While companies in Malaysia are making progress on softer aspects of corporate social responsibility, they still have a long way to go when it comes to the tougher issues

A number of business associations have taken up the corporate responsibility agenda in Malaysia. Several local and international NGOs too are actively pushing the corporate responsibility agenda. In many cases, NGOs are working closely with businesses to advance responsible business practices.

The most high-profile multistakeholder initiative in Malaysia is the Roundtable on Sustainable Palm Oil (RSPO). Formed in 2004, RSPO has introduced a code of conduct and a sustainable palm oil certification programme. Palm oil is an industry that has been the subject of intense criticism from international environmentalists who highlight forest and biodiversity destruction that result from developing palm oil plantations.

RSPO aims to ensure that no primary forests or other high conservation value areas are cleared for new palm oil plantations, that oil palm plantations minimise their environmental footprint and that basic rights of local landowners, farm workers and indigenous people are respected.

“The ultimate goal of RSPO is to transform the market to make sustainable palm oil the norm,” says RSPO secretary-general Darrel Webber.

RSPO-certified palm oil has amounted to 5m tonnes over the past three years, representing 10% of global palm oil production. RSPO grower members in Malaysia contribute 48% to the global total of certified sustainable palm oil.

Webber says a three-pronged approach will help repair the damaged reputation of the palm oil industry and facilitate achieving the RSPO’s mission of 100% sustainable palm oil.

“First of all, industry commitment supported by time-bound and measurable targets will help the transformation of the market,” Webber says. To this end, a growing number of companies are committing to use sustainable palm oil by 2015. RSPO is working on a scorecard, which will map the progress the industry is making in its commitment to source sustainable palm oil.

“Secondly, industries have a crucial role to play in educating consumers and raising their awareness of the importance to consume products containing sustainable palm oil,” Webber says.

Consumer awareness 

Webber says the new RSPO trademark scheme provides the industry with a great tool of raising consumer awareness of sustainable palm oil.

Launched in June 2011, the RSPO trademark can be displayed on the packaging of products that contain palm-derived ingredients sourced in compliance with RSPO standards.

“Thirdly, RSPO’s grievance committee will play an increasingly important role in assessing whether RSPO members adhere to its code of conduct and its principles and criteria in order to protect and enhance the credibility of the organisation,” Webber says.

RSPO’s approach has rattled some palm oil producers. They believe that environmental NGOs’ views are dominating RSPO’s decisions. In a major setback, the Indonesian Palm Oil Association quit RSPO in October 2011 and announced its own scheme – Indonesian Sustainable Palm Oil (ISPO) – backed by the government.

The Malaysian Palm Oil Association (MPOA) has stated that it will not quit RSPO. However, MPOA is advising its members to stop seeking new RSPO certification for the production of certified sustainable palm oil, due to poor uptake of RSPO-certified palm oil. MPOA says 60% of the certified palm oil remains unsold.

Constantly under attack for destroying rainforests, including the habitat of the orangutan, the palm oil industry has taken other steps to project its image as a responsible industry.

For example, the Malaysian Palm Oil Council set up the Malaysian Palm Oil Wildlife Conservation Fund in 2006 at the height of anti-palm-oil campaigns. The industry and the government each contributed $3.1m to the fund.

Developing other schemes to protect forests and wildlife in Malaysia continues to be a major concern for NGOs. The country has a landmass of 33m hectares, of which about 54% is covered with forests. Malaysia has 31 out of 42 types of wetlands identified by the Ramsar Convention, an international agreement to ensure the conservation of wetlands. Malaysia is 12th richest megacentre for biodiversity in the world, possessing 80% of the earth’s biodiversity and 15,000 types of flowering plants.

However, in the past 15 years Malaysia has lost about 60,000 species of life, according to Malaysian Nature Society (MNS), one of the oldest and most prominent environmental NGOs in Malaysia.

“Loss of forests is the main environmental issue in Malaysia”, says Andrew Sebastian, head of communications atMNS.

NGOs complain that most companies do not seem to understand the urgency of saving forests and the wildlife that depends on it. “Most corporate bodies seem to exercise self-restraint in financially supporting or associating themselves with causes or NGOs that campaign to conserve forests,” Sebastian says.

“Another example is where corporations want to fund or support the conservation of only ‘cute and cuddly’ wildlife,” Sebastian points out.

He says saving the tiger and turtles is popular, while projects involving other species such as insects and bats, which are equally important for the ecosystem, do not attract as much funding and support.

Sebastian says there is a need for more platforms in Malaysia where NGOs and companies can come together for dialogue and to develop mutual understanding and encourage NGO-company partnerships.

MNS has a number of successful partnerships with companies including Ricoh, Tesco, Unilever, Ikea, YTL and Talisman Energy.

“Although we have bountiful natural resources such as forests, trees and oceans, it is still important to safeguard this natural capital for the protection of biodiversity and future generations,” says Ruth Yeoh, director at YTL Group, one of the largest conglomerates in Malaysia. YTL supports the work of several environmental NGOs including MSN, WWF-Malaysia and Reef Check Malaysia.

Sebastian offers a recipe for successful partnerships between companies and NGOs: “Clarity of purpose, common interest to undertake conservation activities and open communications are the key attributes for a good partnership.”

Mild media

While the NGO sector is making progress, Malaysian companies rarely come under scrutiny from local media for irresponsible behaviour.

“Malaysia’s mainstream media has always highlighted CSR activities, but these have always been focused towards community work,” says Daniel Chandranayagam, editorial director of Kuala Lumpur-based online publication The CSR Digest. More recently, though, there has been more of a focus on environmental work too, he admits.

However, “work and issues related to transparency, labour, human rights, fighting corruption are rarely highlighted,” he adds.

The government tightly regulates media in Malaysia. In 2010, Malaysia was ranked 141 out of 178 countries in the Press Freedom Index by Reporters Without Borders.

Despite this, Chandranayagam started The CSR Digest with the aim of highlighting both exemplary and unethical corporate behaviour.

Chandranayagam says regional businesses need to look at hard issues such as transparency, fighting corruption, human trafficking, anti-logging, responsible urban development and healthcare. He adds these issues are interlocked with political issues, making it complex for companies to act.

Corruption is another key issue for NGOs. Malaysia’s ranking on Transparency International’s Corruption Perception Index has been sliding over the years. The government seems to have taken note, launching a voluntary Corporate Integrity Pledge initiative in April 2011, asking companies to sign up and shun corruption.

However, fewer than 40 companies have so far signed up the pledge, and many of those are foreign companies operating in Malaysia.

Josie Fernandez, secretary-general of Transparency International Malaysia, says corruption has become a matter of concern for both businesses and the government, as there is a growing realisation that countries known for high levels of corruption attract less investment.

Transparency International Malaysia is part of the government’s multi-agency initiative Corporate Integrity Pledge.

Fernandez says that signing up to the pledge is just the first step. “The next step should be self-assessment, identifying risks, implementing a systematic anti-bribery programme, monitoring the progress, and more importantly, agreeing to external audit by credible professional firms or organisations.”

She says external monitoring of companies’ anti-corruption procedures and initiatives is crucial to building credibility. “Government-linked companies could take the lead and set example by committing to external monitoring,” Fernandez suggests. This would then encourage the private sector to accept the idea of external monitoring.

“As anti-corruption legislation becomes globalised, the Malaysian corporate sector will need to be more aggressive in implementing anti-corruption measures within their organisations,” Fernandez says.

The government’s anti-corruption drive seems to be finding favour with multinational companies, which view corruption as a serious problem and obstructive to business.

The American Malaysian Chamber of Commerce (Amcham) in October 2011 became the first foreign business association to pledge to work closely with the Malaysian Anti-Corruption Commission (MACC), to stamp out corruption in members’ dealings with business partners and the government.

Human rights

But observers say human rights and rights of foreign migrant workers are the most neglected issues. “Companies are very uncomfortable with the current debate on the issue of foreign workers,” says Rikke Netterstrom, country director for CSR Asia, a provider of sustainability consulting services.

Netterstrom says companies look at the treatment of foreign workers as a legal compliance issue rather than a corporate responsibility issue.

There are about two million foreign workers in Malaysia, about half of them working illegally. The government has now offered an amnesty scheme asking employers of illegal workers to register them. However, several employers are hesitant to take up that offer. They fear a rise in costs because of government levies they will have to pay for each foreign worker.

Poor treatment of foreign workers and their exploitation by the middlemen make frequent headlines in the international media. “Human rights issues, especially in the labour market, are very under-resourced,” says Geoffrey Williams, chief executive of corporate responsibility advisory firm OWW Consulting. “Recent stories of bonded labour and trafficking in SMEs in the IT industry and larger companies in plantations are shocking and must be addressed.”

“Companies should focus on material stakeholder issues, address them consistently and avoid ‘one-off’ events,” says Williams.

Materiality is the key here. Malaysian companies need to take a hard look at the real impacts of their business and tailor a response in consultation with stakeholders if they want to establish their credentials as responsible businesses.

 

 



Related Reads

comments powered by Disqus