad areas for directing sustainability initiatives: responsible and safe business practices, empowering communities through mobile and broadband connectivity, and addressing climate change.

The company has aligned its actions and targets. For example, the company obtained OHSAS 18001 certification in 2010 to reinforce responsible and safe work practices. DiGi introduced a supplier code of principles in 2009, and made it mandatory for all suppliers.

The company has an ambitious target of cutting carbon emissions by 50% (85,000 tonnes of CO₂) by 2012. The company’s operations are certified to ISO 14001. In 2010, the company’s data centre received a provisional Gold Certification in Design Assessment by the Malaysian Green Building Index.

DiGi was among the first 10 signatories of theUnited Nations Global Compact Principles in Malaysia in 2008, and is the first Malaysian company to sign up for the “Caring for Climate” initiative under the UNGC.

The company also scores well on corporate governance. In 2010, the company received a distinction award in the Malaysian Corporate Governance Index 2010 by the Minority Shareholders Watchdog Group, and an ethical business excellence award in the large enterprise category by the ministry of domestic trade, cooperatives and consumerism.

Sumitra Nair, head of business environment management and corporate responsibility at DiGi, says the company has sought to gain credibility as a foreign company operating in a tightly regulated telecom industry in Malaysia. She believes that a responsible business image has helped the company to attract and retain talent.

However, pursuing corporate responsibility has not been without challenges. “Mindset is a huge barrier. The biggest challenge is to change mindsets of employees, vendors, government officials etc to have them on board,” Nair says.

“The only way to overcome the challenge is to have constant dialogue with stakeholders and raise awareness.”

Guinness Anchor Berhad – a sustainable brew

If you are an alcoholic drinks company, how do you operate and thrive in an Islamic country? Guinness Anchor, the largest manufacturer of beer and stout in Malaysia, with a market share of 57%, seems to have found the right brew.

Guinness is 51% owned by GAPL, a joint venture holding company between London-based drinks giant Diageo and Singapore-based Asia Pacific Breweries. APB is jointly owned by Malaysia’s Fraser & Neave and Dutch beer giant Heineken.

Guinness Anchor’s corporate responsibility strategy is shaped in part by the policies and targets pursued by Heineken and Diageo.

The company has also aligned its sustainability strategy with the issues specific to Malaysia. For example, the company implemented a new code of marketing practice and replaced images of models in revealing outfits with more socially acceptable graphics in the promotional material.

Renuka Indrarajah, corporate communications and legal director at Guinness Anchor, says the company operates in an environment with high socio-political and religious sensitivities. “Guinness Anchor is the most visible in the alcohol industry because we have a large manufacturing facility, and we provide thousands of jobs directly and indirectly. As a result, expectations and scrutiny are high.”

Between 2003 and 2005, Malaysia increased the excise duty on beer and stout by 72%, making it the second highest excise duty in the world, second only to Norway. 

“When we engaged with the government, we realised that there was a lack of understanding of our business and its economic footprint,” Indrarajah says.

The company set out to engage the government on a regular basis, providing information on types of alcohol, direct and indirect economic contributions made by the company, the firm’s responsible business policies and work with the community. “As a result, there has not been an excise duty increase in five years,” Indrarajah says.

Indrarajah adds that regular engagement with stakeholders has helped the company to better understand their expectations and concerns. “This allows us to map these issues and perceptions so that we can identify possible areas of concern.”

Listed on Bursa Malaysia, Guinness has published yearly corporate responsibility reports since 2004. The reporting is organised around the the common areas of marketplace, workplace, community and environment.

Indrarajah says reporting has also helped in engaging with stakeholders. “By reporting on issues that could develop into controversies and affect stakeholder sentiments, we can build a reputation for credibility and trust, which reduces the risk.”  

UEM Environment – no effort wasted 

UEM Environment is a privately owned waste management company that generated revenue of $74m in 2010. The company is part of UEM Group, which is a wholly owned subsidiary of Khazanah Nasional, an investment arm of the government of Malaysia.

When it comes to sustainability disclosure and transparency, the company’s practices stand up well against some of the largest public companies in the world.

UEM became one of the earliest in Malaysia to start voluntarily publishing annual sustainability reports in 2005. And anyone looking for best practice in disclosing unflattering stakeholder information, should have a look at UEM’s 2010 sustainability report.

The report lists complaints it received from members of the communities around its waste treatment plants, and how the company responded to each one. A similar degree of transparency is evident in the cases of workplace safety reported.

The company’s 2011 sustainability report not only conforms to GRI, but also declares to be consistent with ISO 26000, and includes third party assurance from Bureau Veritas.

UEM has made it a policy that all the companies in the group must be certified to ISO 14001 and OHSAS 18001 “to ensure that the basic requirements and system of environment and safety are in place”.

The company’s environment management services help customers to transport, treat and dispose their waste responsibly. Customers get 5% discount if they are ISO 14001 certified. The company has reported customer satisfaction rate in 2010 to be at 95.4%, slightly lower than the 97.3% achieved in 2009.

Internally, UEM’s sustainability programme is directed at its carbon emissions, water conservation and workplace health and safety. UEM reports greenhouse gas emissions in all the three categories advocated by the GHG protocol. The company has reported 12.9% lower carbon emissions per metric tonne of waste treated in 2010 compared with 2009.

Externally, the company assesses key suppliers for their environmental performance and works with them to raise their standards. On the community front, the company has consistently invested in various projects, and has engaged in open dialogues.

Not surprising, every year UEM wins a number of sustainability, environment and safety awards – with eight in 2010 alone.