Keynote Address


YBhg. Dato’ Zarinah Anwar,
Chairman, Securities Commission

at the

UNDP/ICR Malaysia Corporate Social Responsibility Conference

23 August 2007
Conference Hall, Securities Commission

Raising the Bar

Dr Richard Leete, UNDP Resident Representative for Malaysia, Singapore and Brunei

Mr Tay Kay Luan, Secretary of the Institute of Corporate Responsibility, Malaysia

Our Distinguished speakers for today,

His Excellencies, Ladies and gentlemen,

Good Morning.
1. On behalf of the Securities Commission, I would like to welcome all of you to this Conference. I am delighted to see such a good turnout today, testimony of your commitment and support of the CSR agenda.
2. The SC is privileged to have the opportunity to once again collaborate with the UNDP and the Institute of Corporate Responsibility, Malaysia (ICRM), in organising this Conference. Both these organisations have been playing an active role in promoting CSR in Malaysia. You have heard from both Dr Richard Leete and Tay Kay Luan about the numerous partnerships and workshops that are spearheaded by the UNDP Malaysia and the Institute to raise awareness of CSR locally and enhance understanding of its component parts.
3. This year’s Conference on “Raising the Bar” is most timely, following the success of last year’s conference in creating a greater understanding of what CSR is all about.
4. Let me take a few minutes to review the progress we have made in CSR in Malaysia. CSR is a journey and not a destination; thus we can see that its component parts may change over time.
5. Since our last conference, I am glad to say that much has been achieved. A quick stock take highlights the establishment of the Institute of Corporate Responsibility Malaysia, the development of Bursa Malaysia’s CSR framework, the increasing recognition of the ACCA’s Malaysian Environmental and Social Reporting Awards (MESRA), and the launch of the Silver Book by Khazanah. Last and certainly not least is the requirement in the 2007 Budget for companies tendering for government contracts to report on their CSR initiatives, and for listed companies to have a section in their annual report on their CSR activities by the end of 2007. As a result, Malaysia has established a clear leadership position on CSR in the region.
Ladies and gentlemen
6. Over the last few years, we have seen a discernible and growing trend for investment preferences to be increasingly geared towards ethical or socially responsible investment in line with personal moral, ethical and religious values. In Australia for example, managed socially responsible investment portfolios grew by 56% during the 2006 financial year from $7.67 billion to $11.98 billion.1 In Europe, there are 388 green, social and ethical funds as at 30 June 2006 compared to 280 funds in 2001.2
7. The availability of social and environmental reporting indices such as the Dow Jones Sustainability Index or MESRA here in Malaysia have enabled more investors, institutions and fund managers to focus their investment strategies on the benefits of socially and environmentally responsible investing. This in turn serves as a catalyst for companies to adopt and disclose their CSR policies and performance, which as I mentioned earlier is now required for government contracts and will be required for listed companies.3 When CSR is embedded in corporate strategy it promotes sustainability of business, enhances brand image and reputation, improves financial performance and enhances the ability of companies to attract and retain a quality workforce.
8. Perhaps it is worthwhile for us to take a few moments to fully appreciate what is meant by CSR.
9. CSR consists of three parts: first – WHAT business a company chooses to do – whether it is good or bad for its customers and society; second – HOW it chooses to do business, responsibly or not; third – WHAT it does with the profits it makes.
10. It is important to recognise that the way society assesses each of these elements of CSR changes over time. Society’s acceptance of business practices or even of the business purpose itself cannot be taken for granted. Understanding this simple point lies at the heart of the CSR agenda. Only when companies recognise this can they embed CSR into their strategies rather than treating it as PR whitewash.
Perhaps a couple of examples will amplify what I mean.
11. First is the nature of the business itself: for example, electricity generation is essential for life as we know it today; without it, there would be no power, lighting or air conditioning. Power companies in the past did not have to worry about the acceptability of their business – it was so obviously socially desirable. Yet, as our understanding of the environmental effects of power generation and its use grows, so have the questions involving the coal, oil and gas companies who provide the energy to the utility companies; so have the questions involving the utilities who turn it into electricity and lastly so have the questions involving the users of electricity themselves. Given the growing understanding of the potentially harmful impact of these operations on the environment, such companies can no longer assume the sustainability of their business on the mere premise that their products are desirable; but they have to work harder to justify what they do and how they do it.
12. My second example is about how business is done: today, no one any where in the world would think it is acceptable to have eight-year-old children pulling coal carts a mile underground. Yet in early nineteenth century Britain this was regarded as a perfectly normal working practice. We only need to remember the uproar Nike faced when it was revealed that Pakistani children of the same age were making footballs – a much less dangerous activity! Thus what was acceptable business practice yesterday is not acceptable today, and what is acceptable today may not be acceptable tomorrow.
13. Thus the need for businesses to continuously examine what they do and the impact of what they do on the environment and the community they operate in.
Ladies and gentlemen
14. As we can see, CSR is not just about philanthropy. It is not just about the quantum of donations each company makes a year or the number of conservation projects it finances but more importantly, it is about how the organisation integrates responsible and ethical practices in all aspects of its operations, including ensuring that its business practices do no harm to the environment and the organisation contributes towards the development of capacity within a community to facilitate long term sustainability.
15. The Nobel Peace Prize winner, Professor Mohamed Yunus, the founder of the Grameen Bank explained recently, that a charity or philanthropic dollar only gets used once, whereas a capacity building dollar gets recycled again and again, reflecting the ancient wisdom that if you give a poor man a fish to eat, he will benefit from eating it once, but if you teach him how to fish he will benefit all his life.
16. It is encouraging therefore to note the efforts of for example a food product company that provide education to the rural poor on how to grow chillies, and then buy the chillies from the farmers to make the chilli sauce that the company produces. Through education, this company has managed to equip the rural poor with life long skills, help to eradicate poverty and upgrade the living standards of the poor. This is a modest effort at capacity building – it does not involve a large outlay, but yields tremendous and far reaching results.
Ladies and gentlemen
17. CSR should not be just a box-ticking exercise in fulfilment of legal requirements but one that reflects strategic priorities. A well designed CSR framework takes into account economic, social and environmental considerations throughout the decision making process.
18. It has become a primary force in our companies and the society we live in. Those who choose to ignore it will ultimately face sanctions from their clients, business associates, shareholders and the world at large. They will lose their ‘licence to operate’.
19. In a world where talent is increasingly scarce and able to freely move across borders, it becomes ever more important that companies are well regarded, lest they lose their best people and fail to attract new talent needed to stay competitive.
20. I would also like to stress the relationship between Corporate Governance and CSR. Both share more fundamental similarities than differences. As far back as 1999, Malaysia’s High Level Finance Committee Report on Corporate Governance had defined corporate governance as “the process and structure used to direct and manage the business and affairs of the company, towards enhancing business prosperity and corporate accountability with the ultimate objective of realising long term shareholder value, whilst taking into account the interest of other stakeholders.”
21 Corporate governance and CSR both reflect the organisation’s conscience, its corporate and social conscience. It is tempting for companies to ignore their social conscience, but the costs of so doing are high. For example, the fast food giant that we are so familiar with, McDonalds, was plagued with bad press and expensive lawsuits for causing obesity resulting in a drop in its share price. McDonald’s re-looked at the way it ran its business. It moved from “greasy fingers to green fingers”4 with the introduction in 2003 of salads to its menu and this year, encouraged its customers to lead a balanced lifestyle. Its sales increased and its share price bounced back following from this.5
22. The message here is that both corporate governance and CSR are associated with enhanced company reputation, risk management and sustainable business. Both are in fact central to successful business strategy and must therefore be taken seriously.
Ladies and gentlemen,
23. This year we need to “raise the bar” in our efforts to embed CSR in our organisations. The SC will continue to play our role in driving the promotion of CSR in the Malaysian business environment and steering PLCs towards making CSR a core part of their business strategy. We support the efforts of all parties in moving the CSR agenda forward and I would urge all present today to raise the bar on CSR in your own companies.
24. I hope that after this Conference, we will indeed walk away able to take CSR to the next level.
On this note, I bid you a productive session ahead.

Thank you.

1 The 6 th Annual SRI Benchmarking Study – September 2006, http //www.sustainablefuture.
2 Avanzi SRI Research, ” Green, Social and Ethical Funds in Europe : 2006 Review” September 2006
3 Thomas Clarke and Marie dela Rama, ” The Impact of Socially Responsible Investment upon Corporate Social Responsibility” Ashgate, “Perspectives on Corporate Social Responsibility”
4 Marianne Barriaux, ” McDonald’s goes green- but not all customers are lovin’ it’ in” BBC News 5 July 2007
5 ibid.