YBhg Tan Sri Zarinah Anwar
Securities Commission Malaysia & Chief Judge of the Awards
StarBiz-ICR Malaysia Corporate Responsibility Awards 2009
Friday, 5 March 2010
Nikko Hotel, Kuala Lumpur
His Royal Highness Raja Nazrin Shah, the Crown Prince of Perak Darul Ridzuan
Yang Berbahagia Dato’ Johan Raslan, Chairman of Institute of Corporate Responsibility Malaysia
Yang Berbahagia Datin Linda Ngiam, Group Managing Director and Chief Executive Officer of Star Publications (Malaysia) Berhad
Ladies and gentlemen
First of all, allow me to express my appreciation to The Star, ICR Malaysia and their working partners, ACCA, PwC and SIDC for organising the StarBiz-ICRM Corporate Responsibility Awards that has contributed to raising the visibility of CR as a result.
For the second year running, I am honoured to be part of a distinguished panel of judges tasked with selecting the winners for these Awards.
The last few years have seen an increased awareness and understanding of CR in Malaysia. This has been the result of a number of factors including the efforts of Bursa Malaysia with its mandatory CR reporting; as well as corporate Malaysia’s drive to improve business practices in order to remain competitive and address pressing sustainable development issues such as climate change. In the 2010 Budget, the Prime Minister provided a further boost to the CR agenda by announcing a RM1.5 billion fund to provide soft loans to companies that supply and use green technology.
All of these developments augur well for corporate Malaysia, but the truth is, we are merely beginning in our journey to make CR a strategic priority for companies in this country. Increasingly with growing awareness, CR is no longer perceived as a public relations exercise or an optional extra as a recent study by Edelman, a leading global independent PR company shows. In its 2009 goodpurpose survey involving 6,000 respondents in 10 countries, Edelman found 66% of people say that it is no longer enough for businesses to give money to causes; they want good causes integrated into the daily operations of the business. This is a very encouraging finding as it supports our view that CR is much more than philanthropy: it is not about what a company does with its money once it has made it; it is about how it makes its money. Few companies can choose to ignore this finding if they want to thrive in the new business environment and so boards will have to focus more on how they do business.
On the local front, the growing awareness of CR has given rise to a number of different awards that seek to recognise companies with best practices, and to encourage other companies to emulate such leaders. It is important for us to be able to distinguish the value that each of these awards brings to raising the bar of Corporate Responsibility in Malaysia.
The StarBiz-ICRM Corporate Responsibility Awards are uniquely positioned as a private sector initiative that is supported by the Securities Commission and Bursa Malaysia.
The Awards focus on how well a company demonstrates its understanding of CR throughout its business operations rather than looking at specific projects or initiatives. They view CR as part of a company’s strategy which then influences its business directions and decisions is embedded throughout its business functions. The Awards also emphasise CR performance, not just the extent to which the companies disclose CR practices in their reports.
I will return to this point about reporting and disclosure later.
How were companies screened?
Let me now move on to the Awards themselves and the process of screening and judging.
The Awards categories are the same as last year: companies were divided into 2 market capitalisation segments (above RM1 billion and below RM1 billion) with 4 awards in each segment, namely, Marketplace, Workplace, Environment and Community. At the first stage, all public listed companies were requested to fill in an online survey which assessed a broad level of CR across the company. There were over 330 responses. Bursa Malaysia also sent a letter of support strongly encouraging companies to fill in the survey to assist in assessing the level of CR in Malaysian PLCs.
The bar was raised this year in that although we largely focused on the same criteria as in 2008, the Awards committee specified that all shortlisted companies must achieve a minimum performance across all of the four CR dimensions measured – Marketplace, Workplace, Environment and Community. This means that a company could not win an award for the Environment category, for example, if it did not demonstrate that it had fulfilled certain criteria, met certain threshold in the marketplace, workplace and community categories as well.
Screening of these online submissions was based on both quantitative and qualitative scoring, evaluating the quality and relevance of the responses. Companies were then shortlisted based on a qualitative review of responses and available documentation.
Of the 330 plus companies that submitted, 20 were shortlisted for consideration by the panel of judges. The shortlisted companies chosen demonstrated strong performance in all four aspects of CR, and outstanding performance in at least one area.
You will note that 11 of the shortlisted companies are in the above RM1billion category, as submissions from this group were particularly strong, and each of the shortlisted companies deserved consideration for the awards.
The panel of judges then assessed these 20 shortlisted companies for evidence to prove they had addressed material issues, demonstrated responsiveness to stakeholders, shown accountability through communications, and provided leadership in setting an example for other companies to emulate.
What can we learn from the overall results?
As in 2008, there is a clear distinction between the two groups of companies. In the group with market capitalisation above RM1 billion, 70% of companies achieved a score of more than 50%. In the group with market capitalisation below RM1 billion, only 22% achieved this score. However, the number of high scorers in both categories has increased, pointing to the emergence of more CR champions among both the large and medium-sized companies.
Let me now say a few words on what we have learned from the companies’ responses in each of the four dimensions:
In the Marketplace category, most companies have satisfactory formal corporate governance structures, in line with the Bursa Malaysia Corporate Governance Framework. Most companies also have ethics policies, but there was little evidence of monitoring and enforcement of these policies. It is interesting to note that supplier requirements in the form of environmental specifications appear to be increasing.
Most companies included some reference to the Bursa Malaysia CSR framework in their annual reports. However, only a handful of companies published data or targets, used external guidelines such as the Global Reporting Initiative, or published CR-related policies on their websites.
In the Workplace category, training and development remains a strong area for Malaysian companies. Most companies have structured and extensive training in place for employees. However, basic workplace policies are still weak. A large majority of companies have no policies beyond overtime pay and the policies that do exist – for example on non-discrimination, do not seem to be implemented proactively. Approximately half of the companies surveyed address Occupational Health and Safety issues at the workplace. However, as with environmental performance, there appeared to be no real connection between the risks involved in the activities of the company and efforts made in this area to mitigate them, so there is a lot of room for improvement.
There seems to be higher awareness on Environment, perhaps attributed to increased global discussion and pressure on climate change issues. Although still in the minority, the number of companies setting environmental targets is on the rise. However, there appears to be little correlation between sector impact and environmental performance. A surprising number of companies in the manufacturing, construction and property development industry did not have an environmental policy, and most banks responded ‘not applicable’ on environmental impact questions – which surprised us, since in many countries bank lending is made conditional on social and environmental performance through banks adhering to the universally accepted Equator Principles. On the other hand, technology companies and telecommunication companies scored relatively well. So did the plantation sector, which is most encouraging given the international stakeholder pressures on how palm oil is produced.
Finally, in the Community category, many companies made donations in the form of cash and in-kind benefits to charities while also encouraging volunteering. However, only a small group measured the impact of their donations or related these to National Development Goals or the UN Development Goals. Only a small number of companies engage with local communities on the impact of their operations.
Reporting and disclosure
With these observations on the performance of the companies in mind, I would now like to make some important points about reporting and disclosure.
With the demand for greater accountability and transparency, the ability of a company to report on its activities to its stakeholders is an invaluable and essential part of its corporate responsibility.
New legislation and voluntary standards are continually being introduced to ensure companies are made accountable for their impact on the environment and society. Communicating this accountability to stakeholders is important, and companies should all be looking to report on how CR is being integrated across the company.
In the judging process, the panel of judges were looking for evidence of a company’s CR claims, which were often stated in a general manner. If detailed evidence cannot be easily found in an annual or sustainability report, how will stakeholders be informed of the company’s responsible business practices? In the Environment category, for example, reporting was generally poor, with a lack of data on targets and improvements. If a company is already undertaking initiatives in this area, they should report in greater detail, supplementing the reports with statistics as far as possible.
Companies also need to focus on reporting year-on-year improvements. Many companies continue to report on projects previously undertaken instead of looking at new initiatives or those that have emerged during the year. In the reporting, it is also important to make a distinction between what the company has actually achieved as opposed to what the company intends to do.
Once a company produces a sustainability report, working with an independent assurance provider will greatly enhance the credibility of the report. It provides for an objective view for the verification of data and claims contained in the report. However, it must be emphasised that the assurance or verification process should be kept separate from the actual writing and documenting of the report, in order to keep it independent and free from bias and conflicts of interest. To put it more clearly, the same consultant that helps you write the report should not be engaged to verify the report.
One final comment: while the number of submissions for the survey and awards this time around was considerable at 330 plus companies, a significant number of PLCs did not take part including some companies with established and commendable CR practices.
I urge all PLCs especially those with a good CR record to participate in these awards in the future since their participation will contribute to raising the CR standards in corporate Malaysia through the sharing of best practices.
In conclusion, let me commend all those companies which made the shortlist and congratulate all winners of the StarBiz-ICR Malaysia CR Awards 2009.
I would also like to thank my fellow judges, Dato’ Yusli Yusoff, Dato’ Kok Wee Kiat, Datuk Peter Wentworth and Professor Carol Adams for their commitment to the judging process-for their hard work, insights and cooperation. It has been a great pleasure working with them. I would also like to point out that Dato’ Kok Wee Kiat who is a director on the board of Alcom, one of the shortlisted companies, abstained from the scoring process wherever Alcom was considered for an Award.
My appreciation once again to The Star and ICR Malaysia for organising these important Awards.Your Royal Highness, ladies and gentlemen, thank you very much for your attention.