Ensuring #Sustainability to #Future-proof Business: From #ShareholderPrimacy to #StakeholderCapitalism

To what extent are Malaysian listed companies focused on long-term shareholder value and societal goals instead of short-term financial results? Are these listed entities leveraging corporate social responsibility (CSR) and sustainability agendas merely to enhance their brand equity, publicity and to build stakeholder relationships? Or are they strategic or transformative in their approach to managing their businesses sustainably? To better understand the landscape, I embarked on analysing the CSR and sustainability reports of Malaysia’s top 25 listed companies.

The evidence was both encouraging and enlightening. Encouraging because, Malaysian listed companies seem to be evolving in their understanding of how transformative CSR and its principles of creativity, scalability, responsiveness, glocality and circularity can be integrated into their business, thus taking them through radical strategic changes.

Enlightening on the other hand because many listed companies have yet to transition towards transformative CSR, which is all about identifying and tackling the root causes of our present unsustainability and irresponsibility.

This can be achieved by innovating business models, revolutionising their processes, products and services as well as lobbying for progressive national and international policies. All this would mean contributing to the nation’s transformation.

Notable cases

Nestle began in Malaysia way back in 1912 and over the years, it has demonstrated creativity, responsiveness and circularity in designing and implementing its sustainability roadmap. For instance, Nestle (M) Bhd boasts Malaysia’s biggest Halal Centre, while overseeing over 500 products to meet the needs of consumers.

All of Nestle Malaysia’s factories have a zero landfill status, which simply means effective waste and resources management. The multinational company is committed to long-term thinking in dealing with health-related issues such as obesity and mal-nutrition through sustainable intervention programmes with schools.

Moreover, Nestle’s innovative farming techniques are intended to reduce emissions and efficient use of resources such as water. Not only is the global brand aligning their CSR agenda with their core business, but they are committed to addressing specific social, environmental and ethical dilemmas, working in partnership with multiple stakeholders.

Indeed, global brands such as Nestle do have the resources and capability to drive change and influence behaviour, an essential element to build a community of responsible citizens committed to creating a sustainable world. They can set an example for local companies seeking guidance and successful models of implementation.

Another model organisation is Axiata Group Bhd, which continues to set an example on how organisations can be both strategic and transformative in their CSR approach through creating digital ecosystems and supporting the national agenda of digitisation.

The Malaysian multinational company is continuously changing its business model by looking at renewables, by reaching out to the rural population, and through their green base stations, which generate electricity for off-grid villages.

I have also studied some leading banks, which are completely charitable in their approach, focusing mostly on community involvement and development through ad-hoc projects and campaigns.

My view is that they need to look at (i) strategic philanthropy (i.e. by focusing on areas related to their business) and (ii) supporting venture philanthropy (i.e. by investing in social enterprises or financial technology which could introduce innovative and affordable financial/banking solutions to tap the unbanked population of Malaysia).

Most recently, I stumbled into a leading multinational enterprise, which is involved in recycling campaigns but only to raise money for other charitable initiatives, rather than looking at it as a ‘circular economy solution’ which can help evolve their business model/s while promoting green consumerism.

Despite some limitations, there are many inspiring success stories on how listed companies are emerging as a powerful and influential force, garnering positive consumer response in terms of participation and action for championing various sustainability causes of the nation – from green lifestyles to fair labour standards and equitable income distribution; from gender equitability to inclusive healthcare; from universal design and infrastructure to environmental protection and conservation.

Significant contributions on these causes would help accelerate development and transformation of the nation, too. However, there are also some fundamental issues on how listed companies perceive or fit sustainability/CSR into their bigger scheme of business:

  • Beyond compliance and publicity gains, listed companies may not appreciate the value of investing in a sustainability roadmap with transformative CSR elements and solutions.
  • Listed companies continue to struggle with their ‘short-term’ approach to creating profits and shareholder returns, even when investor community, regulators and even market forces continue to emphasise on the need for socio, economic and environmental performance of organisations.
  • Sustainability and CSR continue to be driven by public relations experts or corporate communication departments which also limit their application in the context of business. Hence, sustainability and CSR are seen as cost centres and tools for promotional/reputational purposes without much practical value for long-term business growth.
  • The C-suite and the key management of listed companies may not necessarily have the right orientation on sustainability and its transformative, progressive and innovative solutions for business.
  • Listed companies may be motivated by awards, visibility and stakeholder relationships, rather than designing long-term CSR/sustainability strategies and blueprints with a transformative agenda.
  • CSR and sustainability are not supported by in-depth third-party assurance which should ideally be a multi-stakeholder/expert panel rather than a large accounting firm. The objectives of third-party assurance must shift from ‘winning awards’ to ‘critical analysis of their CSR and sustainability strategies’, thus helping Malaysian listed companies to break free from their syok sendiriattitude.

A good revelation is that Malaysian listed companies need to take stock of their sustainability journey by conducting a one-time self-assessment of their CSR maturity, their organisational DNA in context of their CSR goals and of course, their preparedness to adopt/embed the principles of transformative CSR.

Irrespective of their main drivers (awards, publicity, social good, environmental integrity, shareholder returns, profits , investor value, etc), what is essential is to acknowledge the need to slowly evolve and transition from traditional CSR efforts towards transformative CSR, which will allow companies to future-proof their businesses, grow sustainably and also meaningfully contribute to the development agenda of the nation.

I see Malaysia at the cusp of transformation, which might fetch the country a ‘developed’ economy status by the year 2020. However, the role of corporate citizens alongside the Government is extremely critical in shaping both the agenda and the outcomes of this process of transformation.

While, it has been an endeavor to keep welfare of the citizens at the very centre of Malaysia’s new economy model (NEM), it is crucial – as the first step – for businesses to define what this ‘welfare’ means to their organisations and their stakeholders as well as in the bigger context of development.

This in itself could be a new beginning to define and articulate CSR & Sustainability vision and mission statements.

Kishore Ravuri is a certified sustainability reporting specialist and a certified CSR2.0 assessor and advisor.