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Corporate Social

Responsibility

Contents
Introduction 2 10
Speeches 11 78
CSR Conference
Breakout Group Findings 79 88
Survey Findings 89 108
Participants List 109 113
Conference Programme (21 22 June 2004)
DAY ONE: MONDAY, 21 JUNE 2004 11.30 a.m. 2. The International Banking
Perspective
9.00 a.m. Registration
Mr Zarir J Cama
9.30 a.m. Welcome Address Chief Executive Officer
Dato Md Nor Yusof HSBC Bank Malaysia Berhad,
Chairman Malaysia
Securities Commission, Malaysia
11.50 a.m. 3. The NGO Perspective
9.45 a.m. Opening Remarks Mr David Halley
H.E. Bruce Cleghorn Head of International
British High Commissioner Development
to Malaysia Business in The Community
United Kingdom
10.00 a.m. Keynote Address:
The Role of CSR in Achieving 12.10 p.m. Question & Answer
Vision 2020
12.30 p.m. Lunch
YAB Dato Seri Najib
Tun Abdul Razak 1.45 p.m. The Islamic Perspective on CSR
Deputy Prime Minister
Introductory Remarks by the
of Malaysia
Chairperson:
10.30 a.m. Refreshment Break Islam and Ethical Business
Practices
Session 1: Why CSR Matters
Chairperson:
11.00 a.m. Introductory Remarks
Datin Zarinah Anwar
by the Chairperson
Deputy Chief Executive
Chairperson: Securities Commission, Malaysia
Datuk Ali Abdul Kadir
Speakers:
Senior Adviser
Ernst & Young 2.00 p.m. 1. Islam and Social Capital
Lord Amir Bhatia
Speakers:
Founding Chairman
11.10 a.m. 1. The International Business The Forbes Trust,
Perspective United Kingdom
Dr Gary W Dirks
2.20 p.m. 2. Islam & Human Capital
Group Vice President,
Including the Role of Women
BP President and CEO
Professor Haleh Afshar
BP China
Department of Politics and
Centre for Womens Studies
University of York,
United Kingdom

2.40 p.m. Question & Answer


CSR: Creating Greater Competitive Advantage
Programme

Session 2: Getting CSR Right for 2020 Title: Setting the CSR Agenda,
Now 2020: Role of
3.00 p.m. Introduction to Topic and
Religion, Society and
Breakout Groups
Business
Mr John Zinkin
Venue: Breakout Room 3
Associate Professor
Nottingham University Business Facilitators:
School
1. Lord Amir Bhatia
Malaysia Campus
Founding Chairman
3.30 p.m. Refreshment Break The Forbes Trust,
United Kingdom
3.45 p.m. Breakout Groups:
Title: Sustainable Development: 2. Dr Zainal Abidin
Getting to 2020 bin Abdul Majeed
Venue: Breakout Room 1 Chairman
Business Ethics Institute of
Facilitators:
Malaysia (BEIM), Malaysia
1. Datuk Peter Wentworth
Title: Achieving Vision 2020:
Chief Executive Officer
Making the Most of
BP Malaysia
People
2. Mr John Zinkin Venue: Breakout Room 4
Associate Professor
Facilitators:
Nottingham University
Business School 1. Mr John Coverdale
Malaysia Campus Executive Director and Deputy
Chief Executive
Title: Looking After the
HSBC Bank Malaysia Berhad,
Environment:
Malaysia
Now 2020
Venue: Breakout Room 2 2. Encik Tajuddin Carrim
Head, Group Human
Facilitators:
Resources and Administration
1. Mr Chew Seng Choon Bursa Malaysia Berhad,
Chairman, Environmental Malaysia
Management Sub-Committee
5.30 p.m. End of Day One
Business Council
for Sustainable Development 7.30 Reception Hosted by British High
in Malaysia 9.30 p.m. Commission

2. Dr Calvin Loh Chi Leong


Executive Director
Malaysian Nature Society

CSR: Creating Greater Competitive Advantage


Programme

DAY TWO: TUESDAY, 22 JUNE 2004 11.25 a.m. Special Address:


CSR & SRI: The Way Forward
9.00 a.m. Special Address:
for Malaysia
Islamic Finance and CSR
YB Tan Sri Nor Mohamed Yakcop
Mr Iqbal Khan
Second Finance Minister,
Chief Executive Officer
Malaysia
HSBC Amanah Finance, Dubai
Session 4: Feedback from
9.45 a.m. Refreshment Break
the Breakout Groups
Session 3: Corporate Governance
11.55 a.m. Chairperson:
and Socially Responsible
Mr John Zinkin
Investing (SRI)
Associate Professor
10.00 a.m. Introductory Remarks by the Nottingham University Business
Chairperson School
Malaysia Campus
Chairperson:
Dato Johan Raslan Closing
Executive Chairman designate
1.00 p.m. Closing Remarks
PriceWaterHouseCoopers
Datin Zarinah Anwar
Malaysia
Deputy Chief Executive
Speakers: Securities Commission, Malaysia

10.10 a.m. 1. SRI from the CG Perspective 1.10 p.m. End/Lunch


Dr Tauni Brooker
Director and Chief Executive
Officer
ORM2, United Kingdom

10.30 a.m. 2. SRI and CSR


Ms Melissa Brown
Executive Director
Association for Sustainable
and Responsible Investment
in Asia (ASrIA), Hong Kong

10.50 a.m. 3. SRI and Syariah principles


Dr Mohd Daud Bakar
Member, Syariah Advisory
Council
Securities Commission,
Malaysia

11.10 a.m. Question & Answer

CSR: Creating Greater Competitive Advantage


The purpose of the conference was to raise awareness of CSR among a key constituency the
directors of Malaysian public listed companies and to help improve understanding of how companies
could act in socially responsible ways as part of their role in delivering the promise of Vision 2020.
In addition, the conference was designed specifically to highlight the convergence of ideas about
CSR and the principles of Islam.

The first session therefore focused on why CSR matters with speakers representing the
commercial, financial and community perspectives. Following lunch on the first day these business
perspectives were reconciled with those of Islam particularly with reference to the importance of
strengthening both social and human capital.

The second session was designed to help delegates think about how best to be socially responsible
in practice. As a result, breakout groups were asked to identify key issues and recommend ways of
dealing with them so that the agenda can be moved forward.

The third session was designed so that the investor perspective could be brought to bear on issues
of social responsibility. The focus of this session is on socially responsible investing and its reconciliation
with familiar concepts such as corporate governance and syariah investment principles.

In addition, the keynote address by the Deputy Prime Minister of Malaysia and the special address
by Finance Minister II provided the political framework to the conference determining the context
and urgency of progress in the area of corporate social responsibility.

CSR: Creating Greater Competitive Advantage


2 Introduction
The Securities Commission and the British High Commission in Malaysia hosted a conference
sponsored by BP and HSBC entitled Corporate Social Responsibility: Creating Greater Competitive
Advantage at the Securities Commission in Kuala Lumpur from 2122 June 2004. Around 170
people from the boards of public listed companies attended it. A full list of participants and the
conference programme is at Annex A.

We were particularly privileged to have participation at the conference by two senior Ministers of
the Malaysian government: YAB Dato Sri Najib Tun Abdul Razak (Deputy Prime Minister of Malaysia
and Minister of Defence) and YB Tan Sri Nor Mohamed Yakcop (Second Finance Minister). This was
a clear signal of the importance attached by the Malaysian government to this issue.

It was a breakthrough conference because of the importance given to CSR by Dato Sri Najib Tun
Abdul Razak in his capacity as Deputy Prime Minister and by Tan Sri Nor Mohamed Yakcop in his
capacity as Second Finance Minister for both speakers regarded CSR as an integral part of
achieving Vision 2020, which remains the strategic roadmap for Malaysia. In addition, CSR makes
good business sense a fact pointed out by both Ministers and endorsed by a number of speakers.
What also became clear during the course of the conference is that CSR fits beautifully with an
Islamic view of society it is not a western invention; it reflects values and principles that have been
central to Islam since the time of the Prophet himself (PBUH). Finally what emerged was that it is
also an essential part of effective Risk Management.

This workbook on Corporate Social Responsibility (CSR) is designed to follow on from the conference
and to represent a further contribution to the debate on CSR in Malaysia and beyond. It is being
distributed to all participants at the conference.

Conference Overview
In welcoming the participants to the conference, YB Dato Md Nor Yusof, Chairman of the Securities
Commission highlighted the fact that profit maximisation is no longer the sole consideration in
ensuring business sustainability. Stakeholders are now becoming more discerning especially with
regard to the impact of businesses products and services on the environment, the local communities
as well as their relationship with their employees. As a result there is an increasing awareness
among businesses of the need to focus beyond compliance with laws in order to respond to the
dynamic economic, societal and environmental changes.

The Securities Commission believes that the promotion of good corporate social responsibility is
essential especially in enhancing the Malaysian capital market. As it is still a nascent field in
Malaysia, it is important for regulators and businesses alike to equip themselves with contemporary
knowledge of the subject in order to manage the evolving challenges. This requires frequent
assessment of the available approaches to corporate social responsibility as well creating continuous
awareness of the latest developments in this field.

CSR: Creating Greater Competitive Advantage


Introduction 3
In his opening remarks to the conference, Bruce Cleghorn, the British High Commissioner to
Malaysia, emphasised how the British Governments strong historical links with Malaysia in
particular and the region in general provided good foundations for Britain to contribute to this
dialogue. Extensive connections already exist in areas such as defence/security co-operation,
science and technology, business, education and the legal profession and both countries are
important trading partners.

Given the debate about the effects of globalisation, the High Commissioner felt it was timely to begin
a dialogue on the civil society issues it creates. These issues are rising rapidly up the agenda both
in Malaysia and in the region and are areas in which Britain has some experience. In recent years,
the British Foreign and Commonwealth Office has become increasingly conscious of the importance
of CSR to its foreign policy objectives because the:

n Behaviour of businesses internationally has a major impact on global stability, prosperity and
efforts to achieve a better quality of life for all;

n Conduct of British businesses has an impact on Britains international image; and

n By helping to ensure private sector activity works to the benefit of all concerned, good CSR
practices can help ensure trade and investment are a positive force for sustainable development
in a globalised world.

As a result the UK has been at the forefront of a number of global CSR initiatives:

n In March 2004 the government announced a draft international strategic policy framework and
invited comment from companies, NGOs and other interested parties.

n UK shows strong support the OECD Convention on Bribery, which makes it illegal for UK
registered companies and individuals to bribe someone overseas.

n The Extractive Industries Transparency Initiative, launched in London in June last year with wide
international support aims to promote a fairer distribution of wealth by achieving greater
transparency over payments by oil, gas and mining companies to host governments in countries
heavily dependent on these resources. Guidelines have been agreed and will be tested in Nigeria,
Ghana and Azerbaijan.

The High Commissioner explained that CSR is an area where the UK is regarded as a world leader
not just because of government policy, but also because British companies generally are regarded as
good performers by international standards. British multi-nationals, like BP, Unilever, and HSBC are
recognised as trend-setters in developing CSR policies. Also it is an area where there is a vibrant
NGO community in the UK and many leading academics in CSR are British.
The High Commissioner went on to explain that the British Government endorses an approach to CSR
that is based on voluntary approaches by companies that go beyond the legal minima in an
atmosphere designed to create trust between stakeholders trust that leads to better business
results. In this way the philosophies adopted by both Malaysia and the UK are very similar.

CSR: Creating Greater Competitive Advantage


4 Introduction

The High Commissioner believed the conference would be successful in starting a dialogue between
Malaysia and the UK at a governmental, business and civil society level. The number of
participants and the rich mix of speakers from the Malaysian government, major British companies,
academics, leading Muslims and socially responsible investors giving their perspectives on the
importance of CSR, are evidence of this. He hoped it would lead to an increased awareness and
application of CSR principles, with Britain as the partner of choice in taking forward these important
and multi-faceted issues.

As became clear from the Deputy Prime Ministers speech, which followed next, there are three
reasons why Malaysian companies must become actively socially responsible: first, it is integral to
achieving the national vision and companies should be aligned with the objectives of Vision 2020;
second it makes good business sense; third, it is the Islamic way of doing business. The fourth
reason, that it is good Risk Management was established on the second day of the conference.

CSR Integral to Achieving Vision 2020

The Deputy Prime Minister reminded the audience of the central objectives of Vision 2020 of
achieving a society infused by strong moral and ethical values, democratic, liberal and tolerant,
caring, economically just and equitable, progressive and prosperous, and highlighted the fact that
enhancing the standards of corporate governance and business ethics were two of the five strategic
objectives of the National Integrity Plan (Pelan Integriti Nasional), to be achieved within the next five
years. He went on to say, It is interesting to note that three out of the nine challenges of Vision
2020 a moral and ethical community, a fully caring culture and an economically just society
perfectly reflect the principles of CSR. To achieve the first challenge of a moral and ethical society,
enterprises should embrace CSR best practices that help to maintain and raise ethical standards in
business decision-making. Enterprises that are conscious of CSR will not just consider their own
economic well-being, but also that of the society and environment in which they operate...
Enterprises that make significant contributions to the communities in which they operate whether
in the form of funds, skills training, employment or knowledge transfer, are in fact contributing to
equitable wealth redistribution.

Tan Sri Nor Mohamed Yakcop pointed out that in addition to the importance of CSR as part of
achieving Vision 2020, it was also an integral part of Malaysias implementation of Agenda 21 of the
United Nations Program for Action for Sustainable Development. In addition to the strides made on
the environmental front, Malaysia is a leader in corporate governance, which like CSR is about
ensuring effective Risk Management.

CSR Makes Good Business Sense

We should not mistake CSR practices as acts of charity or philanthropy. On the contrary, effective
adoption of CSR has the twin effects of improving both short term and long term corporate
performance, with these words the Deputy Prime Minister began his presentation of the business
case for CSR making it clear that CSR helps improve financial performance, enhance brand image
and an increases the ability to attract and retain the best workforce contributing to the market

CSR: Creating Greater Competitive Advantage


Introduction 5
value of the company by up to 30 percent. All of these translate into better client and customer
satisfaction, improved customer loyalty and ultimately into lower cost of capital as a result of better
Risk Management. Finally from a national standpoint, a good reputation for CSR will help Malaysian
companies compete in world markets by resolving the potential concerns end users may have in
developed markets.

The three speakers who talked about Why CSR matters endorsed this perspective. During the
question and answer session Dr Gary Dirks, Group Vice-President of BP made it quite clear that BP
takes CSR seriously because it believes that it is in its business interest to do so: CSR maintains the
Licence to Operate without which businesses cannot continue to invest and grow. Critical to this
approach is BPs belief in its economic purpose, demonstrated every day through the products and
services it provides millions of satisfied customers, creating high quality jobs for more than 100,000
people worldwide and yielding a good return on capital employed. In addition BP aims to do nothing
that brings either the role of government or the role of business into disrepute, for that is in nobodys
long-term interests. Mr Zarir Cama, Deputy Chairman and CEO of HSBC Bank Malaysia Berhad
argued forcefully that adhering to CSR matters and that from a lenders perspective the bank will
assess all major loan proposals for their environmental, ethical and social impact... We have
guidelines about companies to whom we will lend and with whom we will invest. So for HSBC, CSR
is both a source of its own competitive advantage, particularly with regard to ensuring its staff adopt
and live by the highest standards of integrity as well as a criterion against which it lends money,
making it important from a business perspective for seekers of bank finance. Finally, Mr David Halley,
Director of International Development, Business in the Community, pointed out it is a vital business
interest to ensure that the backstreets are prosperous so that the High Streets may flourish. Using
case studies from the UK he was able to show convincingly how businesses were able to turn social
problems into business opportunities by making sure that the communities within which they
operate are successful, just and prosperous.

CSR Enshrines Islamic Principles

In the end, the integrity of the company depends on the integrity of the senior individuals who run
it and it is this integrity that achieves the right strategic balance between stakeholders. This
perspective was reinforced strongly by Datin Zarinah Anwar, Deputy Chief Executive of the Securities
Commission in her introductory remarks to the session when she argued that failures of governance
are the result of personal ethics failures. Consequently regulators can provide a framework that
reinforces ethical perspectives, but they cannot in the end replace religion as the guiding light to be
shed on the ethical dimensions of issues. In this regard Muslims are fortunate as Islam does indeed
shed light on the ethics of business and prescribes ethically correct ways of doing business. In
particular Datin Zarinah appealed to the principle of unity to argue that all forms of discrimination in
the workplace or between suppliers and stakeholders is against Islam. Equally the concept of
balance: balance between stakeholders, balance between time horizons and balance between rich
and poor are fundamental to business behaviour as enjoined by the Quran.

CSR: Creating Greater Competitive Advantage


6 Introduction

More important still is the role of women in developing human capital, recognised as a key CSR
imperative. As Professor Haleh Afshar of York University argued so powerfully, for good women to
raise good women and men it is essential that all women have access to education, that they are
able to exercise their independent judgment and to come to considered decisions concerning their
lives and that of their family. Islam recognised this long before the West, and if women are
disempowered and disenfranchised it is not what Islam expects, but rather a distortion of patriarchal
agrarian societies, holding back modernisation and the growth of the knowledge economy. Professor
Afshar argued not merely is it important for the development of future human capital that women be
empowered, but because women are good negotiators, adept at multi-tasking and care, it is
essential that societies find the right work-life balance to enable women to participate properly in
the modern economy as well as in the home. Perhaps her most powerful argument was the finding
that, in the US, companies with senior women managers perform better than those without.

It is also interesting to note as did Lord Bhatia, Chairman of the Forbes Trust in the UK, that Islam is
pro-business. He went further to indicate that wealth is not owned in Islam, but held on trust for the
community at large. In addition, there cannot really be corporate social responsibility in the Islamic
sense, because in Islam, there is no limited liability and taxes are collected from individuals not
companies. Two quotes from his speech make the point well:

It is worth pausing here and to reflect on this profound message. Wealth is not defined as a
personal or corporate possession, but a something held in trust a persons claim on wealth is
transitory. Wealth, or call it capital or assets these are held by people in trust for the
community. Islam requires constant turnover of capital and discourages hoarding.

Islam does not allow a corporate entity to detach itself from the individual. There is no
limited liability, only unlimited liability in Islam. Under Islam, taxes should be collected
directly from individuals, instead of businesses.

This combined with the principle of Zakat makes it quite clear that CSR is an individual responsibility.

Although it seems there is a different moral imperative when looking at CSR through an Islamic lens,
this reconciles well with the fact that companies begin with the personal aspirations of their senior
management when they decide what it is they want to do, as John Zinkin, Associate Professor of
Nottingham University Business School, Malaysia Campus, pointed out by showing it is possible to
frame the issue of socially responsible behaviour in four separate but related ways:

n First, there are the personal aspirations and values of the senior management of the company.
These determine what the company WANTS to do;

n Second, there are the market opportunities, which dictate what the companys economic purpose
will be. These determine what the company MAY do;

n Third, there are the acknowledged obligations the company has to society the relationship it
has with the community within which it finds itself. These determine what the company OUGHT
to do;

CSR: Creating Greater Competitive Advantage


Introduction 7
n Finally, there are the competences of the company, which determine its sources of competitive
advantage. These determine what the company CAN do.

Furthermore, John Zinkin pointed out the UN Global Compact, which summarises the key dimensions of
CSR, mirrors Islams teachings as can be seen from the table below:

UN Global Compact What Islam Has to Say


Human Rights:
v Principle 1: Businesses are asked to v I have made oppression unlawful for Me and for you, so do not commit oppression
support and respect the protection of against one another.
international human rights within Shahih Muslim, Vol.3 No 6254
their sphere of influence; and
v help their brothers whether he is the oppressor or the oppressed i.e. if he is an
v Principle 2: make sure their own oppressor he should prevent him from doing it, for that is his help and if he is the
corporations are not complicit in oppressed he should be helped (against oppression).
human rights abuses. Shahih Muslim, Vol.3 No 6246

v O ye who believe! Stand out firmly for justice, as witnesses to Allah, even as
against yourselves, or your parents, or your kin, and whether it be against rich or
poor: for Allah can best protect both.
Quran Surah 4 verse 135

Labour:
v Principle 3: Businesses are asked to v Your employees are your brethren upon whom Allah has given you authority. So if one
uphold the freedom of association has ones brother under his control, one should feed them with the like of what one
and the effective recognition of the eats and clothe them with the like of what one wears. You should not overburden
right to collective bargaining; them with what they cannot bear, and if you do so, help them in their job.
Sahih al Muslim 3:4093

v Principle 4: the elimination of all v Allah, (SWT), says: I will be an opponent to three persons on the Day of Judgment:
forms of forced and compulsory One who makes a covenant in My Name, but he proves treacherous, One who sells
labour; a free person (as slave) and eats the price, And one who employs a labourer and
gets the full work done by him but does not pay him his wages.
v Principle 5: the effective abolition of
Sahih al Bukhari 3:2
child labour; and

v Principle 6: the elimination of v No Arab has superiority over any non-Arab and no non-Arab has any superiority
discrimination in respect of over an Arab; no dark person has superiority over a white person and no white
employment and occupation. person has any superiority over a dark person. The criterion of honour in the sight
of Allah is righteousness and honest living.
The Prophets Last Sermon

CSR: Creating Greater Competitive Advantage


8 Introduction

UN Global Compact What Islam Has to Say


Environment:
v Principle 7: Businesses are asked to v ... wear your beautiful apparel at every time and place of prayer: eat and drink: but
support a precautionary approach to waste not by excess.
environmental challenges; Quran Surah 7 verse 31

v Principle 8: undertake initiatives to v Never a Muslim plants a tree, but he has the reward of charity for him, for when it
promote greater environmental is eaten out of that is charity; what is stolen out of that, what the beasts eat out
responsibility; and of that, what the birds eat out of that is charity for him.
Sahih Muslim: 3764
v Principle 9: encourage the development
and diffusion of environmentally
friendly technologies.

Associate Professor Dr Mohd Daud Abu Bakar, Deputy Rector (Student Affairs and International
Development) of the International Islamic University of Malaysia explained how Syariah principles
affect an Islamic perspective of socially responsible investing. There are two levels of screening. The
first are those activities or companies which are deemed to be halal. Their exclusion is mandatory on
ethical grounds. The second are those activities which are treated as coming under the heading
Tayyib. Such activities are recommended for exclusion on quality grounds rather than being
mandated. Thus the halal consideration excludes any goods or services that include riba, gambling,
the manufacture or sale of non-halal products, conventional insurance, and any products or services
regarded as violating Syariah rules. The Tayyib filter rules out those activities that have passed the
halal test, but are regarded as being harmful to public order and international law, against customary
practice or the wishes of the community as a whole, of benefit to a minority at the expense of the
majority, where they create more harm than good (e.g. tobacco), where their halal standing is in
dispute, or finally where they could be regarded as violating the five divinely protected items religion,
life, intellect, dignity and property. From this discussion it could be seen that once again there is no
conflict between Islamic principles and CSR quite the reverse, they are mirror-images of each other.

CSR is Good Risk Management

As was made clear by several speakers, CSR recognises the importance of investing in man-made
capital to make the workplace safer, factories and infrastructure more productive and more
environmentally friendly. So it is about treating environmental issues with care and responsibility.
But it is also about ensuring the right investments are made in human capital, for this is the real
basis of wealth and social stability. And it is about making sure that societies are just and equitable,
that all stakeholders needs and interests are recognised. Failure in any one of these areas puts the
companys Licence to operate at risk. So CSR should be regarded as a form of long-term Risk
Management, with boards of public companies making informed trade-offs between different
stakeholders and different time horizons, lest they alienate any single group of stakeholders to the
point where the right of the business to exist is jeopardised. In addition as Dato Johan Raslan of
PriceWaterhouseCoopers and Melissa Brown of ASrIA argued socially responsible investment is

CSR: Creating Greater Competitive Advantage


Introduction 9
another form of Risk Management, protecting the market value of the company. In todays markets
where so much of the companys market capitalisation is in intangibles based on investor trust,
anything that damages that trust has disproportionate effects on the share price. As was pointed out
by Dr Tauni Brooker of ORM 2, Nikes mistakes cut its share price by 60%, Enrons failures by more
than 95%. Dr Brooker made the compelling point that Swiss Re, one of the worlds largest reinsurers
is now actively targeting companies affected by the climate change agenda by raising their directors
errors and omissions premiums if they are not satisfied with the actions they are taking now to
mitigate potential future effects of climate change.

CSR The Way Forward for Malaysian Companies

YB Tan Sri Nor Mohamed Yakcop, Minister of Finance II in his special address outlined that
Malaysian companies who are serious about incorporating better CSR practices into their business
activities should consider the following:

n Incorporating socially responsible values into strategic documents such as the mission and vision
statements and provide the tactical framework to enable its implementation;

n Adopting global CSR standards and to readily subject their socially responsible practices to audit
and disclosures;

n Enhancing workplace place practices to attract and retain the best resources; and

n Social and environmental labelling of products and services. These should also be able to be
independently audited.
Two quotes from the Deputy Prime Ministers keynote address in conclusion on why Malaysias
companies must be socially responsible going forward:

As business leaders, it is incumbent upon you to drive the adoption of good CSR practices. Global
developments show that large companies have been at the forefront of good corporate social
responsibility. I believe that with our emphasis on balanced development of growth with equity,
things should be no different here in Malaysia.On the contrary,we should in fact be leading the way

and

For Muslims, the concept of CSR is not something new as responsible investment is a religious
duty rather than choice.

Breakout Groups
As well as sessions in plenary, the conference also featured four breakout groups, dealing with the four
types of capital affected by CSR. Their discussions and findings form a separate section in the workbook.

Survey
The University of Nottingham carried out a survey of the participants levels of understanding of CSR.
Its findings form a separate section of the workbook.
CSR: Creating Greater Competitive Advantage
10 Introduction

Our Thanks
The Securities Commission and the British High Commission in Malaysia would like to thank all of
the following without whose assistance in preparing for and participation in the conference, we
would not have had such a successful event.

YAB Dato Sri Najib Tun Abdul Razak, Deputy Prime Minister of Malaysia
YB Tan Sri Nor Mohamed Yakcop, Second Finance Minster, Malaysia

All of Our Speakers:


Dr Gary W Dirks, Group Vice President, BP President and CEO, BP China
Mr Zarir J Cama, Chief Executive Officer, HSBC Bank Malaysia Berhad
Mr David Halley, Head of International Development, Business in the Community, United Kingdom
Lord Amir Bhatia, Founding Chairman, Forbes Trust, United Kingdom
Professor Haleh Afshar, Department of Politics and Centre for Womens Studies, University of York, United Kingdom
Mr John Zinkin, Associate Professor, Nottingham University Business School, Malaysia Campus
Mr Iqbal Khan, Chief Executive Officer, HSBC Amanah Finance, Dubai
Dr Tauni Brooker, Chief Executive Officer, ORM2, United Kingdom
Ms Melissa Brown, Executive Director, Association for Sustainable and Responsible Investment in Asia (ASrIA), Hong Kong
Dr Mohd Daud Bakar, Member Syriah Advisory Council, Securities Commission, Malaysia

All of Our Chairpersons:


Datuk Ali Abdul Kadir, Senior Adviser, Ernst & Young
Datin Zarinah Anwar, Deputy Chief Executive, Securities Commission, Malaysia
Dato Johan Raslan, Executive ChairmanDesignate, PriceWaterhouseCoopers, Malaysia
John Zinkin, Associate Professor, Nottingham University Business School, Malaysia Campus

All of Our Facilitators:


Mr Chew Seng Choon, Chairman, Environmental Management Sub-Committee, Business Council for Sustainable Development
in Malaysia
Dr Calvin Loh Chi Leong, Executive Director, Malaysian Nature Society
Lord Amir Bhatia, Founding Chairman, The Forbes Trust, United Kingdom
Dr Zainal Abidin bin Abdul Majeed, Chairman, Business Ethics Institute of Malaysia (BEIM)
Mr John Coverdale, Executive Director and Deputy Chief Executive, HSBC Bank Malaysia Berhad, Malaysia
Encik Tajuddin Carrim, Head, Group Human Resources and Administration, Bursa Malaysia Berhad, Malaysia

Our Sponsors: BP and HSBC


All conference participants for taking the time to attend conference sessions, and finally John Zinkin,
for his comprehensive editing of this workbook.

CSR: Creating Greater Competitive Advantage


Corporate Social
Responsibility

Speeches
12 Speeches
Welcome Address
by
YBhg Dato Md Nor Yusof
Chairman, Securities Commission
at the
Corporate Social Responsibility (CSR) Conference
CSR: Creating Greater Competitive Advantage
Securities Commission, Kuala Lumpur
2122 June 2004

YAB Dato Sri Najib Tun Abdul Razak, Deputy Prime Minister of Malaysia, His Excellency Mr Bruce
Cleghorn, British High Commissioner to Malaysia, distinguished guests and speakers, ladies and
gentlemen.

A very good morning and welcome to the conference on Corporate Social Responsibility. This event
is being organised in association with the British High Commission which is also a prime advocate
and proponent of the concept of CSR. We also wish to acknowledge the sponsorship of BP and HSBC
for this conference. Indeed the Securities Commission is privileged for this collaboration opportunity.

Ladies and gentlemen,

Business corporations are a vital element of the social fabric today. Profit optimisation is no longer
the main imperative for business sustainability. Outside stakeholders are taking an increasing
interest in the activity of the company what the company has actually done; good or bad, in terms
of its products and services, in terms of its impact on the environment and on the local communities,
in how it treats and develops its workforce. There is now a growing realisation among companies on
the need to focus beyond compliance with laws to responding to interrelated economic, societal and
environmental demands in the marketplace. Indeed over the next two days we will have the
opportunity to obtain a good insight of the concept of corporate social responsibility and how it could
in fact open up new opportunities for corporations to create greater competitive advantage. In this
regard I would like to take this opportunity to express our appreciation to our distinguished speakers
for sharing with us their expertise and experience on the subject of CSR.

Ladies and gentlemen,


The promotion of good corporate conduct is central to the function of the Securities Commission. We
believe it is an evolving challenge requiring continuous currency of approach and awareness. On that
note may I on behalf of the organisers extend our thanks and appreciation to YAB Dato Sri Najib for
his support and encouragement for this important conference. I join the rest of the audience in
looking forward to hearing Dato Sris address in a while.

Thank you.

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Speeches 13
Welcome Address
by
HE. The British High Commissioner
Bruce Cleghorn
at the
Corporate Social Responsibility (CSR) Conference
CSR: Creating Greater Competitive Advantage
Securities Commission, Kuala Lumpur
2122 June 2004

Yang Amat Berhormat Dato Sri Mohd Najib bin Tun Haji Abdul Razak, Deputy Prime Minister of
Malaysia; Dato Md Nor Yusof, Chairman of the Securities Commission, Tan Sri-Tan Sri, Dato-Dato,
Distinguished Guests, Ladies and Gentlemen.

It gives me great pleasure to join Dato Md Nor Yusof in welcoming the Honourable Deputy Prime
Minister to the opening ceremony of the Corporate Social Responsibility conference CSR: Creating
Greater Competitive Advantage, jointly organised by the Securities Commission and the British High
Commission and sponsored by HSBC and BP. The Deputy Prime Ministers presence today
demonstrates very clearly the importance the Malaysian Government attaches to the issue, and
I would like to thank him for so graciously agreeing to give the keynote address.

I also wish to offer my thanks to Dato Md Nor Yusof and Datin Zarinah Anwar and their staff at the
Securities Commission for their sterling efforts in organising and promoting this conference. I also
thank Datuk Peter Wentworth of BP and Mr Z Cama and Mr John Coverdale of HSBC for their
sponsorship, and for the time and effort that they too have contributed. Our thanks go also to
Professor John Zinkin of the University of Nottingham in Malaysia for contributing his expertise to
the organisation of the conference.

Let me start by answering an obvious question: why should the British High Commission wish to
organise a conference on this topic with the Securities Commission?

In recent years the British Government has become increasingly conscious of the importance of CSR
to its foreign policy objectives. The behaviour of businesses internationally has a major impact on
global stability and prosperity and on efforts to achieve a better quality of life for all. It thus impacts
both directly and indirectly on the well-being of the British people. In the UK we believe firmly that
CSR improves competitiveness and efficiency both for companies and in the wider economy. The
Conferences title CSR creating greater competitive advantage reflects that belief. And, of
course, the conduct of British companies has an obvious impact on Britains international image and
thus on the ability of the British government to achieve its objectives.

But there are other reasons for focusing on this issue as an aspect of relations between our two
countries. Malaysia and Britain are both major trading nations. Our bilateral trade was worth over
20 billion ringgit in 2003. And it is growing fast in both directions. As companies and investors on

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14 Speeches

one side benefit, so do those on the other. The relationship between our two economies is thus an
excellent example of the advantages, which flow from an open, transparent and fairly-conducted
trading system and what Tun Mahathir called prospering thy neighbour.

Corporate Social Responsibility is taken extremely seriously by major corporations in the UK. This is
not just because they see good behaviour as a means to improve their brand image. Responsible
corporate behaviour has a direct and beneficial impact on industrial competitiveness. CSR bears
directly on a companys profits and shareholder value. Companies benefit from CSR through
productivity gains in areas such as the health and training of their employees, enhanced risk
management, staff recruitment and retention, the ability to attract and retain capital, and increased
market share through an improved reputation among consumers and customers. Financial markets
reward companies with good CSR records and put pressure on their competitors to do likewise.
Increasingly investors are discerning and like to invest in companies that have a sound reputation for
CSR and ethical business. Leading companies go further and identify socially responsible business
niches as a means to develop and sustain competitive advantage.

In the UK, the Government and business have worked together to develop Corporate Social
Responsibility. In doing this, the Government has started from the premise that efforts to enforce
virtue by applying undue pressure through legislation and fiscal powers are unlikely to succeed, and
that excessive legislation is more likely to stifle progress than to foster change.

Instead our approach has been to encourage, and provide incentives for, the adoption of CSR
through guidance on best practice and, where appropriate, selective regulation and fiscal measures.
For example by requiring pension funds to report on whether they have policies for responsible
investment; offering fiscal and investment incentives to support community development projects;
and encouraging companies to consider health and safety issues at board level rather than
delegating them. A similar approach encouragement, rather than compulsion is also being
applied to corporate reporting on social and environmental issues. For example in 2000 our Prime
Minister, Mr Blair, challenged leading UK companies to report on their environmental performance.
By September last year over half of the top 250 were doing so.

The UK governments objective has been to encourage companies to develop CSR, voluntarily going
beyond legal minimum requirements, working from the presumption that CSR is not philanthropy but
sound business good sense. Our aim throughout is to encourage not compel business and local
communities to work together to create a more transparent and equitable, and therefore better and
more efficient, business environment.

This approach has produced results. British companies are generally regarded as good performers by
international standards. British multi-nationals, like BP, HSBC, Shell, Unilever, Standard Chartered (all
represented at this seminar by senior board members) are recognised as trend-setters in developing CSR
policies. There is a vibrant CSR debate among NGOs in the UK. And NGOs such as Business in the
Community (whose Head of International Development, David Halley, is with us today) and the
International Business Leaders Forum are among the leading promoters of change in business behaviour.

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Because, like Malaysia, the UK is a major trading nation, we see CSR as an intrinsic part of our
engagement with the rest of the international community. The government wants British companies
to consider their economic, social and environmental impact on the countries within which they
operate and to address the key sustainable development challenges which arise there. In March this
year the government published a draft international strategic policy framework and invited comment
from companies, NGOs and other interested parties. The framework describes what the government
expects of British companies working overseas. And it underlines the UKs strong support for
international instruments, such as the OECD Convention on Bribery, which makes it illegal for UK
registered companies and individuals to bribe someone overseas. The Extractive Industries
Transparency Initiative, launched in London in June last year with wide international support, has
similar objectives. It aims to promote a fairer distribution of wealth by achieving greater transparency
over payments by oil, gas and mining companies to host governments in countries heavily dependent
on these resources. Guidelines have been agreed and will be tested in Nigeria, Ghana and
Azerbaijan.

The application of CSR can make a real difference in the developing world. Many leading companies
now recognise the key role they are able to play in making globalisation work for everybody. There is
growing public interest in the impact of business operations in developing countries. This has helped
achieve progress on issues such as child labour, corruption, human rights, labour standards and the
environment. By applying best practice in these areas, business can play an important role in
reducing poverty, tackling climate change, achieving sustainable development and promoting human
rights. This was recognised by the UN in its Global Compact, launched by the UN Secretary-General
in July 2000. This encourages companies to build core human rights, and labour and environmental
principles, into their business strategies for the developing world.

Of course, the ethical assumptions behind CSR are not new. Nor are the objectives sought through
CSR just the latest Western corporate fad. To underline this, todays conference includes a strong
Islamic theme. CSR incorporates ideas long embedded in Islam, and there are many lessons relevant
to CSR, which can be drawn from Islam. I am therefore delighted to welcome from the UK Lord
Bhatia, who will speak about Islam and Social Capital, and Professor Haleh Afshar, who will talk
about Islam and Human Capital including the role of women.

Let me conclude by saying how much the British Government welcomes the opportunity to
participate in the organisation of this conference, the aims of which reflect the ethical concerns,
which the Prime Minister of Malaysia, YAB Dato Seri Abdullah Hj Ahmad Badawi, has made central
to his new government. I therefore wish you all a lively and successful conference, and I look forward
to welcoming you to my Residence this evening.

May I again thank YAB Dato Sri Najib for his presence here this morning. And may I thank you for
listening.

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Dato Sri Najib Tun Abdul Razak


Deputy Prime Minister of Malaysia

The Role of CSR in Achieving Vision 2020


His Excellency, The British High Commissioner, Mr Bruce Cleghorn.

Yang Berbahagia Dato Md Nor Yusof, Chairman of the Securities Commission.

Distinguished speakers and guests, ladies and gentlemen.

Assalamualaikum Warahmatullahiwabarakatuh dan selamat pagi.

First of all, I would like to thank the co-organisers of this event, British High Commission and the
Securities Commission for inviting me to deliver this mornings opening address of the Corporate
Social Responsibility (CSR) conference.

The two organisers deserve to be congratulated for their efforts to host this conference. Corporate
Social Responsibility or CSR in short, is fast gaining prominence and is beginning to have profound
effect on the conduct of business not only in Malaysia but across the world.

As you will no doubt be hearing from the many experts present, CSR is a subject that covers a wide
spectrum of issues such as business ethics, corporate governance, socially responsible investing,
environmental sustainability and community investment. CSR is perhaps best defined as a concept
whereby enterprises integrate social and environmental concerns in their business operations and in
their interactions with stakeholders, usually on a voluntary basis.

CSR and Vision 2020

Adoption of CSR entails a paradigm shift from the industrial-age notion that economic, social and
environmental goals are always and invariably in conflict with one another. Underpinning CSR is a
realization that creating a more equitable society and promoting economic growth are not mutually
exclusive goals.

Vision 2020 offers the perfect foundation for marrying these two seemingly conflicting objectives. Its
aims go beyond just the attainment of material wealth and economic advancement. Tun Dr Mahathir
Mohamed, when presenting his groundbreaking paper The Way Forward, cautioned us all against
making economic development the be-all and end-all of our national endeavours.

The ultimate aim of the Vision is to establish a nation that is united, a Malaysian society infused by
strong moral and ethical values, democratic, liberal and tolerant, caring, economically just and
equitable, progressive and prosperous. All these goals are of course underpinned by an economy that
is competitive, dynamic, robust and resilient.

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This holistic approach to modernization under Vision 2020 has been underscored and given
additional impetus by our Prime Minister, Yang Amat Berhormat Dato Seri Abdullah Haji Ahmad
Badawi. The recent launch of the National Integrity Plan (Pelan Integriti Nasional) and the Malaysian
Integrity Institute (Institut Integriti Malaysia) demonstrates the Governments commitment to
achieving economic progress that is consistent with good personal values and corporate ethics.

As part of this plan, the government has outlined five strategic objectives to be achieved within the
next five years. Among the key objectives is the need to enhance the standards of corporate
governance and business ethics as well as improving the quality of life and the well being of the
citizens. I believe these are the areas where the concept of Corporate Social Responsibility can and
must play a significant role. I am certain that the introduction of the National Integrity Plan brings
us closer to realizing Vision 2020s goal of creating a moral and ethical society, by addressing
pressing fundamental challenges facing the Nation today.

It is interesting to note that three out of the nine challenges of Vision 2020 a moral and ethical
community, a fully caring culture and an economically just society perfectly reflect the principles
of CSR. To achieve the first challenge of a moral and ethical society, enterprises should embrace CSR
bets practices that help to maintain and raise ethical standards in business decision-making.

Enterprises that are conscious of CSR will not just consider their own economic well-being, but also
that of the society and environment in which they operate. This demonstration of caring and
benevolent behaviour on the part of the business sector reinforces the community spirit of the nation,
and will help us to overcome the second challenge of building a fully caring society and culture.

CSR is also concerned with the mechanism by which wealth is distributed within society. Enterprises
that make significant contributions to the communities, in which they operate whether in the form
of funds, skills training, employment or knowledge transfer, are in fact contributing to equitable
wealth redistribution. This helps to address the third challenge of an economically just society where
there is a fair and equitable distribution of wealth, with full partnership in economic progress.

It is clear that CSR practices are important elements in achieving our national development goals.
The need to nurture such practices among Malaysian corporate is obvious. As business leaders, it is
incumbent upon you to drive the adoption of good CSR practices. Global developments show that
large companies have been at the fore front of good corporate social responsibility. I believe that with
our emphasis on balanced development of growth with equity, things should be no different here in
Malaysia. On the contrary, we should be in fact leading the way.

CSR and Corporate Performance

We should not mistake CSR practices as acts of charity or philanthropy. On the contrary, effective
adoption of CSR has the twin effects of improving both short term and long term corporate
performance.

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Companies that have embraced CSR have found real and significant competitive advantages in the
form of improved financial performance, enhanced brand image and reputation, an increased ability
to attract and retain quality workforce, more effective risk management, reduced long term cost and
attractiveness to increasingly sophisticated institutional investors.

CSR efforts also allow companies to distinguish themselves from competitors, and add value to their
brand. Better brand value proposition translates to better client and customer satisfaction especially
in a world where consumers, employees and investors are becoming more discerning. Brand
reputations can be enhanced if the causes that such companies support and represent are ethically
or socially laudable. The perception of the brand as socially responsible can often influence customer
loyalty, lender and investor scrutiny, and ultimately reduce the cost of capital. From a national stand
point, strong brands will also allow Malaysian companies to compete effectively in the global market.

Practising CSR has profound and far reaching impact within an organisation in terms of employee
relations and talent management. Employees are also beginning to demand that their work and the
organisations that they work for are aligned with their personal values. Employers who are unable to
accommodate this will find their employees leaving for more compatible settings. Issues such as
investing in human capital, promoting health and safety, empowering managers and achieving the
ideal work-life balance all become central to good CSR practices. Vision 2020 regards human capital
as the ultimate and most important national resource. It requires us as a nation, to focus on the
development of our people as a matter of great urgency.

Again, companies that adopt CSR practices that benefit their employees, stand to gain in
performance. Superior human resource management can have positive effects of raising a
companys market value 1. A recent study of 400 public companies by a global HR consulting firm
found that a well managed workforce can contribute up to 30% of a companys market value. Other
studies have shown that improving employee satisfaction can also enhance the financial
performance of companies 2 by up to 40%.

Role of the Stakeholders in Enhancing CSR

The participation of multiple stakeholders is essential to bringing about an environment where CSR
can thrive. Government policies and regulations can and do play an important role. As an example,
there are minimum standards set down in law for environmental protection and health and safety,
and enterprises are rightly compelled to comply with them. While the Government does play an
important role in encouraging the development of CSR in the corporate sector, such as practices and
changes in corporate behaviour cannot be legislated into being by Acts of Parliament alone.

Beyond putting in place laws that promote CSR, the Government also acts as a facilitator. For
example, the ministry of Domestic Trade and Consumer Affairs and the Companies Commission of
Malaysia have placed significant emphasis on CSR with the introduction of the Malaysian Business
Code of Ethics and the Company Directors Code of Ethics. Companies which are serious about CSR
should consider the adoption of such codes of conduct as a good starting point.

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The role of NGOs and professional bodies is also important to complement the Governments
efforts to spur CSR. Through self regulation and raising public awareness and expectations, NGOs
and professional bodies can place pressure on companies to go beyond their minimal statutory
duties and legislative requirements. Efforts taken by bodies such as The Malaysian Accounting
Standards Board to encourage greater disclosure of environment-related financial disclosures and
the ACCAs findings on the State of Corporate Environmental Reporting should be applauded and
continuously encouraged.

It is encouraging to note that the Malaysian corporate sector is beginning to embrace CSR in earnest.
And Malaysian companies have shown that they can truly distinguish themselves in CSR when they
are truly committed. The current list of 310 component companies on the Dow Jones Sustainability
World Index (DJSI) includes two Malaysian companies 3. This is an indication that there are
Malaysian companies that have successfully adhered to some of the highest CSR standards for their
particular industries benchmarked globally 4. The Government would like to see more Malaysian
companies included in the list, especially among major public-listed companies present here today.

I am pleased to recognize some of the many examples of commendable CSR initiatives undertaken
by Malaysian companies. BAT Malaysia for instance, produces its annual Social Report highlighting
critical issues of concern raised by the stakeholders and measures to overcome them. BAT Malaysia
is also helping other BAT companies around the world to enhance their stakeholder engagements.
This disclosure-based approach has also been adopted by Shell Malaysia with its Sustainable
Development Report.

Government-linked companies have also been active in pursuing CSR initiatives. Tenaga Nasional,
Telekom Malaysia, Petronas and Sime Darby have all demonstrated great commitment to developing
our nations human capital through scholarships, educational funds and the establishment of major
private universities.

On the environmental front, 26 Malaysian companies including Golden Hope Plantations Berhad and
its subsidiaries have adopted the Malaysian Chapter of the Global Forest and Trade known as the
Kumpulan Khazanah Hijau. By subscribing to this, these companies have shown their commitment
to responsible forest resource management through minimum certification standards.

These fine examples of CSR practiced by Malaysian companies should encourage others to take
stock of current business practices and identify areas that would benefit from a CSR approach.
Companies should assess whether they are doing enough to make voluntary disclosures to
shareholders and other stakeholders. We hope that with more and more companies coming forward
to make public their CSR track record, many others will be encouraged to follow suit.

Apart from the Government, NGOs, professional bodies and companies, we should not forget the role
of the investment community in enhancing CSR. Globally, there is an increasing recognition that
capital markets will be central to establishing the incentives that drive corporations towards CSR in
the future. The power and clout of investors in enhancing CSR is best illustrated by the growing trend
of Socially Responsible Investing (SRI).

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SRI investments compel investors to take into account wider concerns, such as social justice,
economic development, peace, healthy environment along with other conventional financial
considerations. Good SRI funds should be able to contribute towards social and environmental
rewards that go beyond the direct financial return to the investors.

For Muslims, the concept of SRI is not something new as responsible investment is a religious duty
rather than choice. The principles of responsible investing form important pillars for the 61 Syariah-
compliant funds available in the Malaysian market today. I believe over time, there will be a greater
demand among both retail and institutional investors in Malaysia for public companies to practice
CSR in all their activities, and ensure that companies combine their bottom line objectives with the
needs and concerns of wider society

The promotion of CSR is a long-term task that requires the collective support of all. The Government,
NGOs, companies, investors, and other stakeholders have just started on this effort to raise the
standards of corporate behaviour, accountability and action. Events such as this one today serve to
provide a helpful primer on the issues, challenges and approaches we can and should adopt in
pursuing greater corporate social responsibility. There is currently a great surge of interest in this
area globally as companies come to terms with greater expectations from their stakeholders.

I note that there will be various experts, both local and international, who will be addressing this
conference over the next one and a half days. I would urge all of you to tap into the wealth of
experience assembled. It is not just vital for the future of your enterprises but also if Malaysians are
to succeed in addressing the social, cultural, environmental and economic challenges that lie in the
way of achieving Vision 2020. I wish you a successful conference.

Thank you.

1. Amernik, Jerry. Drake Business Review. Watson Wyatt Human Capital Index study (1999). A study of 405 public
companies found that a well managed workforce can up to 30% of the companys market value.
2. Low, Jonathan & Kalafut, P.C., Invisible Advantage Perseus Press (2002). A study of 29 professional.
3. Sime Darby and BAT Malaysia.
4. DJSI World comprises a total of 310 companies and screens stocks on the basis of a best-in-class approach.
Categorized into 59 DJSI industry groups, companies are assessed in line with general and industry-specific
criteria. They are compared against their peers and ranked accordingly. The leading companies in each industry
globally are included in the DJSI.

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Speeches 21
Dr Gary Dirks
Group Vice President
BP President and CEO, BP China

Corporate Social Responsibility An Overview


Tan Sri-Tan Sri, Puan Sri-Puan Sri, Dato-Dato, Datin-Datin,

Ladies and Gentlemen, Good morning!

It is a privilege and a pleasure to be invited here today to share some thoughts on Why CSR
Matters from a business perspective.
Corporate Social Responsibility is an elusive subject. It defies simple definition, elicits deeply held
but very diverse views and generates many papers, seminars and conferences. The richness of the
debate around the subject is understandable in part because it is one aspect of a larger discourse
that is both basic and very old. This larger discourse concerns just societies and the roles of the state,
civil society and commerce in creating and sustaining them. It is a discourse that cuts to the heart
of what it means for a society to be civilized.

The richness also arises from new forces that are driving deep change in virtually every country they
touch. Among these forces I note three of particular importance to our deliberations. First is the
globalization of commerce that allows nations from virtually anywhere in the world to compete for
business virtually anywhere else in the world. The second is the growth in multinational
corporations with economic scope and scale that is no longer simply circumscribed by political
boundaries. And third is the advent of communications technology and especially the internet and
mobile phone which effectively make instantaneous world wide transfer of information possible.

These forces and others have had the effect of taking the practice of building societies from essentially
a national or local context to a global one. In the process differences in national priorities especially
between developed and developing countries and differences in cultural values and norms between
societies have come into stark contrast often with the effect of polarizing the discourse unproductively.

In developing my remarks I base much of my thinking on our experiences in BP, not because BP has
all the answers, but because it is the company with which I am most familiar. Despite this limitation,
I believe my remarks have a general relevance and validity, because all businesses consist of people,
operate within the confines of the law and the political priorities of the State, acting as partners to
a greater or lesser degree with the State in making society a prosperous, fair and safe place to live.

Although the term Corporate Social Responsibility is relatively new, the ideas underlying it are old.
Ever since the creation of the East India companies in the 17th century, there has been debate about
where the boundaries lie between what the State is expected to do and what companies are
supposed to do. More recently the growth of civil society has brought a third actor onto the stage
intensifying the debate on where the boundaries lie.

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Shifting Boundaries and Nation Building

Originally the East India companies were only interested in doing business. When they found law
and order could not be taken for granted, they moved into the business of government with the
East India Company becoming the government of much of India, Pakistan, Bangladesh and Myanmar
until the Indian Mutiny. They discovered that the skills of governing and making money are not the
same, and the East India Company went bankrupt, forcing the British government into the role of
governing India.

The experience of business governing in the 18th and 19th centuries suggests businessmen are not
well suited to running countries. Ironically the experience of governments trying to run business in
the 20th century also suggested this is an area best left to businessmen. As a result, in Europe,
governments have privatised their business activities to focus on getting on with the business of
government, leaving the government of business to business. BP itself is a good example.

Decolonisation in Asia meant that politicians had to nation build in Malaysia as elsewhere. Political
priorities came first and those of business second. Companies were asked to do national service
sometimes at the expense of shareholders, but this did not matter in the context of the greater task at hand.

However, with the task of nation building more or less completed, the State can begin to step back
and hand over some of the responsibility of creating a fair, open and successful society to businesses
as engines of growth and prosperity.

As Malaysia engages more deeply with the global economy, competing for inward investment and
technology with China and India, I would expect the State to focus more on providing the conditions
to attract FDI: security, the rule of law, the development of an educated workforce, the promotion of
transparency in business dealings, and competition and meritocracy to foster world-class capability.
In return, multinationals like BP provide the transfer of technology, the development of knowledge,
the application of world-class standards, the training of people, needed to create world-class
organisations as our part of the developmental bargain.

So What is the Role of Business in Society?

The law is clear. The responsibility of boards is to their shareholders. Their fiduciary duty is to ensure
that the shareholders come first.

Milton Friedman has argued compellingly that the role of a company is to serve an economic
purpose by creating products and services that satisfy customers and deliver a satisfactory profit
to the shareholders as a result. In so doing, the company must obey the law and the norms of
society. As long as it has done this, it is being socially responsible. He argues that we businessmen
have no right to involve ourselves in social agendas. We have no mandate; we are not expert in
making social trade-offs and we do not have the reach to affect the different parts of society that
governments have.

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Nevertheless we need to recognise that competition creates winners and losers if we are not to
alienate society and lose our Licence to Operate as a result. Once I replace the words Corporate
Social Responsibility with Licence to Operate it is easier to see why we cannot ignore CSR.

The Licence to Operate Recognises the Law is not Static

As businessmen, we must think about the priorities of society, for as they change, so do norms,
followed by the law. If we hide behind obeying the law as it stands, without thinking where the law
could be going, we may find our Licence to Operate constrained. Take the current uproar in the UK
over obesity following the death of a three-year old from heart failure. It is no longer the vendors of
fast food and carbonated soft drinks that are under attack. Socially responsible companies like
Unilever and Nestle are now facing possible new legislation designed to protect people from the
consequences of their own excesses legislation, which will affect the way they do business and
the products they are allowed to sell. Fifty years ago nobody thought badly of tobacco companies;
today the picture is quite different.

We must keep abreast of changes in the way society views our goods and services, lest we lose our
Licence to Operate and this requires thinking about how we affect the society around us.

Practices Can Become Unacceptable Too

Practices are even more subject to change in societys norms. In England during the Industrial
Revolution it was acceptable for children to pull coal wagons a mile underground; in China it was
accepted women would go blind doing blind-stitching embroidery work so fine it destroyed the
eyes of those making it. In America, GE got into severe trouble for discharging chemical waste in the
Hudson River. All of these practices were acceptable at the time but are unacceptable today. More
than ever businessmen must look at how we do business as well as what business we choose to do.
Perhaps the key to getting this right is a matter of balance.

Getting the Balance Right

Socially responsible behaviour is about balance:

First, we must find the right balance between stakeholders.

n According to Peter Drucker, the sole purpose of a business is to create and keep satisfied
customers. Done well, everything else looks after itself.

n The Japanese used to argue the first priority is to employees. Look after them well; keep them
motivated, and the firm will prosper.

n Companies used to operating in regulated industries know they can ill afford to alienate
regulators and the government.

n NGOs argue that the primary responsibility is to the community creating a better social contract
lest society disintegrate to the detriment of all.

The problem for us is that, each in its way is right.

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Second, we must decide on the right balance between efficiency and the needs of the community.
This is never easy, and as soon we cross borders, it becomes much more complicated. When a
company moves manufacturing from one community to another in the same country to remain
competitive there are immediate conflicts of interest between the community losing the jobs and the
one gaining them. Imagine how much worse this is when the losing community in is one country
and the gainer in another. What is the socially responsible thing to do? The law is clear the
shareholders interests come first. As a result, whole industries get hollowed out at the expense of
the community, in the name of efficiency. Some would call this irresponsible but what if the
company were to go bankrupt if it did not move? That would be greater irresponsibility.

Third, we must also decide between time horizons and even between generations. Increasingly we
are being asked to think of sustainable development with the expectation that future generations will
not be disadvantaged as a result of current activities. Many argue that the environmental dilemma
requires trade-offs. However, it has been my experience in BP that a creative approach to
intergenerational issues can solve problems without trade-offs both at the local level for pollution
and waste management; and at the global level for climate change, resource management and
cross-border pollution.

Fourth, we must find the right balance between different jurisdictions and cultural norms. Some
Multinationals have become experienced in handling this over the years. Even so, globalisation
makes matters ever more complex. Responsible behaviour in one country may be unaffordable
behaviour in another.

Fifth, there is the issue of expected ways of behaving. Increasingly the bigger Multinationals
embrace diversity of background and origins, because they believe it makes good business sense.
The resulting ideas are richer and more suited to local markets. But at the same time this introduces
serious differences in attitudes to values, norms and practices.

n Lets take values first. Certain values are universal. Regardless of culture or creed, from a
business perspective we all prize integrity and honesty, security and safety, dignity and respect,
accountability and responsibility, fairness and justice. These values are the foundations upon
which norms of behaviour are built. However, when cultures differ, we may see these values
manifested as different norms. And wherever norms differ, they need to be treated with respect
and sensitivity as part of cross cultural management skills

u In every society it is morally wrong to jeopardise the security and safety of customers and
employees; just as it is wrong to deny them dignity and respect. Responsible behaviour
requires that the value chain reflect this.

u However, take integrity and honesty in America, they allow people to confront each other, to use
conflict to resolve problems. In much of Asia including Malaysia, such behaviour is unacceptable
because it threatens harmony, and so non-confrontational, indirect behaviour is preferred.

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u When it comes to accountability and responsibility there are bigger differences with
Americans believing in personal accountability based on individual liberty, and Malaysians
preferring collective accountability and group responsibility. Both views are grounded in the
same values yet the two societies have chosen different points on a continuum upon which
to base their norms of behaviour.

u This is also true for fairness and justice. In the West people look to the Rule of Law and due
process to provide these, whereas in China for example, people have looked to the Rule of
Man and the individual exercise of authority to deliver justice.

n Lastly there are current practices where differences can be significant. In my view, practices are
derived from values and norms. Over time their founding principles may be forgotten, so current
practices may become a perversion rather than an accurate reflection of norms and values.

Perhaps the simplest test of whether a practice is a perversion is to ask whether its promotion would
win votes. There is not one single country where a political party offering the electorate more
corruption, greater pollution, fewer human rights, or less safety in the workplace would win. So
people do actually know deep down what their values are and that they may differ from their
practices.

This is particularly true for bribery and corruption. We in BP believe in the importance of competition
and open markets, rule of law and due process. If these are to flourish, then bribery and corruption
must be stopped. Many justify bribery as a highly developed system of interlocking favours. It may
be; but it puts economic activity at the mercy of individuals on a grace and favour basis, rather than
ensuring the best offer wins through due process. And so it buttresses inefficient, unfair and
expensive ways of doing business, at the expense of the poorest in society.

Defining Responsible Behaviour

This brings me to my last point defining responsible behaviour. It should be clear by now that
responsible behaviour is not just about providing the right products the WHAT of business, but
also about having the right values, processes and practices the HOW of business.

Responsible companies serve an economic purpose with processes that minimise the use of raw
materials, minimise harmful side-effects to people, and minimise environmental damage.
Responsible behaviour exists throughout the companys operations from the start of the value
chain to its finish.

If we have done everything that is possible within reason to make sure we do not harm the
environment, we do no harm to people either through the products we market or the processes used
to manufacture them, if we respect peoples rights and treat them with dignity and fairly, then we
are being responsible.

As partners with government in the creation of open, prosperous and free societies where business
can flourish, we must ensure that we maintain the legitimacy of our role in society and that of

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government. This requires us to be careful in dealings with government. Responsible relationships


with government depend on three things:

n Avoiding partisan politics. We in BP do not fund parties or use influence to affect elections. Nor
do we represent the interests of the UK government and we do not force choices on the
governments of the countries where we operate or tell them how to run their country.

n Avoiding business-government relations built on corrupt practices: they undermine the


legitimacy of government, are bad for society and for business because they weaken the rule of
law, create instability and unpredictable outcomes, making it difficult to provide a fair return to
shareholders.

n Lobbying because it forms the basis of dialogue, helping government understand the impact of
their policies on the one hand, and offering them alternatives on the other. It also helps
businesses understand what the governments priorities are and look for ways of working within
the governments agenda.

Bearing these in mind, we can create Mutual Advantage.

The Concept of Mutual Advantage

As socially responsible actors, it is our job to see how we can work with government and help
develop the national agenda. This may require us to work with government on developing capability
within the community where we operate, stepping outside our normal line of business.

For example, in Malaysia, BP has helped with the roll out of the Malaysian code of corporate governance,
even though we are not publicly listed. We did this because we believe an open, transparent and well-
governed capital market leads to a more prosperous economy, to our benefit. In China we have helped
the government set standards on health and safety in other industries. The benefits of such actions are
for society as a whole, and in turn we benefit from the creation of a safer society.

Sometimes a company cannot act alone. Then responsible behaviour is about protecting the
industrys Licence to Operate. In such a case, the firm must act with other industry members,
building positions that define behaviour and standards for all participants to reduce the problem of
free riders. This can be done though voluntary association, as in the chemical industry with the
Responsible Care programme, where all agree to abide by certain rules and meet certain standards,
or it can be done through one company mobilising consumers to define standards for the industry as
a whole, as with Unilever and the Marine Stewardship Council. By encouraging its creation, Unilever
persuaded major retailers in Europe to adopt sustainable fishing standards, making Unilever part of
the solution rather than the problem.

I have not mentioned philanthropy an area most business leaders in Asia equate with CSR. Of
course philanthropy matters. Where would the money for the disabled, for schools and the arts come
from if it were not for philanthropy?

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As I see it, philanthropy can be an element of CSR, but it is not the essence of CSR. CSR should first
and foremost be about the way in which the company makes money. Philanthropy does not change
the way the company makes its money. The money is only given after the company has profits. It has
no direct relationship with the business processes or products offered, so it does not encourage the
company to behave responsibly before giving back.

Some Themes to Consider

Perhaps I can briefly share with you some ideas we are working on in BP, which may help in thinking
about CSR.

We make products that satisfy our customers millions of times every day. In so doing we provide
good quality jobs for 100,000 people around the world and pay taxes to raise the wealth of nations.
Too often companies apologise for what they do, taking their innovations and products, the jobs they
create, and the taxes they pay for granted.

We reward our shareholders and recover the cost of capital so we can continue developing new
processes, products and ideas whose time has not yet come, but which will be vital if we are to
conserve the environment for future generations. We do this without squandering scarce resources.

Our approach to climate change has helped move the agenda for the entire energy industry. BP is
working with partners on initiatives that benefit the energy and transport industries as a whole
through raising safety standards and looking into ways of creating sustainable mobility. We do this
because the benefits our products provide to our customers cannot be separated from the
responsibility we all have to produce and consume in ways that avoid accidents, do no harm to
people, and no harm to the environment.

We are active in the World Business Council for Sustainable Development, the Extractive Industries
Review and the Transparency Initiative. For in all these areas BP alone cannot change the world. So
we work together with partners to change the climate of opinion and improve the chances of
responsible behaviour by increasing its rewards.

Above all we focus our energies on some simple ideas:

n All our actions are tested for their creation of mutual advantage, positive social impact and
transparency;

n We believe in respecting human rights; and

n We recognise the rights of unborn generations through environmentally sound practices


attempting to reconcile the needs of present and future generations through the application of
technology and human ingenuity.

Obviously some of these areas are totally our responsibility: the kinds of product we make and their
impacts; the processes and standards we apply to Ethics, Human Resources, Health, Safety and the
Environment.

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Others are not so clear-cut: environmental dilemmas where the science is provisional or social impact
assessments where differences in norms and values can cloud the debate. Here we regard ourselves
as stewards for the activities in question though we may not be sure how best to measure the effects
of what we are doing.

Still other areas fall outside our ability to control the outcomes, but we can work in partnership with
interested parties to influence a positive result for all.

Some issues are global in scope; others are local and we tailor our responses and involvement
accordingly. Currently we believe the themes most appropriate for a global response are: climate
change; sustainable mobility; the impact of our products on the environment; containing the
Resource Curse by ensuring maximum transparency; and finally the development of thriving
communities through improved access to energy, human rights, safety (especially road safety),
education, and local capability to strengthen social institutions.

We do not just develop these themes in our operations; we also ask our partners and suppliers to
adopt them as well, if they are to continue working with us.

Water management and biodiversity are handled locally because these depend on the geographical
context of our operations, which varies from location to location.

Summary

In the few moments left, let me summarise.

CSR will be more important as governments reduce their societal footprints, delegating greater
responsibility to companies and civil society. It will become more prominent as companies cross
borders or become parts of global supply chains dealing with jurisdictional conflicts and cross-border
differences in norms of behaviour.

Perhaps the best way to decide which areas of social responsibility to focus on is to answer the
following questions:

n Does the company serve an economic purpose without wasting scarce resources?

n Is responsible behaviour built into the companys value chain?

n Is the community where the company operates better off now and in the future for its being there?

n Are the shareholders interests well served?

In answering these questions we must reconcile apparently conflicting short and long-term
interests. Yet if we fail in the long run, the company will lose its Licence to Operate surely the
worst way to look after shareholders interests. And so, perhaps the easiest way to look at CSR is to
regard it as being the best way to protect the companys long term Licence to Operate.

Thank you very much.

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Mr Zarir J Cama
Deputy Chairman & CEO
HSBC Bank Malaysia Berhad

Why CSR Matters: The International Banking Perspective


Distinguished Guests, Ladies and Gentlemen: Good morning.

It is a pleasure to be here today and to have the opportunity to talk on corporate social responsibility
(in short, CSR), and about the challenges and opportunities facing financial institutions. And to
discuss how such considerations may change the way we do business.

That said, let me begin by offering you a brief reminder of how much our business has already
changed in areas other than the environment.

Yesterday, our business was simple. We concentrated on collecting deposits and making loans. We
competed against other banks and our relationships with customers were based on loyalty and
longevity.

Today, we must deliver a portfolio of products while competing against non-traditional players
targeting profitable sectors of our business. Relationships with customers are increasingly based on
price, quality and speed.

Yesterday, we did business during set hours.

Today, we must supply customers with access to financial services 24 hours a day, seven days a
week, by phone, online and sometimes even still in person. We must also be able to understand and
meet the needs of customers on the other side of the world who have different business practices,
cultures, rules and levels of knowledge.

If this isnt enough to keep us busy, we also face shrinking profit margins, volatile stock markets and
global economic uncertainty. Here in Asia there is the added impetus to continue the restructuring
process that was sparked by the regions financial crisis.

Given this rather full agenda, some might say this is hardly the time to be focusing on a companys
social and environmental policies and practices.

However, in the same way that we should not let short-term turmoil sidetrack necessary reforms...
we should not let economic uncertainty deter our efforts to incorporate environmentally sound
business practices and to promote sustainable development.

What Does this Mean for HSBC?

As you are aware, CSR offers its own set of unique challenges to financial institutions.

First, there is the simple fact that CSR means different things to different people.

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The breadth and vagueness of this definition creates challenges. They range from staff issues,
gender policies, attitudes towards the environment, charity given to transparency and validity of
financial reporting.

Overwhelmingly, surveys show that society wants more than profits from big companies.
Malaysia is no different.

When compared to other countries, Malaysia still lags behind. For instance, some 45% of Global
Fortune 250 companies make such periodic reports. In Britain, a total of 81% of companies on the
FTSE 100 index do so, as do 44% of American firms included in S & Ps US Top 50, and 74% of top
50 European companies.

The Challenges

It occurred to me as I was preparing for my presentation today, that much has already been said
about many of the topics this conference is focusing on. Some are questioning the unscrupulous
practices of corporates, which now stand indicted in the court of public opinion. Others raise
concerns about social impacts of multinationals, pointing out that there is miserable comfort in
working for the foreign exploiter. Others and this is particularly relevant to my topic might
stress the need to keep your head during uncertain times.

Lapses in corporate ethics. The impacts of globalisation. Leadership in the face of adversity. All
prominent issues currently on the minds of todays business leaders. All issues that have, in varying
degrees, been discussed in the past.

In fact, I have purposely misled you to make a point.

All of the aforementioned quotations are NOT from current times.

The statement about corporate governance was made by Franklin Roosevelt in his inauguration
speech in 1933. The observation relating to foreign exploitation was made by Mahatma Gandhi in
1922. And the comment about leadership came from the pen of Rudyard Kipling in his poem If,
published in 1910.

Those of you who regularly read the FT and I assume at least a few of you here today must may
recognise the Kipling quote. It was featured in a book review in the FT sometime ago.

It has also been said that the great conceit of people in every age is to think that they are going
through madness and chaos and to wrongly assume that things were quiet in the past.

We live in a world inundated with short-term information and we do business in a world infatuated
with short-term results. Consequently, I believe it is critical for corporate leaders to maintain a proper
perspective, particularly when others as Kipling wrote are losing theirs.
Before going any further, let me pause to point out that in keeping with my assigned task, I intend
to spend my allotted time today talking about how HSBC is fostering a culture of corporate
sustainability. In particular, I am going to share with you six things we do.

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The first I just mentioned: we try to maintain a proper perspective. We do not let short-term events
cloud our long-term thinking. We are very conscious of the fact that our corporate ancestors lived
and managed through world wars and civil wars, market crashes and bank failures, riots and
recessions. Many of todays issues pale in comparison.

Now I realise that some of you may be thinking it is all well and good to be talking about many of
todays issues having also been problems in the past. But today, these and other challenges are
occurring all at once. And at lightning speed.

This is true. What is also true, however, is that leaders today are better equipped to tackle these
challenges. In my business, for example, technology allows us to be more customer-driven, to reduce
costs and to cross-sell more products and services. Perhaps most importantly, in the context of
leadership, is the fact that todays technology enables us to communicate more easily with our staff.

HSBC has numerous intranets around the world. Through these intranets we can provide timely
information to our staff, such as frequent updates during the SARS outbreak and the bombing in
Turkey. In other words, the second thing we do is to provide any and all information to our staff that
will assist them in doing their day-to-day jobs.

HSBC also has staff in 79 countries and territories around the world. In Malaysia alone, we have
3,500 staff in banking and another 1,000 in our Group Processing centre. We know that any action
by any one of these employees can have an impact on the reputation of HSBC both locally and
globally. Consequently it is a necessity for us, as an organisation, to maintain high standards in terms
of the actions of individuals and in terms of overall corporate governance in the countries that we
operate in.

When I joined the Bank in the late 1960s, there was a written set of standards or Head Office
Standing Instructions as they were officially called back then which spelled out the basic principles
by which HSBC wished to conduct business worldwide. The topics covered included risk and
reputation. There were clear rules covering assets, liabilities and profit and loss accounts. Today
these rules and supporting guidelines have evolved into a Group Standards Manual. A document that
any employee anywhere in the world can access at any time on the aforementioned Group-wide
intranet. Compliance with such principles remains mandatory wherever we operate.

The importance of codifying our standards in this way is obvious when one considers our growth.
Some 15 years ago, HSBC had around 52,000 employees. Today we have close to 223,000. Simple
math confirms that many are relatively new to our organisation, coming to HSBC through
acquisitions. Simple logic suggests that if we are going to have the same standards, then these
standards have to be clearly articulated and readily available.

Such standards also help reinforce the third thing we do, which is to maintain HSBCs long-
standing values.

A Chairman of the Bank once told our shareholders that A bank wants three things, good character,
good management and solid resources of its own. In the absence of any of these, pronounced

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success would be impossible. He was speaking to an Annual General Meeting for our shareholders
in 1899. His words still apply now.

Today, one of our goals is to make HSBC one of the worlds leading brands. In other words, we want
people to know us and want to do business with us. To achieve this goal, we continue to build on our
name recognition. Hence our presence on the various bill boards and gantries around the major towns
and cities. I am sure many of you would have seen our advertisements in the daily newspapers too.

We are fully aware, however, that our reputation is and will always be based on actions and not ads.
That is why we abide by the spirit as well as the letter of local laws and regulations. That is why we
take a completely apolitical stance. We make no political donations. We do not see it as our job to
act as international judges of different political or economic structures.

In fact, we operate according to a set of Key Business Values and the number one point on this list
calls for the highest personal standards of integrity at all levels. Other values on our list include a
commitment to truth and fair dealing. Putting the Groups interests ahead of the individuals. Being
a fair and objective employer. Using a merit approach to recruitment and selection and promotion.
Delegating authority with accountability. And last but certainly not least, promoting good
environmental practices and sustainable development.

That is also why, in terms of good corporate governance, we emphasise performance over
conformance. We believe we can gain a competitive advantage by going beyond generally accepted
corporate governance standards. And our efforts to be transparent, responsible and accountable to
our shareholders have been recognised.
Meanwhile, the activities of large international corporations like HSBC are continuing to come under
more and more scrutiny. The scrutiny goes beyond just increased legislative and regulatory
pressures. There are now ethical indices such as FTSE4Good as well as an increasing number of
funds concentrating on SRI (Social Responsible Investment). These indices are seen to provide a form
of third party approval of companys sustainability performance and management.

In response, HSBC is now making explicit what was previously implicit the fourth thing we do.

For example, in our 1998 Annual Report we published for the first time a statement of our
business principles and values. More recently we have been producing an annual HSBC in the
Community report. This global publication a report card in some respects covers our efforts to
be a socially responsible company. From the environmental performance of our operations. In
Malaysia, we pledge our support to various community sponsorships focusing mainly on education
and the environment, heritage and the arts. Annually, we also donate substantially to worthy
philanthropic causes.

To our views on what constitutes responsible finance. To our five-year 50 million US dollar
commitment to work with three leading NGOs: Earthwatch, WWF and Botanic Gardens Conservation
International.

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The partnership with Earthwatch is a good example of what we do: encouraging our employees to
get involved. A total of twenty-one (21) Malaysian staff have participated in this programme.

Just in the last three months, for example, employees of HSBC Malaysia have helped observed and
tracked macaws of the Peruvian Amazon, studied dusky dolphin society and behaviour in New
Zealand. They have also monitored and tracked the unique and enigmatic underground dwelling
marsupial mole in Itjarijari, in Outback Australia. When they return, they will also bring nature to
their neighbourhoods, by undertaking environmental activities and projects in the local
community.

We send employees on Earthwatch fellowships and we provide support to various other environmental
projects because we want to make a difference. And because we view the environment as an integral
part of our business the sixth and final item on my list of the things we do.

Here in Malaysia, for example, the Bank played a significant role in the conservation of wetlands. For
six years, we have partnered with Wetlands International to heighten awareness and the importance
of wetlands to the environment. This year we have embarked on another environmental project with
WWF, officially launched on 12 June this year. Located in on the highlands of Frasers Hill, this three
year project will focus on conservation of water and educating the local community on
environmental matters ultimately leading to a greener and more sustainable Frasers Hill.

Globally, we were one of the original signatories of the UN Environment Programme Statement by
Financial Institutions. We also endorse the Global Sullivan Principles. In 2001, we became a
corporate member of the United Nations Global Compact.

On the customer side, we assess all major loan proposals for their environmental, ethical and social
impact. We expect that the companies we lend money to will comply with the relevant legal and
regulatory requirements where they are doing business. We have guidelines about companies to
whom we will lend and with whom we will invest.

We recently reinforced our long-established standards in this area by adopting the Equator
Principles, which helps the HSBC Group to assess the environmental and social impact of
commercial lending proposals. This reinforces the banks long established environmental and
social risk evaluation process and its position as one of the leading companies in environmental
impact management.

Before I go on further, I would like to put in A disclaimer.

I have spent most of my time today talking about the things we do at HSBC. Please do not think I am
trying to imply that HSBC has all the answers. We dont. Or that we are a perfect organisation. We
arent. In terms of measuring our environmental impact, for example, we openly acknowledge that
there are gaps in our baseline data and areas where data quality can be improved. Likewise, I
recognise that not all companies are able or would want to send their employees to far-off lands on
research projects.

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That said, I am a firm believer that all companies do have a role to play. After all, the concept of
sustainability of looking after ones assets to ensure a return in the future is hardly a
revolutionary practice in the business world. Companies of all sizes and in all sectors must constantly
address questions of how to get more for less. And how to combine resources to maximise output
and minimise costs.

Last but no least, there is a lake in south central Massachusetts that is highly relevant to the subject
of sustainability. It is:

Lake Chargoggagoggmanchauggagoggchaubunagungamaugg

which has the longest name of any lake in the United States. Its 45 letters also make it one of the
longest place names in world. Not many speakers would dare attempt to pronounce such a long
word.

The popular belief is that the lakes name is a Native American word, which means: you fish on your
side, I fish on my side and nobody fish in the middle.

The perfect solution to sustainability some might say.

It seems, however, that this popular definition is solely based on a single newspaper article written
back in the 1920s by a journalist who used more imagination than facts.

According to the chief of the local band of Nipmucs, the word


Chargoggagoggmanchauggagoggchaubunagungamaugg actually means the fishing place at the
boundaries and neutral meeting grounds. Over the years there have been various attempts to
correct this misconception. Yet the myth lives on, overshadowing reality.

Large corporates face a similar challenge going forward. Simply put, a perception exists that
corporate social responsibility is all talk and no action. An effort by companies anxious to lose
their image as greedy pillagers of the Third World and adopt a more cuddly persona is how one critic
describes CSR.

Corporates like HSBC need to correct this myth. Our success indeed our sustainability depends
on it.

That concludes my remarks. If I knew the Nipmuc word for thank you for your attention, Id say it.
But I dont, so I wont.

Thank you.

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YBhg Datin Zarinah Anwar
Deputy Chief Executive, Securities Commission

Opening Remarks on Islam and Ethical Business Practices


Distinguished speakers, honoured guests, ladies and gentlemen.

Good afternoon and welcome to this panel session on Islam and Ethical Business Practices. I
would also like to extend a warm welcome to our two eminent speakers: Lord Amir Bhatia, OBE,
Chairman of the Forbes Trust and Professor Haleh Afshar from the Department of Politics,
University of York.

Ladies and gentlemen,

A discussion on CSR from the perspective of Islam is both timely and appropriate. The recent series
of corporate scandals across the globe, including the numerous corporate failures in Malaysia,
brought about by the 1997 financial crisis, have indeed changed our expectations of corporations
and their business conduct. Although these failures have been attributed to bad corporate
governance and breaches of the law, they are essentially brought about by a failure of ethics.

Ethics and morality involve societys ethos and mores the way people behave and the rules they
use to govern themselves. Thus while regulators can develop strong legal and institutional
frameworks to enforce accountability and foster good corporate governance practices, they cannot
legislate on ethics and morality. Ethics is beyond law. Law does not and cannot specify all that is
ethical for acting ethically requires not only not doing the wrong thing but also doing the right
thing. It is inevitable therefore that one looks towards religion to shed the guiding light on what
constitutes ethical behaviour.

Faith and ethics are the inseparable nucleus of all religions of the world. While the fundamental
tenets of all religions propagate good ethical behaviour, our focus on Islam at this conference reflects
its significant global economic impact, not surprising, since Islam is a religion that is pro-business.
The Quran has said Allah has made business lawful for you. 1

And in Islam, ethics governs all aspects of life, including the conduct of business. Worldwide, the
development of finance and investments based on Islamic principles is gaining growing
acceptance, not only amongst Muslims, but also amongst non-Muslims, for the principles of
justice and equity propagated by Islam are universally applicable to all of mankind. Allah
describes people who attain success as those who are inviting to all that is good (khayr),
enjoining what is right (maruf) and forbidding what is wrong (munkar). While the Quran did not
apply this to any specific situational context, it can very well describe the specific standards for
the conduct of business, since business ethics, simply limits its frame of reference to business
enterprises 2.

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The Quran has enjoined that the economic success of businesses will flourish if it is underpinned
by ethics and businesses are reminded to give full measure whenever you measure, and weigh
with a balance that is true 3. Thus the convergence between Islams focus on ethics and the
economic orientation of businesses is very apparent.

Translating Concepts into Business Actions

Ladies and gentlemen,

Let me share just a few practical business implications, of basic Islamic concepts.

The concept of unity is paramount in Islam. This requires all Muslims to obey and observe Gods law,
which amongst others, highlight the fact that humans all share equality of origin 4. Thus human
dignity must apply to all, and on that basis, no one should discriminate against his employees,
suppliers, buyers, or any other stakeholders on the basis of race, colour, gender or religion. This
Islamic principle used to be reflected in businesss management of human capital, an issue that will
be dealt with by Professor Haleh Afshar later in this session.

Socially responsible corporations are expected to adopt recruitment practices that do not
discriminate against women, older workers, the long-term unemployed and the physically
challenged. Such practices are essential in reducing unemployment and fighting against social
exclusion.

Adl or equilibrium is a concept that requires all aspects of life to be balanced in order to produce
the best social standards. To maintain a sense of balance between those who have and those who
have not, Allah says we should not consume conspicuously 5. This principle is reflected in the
practice of sustainable development and conservation in the pursuit of economic benefits. In
general, reducing the consumption of resources as well as reducing polluting emissions and waste
can reduce harmful environmental impact, good for business and for mankind.

Furthermore, the concept of Adl also lies behind charity and philanthropy as an investment in social
stability. This is the foundation of Islamic social capital. Central to the Islamic faith is the practice of
charitable giving and looking after the community through the concept of Zakat (obligatory charity),
Wakafs (foundations) and Baitulmal (redistributive non-profitable organizations). The development of
positive relations with the local community and thereby the accumulation of social capital is an asset
from which business can flourish. We are very privileged this afternoon to have the opportunity to
listen to Lord Bhatias perspectives on this subject.

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Ladies and gentlemen,

Conclusion

Moving forward, businesses can draw from the values propagated by Islam to form a solid
foundation for ethical management and good governance. Being responsible, fair, transparent and
accountable must be the concern of all parties, be it the company, its directors, employees and other
stakeholders. The current competitive global environment demands this from businesses. Businesses
can no longer ignore the importance of ethics and good governance in their economic conduct.

On that note, ladies and gentlemen, please join me in welcoming Lord Amir Bhatia who will speak
on Islam and Social Capital.

Thank you.

1. Quran 2:275
2. Beekun, R.I. Islamic Business Ethics. November 1996. University of Nevada and Islamic Training Foundation.
3. Quran 17:35
4. Quran 49:13
5. Quran 2:195

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Professor Haleh Afshar


Department of Politics
University of York
York YO10 5DD UK

Islam, Human Capital, the Role of Women


It is the contention of this paper that Islam, some 14 centuries ago recognised the important
contributions that women can, and do, make to the development of human capital in their societies.
Thus the domestic work of women was recognised and remunerated and the believers were
commended to respect their mothers and recognise and value the services of their wives. It was
agreed that great men were raised in the lap of good women. However this did not mean that
women had to be enclosed in the domestic spheres. They were also given non-negotiable
independent rights of ownership and economic sovereignty over their own property and income and
along with the men advised to pursue knowledge in order to appreciate the greatness of the
Almighty. At no time have Muslim women been the chattel of their husband. Thus, in terms of their
faith, Muslim women have always had the possibility of both contributing to the development of
human capital and, equally importantly, providing human capital in terms of their own contributions
to the economy and society. Even though over the centuries there have been attempts made to
separate women from the workplace it is the contention of this paper that they have remained
important. With the dawn of the 21st centuries of Christianity they are beginning to play a central
role in terms of both development of human capital and in terms of direct contribution of their own
labour to society and its economy. Evidence from the world over suggests that recognising and
valorising the world of women benefits the economy and the enterprises. Increased income of
women in turn is likely to benefit the household since that is where the bulk of womens resources
are invested. Thus, it is argued, valorising womens work would result in a win win situation for the
public as well as the private escorts of the economy.

Muslim women were granted rights and entitlement some 14 centuries ago that remain the envy of
feminists the world over. However there have been impediments preventing them from exercising
these rights in many Muslim countries and it is only in the course of the 20th century that they have
succeeded in dismantling some of the barriers placed in their way. It is the contention of this paper
that not only women, but also the economy and society benefit from their full participation at all
levels. In this respect Muslim women have inalienable economic rights and a long tradition of
exercising those rights without undermining their domestic and parental duties. As the West moves
towards finding a way of combining work and life, Muslims women could set an example by showing
the multiple ways that they have over the past century used their Islamic rights to economic agency
and exercised them in the different cultural contexts in ways that that valorise both the family and
the independence of women.

CSR: Creating Greater Competitive Advantage


Speeches 39
Women and Islam: A Revival

Islam places no limitation whatever on the participation of women in the public, political economic
and cultural domains. The very first convert to Islam and the wife of the Prophet, Khadijeh was a
business woman of independent means and any religion that she adhered to had to accommodate
powerful women who were active in commerce and in the public domain. However in the centuries
that followed patriarchal processes marginalized women in the Muslim countries and in some cases
confined women to the domestic sphere. This was neither a smooth nor a linear process. There has
always been protest, but with the dawn of the 20th century and the extension of education Muslim
women have begun on a concerted effort to regain their rights and exercise them fully. They are now
re-writing history and regaining access to their rights.

As a woman who belongs to Muslim society and has access to writing (a male privilege and
the incarnation of power), I am indulging in the indescribable pleasure of re-writing the
cultural heritage a subversive and blasphemous act, par excellence. What I mean by
re-writing is an active reading that is, a process of decoding the heritage and at the same
time of coding it in a different way. I am going to indulge myself and take the elements that
have been assembled by the religious authorities and philosophers into a specific order and cut
them up and resemble them according to an order fantasized by me. (Sabbah 1984:6)

The process of reclaiming the faith is one that has bestowed pride and dignity to Muslim women
who claim that it is Islam, rather than the West, that has given them dignity, humanity and the
undisputed right to participate fully and democratically in the affairs of their land:

If womens rights are a problem for some modern Muslim men, it is neither because of the
Koran nor the Prophet, nor the Islamic tradition, but simply because those rights conflict with
the interest of the male elite (Mernissi: 1991: ix)

Looking at the historical experience of the early Muslims Mernissi argues that it was the promise of
equality that attracted the women to convert to Islam:

Women fled aristocratic tribal Mecca by the thousands to enter Medina, the Prophets city in
the seventh century, because Islam promised equality and dignity for all, for men and women,
masters and servants. Every woman who came to Medina when the Prophet was the political
leader of Muslims could gain access to full citizenship, the status of sahabi, Companion of the
Prophet. Muslims can take pride that in their language they have the feminine of that word,
sahabiyat women who enjoyed the right to enter into the councils of the Muslim umma, to
speak freely to its Prophet-leader, to dispute with the men, to fight for their happiness and to
be involved in the management of military and political affairs. (Mernissi, 1991: viii)

Since Muslims believe that the best path towards righteousness is one that follows the example set
by the Prophet and his descendants and companions, the women of the golden age of Islam have
an important part to play in shaping the path. The most eminent of these is the Prophets much loved
wife Aisha who is one of the most respected and reliable sources of hadith, reports of decisions

CSR: Creating Greater Competitive Advantage


40 Speeches

made by the Prophet. She related over 2000 sayings of the Prophet Mohamad; 170 of these have
been approved and by the strict Islamic scholar Bukhari who himself included 54 of the sayings in
his treaties, (Husayn: 1924:33).

Similarly Fatima al-Zahra the daughter of the Prophet gave lectures and taught men and women in
schools and mosques. In addition to the family of the Prophet there are some 700 women
companions who have been sources of hadith (Shaaban: 1995:62). A good example is Asma Bint
Yazid al-Ansari who was a woman of science and defender of womens rights and who related 81
sayings of the Prophet. What is important is that of all those who have repeated the sayings of the
Prophet, ravayat, women have been amongst the most reliable and trustworthy.

Not only did women relate the sayings of the Prophet and thereby contributed to building the
foundation of Islamic laws, but also they assumed political power, ruled over Islamic nations, waged
wars and were artists, poets and critics.

In the process of reform and feminist scholars have been aided by the inalienable Koranic rights that
Muslim women have always had including inalienable right of inheritance, inalienable right of
economic independence and a legal and economic identity which has always been separate from
that of their husbands or their fathers. Furthermore womens work at home and at work has always
been both recognised and valorised.

Islamic feminists contend that the convergence of faith and politics would not be detrimental to the
nation and its economy. On the contrary they contest that enlightened spirituality, which illuminates
the path of Islam, would be beneficial to all and that there are no irresolvable contradictions between
the benevolence of the creed and the progress and success of women (An-Naim 1995:54). Human
interpretation adjusted to local needs and circumstances makes the new interpretation of Islam as
liberating, if not more so, than feminism has been for women (Rahnavard n.d)

Economic and Social Rights of Women According to Islam

It is argued that whereas Western feminism in its quest for equality has conceptualised women as
quasi men and demands of them to compete on an equal par with men, Islam has recognised and
valued the different but complementary work done by men and women, without imposing on them
burdens that they cannot carry. Womens work in the domestic sphere has been celebrated and
valorised, marriage and motherhood have been remunerated, womens economic independence
enshrined in the faith. Yet there is no compulsion for women to remain confined in the domestic
sphere. It is recognised that women have a life trajectory that included motherhood but is not limited
to it. They may and have been businesswomen, entrepreneurs and political leaders.

Whereas in much of the world women became the chattel of their husband on marriage, in Islam,
marriage is a matter of a contract between consenting partners. There is a separation of goods,
womens wealth is their own and it is not subsumed into that of the household. At the same time
marital requirement stipulates that the husband must make an initial down payment of mehre (lV:
4), before the consummation of the marriage.

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In addition to payment for the consummation of the marriage, husbands must also pay nafaqeh,
maintenance, for the household and the wife so long as the marriage lasts. Nor is marriage a once
and for all and continuous commitment; the failure of either partner to fulfill their contractual
obligations provides more or less compelling grounds for divorce; although men have the advantage
over women where divorce is concerned. Nor is re-marriage condemned. Thus Islamist women can,
and do, argue that in its recognition and valorisation of marriage, and womens sexuality within it,
fourteen centuries ago Islam offered women what twentieth century feminists are yet to achieve,
namely a recognised, well remunerated relationship with a man who is required to be both physically
and financially satisfactory.

Islams Recognition of Womens Contribution to the Development of Human Capital

Although women have undoubted economic independence, in Islamic societies, as elsewhere, they are
also seen as the cornerstone of the family and the household. The preamble to the constitution of the
Islamic Republic of Iran for example states places women at the centre of the family, which it defines as:

the fundamental unit of the society and the central kernel for growth and development of
humanity which must be nurtured and protected... this is central to our creed and it is the duty
of the Islamic Republic to achieve this end... such a position on the family removes women
from being objects of pleasure or tools of production and frees them of the burdens of
exploitation and imperialism and enables them to find once more their critical duties of
motherhood and raising of humanity.

There maybe a tension between such a firm positioning of women at the core of the family and the
expectations that they should be active in the economic and political domains. In May 1995 a
representative of the Iranian Foreign Ministry, Mohamad Hashemi, announced that women are
essential to the well being of the family and on no account should they err or fail to pay constant
attention to their domestic chores. He conceded that their contributions might have been
undervalued, but seemed to feel that was their destiny:

The family is the very basis of civilisation and society in the world and women play a
complex role within this structure. It is they who have the highest levels of productivity, who
give the best quality of service and provide the essential physical and psychological care. Their
part is of the essence and the slightest inattention on their part carries unaccountable costs for
the entire society... throughout history women have played a fundamental part in the
construction and reconstruction of society and they have always obtained the least rewards. 6

It was argued that good men are raised in the laps of good women. But there is a divide between
what many women see as the intention of the faith and the interpretations made by some men.
For good women to raise good women and men it is essential that all women have access to
education, that they are able to exercise their independent judgment and to come to considered
decisions concerning their lives and that of their family. Such opinions cannot be formed in
isolation or behind closed curtains. Therefore many have argued convincingly that in order to fulfill
their social and economic duties, Islamic nations must, as a matter of course facilitate access to

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42 Speeches

education, to knowledge to women as well as men and allow them to exercise their independence
and have agency.

It is very much as a result of their insistence on exercising their rights and their great enthusiasm for
the pursuit of knowledge that we find that in Iran as in Malaysia there are now more women than
men at Universities. Something that is not mirrored by the Universities in the West.

Over the recent decade there has been a general discussion in the UK about the crisis of masculinity
and the tendency for young boys to do less well than young girls. This has been accompanied by a
tendency for the younger generation not to heed the many government-initiated programmes to
encourage them to continue their education. But the Muslim community in the UK is highly
committed to education and sees it as one of the best means of social mobility. There is a
commitment to educate girls as well as boys. In this respect it has a higher rate of participation than
the younger group of the same age of the host community. In 1991 whereas 26.5% of the host
community females aged 16-24 were in full time education, 66.3% of Asian others (which include
Persians and Arabs as well as Asians born in the UK), 37.2 of South Asians, 30.7% of Pakistanis,
32.8% of Bangladeshi and were in full time education (Owen 1994 (a):113). The minority women
across the generations were finding education an important means of integration and mobility
(Afshar 1989).

Role of Women in Providing Human Capital and Their Direct Contributions to the Economy and
Society

But it is on the contribution that women make to the economy that I would like to focus. There is a
universal view that woman are naturally suited to domestic work. This is reflected in tacit attitudes
of employers who assume that women in general and married women with children in particular are
inferior bearers of labour (Elson & Pearson). They are suited to domestic tasks, which they do for
nothing at home and so deserve to be low paid in the work place. Or alternatively that they are
biologically made with attributes such as nimble fingers that make them naturally better able to do
some jobs. The argument concludes that since it is nature that has endowed them with these
attributes they need not be paid as trained and skilled workers. Women the world over have fought
against these assumptions and I am pleased to say that progress is notable, though of course there
is a long way to go yet. In addition to the shared experience of gender inequality, Muslim women,
both when they are minorities and sometimes also in Islamic countries, have faced additional
problems of formal and informal discriminatory treatment. They too defend their rights and remain
optimistic about the future of the younger generations of career women.

Women and Work

Women the world over have been governed by laws that have been influenced by the arguments
about womens natural abilities. Laws enacted by a legislature, which is male dominated. They work
in a labour market, which is male dominated. The work place continues, to a large extent, to employ
the manpower to man the desks and the factories. This formal labour market functions on the
assumption that the workers can work the stipulated man hours. But they can do so because they

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are backed by domestic carers who ensure that the workmen are fed, clothed, washed and generally
tended to, so that they can rest before and after work. Universally it has been women who have
provided the domestic back up by working full time at home. As a result most women have found it
difficult to shoulder the second burden of employment. In the formal labour market many have had
to choose jobs with sufficiently low levels of responsibility to enable them to drop everything at any
point to meet the urgent needs of the family. Some women have chosen to compete as quasi men.
In the first instance prioritising the family means that women get drafted into badly paid, part time,
dead end jobs where they can move in and out as necessary to meet the responsibilities of their
unpaid domestic work. In the second case, to succeed, women have to operate successfully in a male
environment. They must be better than the men, be more efficient and more effective, work longer
hours and be wedded to the job. To gain access to the better-paid jobs women have to be better
educated, more highly and better qualified. This means that they have to spend longer in training
and education in order to have the appropriate qualifications. If they make the grade then the career
women are in need of a wife themselves and have to defer marriage and motherhood unless they
can find a reliable house husband. To secure the appropriate track records in their jobs they have to
defer motherhood or abandon it altogether; hence the nearly static or negative rate of population
growth in many Western industrial countries. But even when women abandon their familial roles
they are not likely to reach the zenith of the careers (Rahnavard n.d.) In too many sectors of the
economy sooner or later they hit the glass ceiling (International Labour Review 1999).

The labour market has been segregated vertically and horizontally. Most women work in sectors of
the economy concerned with health, education, welfare and services and in terms of industry in
garment and food sectors. Even in these vertically separated sectors women rarely make it to the top.
The horizontal segregation means that even in feminised industries the management has been
almost universally male. Furthermore once a sector became feminised the likelihood was that the
wage levels in that sector would collapse. So for example the medical profession, which is still male
dominated in the West, is highly paid. But in the socialist countries, where the profession has been
feminised, the general pay levels have fallen. In both cases however the top professionals are men
and highly paid. We can observe a similar trend in the education, welfare and other service sectors.

Yet increasingly households require two incomes to survive and it is becoming a matter of necessity
to change the domestic context to enable women to contribute in terms of cash as well as time to
the family. Feminists have fought for and over the past century made much progress in achieving, at
least in terms of formal legislations, almost an equal status in the work place. Though as a matter of
fact they are yet to ensure that the theory has been put into practice.

Grass Root Women

However it is the contention of this paper that the failure to value womens work should be seen as
a problem of patriarchal power and in no way a reflection on womens work. As a matter of fact it
may be argued that women, because of their ability for multi-tasking, because of their long training
in dealing with familial disputes, disruptions and multiple demands, gain considerable management
training and skills that are easily transferable to the public domain. The skills that they gain as

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44 Speeches

domestic managers had been recognised and valued by Islam at the inception of the faith, what is
needed is that they be revived, recognised and valued by the governments. It is advantageous and a
mark of success to enable them to access their entitlements and fulfil their capabilities (Sen 1999).
They should be able to combine work and motherhood, what the West is now calling a life/work
balance: a path that helps them in fulfilling their mothering duties and facilitates their return to the
workplace in due course.

Iranian activist Azam Nuri argues that women would make perfect planners and should be employed
as such.

In our society women have not yet been accepted fully and their potential to contribute to the
public domain has not been used... we have many women who should move up the echelons
much faster, but who are held down because of their gender rather than the quality of their
work. 7

Where womens skills have been recognized and respected, there is considerable evidence that both
the employers and the family have benefited. The experience of micro financing in South East Asia
and elsewhere has, over the past half century demonstrated that lending money to women
entrepreneurs makes not only for good business but may also benefit the family (Everett and Savara
1991, Khan Osmani 1997, Lemire, Pearson and Campbell 2002). One of the early projects began in
the 1970s in India offering a differentiated rate of credit (DRI) to slum dwelling women. The aim was
to at enable them to invest in fixed assets and have some working capital to develop their home
based production capacities. The most successful projects were those spearheaded by women
NGOS, such as SEWA, Self Employed Womens Association and WWF, Working Womens Forum. As
early as 1981 a study by the Bank of India showed that almost all the loans disbursed in 1979 by
WWF in Madras had been repaid in full. That poor women repay their loans has now become a
truism. Examples from as far apart as Bangladesh, India, Italy and the US demonstrate that
impoverished women borrowers have some of the highest rates of repayment (Houghton, 2001)

However it is not only that women are good at repaying, but also there is considerable evidence that
the trust placed in women and the capabilities that are enhanced through loans empowers the
women enriches society and pave the way towards freedom and development (Sen:1999). Such
development enables them to rise above day to day problems and cope effectively with difficult
circumstances. In her work with rural women in Bangladesh, Lutfan Osmani found that women who
had accessed loans offered by the Grameen bank, were not only reliable and highly likely to repay
their loans, but also had gained considerable self-confidence in the process. The majority felt that at
time of crisis they would be capable of supporting themselves (Khan Osmani, 1998:79).

Women and Management

I think that women have two natural inherent and acquired characteristics that make them
into good managers. Women are methodical planners who are very good at sorting out details
and the minutia; these qualities are most useful in managerial positions. In the home women
work as general managers of a small unit and they have always proved to be competent and

CSR: Creating Greater Competitive Advantage


Speeches 45
successful managers in the domestic sphere. They have been equally successful in the public
domain... 8

As yet the importance of womens managerial skill has not been recognised in the higher echelons
of the workplace. Mainstreaming remains a hope rather than a reality since the labour market
remains segregated. The highest paid sectors, such as banking and finance remain the domain of
men and in these sectors women are under represented and the gender pay gap is large. By contrast
where the labour market is feminised the incomes are relatively lower and the gender gap in earning
much smaller. The majority of women remain in the health, education, welfare and service sectors.
Pay varies a great deal between different sectors. According to the Labour Force Survey 1998 in the
United Kingdome there is still a 20% pay gap; that is to say for every 10 earned by men women earn
about 8. The highest average pay for men is in banking, insurance and pension provision where they
earn 18.10 on average, as compared to the general average of 10.30. In this sector women are
under represented and those who work there earn only 55p for every 1 earned by men.

Pay also varies between occupations. Men earn most on average in managerial and administrative
jobs; women earn most in professional jobs. The greatest pay gap is in less well-paid occupations:
women earn 68p for every 1 earned by a man in craft and related occupations. In this sector women
form only 10 % of the workforce. The pay disparities are smallest in the clerical and secretarial posts
where women form over 75% of the workforce and earn 96 p for every 1 earned by a man (Labour
Force Survey 1998).

What this means is that at the moment women have a great market advantage clouded by prejudice.
They are able and willing to work well, their contribution comes at a lower cost and yet they are as
effective as any man. In some parts of the formal labour market this has led to the feminisation of
the workplace. It may well be that management is the next possible target.

There is considerable evidence that organisations that employ women gain from their participation
at all levels. A recent study by Catalyst (2004) indicates that in the United States corporations that
have a higher representation of women at higher management levels are more successful than those
who do not have women in their teams. 9 Looking at a sample of 353 of the companies that appeared
in the Fortune 500 at least once during the five years between 1996-2000 (catalyst: 2004:17), it came
to the conclusion that:

The group of companies with the highest representation of women on their top management
team experienced better financial performance than the group of companies with the lowest
womens representation. This finding holds for both financial measures analyzed: Return on
Equity ROE, which is 35% higher and Total Return to Shareholders (TRS) which is 34%
percent higher (catalysts: 2004:2).

Solutions

Thus there is plenty of evidence that women can make invaluable contributions to the workplace
both at the formal and in the informal level. At the same time universally women have been by and

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46 Speeches

large committed to their domestic work. Therefore the best solution for the economy and society
would be to seek and provide a life/work balance that would enable men and women to be effective
workers and effective parents.

A number of companies and institutions as diverse as Unilever, Asda, Kings College Hospital and the
Inland Revenue have embarked on a range of imaginative programmes to improve life/work balance
and facilitate the progress of women. The common emphasis has been on:

n Need for flexibility

n Need for family friendly policies

n Creation of a career structure that

a) Moves women off the sticky floor

b) Allows them to move across the clerical/administrative divides

c) Allows them to crack the glass ceiling

The suggested policies range from the recognition of part time work as providing a career path to
recognition of domestic and mothering multi-tasking as important managerial skills (Unilever
application forms now have a section on this) to instituting mechanisms for enabling women to
access the qualifications and training to move across all the grades:

One of the directors of Unilever is a successful woman who combines motherhood with holding an
effective managerial job at the top on a part-time basis. She is the one who introduced a section on
transferable domestic skills to all application forms.

Provision of paid assistance to allow women to move from cleaning jobs to becoming nurses and
doctors: Kings College Hospital offers the opportunity to all its manual staff to apply for places in
appropriate courses to enable them to take access courses. Initially successful applicants are
assisted to go to evening classes. If they obtain the right qualifications they are given bursaries to
attend courses. Of an initial intake of 22 individuals 12 completed the access courses, 4 went on to
do nursing and one is now beginning to train to become a doctor.

Asda encourages its till workers to apply for training to become managers.

The Post Office has a programme to encourage women and ethnic minorities to embark on
appropriate training or educational courses to enable them to move up the grades.

It would be possible to implement similar policies at the University. Kings College Hospital provides
a very good example of such practices being implemented in a similar institution. The opportunities
are made available in terms of identifying suitable courses, providing paid time off for employees to
embark on these courses and even offering three years scholarships to those who eventually go on
to tertiary education. In return the participants agree that on graduation they would work for a given
length of time for the institutions.

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Speeches 47
In a different way Asda is providing the opportunity for its till workers to train for managerial
positions. Once more individuals can apply for appropriate courses. They self select and are not
chosen, but encouraged to put themselves forward. The training is provided in-house. If they achieve
the appropriate levels then it is possible for them to move across to the administrative grades.
(Women and Equality Unit 2003)

14 centuries ago at its inception Islam provided solutions that recognised the life/work balance for
women and remunerated it. It required of believers to respect womens independence and offered
women the possibility of being good wives and mothers and becoming good teachers and
entrepreneurs. There has been a period of darkness where these rights may have been respected in
the letter but not in the spirit. The failure to value women and their work may indeed have prevented
true development in many regions (Sen 1999). What is needed now is for Islamic countries to forge
the way forward by respecting women and granting them their God-given rights to exercise their
capabilities to the full. It may well be that Islam has the real solution for the best work life balance
and Islamic countries could be ahead of the game and could provide examples of good practice
based on their faith that would be followed by the rest of the world.

Women across the world are working to either to change discriminatory laws and archived parity.
Muslim women however have God-given rights and a millennial recognition of the value of their
contributions at the domestic level. At the level of formal economic activities they not only have
rights but also exemplary women like Khadijeh who have paved the way. Thus in theory it should be
considerably more easy for Muslim women to succeed as entrepreneurs and it would be to the
advantage of Islamic government to rely on these rights and facilitate the progress of women.

6. Zaneh Ruz 6 May 1995


7. Zaneh Ruz 30 April 1994
8. Azam Nuri interviewed by Zaneh Ruz 30 April 1994
9. I am most grateful to Mohd Zameen Azuan Mohd Zahari for drawing my attention to this paper

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48 Speeches
Bibliography
n Afshar H Education: hopes, expectations and achievements of Muslim women in West Yorkshire, Gender and Education,
vol. 1 no. 3, December 1989, pp 261-282.
n An-Naim, Abdullahi (1995) The dichotomy between religious and secular discourse in Islamic societies in Afkhami,
Mahnaz, (ed) Faith and Freedom, Womens Human Rights in the Muslim World, I P Tauris, London and New York.
n Bank of India (1981) Promotion of Self-employment through Bank finance: A case study of DRI Scheme for Slum Dwellers
in Madras, Bombay.
n Catalyst The Bottom Line, Connecting Corporate Performance and Gender Diversity. http://www.catalystwomen.org/publi-
cations/executive_summaries/financialperformance.pdf
n Everett, Jana and Savara, Mira (1991) Institutional credit as a strategy towards self reliance for petty commodity produc-
ers in India: a critical evaluation in Afshar H (ed) Women Development and Survival, Longman, London and New York.
n Javadi Amoli, Abdolah (n.d) Zan dar Ayineyeh jala va jamal [women reflected in the mirror of light and beauty].
n Houghton, Mary Women, Institutional roles and Economic Opportunities in Beverly Lemire, Ruth Pearson and Gail
Campbell (eds) (2001)Women and Credit: Researching the past, refiguring the future Bergs publishers Oxford pp117-27.
n Khan Osmani, Lutfun the Grameen Bank experiment: empowerment of women through credit in Afshar H (ed) Women
and Empowerment: some illustrations from the Third World Macmillan Houndsmill 1998.
n Lemire Beverly, Pearson, Ruth and Campbell Gail (eds) (2001) Women and Credit: Researching the past, refiguring the
future Bergs publishers Oxford.
n Mernissi, Fatima Women and Islam; an Historical and theological enquiry, Blackwell, Oxford 1991.
n Owen David, 1994 Ethnic minority women and the labour market tables derived from the 1991 census Equal Opportunities
Commission, Manchester.
n Rahnavard, Z (n.d.)Toloueh Zaneh Mosalman, Tehran Mahboubeh Publication.
n Sabbah, Fatna A. (1984) Women in the Muslim Unconscious Pergamon Press, New York, Oxford.
n Sen, Amrtya (1999) Development as Freedom, Oxford University Press.
n Women & Equality Unit Improvising life at work advancing women in the workplace: good practice guide Department of
Trade and Industry, London 2003.

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Speeches 49
John Zinkin
Associate Professor of Marketing & Strategy
Nottingham University Business School

Getting CSR Right


Good afternoon, distinguished guests, ladies and gentlemen,

We heard the message from the government and listened to leading practitioners of CSR this morning.
I now have the thankless task of following up after lunch the most difficult time of the day to get and
keep attention. Before we break into the different groups to discuss among ourselves the relevance of
CSR to our operations, the problems of implementing it and possible ways of overcoming them, I would
like to take a few minutes to address some of the issues relating to getting CSR right.

I propose to cover the following areas: how to get CSR right; regarding CSR as the Licence to
Operate, the consistency of the UN Global Compact with Islam, finally treating CSR as a form of
stewardship leading to Capital Stock Renewal, with four vectors of investment.

Getting CSR Right

Perhaps CSR can be defined as the incorporation of globally accepted ethical and moral values into
the day to day transactions of any corporation, and this makes it sound relatively easy to do.

Yet getting CSR right is difficult because it is a journey, not a destination. As countries evolve, getting
richer and better educated, so societys expectations of company behaviour become more
demanding. So what was good enough yesterday may no longer be good enough today, and certainly
will not be good enough tomorrow.

Nevertheless when companies decide on their strategic direction, it is possible to frame the issue of
socially responsible behaviour in four separate but related ways: 10

n First, there are the personal aspirations and values of the senior management of the company.
These determine what the company WANTS to do;

n Second, there are the market opportunities, which dictate what the companys economic purpose
will be. These determine what the company MAY do;

n Third, there are the acknowledged obligations the company has to society the relationship it
has with the community within which it finds itself. These determine what the company OUGHT
to do;

n Finally, there are the competences of the company, which determine its sources of competitive
advantage. These determine what the company CAN do.

What makes CSR a particularly difficult subject are the dilemmas managers have to face when
deciding on the nature of responsible behaviour.

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50 Speeches

Exhibit 1: Six Dilemmas of CSR

Dilemma 1: Behaving Contextually Correctly Dilemma 2: Being Responsible Globally

Socially Acceptable Building Local Capability

Illegal Legal Race to The Race to The Top


Bottom

Socially Unacceptable Destroying Local Capability

Dilemma 3: Sustaining Core Values Dilemma 4: Creating Sustainable


Employment
Individual Freedom
Gesellschaft/ McDonaldization/ Instrumental
Religious Society/ Secular Society/
Recyclable Building
No Logo Branded
Comparative World-class
Consumption Consumption
Advantage Organizations
Collective Good
Gemeinschaft/ Traditional/ Social

Dilemma 5: Handling Externalities Dilemma 6: Creating Sustainable


Development
Satisfying Customers
Growth Benefits all

Maximum Costs Minimum Costs


Harm To No Harm To
Externalized Externalized
Environment Environment

Satisfying Shareholders
Growth Benefits Elites

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Dilemma 1: Behaving correctly depends on the context within which the firm operates. In this case,
the top right hand quadrant is the place for a firm to be: its activities are both socially acceptable
and legal.

However, there are firms whose activity would place them in the bottom right quadrant: tobacco,
alcohol, gambling and armaments companies; some might even say extractive companies. In their
case it is less clear what socially responsible behaviour means. Does this mean they should not
invest in their activities to ensure efficient operations? No, for inefficient companies benefit nobody.

Dilemma 2: Behaving responsibly across the globe. In this case, firms should aim to be in the top
right quadrant for there are no losers there. Being in the bottom left hand corner is one of the
reasons why globalisation has a bad reputation and it is why Kofi Annan launched the Global
Compact.

On the other hand, multinationals in the bottom right quadrant are doing right by their shareholders
in their home country. However, if they are destroying local capability by putting local firms out of
business through their greater economic muscle, or using the Race to the Top in terms of
standards as a way of disqualifying local players from competing on the global stage, then they
create political problems for their host country.

Being in the top left hand corner is exactly what many international firms are accused of doing
building capability, but using the Race to the Bottom with lower standards in health, safety and the
environment that exist in many Third World countries to compete unfairly. And this has become
politically sensitive. Senator John Kerry, the leading Democratic contender for the 2004 US
Presidential elections, has accused companies that outsource or offshore jobs of being traitors, and
has stated he will revoke their tax breaks to raise the costs to them of exporting jobs, should he
become President. 11

Dilemma 3: Sustaining core cultural values is another dimension in the global debate affecting
multinationals, regarded by some as cultural polluters. In this case it is not at all clear where a
company should position itself in order to be regarded as being socially responsible:

n American companies, with their traditions of consumer choice, easy credit and post-modern
materialism would clearly opt to be in the top right hand corner.

n Companies with Protestant or Quaker cultures are also likely to be comfortable in the top right
quadrant.

n On the other hand, companies from collectivist societies like Japan or Korea are more likely to
seek to be in the bottom right hand corner.

Activists, like Naomi Klein 12, want companies to move into the top left corner, even though they may
not be driven by religious motives. Catholicism, Islam and Hinduism are also more likely to push
businesses towards the left hand side of the grid, with the ultra-orthodox in all religions seeking to
push companies into the bottom left, as they reject the crass materialism of the post-modern world.

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Dilemma 4: Creating sustainable employment is a dimension multinationals must consider carefully,


for they, above all, are accused of destroying jobs in their relentless search for efficiency at the
expense of community. It is the multinationals in the main that have hollowed out industries in the
developed world as they have moved two factors of production capital and technology to where
the third, labour, is cheapest.

In these circumstances, a company from a developed economy wanting to position itself as socially
responsible would aim for the top right quadrant high on efficiency and on building world-class
performance. That is exactly the positioning of companies that have entered markets previously
served by governments. The resulting loss in jobs has made privatization and globalization unpopular
in the countries where this has happened.

Small companies with little or no brand equity to defend are likely to operate on the left hand side of
the grid, operating in either a Social fashion 13, if they are small family funded firms as is the case
with many Overseas Chinese operations, or in an Instrumental fashion 14, if they are Anglo-Saxon or
Scandinavian. The point to note here is they are practicing what Terutomo Ozawa calls Recyclable
Comparative Advantage 15. They enter a country where labour is cheap, set up operations and move
on as soon as labour gets more expensive. This behaviour has been typical of the small Asian
companies in the garments and footwear business, where Taiwanese companies have moved from
Taiwan to China, then to Vietnam and on to Bangladesh in search of ever-cheaper labour. But it has
also been true of Nike, and has landed them in trouble with civil society 16. Nikes error was to
behave like a small company, forgetting it had brand equity and market capitalisation to protect.

Dilemma 5: Handling externalities responsibly is an issue that applies to all firms, regardless of
where they are located. Being responsible requires the company to position itself on the right side
of the grid. Whether it chooses the top right quadrant or the bottom right quadrant depends on
whether it believes it has a primary responsibility to satisfy customers 17 Peter Druckers
perspective; or whether it believes it has a primary duty to satisfy shareholders Milton Friedmans
perspective. 18 This latter view would encourage the firm to opt for the bottom left quadrant, as long
as it could get away with offloading its internal costs onto the community legally.

Dilemma 6: Creating sustainable development is the final dimension firms need to consider. Here,
it is clear where responsible firms would like to be, namely in the top right quadrant, for it is only
there that development is sustainable over the long-term, since the activity does no harm to the
environment and benefits everybody, thus making it risk-free politically.

However, there are times when companies, especially those in the extractive industries, with a fifty-
year time horizon, find themselves having to choose the second-best solution, namely to be in the
bottom right quadrant, where they operate in such a way as not to harm the environment, but at the
same time have to deal with elites who are the primary short-term beneficiaries of royalties and the
granting of licenses, creating opportunities for lack of transparency and corruption.

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The issue in this set of dilemmas is the question of inter-generational equity. In really poor countries,
the tendency will be to swing towards the left hand side of the grid, as any damage to the
environment may be outweighed by the immediate benefit of providing starving people with food
and jobs, however short-term the sustainability of the activity.

The Licence to Operate

The first time I heard this phrase was at BP. It seems to me to capture admirably what CSR is really
all about. Whenever I have used the phrase since first meeting it in BP, the response of senior
managers has been the same: they agree it captures what they need to do to satisfy their multiple
stakeholders to stay in business. 19

It is not a technical term; it is not a legal licence to do business, as some might think. Instead it
consists of two complementary ideas: efficiency and effectiveness for without either a company
will lose its Licence to Operate.

Being efficient is an inward looking process. It is about doing things right, once it has been determined
what should be done. Consequently, efficiency deals with the supply side. Companies must be efficient
if they are to compete in providing goods and services successfully to their customers. Failure to be
efficient will destroy the firms ability to satisfy its shareholders because it will not be able to provide
them with a satisfactory return on their investment. It will also destroy its ability to create and retain
satisfied customers because more efficient competitors will be able to provide equivalent goods and
services at lower prices, and will also be able to continue with investment and R&D to develop superior
products. To maintain its Licence to Operate a company must therefore do everything it can to be as
efficient as possible. However, focussing on efficiency alone, at the expense of effectiveness will also
create trouble, and in the end may damage its Licence to Operate For example, if a company focuses
only on efficiency and externalises as much of its costs as possible to the detriment of society, it will
ultimately face social sanctions that will at the very least increase its costs or could put it out of
business altogether as Senator John Kerry has threatened to do in the US. 20

Being effective is an outward looking process whereby the company ensures it is doing the right
things. These are, amongst others, maintaining the relationships it has with its stakeholders who can
be grouped into five categories: shareholders, customers, employees, government and communities.
If it fails to satisfy its stakeholders, it will ultimately lose its Licence to Operate. If, by being
inefficient, it fails to provide the goods and services its customers want, it will lose revenue, and go
out of business or be taken over by a team of managers who can make better use of the assets
involved. If it fails to satisfy its employees, they will leave or else work without enthusiasm and
damage the organisational brand. If it fails to do the right things by society at large, it will find civil
society activists mobilising public opinion, legislators and regulators against the activities of the firm
threatening its Licence to Operate and possibly its very existence.

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There is therefore a dynamic tension between doing the right things in order to maximise the
Licence to Operate:

n Handling externalities responsibly;

n Sustaining core values;

n Creating sustainable development;

n Creating sustainable jobs;

n Behaving responsibly globally (for those who go abroad).

and being efficient. Yet firms must find the right balance between efficiency and effectiveness if they
are to recognise the interest of stakeholders who can deny them the Licence to Operate in the
medium to long term.

The UN Global Compact

Since 26 July 2000 when Kofi Annan launched the UN Global Compact, there has been a voluntary
framework within which companies around the world can advance socially responsible behaviour and be
part of the solution to the challenges of globalisation. This framework deals with three areas: human
rights, labour and the environment. Since that date, some 1,629 companies worldwide have signed up to
the Global Compact. It is interesting and somewhat saddening to see how few have done so in Asia. As
can be seen from Table 1 below, the countries in Asia, which are the most frequent investors across
borders in the region, Hong Kong, Taiwan, Singapore and South Korea, have no companies signing up at
all. The exception to this is Japan. It is therefore perhaps not an accident that many NGOs regard Asian
companies investing in the region as being the cause of the Race to the Bottom, where companies
deliberately invest in countries with weak regulation and low standards to cut costs.

I was surprised to see that only two Malaysian companies have signed up so far (Ford and Dupont),
and believe that this is an additional reason why this seminar is so timely and important in order to
raise awareness of CSR, here in Malaysia.

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Table 1: Companies in Asia Signed Up to the Global Compact

Country Number of Firms Signed Up

Bangladesh 2
Cambodia 0
China 17 (of which 2 are SMEs)
Hong Kong 0
India 90 (of which 6 are SMEs)
Indonesia 3
Japan 13
Malaysia 2 (Ford and Dupont)
Pakistan 2
Philippines 135 (of which 13 are SMEs)
Singapore 0
South Korea 0
Taiwan 0
Thailand 13
Vietnam 0

Source: www.unglobalcompact.org

I was all the more surprised when I realised how close to Islamic precepts the Global Compact is as is
shown below. As a guide to business behaviour, the UN Global Compact is admirably consistent with
the teachings of Islam, so it should not be regarded as some kind of imposition of alien Western values.

Table 2: The UN Global Compact as a Guide to Behaviour

UN Global Compact What Islam Has to Say


Human Rights:
v Principle 1: Businesses are asked to v I have made oppression unlawful for Me and for you, so do not commit oppression
support and respect the protection of against one another.
international human rights within Shahih Muslim, Vol.3 No 6254
their sphere of influence; and
v help their brothers whether he is the oppressor or the oppressed i.e. if he is an
v Principle 2: make sure their own oppressor he should prevent him from doing it, for that is his help and if he is the
corporations are not complicit in oppressed he should be helped (against oppression).
human rights abuses. Shahih Muslim, Vol.3 No 6246

v O ye who believe! Stand out firmly for justice, as witnesses to Allah, even as
against yourselves, or your parents, or your kin, and whether it be against rich or
poor: for Allah can best protect both.
Quran Surah 4 verse 135

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UN Global Compact What Islam Has to Say


Labour:
v Principle 3: Businesses are asked to v Your employees are your brethren upon whom Allah has given you authority. So if one
uphold the freedom of association has ones brother under his control, one should feed them with the like of what one
and the effective recognition of the eats and clothe them with the like of what one wears. You should not overburden
right to collective bargaining; them with what they cannot bear, and if you do so, help them in their job.
Sahih al Muslim 3:4093

v Principle 4: the elimination of all v Allah, (SWT), says: I will be an opponent to three persons on the Day of Judgment:
forms of forced and compulsory One who makes a covenant in My Name, but he proves treacherous, One who sells
labour; a free person (as slave) and eats the price, And one who employs a labourer and
gets the full work done by him but does not pay him his wages".
v Principle 5: the effective abolition of
Sahih al Bukhari 3:2
child labour; and

v Principle 6: the elimination of v No Arab has superiority over any non-Arab and no non-Arab has any superiority
discrimination in respect of over an Arab; no dark person has superiority over a white person and no white
employment and occupation. person has any superiority over a dark person. The criterion of honour in the sight
of Allah is righteousness and honest living.
The Prophets Last Sermon

Environment:
v Principle 7: Businesses are asked to v ... wear your beautiful apparel at every time and place of prayer: eat and drink: but
support a precautionary approach to waste not by excess.
environmental challenges; Quran Surah 7 verse 31

v Principle 8: undertake initiatives to v Never a Muslim plants a tree, but he has the reward of charity for him, for when it
promote greater environmental is eaten out of that is charity; what is stolen out of that, what the beasts eat out
responsibility; and of that, what the birds eat out of that is charity for him.
Sahih Muslim: 3764
v Principle 9: encourage the development
and diffusion of environmentally
friendly technologies.

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CAPITAL STOCK RENEWAL

Islam teaches that wealth belongs to Allah and that man is a trustee of all the resources at his
disposal. This means that businessmen are stewards of the wealth and resources they possess. A
good steward is one who husbands the resources at his disposal so that they are greater at the end
of his stewardship than at the beginning. Maintaining and improving the stock of capital the assets
for which he is responsible, achieve this. And so it is with CSR. The easiest way to think about CSR
is to consider its various elements as being forms of capital, which need to be maintained, replaced
and upgraded as time passes. In the context of CSR there are four types of capital requiring
investment: manmade capital; natural capital; human capital and social capital:

n Manmade Capital consists of manufacturing plant and equipment; offices and buildings and their
associated equipment; physical infrastructure such as roads, ports, airports and railways; as well as
logistics systems and equipment such as vehicles, warehouse equipment and the associated software
that goes with them. Such capital depreciates as a result of normal wear and tear or technological
obsolescence. As a result businesses are perfectly comfortable with the idea that it must be maintained,
renewed, and if possible upgraded, to maintain a companys or countrys competitive edge.

When companies look at improving this capital stock, their focus will naturally be first of all on
improving the productive capacity of the investment i.e. creating more wealth using given
resources. To be socially responsible, however, firms need also to think about how to improve the
Health and Safety aspects of the equipment involved and the associated work processes. Socially
responsible companies will try also to reduce the resources needed to achieve the same output
while at the same time seeking to improve productivity.

Considering how to reduce the amount of material throughput involved, while still creating the
desired value and revenues, when processes are redesigned with closed loop thinking as far as
environmental impacts are concerned, can achieve remarkable results. Some examples, including
a notable one in Singapore, serve to make the point:

u Renting rather than selling: Dow Germany has created a Rent-a-Chemical division for the
supply of solvents. Instead of selling solvents to customers, thus maximizing production and
its attendant need to dispose of the used solvents, they have leased solvents to customers on
the basis of minimizing the cost of cleaning per sq. foot. As a result they consume fewer
chemicals in the making of solvents and they reduce the environmental damage caused by
solvent disposal.

u Redesigning the machining process: Pratt & Whitney used to machine ingots into turbine
blades with a resulting 90% waste. By asking their suppliers to pre-form the ingots into
approximations of the final turbine blade, Pratt & Whitney were able to reduce the waste from
90% to a mere 10% 21. Net shape production has similarly striking effects on the material
intensity of the production process. By consolidating many small parts into a large single part,
a 13lb tricycle with 126 parts was redesigned into a 3lb, 26 part tricycle costing one-fourth of
the original to make. By using a US$68 per lb. carbon fibre, a windshield wiper was

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reengineered from 49 parts to one, at a lower cost, despite the use of the expensive carbon
fibre 22. Net shaping can be done with metals as well as plastics through hydroforming, semi-
plastic forming, plasma spray and powder metallurgy. By eliminating stages in the machining
process, these new techniques eliminate machining scrap.

u Closed loop thinking where Steel Case, the American office-furniture company turned their
fabrics from potentially hazardous waste into edible materials with the help of Ciba-Geigy
after they tested 8,000 chemicals and jointly rejected 7,692, creating an entire line using only
38 chemicals 23. Perhaps the most important element in the closed loop process is the setting
of measurable improvements in waste reduction, by making the output something that is
deliberately minimized or eliminated altogether. By 1993 Gillette had reduced its Toxic Release
Inventory wastes by 97% from their 1987 level mainly in the area of solvents. 24

u Reconfiguring heating and ventilation systems in factories. A radically different approach designed
to eliminate all sources of friction in the ventilating system can yield a tenfold saving in energy
consumed, as is shown by an example from Singapores Supersymmetry Services Pte Ltd: 25

Most engineers would count themselves lucky to use only 1.75 kilowatts of electricity to
provide 1 ton of cooling [in Singapore], and many use 2 or more. Lee Eng Hocks systems,
however, use only 0.61 kW per ton 65-70 per cent less... Lees systems also provide much
better comfort, take up much less room, are more reliable and generally cost less to build.
They cost less partly because every part is exactly the right size, not too big Energy is
used over and over until almost nothing is left... Most engineers would suppose that the
place to save air-conditioning energy is in the chiller... Lee saves a third of its energy,
chiefly by using heat exchangers three to ten times bigger... and making the chiller spin at
just the right speed. But thats only a fifth of his total energy saving. Two-fifths is in the big
supply fans that blow chilled air around the building, and the other two-fifths is in the
pumps and in the cooling-tower fans that dissipate the heat to the outdoors.

Lees supply fans use not the normal good practice 0.60kW/t but only 0.061kW/t 90
per cent less. His chilled-water pumps use not 0.16 but 0.018kW/t 89 per cent less. His
condenser-water pumps, which move heat out of the chillers, use not 0.14 but
0.018kW/t 87 per cent less. His cooling towers use not 0.10 but 0.012kW/t 88 per
cent less. Where do these roughly tenfold energy savings, with improved performance,
come from? From common sense, whole-system engineering about traditional practice
and rigorous application of accepted engineering principles often ignored in that
practice. Above all, from ruthlessly eliminating friction wherever it can be found. 26

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u Designing buildings differently. Perhaps the worst examples of wrongful use of energy are in
buildings where the fundamental problem is one of a faulty pricing mechanism. Currently architects
and realtors are incentivized to build big, expensive projects and to develop/sell them quickly.
Avoiding waste requires a different approach. In the case of energy efficiency, it requires finding a
way in which the developer and tenant/buyer both benefit from energy efficiency i.e. that the
developer is rewarded for building in savings in the use of the property, rather than just looking to
build with the cheapest materials in the fastest time. The savings in use can be really significant if
the building is designed with these in mind at the outset. For example, by incorporating energy
efficient ideas through different approaches to lighting, ventilation and the use of intelligent
windows, ING were able to save 90% of the energy used in their old headquarters in the new one.

n Natural Capital is represented by all the products and services provided to mankind by nature.
This includes all the raw materials renewable and non-renewable to be found on Earth. When
it comes to dealing with Natural Capital, there are four problem areas: depletion, damage to the
environment, degradation of the commons (those things we share and regard as being provided
for free) and disposal of waste:

u Depletion. Ever since the Club of Rome forecast that we would run of energy before the year
2000, the threat of depletion of natural resources has not been taken so seriously. The reason
is that depletion can be seen as a pricing issue. If the price of increasingly scarce resources
rises high enough, either demand for them is choked off solving the problem through a
reduction in demand; or new technology and processes are created to find these resources at
the new price. This is exactly what has happened with energy: demand was reduced by the
1973 oil price shock on the one hand, and new fields in ever more difficult environments have
come on stream as they have become economical as a result of higher prices.

u Damage to the environment. The real threat caused by depletion is paradoxically in the area
of renewable resources forests. Forests do not just provide timber resources. They provide
oxygen and carbon sinks; clean water through watershed management; biodiversity and
tourism. Cut them down and we do not just lose the timber products. We lose sources of
oxygen and release carbon into the atmosphere, making Climate Change more of a threat;
water becomes turbid; erosion and flooding increase as a result of damage to the watershed
systems; biodiversity is reduced and tourism disappears. And the most serious problem is that
once these changes have occurred they may not be reversible.

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u Degradation of the commons. We know how to put a value on those materials we have
traditionally paid for, but we have great problems valuing those parts of natural capital that
have been free in the past: the creation of oxygen and water, the ozone layer protecting us
from UV radiation all of them essential to life, and yet apparently free:

Many environmental resources have no market. They are not bought and sold.
Accordingly, there are no price signals to alert us to their scarcity or to induce
discovery, substitution and technological change. The same feature of these missing
markets also results in an uneven playing field between environmental conservation
and the immediate factors, which threaten conservation. To the slash-and-burn
farmer there is little benefit in pointing to the many ecological functions served by
the forest if he receives no income, in cash or kind, from those services It is
difficult enough internalize the externality (that is to make the polluter regard the
externality as a cost to himself or herself) when the externality results in cash losses
to others. It is even harder when the losses show up as non-monetary losses, as for
example in the loss of amenity or impaired health. 27

Valuing natural capital is a difficult and imprecise exercise at best. Nonetheless,


several recent assessments have estimated that biological services flowing directly
into society from the stock of natural capital are worth at least $36 trillion annually.
That figure is close to the annual gross world product of approximately $39trillion
a striking measure of the value of natural capital to the economy. If natural capital
stocks were given a monetary value, assuming the assets yielded interest of $36
trillion annually, the worlds natural capital would be valued at somewhere between
$400 and $500trillion tens of thousands of dollars for every person on the planet.
That is undoubtedly a conservative figure given the fact that anything we cant live
without and cant replace at any price could be said to have an infinite value. 28

In this area one of the key tasks is better water use and management. Here again, it is
remarkable what can be achieved when companies actively seek to prevent water wastage
and pollution. Some examples of what can be achieved are shown below:

3 Weiss, a Hamburg oil re-refiner eliminated all effluents discharged into Hamburg harbour
after being targeted by Greenpeace. 29

3 Papermaking in Germany required 500 1,000 litres of water per kilo of paper in 1900; by
1995 this had dropped to only 1.5 litres. 30

3 By 1993 Gillette used 93% less water to make a razor blade than in 1972 and 90% less
water to make a Papermate pen than in 1974. 31

3 In 1991, Mitsubishi Semiconductors America was able to reduce water consumption by


70% while production went up by 30% in its North Carolina integrated circuit factory by
introducing deionization and reverse osmosis processes. As a result they eliminated CFCs

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entirely and plating sludge by 96% through changing the chemistry of the process rather
than the process itself. Electro winning reduced the lead concentration in the plating
sludge from 1,100 to 30 parts per million, which in turn reduced the sludge by reducing
the need for further reactants. 32

3 Residential water use has been reduced by up to 67% in Tucson Arizona, and in Israel,
where water is always short, mobile homes have been developed, using space technology,
allowing them to eliminate all external sources of water and recycle completely both water
and wastes. 33

3 In textiles, Brinkhaus, a German manufacturer was able to cut water consumption by 80%
and reduce wastewater by 92%. 34

3 Overall in the US the amount of water used per capita fell 21% between 1980 and 1995, and
more crucially the amount of freshwater used per unit of GDP fell 38% in the same period. 35

u Disposal of waste. Here the problem is perhaps the most acute because the human pollution
footprint has expanded alarmingly as a result of the combined effect of population growth and
industrialisation. Yet the planet has not grown correspondingly, so its ability to absorb the
wastes we create is increasingly under threat. We are running out of landfills and the seas
ability to absorb the rubbish and the chemicals we discharge is also being reduced by the day.
The only solutions to these problems are for companies to design products and services with
the three Rs in mind from the outset:

3 Reducing raw material use has already been discussed

3 Recycling is a powerful concept, which, when properly used, can make a big difference as
the following example shows. If instead of knocking buildings down as fast as possible,
the principle of salvaging everything possible from the old buildings was applied, the
amount of rubbish going to the landfill would be cut dramatically, while at the same time
providing employment to the least skilled in society a doubly beneficial outcome:

Of the total volume from demolition, 64 per cent was estimated to be wood, 30 per
cent concrete, 2 per cent metal, and 3 per cent the tar-and-gravel roof. Normal
demolition would have sent 92 per cent of this entire volume to landfill. But in the pilot
project, only 5 per cent was landfilled and the other 95 per cent reused or recycled. The
1.5 months of extra labour was compensated for by the sale of the materials. 36

3 Reusing materials such as scrap metal, glass, paper has the double benefit of reducing the
depletion effect, and in many cases means using less energy, and creating less pollution
in the process. Companies like Volkswagen now design their cars with recycling and reuse
of the materials involved as part of their contribution to being socially responsible.

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n Human Capital is perhaps the most important capital of all. It is the source of wealth creation
more than natural capital as can be seen from Table 2 below:

Table 2: Wealth Estimates by Country:Manmade Capital

Country Percent due to Percent due to Percent due to


Human Capital Natural Capital Manmade Capital

Haiti 76 8 16
India 70 7 22
Benin 76 8 16
China 77 7 16
Egypt 64 5 31
Peru 67 8 25
Indonesia 75 12 13
South Africa 75 5 20
Thailand 79 6 14
Malaysia 73 9 18
Saudi Arabia 40 42 18
UK 79 2 19
US 77 4 19

Source: Kunte et al, 1988, quoted in Blueprint for a Sustainable Economy, p87

The table above would seem to suggest that natural capital really is not all that important, except for
Saudi Arabia and perhaps Indonesia and this is the result of the valuation problem mentioned
earlier. Nevertheless, it is not surprising the overwhelming preponderance of wealth is derived from
human capital Switzerland, Singapore, Hong Kong and Japan are well known examples of this fact.
And as countries move towards becoming service economies, this will become truer still, as can be
seen from the UK and US percentages.

As a result socially responsible companies will look to get the best from their people through
encouraging education and training, lifelong learning and knowledge management. In todays world
it may no longer be possible to guarantee employees jobs for life, but it is possible to promote their
employability for life instead through the adoption of lifelong learning programmes and sensible
health and nutritional policies though these need reinforcing by government.

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n Social Capital is the glue that enables societies to deliver quality of life and can be defined as
follows:

Quality of life can be experienced by individuals or be an attribute of societies as a


whole. In its latter form, radical advocates of sustainable development want to include
the ideals of equity (interpreted as a lessening of inequality) and community/culture.
By the latter is meant the vibrancy of communal life, including cultural traditions and
local distinctiveness, voluntary association, mutual aid, and local knowledge. It is the
conservation of local cultures and communities, along with equity and a third ideal,
participation, which can broadly speaking be said to make for social sustainability. 37

We take it for granted, and yet we only need to look at the failed states of Africa to see what
happens when social capital is destroyed. In the context of CSR, companies must work with
government to ensure that the social capital stock is adequately maintained. Typically this means
cooperating in the creation of the necessary legal frameworks designed to foster good
governance and transparency.

...Social capital [comprises] certain features of social organisation norms of behaviour,


networks of interactions between people and between institutions, and trust between
people... 38

The importance of having the right social capital in place cannot be overstated. It is what makes
for a civil society; it also enables a society to manage transitions from traditional to modern ways
of being and doing. It acts as the vector by which innovation and new technological ideas can be
absorbed. Failure to develop the right social capital leads not just to a miserable quality of life,
but also reduces a societys ability to accept innovations that are necessary for growth:

The feature that will increasingly differentiate one geographic area (city or country)
from another will be the quality of public institutions. The most successful areas will be
the ones with the most competent and effective mechanisms for supporting collective
interests, especially in the production of new ideas. 39

A key reason for the success of East Asia when compared with other developing countries has
been the strength of its social capital:

For a variety of historical reasons, including a focus on basic education and basic
health care, and early completion of effective land reforms, widespread economic
participation was easier to achieve in many of the East Asian and Southeast Asian
economies in a way it has not been possible in, say, Brazil or India or Pakistan, where
the creation of social opportunities has been much slower and that slowness has acted
as a barrier to economic development... 40

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In this context, it is the role of responsible business to do everything in its power to help
government build the legal institutions designed to foster a climate of good governance and
transparency as these create more efficient and deeper capital markets, lower costs of capital
and lower transaction costs to the benefit of the community as a whole. Managers need to resist
the temptation to indulge in corrupt practices, which corrode the institutions of good governance.

Much of this is achieved by building on values that are truly universal, recognising that they
translate into culturally determined norms of behaviour. More important, companies must
recognise that practices may well be perversions of societys values and norms and should be
courageous enough to resist those that undermine social capital, lest its decay lead to a
breakdown of society from which nobody benefits, least of all businesses.

To conclude, implementing CSR is difficult because it is a journey and not a destination indeed a
moving target with changing goal posts and it is contextually determined. Nevertheless if CSR is
understood as maximising the Licence to operate, it becomes a concept business can understand
and work with. The UN Global Compact provides a global framework guiding what companies should
address if they are to be socially responsible through investing in the four types of capital: manmade,
natural, human and social. In so doing, it reinforces the precepts of Islam for there is no conflict
between their two ways of looking at the world of business.

Thank you.

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Iqbal Khan
CEO, HSBC Amanah Finance

Corporate Social Responsibility, Islam and Islamic Finance


In todays world, unfortunately the word Islam carries somewhat of a negative connotation. When
the Media Group of the Muslim Council of Britain did research on all the articles written in British
newspapers over the recent few years to study the context in which Islam was mentioned, a steady
deterioration of the context was noticed from fundamentalism to extremism, to now terrorism. But I
want to start today by reading from a speech that was given by Carly Fiorina, the CEO of HP, soon
after September 11, 2001. She was narrating the story of a civilization that was once considered the
greatest in the world.

It was a civilization that was able to create a continental super-state that stretched from
ocean to ocean, and from northern climes to tropics and deserts. Within its dominion lived
hundreds of millions of people, of different creeds and ethnic origins. One of its languages
became the universal language of the world, the bridge between the peoples of a hundred
lands. Its writers created thousands of stories. Its poets wrote of love, when others before them
were too steeped in fear to think of such things. When other nations were afraid of ideas, this
civilization thrived on them, and kept them alive.

While all of this sounds a lot like a current-day civilization, the CEO of HP was actually talking about
the Islamic World from the year 800 to 1600 which included the Ottoman Empire, and the courts of
Damascus and Baghdad, and rulers like Suleiman the Great. From this peak we find ourselves in our
current situation due in great part to our negligence of our corporate social responsibilities as
outlined in the Quran and Sunnah.

This conference of CSR is very timely as it brings our attention to the core principles that are needed
for success. Today I will talk about how these principles of CSR are rooted deeply in Islam, and of
the rich legacy that Muslims proudly share. I will talk about the need for Muslims to recapture and
reclaim this legacy and will highlight Islamic Finance as an example in this effort.

The primary objective of the Syariah is to establish Justice, as without Justice there can be no peace
or freedom. As such, the primary message of the Quran is the establishment of Justice. Allah says
O ye who believe, stand out firmly for justice, as witnesses to Allah, even as against yourselves, or
your parents, or your kin, and whether it be against rich or poor, for Allah can best protect both.
(Surah An Nisa v. 135)

As the final message in a monotheistic series, Muslims consider the Quran and Sunnah to be
the final word on all matters. Allah has set the boundaries (or Hudood) very clearly everything
that is Haraam is clearly stated, and everything else is permissible (except in matters of worship).
It has defined all aspects of human life in great detail, leaving no aspect without guidelines.
Corporate Social Responsibility is no exception to this, and Islam has clearly defined
responsibilities for the individual, the corporation, and the state. In Islam, Corporate Social

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Responsibility is deeply rooted in the Quran and Sunnah. As an example, one only needs to read
the final sermon of the Prophet (SAWS) which deals mostly with social justice and responsibility.
He said in this sermon:

Verily, you will meet your Lord and He will ask you about your actions. You will neither
commit injustice neither will you be wronged. No Muslim is allowed from his brothers
property except what he gives away with good heart, so do not wrong each other. The most
honorable of you with Allah is that believer who has morality.

In the individual domain, the sanctity of human life and honor occupy the highest place. This sanctity
of life is underscored in the verses of the Quran where the taking of one life is equated with taking
the life of all mankind, and likewise the saving of one life is equated to the saving of all mankind.

Additionally, the obligations of a group of people over another are also well defined. As an example,
the rich have an obligation to provide charity to the poor, and the husband has the obligation to
provide sustenance and support to the wife. Many such obligations are laid out in the Quran and
the Hadith of the Prophet (SAWS). I will mention a couple that highlight the importance of the
concept of responsibility toward each other.

Neighbors are given such great obligations that the Prophet (SAWS) told one of his companions that
when Archangel Jibreel [Gabriel] was informing him of the obligations of a neighbor, the list went
so far he thought that neighbors will also be given the right to inherit from each other!

As an example of the right of personal property, a person who prays in the house of another without
permission will not have his prayers accepted by Allah! Additionally, we are all aware of the story of
the person who came to Umar to report on the drinking habits of another person. When asked how
he had found out, this person revealed that he had seen the drinking with his own eyes by peeping
through a hole in the mans house. On hearing this, instead of punishing the person who drank wine,
Umar punished the person who violated the property right of the homeowner by peeping through a
hole in the house. To Umar, the information was obtained through an unacceptable means, and he
found it necessary to punish this person for violating personal property rights!

Besides our obligations to each other, Muslims also have a responsibility towards nature to
conserve and maintain it. We know the famous Hadith of the Prophet (SAWS) on how we are
commanded to use as little water for ablution as possible. It is reported that the Prophet (SAWS)
used the equivalent of one glass of water for his ablution. Similarly, it is prohibited to cut down trees
and damage the environment unnecessarily.

In a corporate setting, Muslims have always measured the corporation against two goals: financial
goals, and social goals. A for-profit institution that meets only the financial goal is regarded as a
failing institution. In recent times, means of making profit often comes at the expense of the social
good. Therefore the financial and social goals seem contradictory from time to time. However, within
the framework provided by Islam, there is a harmonious zone of sustainability which is to be
achieved, and I will talk about this zone in the next slide.

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The framework I am referring to is both the conduct that has been sanctioned (or encouraged) and
the behavior that has been prohibited. Both the acceptable and prohibited actions of a corporation
are well defined in the world of Islam. However, unfortunately a lot more work needs to be done to
re-discover and implement these principles in todays business environment. Areas such as corporate
governance and transparency, defending the rights of minority shareholders, and the culture of
collective management as opposed to a star-based culture are a few examples. In fact, the longest
verse in the Holy Quran in Surah Baqarah deals with just these issues. It talks about the duty of
financiers to document their transactions, and about the laws of disclosure and transparency, and
about the appointment of agents in trade. All these CSR principles have been covered in detail and
underscore the importance of ethics in business.

Corporate Responsibility: Zone of Sustainability

ECONOMIC SOCIAL
IMPERATIVE IMPERATIVE
ZONE OF
SUSTAINABILITY

Islamic
prohibited sectors businesses NGOs
(tobacco, alcohol, not-for-profits
gambling)

The Islamic Zone of Sustainability is at the intersection of the economic and social imperatives.
This is depicted by the shaded area in this graph. An organization that is to the far left on this chart
would be unacceptable in Islamic Society, as would a for-profit organization that operates in the far
right corner. It is worth mentioning that non-profit organizations such as NGOs are expected to
operate in the right corner as they are not held under the rules of a commercial corporation. But they
would be subject to all the prohibitions and guidelines mentioned earlier.

So what are the Islamic CSR principles? Let me begin with the principles of conduct that are
accepted and encouraged. Among these are the freedom of economic pursuit; justice and equity in
all dealings and transactions; and the equal importance of means and ends; of form and substance.

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Just as individuals are afforded the right to own property, so are Corporations. In fact, most business
dealing would be unimaginable in the absence of strict and enforceable property rights. Similarly,
rights are also extended to the use, exchange, and sale of such property. Freedom in trade requires
consent and agreement in transactions from all the parties dealing with each other with full
transparency and disclosure.

The Islamic teachings pertaining to justice in business deal with the fulfillment of promises and
contracts, the exactness in weights and measures, and fairness in wages paid to workers, among
others. The Prophet (SAWS) had instructed people to pay their workers before the sweat on their
brow had dried. It is the right of a worker that he be paid fairly and in a timely manner, so much that
the sweat on the brow should not dry before payment is received!

Equally important to the substance of a transaction is the form in which the transaction is
conducted. This is especially true in Islamic Finance, where as an example, Allah mentions that trade
looks similar to riba, but Allah has permitted trade and forbidden riba.

Just as certain practices and conducts have been endorsed by Islam, certain actions have been
expressly disallowed in business dealings. I am sharing a sample list of such conduct, but let me just
highlight a few as examples.

Hoarding of any commodity or wealth is severely denounced in the Quran. Allah warns us that any
wealth that is hoarded will be used as fuel in hellfire to punish the hoarder. The Prophet (SAWS) also
expressly forbade hoarding due to the harmful effects it has on society. Hoarding blocks money and
commodities from circulation, causing an adverse effect on the distribution of wealth. It also creates
dead-assets and a black market, and it was the goal of the Prophet (SAWS) to establish a free market
so that just prices could emerge.

Also, price fixing by any governmental body is also prohibited in Islam. When the Prophet (SAWS)
was approached by some of his companions requesting to fix prices, he refused to interfere with the
price mechanism in the market, saying that he wanted to meet Allah having wronged nobody. This
underscores the inherent injustice in price fixing, and hence the prohibition.

I have already mentioned the prohibition of undue delay in paying wages to workers. The same injunction
applies to the repayment of debt, where any unnecessary delay in repayment is expressly forbidden.

As Muslims, we have a very rich and deep heritage in the area of Corporate Social Responsibility.
The foremost example is the life of the Prophet (SAWS). There is no other human in the history of
mankind whose life has been documented in such detail. The Prophet is the best example for all, and
this is also true in the area of corporate social responsibility. He exemplified the ideal conduct of a
person in all his dealings. Ms Annie Besant, an internationally famed theological philosopher said of
Prophet Mohammed that:

it is impossible for anyone who studies the life and character of the great Prophet of Arabia
to feel anything but reverence for that mighty Prophet. I myself feel, whenever I read [about
him], a new way of admiration, a new sense of reverence for that mighty Arabian teacher.

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Similarly, the four caliphs that followed after the Prophet are an excellent example for us in how
to run the affairs of a state. I will mention a few examples of their conduct. The first day after Abu
Bakr (RA) was appointed as the Caliph, he proceeded to the market to carry out his usual business.
But Umar (RA) stopped him on his way, asking him what he was doing. Abu Bakr said that he is
proceeding to the market to do his business as usual, but Umar told him that he can no longer do
that as he is now the Caliph. The traders might be influenced by the status of Abu Bakr and this
might change their attitude in the trade. Umar advised Abu Bakr to appoint an undisclosed agent
for himself who will carryout his business for him. And so the first agency agreement was created
between the caliph-elect and an individual. This shows the concern these leaders had for justice
and transparency.

Similarly, Caliph Umar (RA) was the first head of state to establish various trusts. He established the
first fund to protect trees, the first fund to maintain places of worship for all religions, and the first
fund to protect animals that had lost their productive usage. In fact, the first Social Security system
was established by the Muslims for a Jew who lived under the rule of Caliph Umar (RA)!

It is also well known that Ali (RA) used to frequent the markets in person to ensure that traders were
being fair in their measurements. How often do we see such enforcement of social laws in Islamic
societies around the globe today?

Our books of history are, therefore replete with such examples. There is a book titled Some beautiful
aspects of our civilisation by Dr. Mustafa Sibaei that details Muslim contributions that one can refer
to. And it is heartening to see that some modern day businesses are attempting to re-introduce this
social consciousness in business dealings. One particular business that I have had the pleasure of
knowing is SADAFCO in Saudi Arabia whose entire business mission and strategy are directly
aligned with the principles of the Syariah.
It is also important for us to recognize that for long periods in history, Muslims have strayed from
these principles in their business dealings. We can link this to decline at several levels. Islamic states
moved to inherited rule, scholarship stagnated as the doors of ijtihad were closed, and Muslim
societies eventually capitulated to foreign rule.

The same point can also be made by reference to a classic religious paradigm. We see this in the
Hebrew Bible and the Old Testament as well as in the Quran itself. Allah says in the Quran that the
Haqq (virtue) always has the power and will rise up above the Baatil (falsehood). When the believers
follow the Haqq, they enjoy great prosperity. But over time, they allow the Baatil to slowly creep into
their societies. The first sign of decline is the loss of love for the Prophet (SAWS). This is indicative
of the beginning of decline as society losses the divine blessings from Allah. This loss of divine
blessings leads to corruption, stagnation and economic and political humiliation. It is only with a
return to faith-based CSR principles that Muslims can regain their competitive edge as individuals
and as a community.

If businesses and corporations in the Muslim world are to be successful, they need to re-capture this
rich heritage of CSR principles that are rooted in Islam. We do not need to invent new principles or

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doctrines. They are there for us to re-discover and practice in order to enjoy long-term prosperity.
Adherence to the guidelines of Allah and operating within this framework will ensure success now
and in the future. A renewed commitment to the divine CSR principles is all that is needed for us to
recapture our lost position.

And in this attempt to recapture our heritage, education is our strongest weapon. As we all know,
the first commandment that came down on the early Muslims was to read and acquire knowledge.
This holds true especially today, where we need to educate ourselves of the Islamic CSR principles
and our legacy in this area. Only when we are aware of this can we implement them in our lives and
benefit from the blessings of the Almighty.

We look around to see where this change is happening, and we see efforts in several areas. We
see it happening in Islamic Architecture, and Islamic Calligraphy. And among these attempts is
the effort in Islamic Banking. In the 1970s when Muslim countries gained some stability and
wealth after their independence, a small group of people including HRH Prince Mohammad Al
Faisal and Sheikh Saleh Kamel recognized the need for Syariah compliance and CSR principles in
the area of finance. They set out to do just that and started by establishing Mudarabah based
investment houses. From this humble start by the pioneers of Islamic Banking, this industry now
stands at multiple hundreds of billions of dollars in size, continuing with the aim of exemplifying
and operating within the zone of sustainability as laid out by the Syariah. This industry has
gained worldwide acceptance as a viable system and continues to gain momentum throughout
the world. It is now estimated to be a $250 billion industry growing at an annual rate of greater
than 15% per annum. Its reach spans most of the globe, from the Far East to the United States,
and it all started with the humble efforts and pure intentions of the pioneers like Dr Ahmed
Mohamad Ali and many others.

In this area, I would specially like to commend the government of Malaysia for its vision and commitment
to adopt a gradualist, evolutionary and long-term approach to the Islamic Finance Industry.

HSBC has a long and very rich tradition of community banking. In fact, our motto is to be the worlds
local bank. And as part of this commitment, we have had a deep sense of CSR, which can be
reflected in the statement of the Chairman of HSBC back in the 19th century. He said that the three
essential ingredients of a successful bank are good character, good management, and solid
resources. It is quite remarkable to see the commitment to having a good corporate character at
HSBC long before most corporations made this a priority. As part of the character, HSBC has found
it important to focus on environmental protection and preservation, along with education at the
primary school level.

HSBCs Islamic Finance practice, HSBC Amanah, was also a direct off-spring of this sense of
good character and tradition of community banking. Amanah offers products to consumers,
corporates, and MnCs around the globe fully complying with Syariah principles. Inherently, this
makes Amanah a socially responsible venture as it has pledged to abide by the comprehensive
laws of Syariah.

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Today, Amanah has a presence in six countries worldwide and is supervised by an independent
committee of Syariah Scholars who are all renowned for their contributions to this industry. To date,
we have executed over $6 billion in transactions since inception, and we continue to grow at a fast
pace. In addition, HSBC has helped with the creation of several Islamic Indexes with major Stock
Indexes like the FTSE Islamic Index. This year we were recognized by EuroMoney as the best
International Islamic Finance service provider and the best International Sukook house.

Like all growing industries, Islamic Finance faces its own set of challenges. Some of these challenges
are more tangible, like the Basel 2 accord, or the establishment of commonly acceptable standards
and regulations. And although there is work being done in harmonizing Syariah standards, there is
still more work to be done. There is also a need to establish training institutions to train future
Islamic Bankers, and Banks will have to work hard to attract the right kind of talent that is committed
to the industry, and then retain this talent for the long run.

The other challenges are more intangible in nature and continue to push the industry in deeper areas
of CSR. For example, how do we instrumentalize the institutions that aim to reduce poverty and
establish a more even distribution of income through the use of zakat, sadaqah, and Qard Hasan (a
beautiful loan)? There exists a large income divide in the 1.5 billion Muslims around the globe. How
can we create instruments that form the core of CSR and help alleviate these global problems? Do
banks have a role to play, and if so, what is their role? And our duty to establish socio-economic
justice is not limited to Muslims, but extends to all citizens regardless of their religion. How do we
solve these problems in our countries and establish justice as we are supposed to?

Muslims form the group that are the most under provided in education, pension and takaful. Can
Islamic Finance help alleviate this situation through instruments such as takaful, educational loans,
pensions, and estate planning? There is also a need to establish think tanks that can conduct cutting
edge research in this field. There is a lot of room for growth and an exciting path lies ahead for this
industry to re-live the Islamic CSR heritage.

To conclude: Islam has a well-defined CSR doctrine creating a rich heritage in the realm of social
responsibility. But this heritage needs to be reclaimed if businesses are to be successful. The
development of Islamic Finance is an example of one such attempt and the road ahead is a very
exciting one which holds a lot of promise.

Thank you.

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YBhg Tan Sri Nor Mohamed Yakcop


Second Finance Minister of Malaysia

CSR & SRI: The Way Forward for Malaysia


Introduction

His Excellency, The British High Commissioner, Mr Bruce Cleghorn.

Yang Berbahagia, Dato Md Nor Yusof, Chairman of the Securities Commission.

Distinguished speakers and guests, ladies and gentlemen.

Assalamualaikum Warahmatullahiwabarakatuh dan selamat pagi.

First of all, I would like to thank the British High Commission and the Securities Commission for
inviting me to deliver this mornings special address for the Corporate Social Responsibility
conference entitled CSR: Creating Greater Competitive Advantage.

From the programme, I note that the distinguished panel of speakers had, over the past one and a
half days, covered key areas relating to CSR namely its importance to the businesses and the
community, how CSR can contribute towards realizing Vision 2020, the various aspects and
perspectives of CSR and its relationship with corporate governance and socially responsible
investing. So naturally, the question that all of you might and indeed should be asking at this
juncture is, how do we move forward from here?

Taking Stock The Current Level of CSR and SRI in Malaysia.

Ladies and gentlemen,

As with any strategic analysis, it is always useful to begin with an assessment of the current state
of CSR practices in Malaysia. By benchmarking this against global best practices, we can thus
identify strategic challenges and ways for the nation to move ahead.

The terminology CSR might be new to most people in the country but the concept, is not. At its
core, CSR principles epitomize the fundamental religious and social values that have held the very
fabric of humanity together since the dawn of civilization. It is a natural extension to individual
social responsibilities and manifested religious obligations that we have, as a society, been
practicing for thousands of years. As corporations in the last hundred years are beginning to have
profound effects of the way we live, it is timely that we demand the same standards of social
accountability from them.

For instance in Malaysias National Report on UNs Agenda 21, the Government recognized the
importance of sustainable development 1. Measures and commitment undertaken by the
Government will no doubt to a certain extent, would have to be realized by major enterprises like
those present today. It is the Governments priority to ensure that businesses and public activities

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pay heed to CSR issues such as eradicating poverty, conserving energy, combating deforestation,
managing fragile ecosystems, protecting health and managing land resources.

There are also various instances where the private sector and government agencies along with
NGOs have worked together for the betterment of the environment. Initiatives like the Tree
Planting Group 2 and the Prime Ministers Hibiscus Award are testament to these collaborations.
The corporate sector in Malaysia supports environmental educational and awareness efforts by
participating and making contributions towards programmes like the Environmental Education and
Awareness Trust Fund. Responsible enterprises have successfully supported environmental-
related efforts like the Beautification of Schools programme and the Environmental Journalism
Award. I am also very glad to note the level of support given by the private sector to NGOs like the
WWF, ENSEARCH, Environmental Protection Society of Malaysia and the Malaysian Nature
Society.

Besides the progress that we have made on the environmental front, Malaysia has also made
significant advancements in the area of corporate governance (CG) reforms. Progressive steps have
been taken to establish a strong foundation for CSR strategy and implementation with the Malaysian
Code on Corporate Governance (the Code). Though not exactly two sides of the same coin, CG and
CSR do have a lot in common. While better CG practices address the concerns of shareholders, good
CSR on the other hand more often address the concerns of the stakeholders. However, investors are
now increasingly interested in this area as they believe that a well-managed company will address
CSR issues and take its stakeholders seriously. Some aspects of CSR, such as energy conservation
or recycling, can cut cost and increase profits while others may be seen in terms of risk management,
another area of focus brought by the our recent CG reforms.

Besides progress on the CSR front, again Malaysia has also been active in nurturing Socially
Responsible Investment or SRI. Though SRI products might be new, the concept is not especially for
Muslims.

Last year, Malaysia witnessed the birth of two ethical or SRI funds 3. The focus of these funds is to
invest in companies which are not just profitable but are not involved in tobacco, liquor and gambling
as well as having socially accepted practices such as good corporate governance and
environmentally-friendly. These funds have been collaborating closely with various NGOs to advise
them on ethical issues as well as having a special advisory board to guide the fund managers on
topics such as corporate governance, social responsibility and environmental protection. Investors
should also be encouraged by the fact that SRI funds often provide comparatively good financial
returns as well additional social and environmental benefits that go beyond direct financial reward
to the investor.

SRI is a positive economic choice about the way we live and the world we live in. The SRI funds that
we have are basically in the category of portfolio screening. This basically means the inclusion or
exclusion of stocks in the investment portfolio on ethical, social and environmental grounds. This can
be done via screening criteria or corporate ratings based on the best of class basis 4.

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A special category of portfolio screening has a long established history in Malaysia namely the
Syariah Approved funds. Since the establishment of the first Islamic equity fund in 1968 5, Islamic
funds have seen phenomenal growth. As at 31 March 2004, there are 61 Islamic funds with net asset
value of RM5.32 billion. Islamic funds grew 85.36% from 2002 to March 2004 6.

The stunning growth of the Islamic capital market is driven by a variety of catalysts. The
Governments aspiration for Malaysia to be an international Islamic capital center is manifested in
the Capital Market Masterplan. The Securities Commission is tasked with spearheading this
initiative. Efforts such as the Syariah Index, establishment of the Syariah Advisory Council and the
maintenance of the ever-growing list of Syariah compliant securities on Bursa Malaysia are some
of the examples of this effort. As at 30 April 2004, there were 743 companies listed on Bursa
Malaysia which were deemed to be Syariah-compliant, covering close to 80% of all shares traded
on the exchange 7.

Indeed the development of the Islamic capital market provides a favourable grounding for the
development of SRI funds. Most Islamic funds are essentially negatively screened ethical funds. It
would be a relatively straightforward next step for companies offering Islamic funds to install some
SRI positive screening on top of the current selection mechanisms 8.

In Malaysia, another category of SRI, namely community investing is also present. This category of
CSR involves supporting a particular cause or activity through financing it via investment or loans.
Community investing includes micro credit and revolving loan schemes. Community investors may
seek a financial return at lower than market rates to achieve a particular social return for society from
their investment. However, unlike philanthropy, social finance institutions require, at a minimum that
the original value of the investment can be returned. Amanah Ikhtiar Malaysia (AIM) is an example
of a micro-finance institution where it has adopted the Grameen Bank model and is intent on
targeting the hardcore poor. To date, AIM has helped 88,095 applicants free themselves from the
hardcore poor status with RM963 million worth of loans disbursed 9.

Moving Forward Options for Growth

Ladies and gentlemen,

The next natural option is to consider how we as a nation can ensure and enhance the progress of
CSR and SRI. However, there are of course minimum standards laid down in law in terms of
environmental protection, occupational safety and health as well as employment. CSR should begin
its corporate journey here voluntarily. Captains of the industry like those present today should
voluntarily go beyond the minimum regulatory measures and take proactive action to enhance their
CSR practices.

With the increasing awareness and global demand for better CSR practices, companies should
recognize and adopt CSR into their management practices. In moving forward, it is important to note
that while CSR can only be taken on by the companies themselves, stakeholders, especially
employees, consumers and investors, can play a decisive role in prompting companies to adopt CSR

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practices. The stakeholders can also enhance their CSR role by requiring companies to be effectively
transparent about their social and environmental performances.

CSR as a Strategic Initiative for Companies

The effort to nurture good CSR practices begins with the company. At the start, companies should
adopt a mission statement, code of conduct or credo where they state socially responsible purpose,
core values and responsibilities to the stakeholders. These strategic objectives must be effectively
translated into tactical plans such as adding social and environmental dimensions in plans and
budget. Companies can also consider carrying out environmental audits and setting up continuous
education programmes. Global companies have also adopted the creation of community advisory
committees to advise them on the impact of their business on the well being of the community at
large. This includes assessing and reporting environmental effects and also social aspects such as
participation in the surrounding communitys activities.

Taking Pro-active Steps CSR Reporting and Auditing

Ladies and gentlemen,

CSR should not just be confined to the strategic realm. It must be manifested in companies business
practices and should be made known to interested stakeholders. Many multinational companies are
now issuing CSR reports. A few Malaysian companies 10 have actually disclosed in their annual
reports their CSR practices. However, in most instances, these reports are only limited to issues such
as environment and occupational health safety. These are good areas to begin the CSR reporting
process, but moving forward, issues such as non-discriminatory recruitment practices and socially
beneficial activities should also be disclosed. These disclosures serve as a very useful tool for SRI
investors to base their investment decisions on. It can also serve as a differentiation factor for
companies especially if reporting awards such as the ACCA Malaysia Environmental Reporting
Awards recognizes the companies reports. To further distinguish themselves companies may also
opt to publish a stand-alone CSR report.

Besides that, in line with developments in other jurisdictions, corporates may also elect to adopt
global standards for social accounting, reporting and auditing. There are major international
initiatives focusing on the globalization of social standards, public disclosure of information and the
development of social reports. Some of the notable ones are the Social Accountability 8000 (SA8000)
and the Global Reporting Initiative (GRI).

Ladies and gentlemen,

It is important that verification by independent third parties is done to avoid criticism that the reports
are nothing more than a public relations gimmick without any substance. The involvement of
stakeholders such as the trade unions and NGOs, could improve the quality of verification.

CSR reporting and the adoption of related standards are very important. Given the current dynamism
and the exponential growth of CSR, in the future, it will no longer serve just as an order winner

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but will also be the prerequisite order qualifier. This means that, good CSR practices will be the
precondition for customers to even consider doing business with the enterprise.

The Government strongly supports the adoption of voluntary reporting and CSR standards as it
believes that regulations should not precede private sectors progress and initiatives within a
voluntary CSR framework.

A Growing CSR Force Your Employees

Ladies and gentlemen,

There is an increasing belief that the number of employees who are concerned with social values of
their employers are on the rise. As companies seek to recruit the best and the brightest, these
enlightened workforces will increasingly use their clout in the labour market to affect increased CSR
performance of companies. Certainly, companies with bad CSR records will have difficulty recruiting
and retaining their staff compared to companies with good CSR practices.

Over the period of one and a half days, the point has been emphasized that employees are major
stakeholders of companies. Implementing CSR is an enterprise-wide effort, thus it requires not
only the drive from management but also innovative thinking, new skills and closer involvement
of employees. Mechanisms such as social dialogues with the employees therefore, play a crucial
role in embracing CSR. These dialogues can structure permanent feedback and adjustments for
the CSR initiative.

Influencing Global Consumers Show Them What You Have

Thought leaders believe that there will be a specific category of CSR consumers in the future with
high income and increasing influence in the marketplace 11. This is especially true in developed
markets such as Europe where surveys have shown that consumers do not only want good and safe
products but also seek the assurance that it was produced in a socially responsible manner 12. More
often than not, products from developing nations like Malaysia often carry the connotation of being
produced irresponsibly. With the advent of globalization, our producers must seek to change this
often-misleading preconception. Without, which, it might not be able to compete in the global
market especially when CSR criteria become order qualifiers. So what can we do?

I believe the answer is to adopt CSR and let the consumers know that you do. Unlike CSR reports,
which are usually relied upon by SRI investors and fund managers, your end-customers are often
unaware of any CSR initiatives that you have undertaken. Companies can utilize the very
powerful market-based incentive of social and eco-labeling. These can help deliver positive social
change among enterprises, retailers and customers. Basically, social and eco-labels imply
guarantee that the item or materials used in the delivery of services, was produced free from
exploitation and abuse.

To ensure that these labels are credible, enterprises should ensure that they are transparent and able
to verify their claims.

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Speeches 77
Being Socially Responsible Pays The Role of SRI

Ladies and gentlemen,

There is a widespread agreement that shareholder action and institutional investors will have a
significant impact on the future of CSR. The prevailing belief is that, capital markets will be
central to establishing the incentives that drive corporations towards being socially responsible
in the future 13. This is due to the fact that, socially and environmentally responsible policies
provide investors with a good indication of sound internal and external management. Good CSR
practices can also contribute towards managing risks by anticipating and preventing crises that
can affect reputation and cause dramatic reduction in share value. It is anticipated that there will
be a growth in investors looking at CSR as a contributor to the companies intangible assets and
future earnings potential. Criteria often scrutinized by the investors are the companys ability to
recruit and retain the best workforce, engender trust in customers, build a good reputation or
manage its risks. In anticipation of such demand, especially if your company harbours global
ambitions, your company should try to increasingly link sustainable development with
shareholder value, both by building it into business and building new business around it to create
shareholder value.

The Government has and will continue its current drive to establish Malaysia as the center for
international Islamic capital market. This will undoubtedly continue to foster the tremendous growth
of the special category of SRI funds namely the Islamic funds. Investors familiar with the negative
screening mechanisms of these faith-based funds will be more receptive to conventional SRI funds.
This makes Malaysian investors relatively socially aware compared with their other counterparts in
the region. A 2003 report by the Association for the Sustainable and Responsible Investment in Asia
(AsRIA) highlighted that this awareness makes Malaysia a strong potential market for SRI funds 14
to the local market.

Ladies and gentlemen,

To wholly embrace the concept of SRI as the impetus to drive the development of CSR, we must also
focus on developing conventional SRI funds. Asset management companies and investment houses
should explore the possibility of adding to the two SRI financial products currently in the market.
Academic studies and empirical evidence have shown that there is no systemic reason for SRI funds
to underperform. Indeed much of the studies pointed that SRI funds can perform as well as and often
outperform their benchmark 15. For instance the Domini 400 social index has consistently
outperformed the benchmark S&P 500 on a total return basis since its launch in 1990 16. Thus, given
the success of SRI funds elsewhere especially the fact that being socially responsible does not
compromise the financial returns, Malaysian asset management companies should seriously
consider introducing conventional SRI funds.

CSR: Creating Greater Competitive Advantage


78
Conclusion

Ladies and gentlemen,

On balance, the development of CSR and SRI in Malaysia is relatively advanced compared to other
nations in the region, albeit being pursued under different forms. However, there are still many
improvement opportunities for us to continuously enhance its progress. The way forward requires a
collaborative effort of Government, companies, investors, NGOs and other stakeholders. I sincerely
hope that you can utilize the introductory knowledge gained during this conference to put your
current business operations and strategic direction within the ambit of better CSR practices.

Ladies and gentlemen, on that note, I thank you for your attention.

1. Johannesburg Summit 2002 Malaysia: Country Profile.


2. Malaysian Nature Society, FIABCI Malaysian Chapter, Persatuan Penilai dan Perunding Harta Swasta Malaysia (PEPS),
Lions Club of Kuala Lumpur (HOST) & Malaysia, and the Forest Research Institute of Malaysia (FRIM). The Group also
receives support from the National Landscape Department (JLN) and the Department of Environment.
3. Mayban Ethical Trust Fund, January 2003 and Philip First Ethical Fund, June 2003.
4. Association for Sustainable and Responsible Investment in Asia. www.asria.org
5. Dana Al-Aiman, ASM Mara Unit Trust Management, May 1968.
6. In 2002, there were 34 Islamic funds with the NAV of RM2.87 billion.
7. Securities Commission. List of Securities Approved by the Syariah Advisory Council of the Securities Commission 30
April 2004.
8. SRI In Asian Emerging Markets: Malaysia. Asria Report October 2003.
9. Maznah Abdul Ghani, Penolong Pengarah Bahagian Pentadbiran dan Perjawatan AIM, 85,095 Bebas Belenggu
Kemiskinan Utusan Malaysian, May 5 2004.
10. As at December 2002, there are 40 public listed companies that provided environmental reporting as part of their annual
reports. State of Corporate Environmental Reporting in Malaysia 2002. ACCA.
11. Strandberg, Coro. Op.Cit.2002
12. Source: MORI (2000)
13. Starndberg, Coro. Op.Cit.2002
14. AsriA Report, October 2003. Op.Cit.
15. www.asria.org
16. www.kld.com

CSR: Creating Greater Competitive Advantage


Corporate Social
Responsibility

CSR Conference
Breakout Group
Findings
80 CSR Conference Breakout Group Findings
As part of the process of raising awareness of CSR, four breakout groups were asked to look at
specific areas where CSR matters:

n Sustainable Development: Getting to 2020

n Looking after the Environment: Now 2020

n Setting the CSR Agenda Now 2020: Role of Religion, Society and Business

n Achieving Vision 2020: Making the Most of People

This report covers the individual findings of the four breakout groups and in addition attempts to
draw out some key themes that appear across the work of the four breakout groups for the
government to consider carefully, as they seem to be critical if Vision 2020 is to be achieved.

The process by which the breakout groups identified which themes to cover, what the key obstacles
were to prevent CSR implementation, and the most important recommended solutions is explained
in Appendix 1. The key point to note is that the process adopted forced the breakout groups to select
the most pressing issues and to come up with preferred solutions. Given that the breakout groups
consisted in the main of Chairmen, CEOs and Directors of public listed companies; their
recommendations should carry some weight.

Key Themes for Achieving Vision 2020:

Certain themes recurred in the presentations of the four breakout groups:

n A need to reinforce the sense of direction of the country as a whole so that appropriate trade-
offs can be made between what is in the national and what is in the state government interest.
Specifically the areas affected by this are:

u Water and forestry, as both of them are interlinked, given the importance of sustainable
forestry practices in the provision of good water supply. In both cases, the issues run up
against constitutional issues, namely of who grants land-use rights. The view of the relevant
breakout groups is that the current arrangements between the state governments and the
Federal government need changing if the issues are to be addressed. Clearly this is a long-
term agenda, but needs to be broached now. In the case of water, this seems to require the
formation of a National Water Board with government owning the infrastructure and private
companies providing distribution and sales

u Biodiversity where the view was clear that the Federal government must get the balance right
between supply and demand and between the development needs of the population and the
need to conserve the ecosystem

u The need to raise ethical standards, where what is suggested is a national plan focussing on
education and behaviour, bringing together a religious focus and a business focus across all
affected stakeholders

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CSR Conference Breakout Group Findings 81
n Education is clearly a major issue both in terms of the moral values that need to be
emphasised and in terms of ensuring:

u The right balance is struck between affirmative action and meritocracy

u The Tidak Apa attitude is handled appropriately

u People come to realise what is possible so that Malaysia can compete effectively in global
markets

u People are able to develop lifelong employability in a rapidly changing world

n To a greater or lesser degree, the groups dealing with sustainability, environment and the
social agenda found issues with awareness, corruption and enforcement best captured by the
group on the Environment in a simple mnemonic ACE:

u Awareness needs to be created at all levels, and this requires sponsors and support of
awareness building and education programmes

u Corruption needs to be stamped out at all levels, through changes in the behaviour of both
the corrupter and the corrupted

u Enforcement strict enforcement of the laws and regulations, without fear or favour is
essential if behaviours that prevent Vision 2020 from being realised are to be eliminated. The
feeling that the time had come to adopt a tougher approach to enforcement and punishment
was quite pronounced in two of the groups

Individual Breakout Group Findings:


Sustainable Development

The breakout group dealing with the topic Sustainable Development: Getting to 2020, came up
with two themes they wished to discuss:

n Achieving a First World Mentality without Americanising Malaysia

n Water and its related issues of shortages, wastage and poor quality

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82 CSR Conference Breakout Group Findings

a) Achieving a First World Mentality

This theme picked up on the thinking of the Prime Minister Datuk Seri Abdullah Ahmad Badawi
and the group set about defining what the obstacles were that prevent Malaysia currently from
having a First World mentality.

The key obstacles were identified as being:

n A problem of attitude best captured under the ideas of:

u Tidak Apa

u Being a frog under a coconut shell reflecting a general lack of awareness of what the
potential and possibilities could be as a result of a knowledge gap of best practices elsewhere

n Lack of appropriate education, felt to be the result of a failure of the system to provide what is
needed for Malaysia to get to 2020

n No systems-process thinking, reflecting a general lack of understanding of the importance of due


process and systems, including maintenance, as a result of an approach that depends on
relationships overcoming defects in the processes or systems. This is perhaps the result of:

u A traditional approach, with a culture that remains somewhat feudalistic at heart

u Inadequate emphasis on compliance, necessary to reinforce the systems approach

The recommended solutions were:

n Punish Tidak Apa thinking, and focus on making people individually and collectively
accountable and answerable for their actions; recognising the importance of the need to enforce
laws and rulings, and that the time had come to be tougher on enforcement than in the past if a
First World Mentality was to be achieved

n Develop the appropriate approach to education, emphasising the why rather than the what
and how to foster creativity and challenging minds; at the same time instilling Nilai Murni and
proper ethical values

n Focus on positive thinking to narrow the knowledge gap, using benchmarking and best practices
transfer, in order to create world-class capabilities and systems thinking and a willingness to
compete.

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CSR Conference Breakout Group Findings 83
b) Managing Water for 2020

The obstacles to long-term responsible water management identified were as follows:

n No policy, reflected in the problems of deforestation and pollution

n The absence of a long-term strategic plan, reflected in the lack of diversification in supply,
poor infrastructure and a lack of maintenance

n The structure of water ownership, with land belonging to the state governments so that
supply is controlled by the states, yet demand has to be managed across state borders by the
Federal government

n Water abuse, through misuse and wastage (40% of water in the Klang Valley is wasted
through leaks)

The Proposed Solutions were:

n Establish policy and control at national level, so that catchment areas can be defined, gazetted
and protected

n Form a National Water Board, with infrastructure owned by the government(s) with sales and
distribution by the private sector

n Introduce tiered pricing to reward responsible usage and punish waste. This must be enforced,
and indeed enforcement is key to all the proposals suggested for future water management

n Diversify sources of supply, especially by finding ways to catch and cycle rainwater rather than
allowing it to run off

n Manage pollution and reduce waste, by using oil and gas technology and skills to prevent and
detect leakages

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84 CSR Conference Breakout Group Findings

Environment

The group dealing with Looking after the Environment: Now 2020 considered discussing climate
change, human habitat, toxic waste, ozone depletion, and land degradation. These issues are
important, but the group elected to focus on three themes: water, biodiversity and sustainable
forestry. They identified issues of concern as opposed to obstacles as follows:

a) Water

Here the problems were identified as belonging separately to fresh and seawater.

n Fresh Water

As far as fresh water was concerned the issues appear to be:

u Pollution and disposal of solid waste

u Degradation and depletion of catchment areas (similar to the first breakout group)

u Wastage and over-consumption of fresh water (similar to the first breakout group)

n Sea Water

There was recognition of the problems of pollution caused by landslips, damage caused by
land reclamation and issues of sedimentation (related to failures to look after fresh water
catchment areas properly). The group decided to deal with issues of fresh water only as they
are more urgent.

The proposed solutions for fresh water were as follows:

n Better water management, to be achieved by the Federal government taking over from the
State governments (a similar solution to that proposed by the first breakout group)

n Water treatment and planning, supported by the enforcement of anti-dumping of untreated


sewage and industrial waste into rivers (here, as with the first breakout group, the importance
of proper enforcement was highlighted)

n Raising the awareness of the public through public campaigns to the issues surrounding
water use and management so people behave in a more responsible way in their usage of
water

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CSR Conference Breakout Group Findings 85
b) Biodiversity

The issues of concern were rapid species loss and destruction of the marine habitat as a result
of uncoordinated development.

The proposed solutions were:

n Integrated planning, recognising the central role the Federal government must play in getting
the balance right between supply and demand and between the development needs of the
population and the need to conserve the ecosystem (Malaysia has one of the highest
biodiversity indices in the world and has a special responsibility as a result in this regard)

n Conducting research to record the state of biodiversity

n Raising the awareness of the public through public campaigns to the issues surrounding
biodiversity and land use management so people behave in a more responsible way in their
demands on the land

c) Sustainable Forestry

The obstacles identified were:

n No implementation of an integrated national forestry management plan, again requiring a


joint approach between the Federal authorities and the state governments, which in turn
assumes a change in patterns of land ownership and land use grants

n Over-harvesting of timber, reflected in the clearing of old-growth forests

n Lack of a verifiable supply chain, leading to smuggling

n Inadequate enforcement of forestry regulations

n Corruption, underlying all of the above

Proposed solutions were:

n Integrated forestry management, requiring the Federal government to be given more authority
to implement a national forestry management plan

n Enforcement stricter enforcement and transparency in monitoring needed to ensure this

n Raising the awareness of the public through public campaigns to change consumer
behaviour so they are wiling to pay more for products from certified sustainable forests

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86 CSR Conference Breakout Group Findings

Setting the CSR Agenda

The group dealing with Setting the CSR Agenda Now 2020: Role of Religion, Society and
Business decided that the three themes they wished to consider were: creating a fair society,
ensuring high ethical standards, and eradicating poverty. In discussing the issues and obstacles they
identified them separately for the three topics, but concluded that the solutions were of the same
nature for all three. Consequently the obstacles are set out separately by topic below, with the
solutions applying to all three themes set out together.

a) Creating a Fair Society

The group identified the following obstacles to achieving a fair society:

n Lack of political will and selfishness caused by individual peoples unwillingness to give up
what they have already acquired for the benefit of society as a whole

n Existence of prejudices between and within the multi-ethnic, multi-cultural and multi-
religious groups comprising Malaysian society

n Lack of employment opportunities across the different groups

n The need to manage the pace of change (not too fast and not too slow) in redressing the
unfair distribution of wealth

b) Ensuring High Ethical Standards

The group identified the following obstacles to ensuring high ethical standards

n Lack of strong leadership with strong moral values, as organisations require moral leadership
from the top from which to take their direction, and the lack in general of moral values,
caused by the ineffective role of religion(s) and the practice of bad politics (lacking integrity)

n Conflicting expectations between senior managers and the middle managers and employees
who have to implement policy, particularly with reference to time horizons for implementing
change

n Lack of commitment to and awareness of ethical conduct, caused by the perception that
ethics (doing right) is costly

c) Eradicating Poverty

The group identified the following obstacles to eradicating poverty

n Lack of an effective national agenda, as a result of low awareness and interest

n Efforts not coordinated

n Lack of infrastructure and job opportunities in rural areas

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CSR Conference Breakout Group Findings 87
The following combined approach to resolving these three sets of issues was proposed:

n Develop a comprehensive national programme, with adequate funding and a coordinate


approach among respective stakeholders

n Focus on education to raise awareness, with a particular emphasis on encouraging religious


practices and behaviour, supported by ethics education at university and in business, and
establishing the right work-life balance

n Enhance transparency at all levels and in business government dealings

n Monitor progress and enforce to ensure success

Making the Most of People

The group dealing with Achieving Vision 2020: Making the Most of People decided that what
mattered was aligning the values of the country, corporation and individual, and as a result
approached the issues by defining Whats in it for me? and then looking at the obstacles and
solutions.

Whats in it for me? was broken down into its three constituent parts and suggestions for each
were discussed as follows:

n At national level there was a need to:

u Promote overall vision (Vision 2020)

u Modify the education system so that it can deliver what Vision 2020 requires

u Get the right balance between affirmative action and meritocracy

u Promote social justice

n At the company level there was a need to:

u Align corporate values and culture with the national ones

u Communicate these to all staff

u Ensure that appropriate behaviours were rewarded and recognised

u Provide equal opportunities and encourage diversity

u Train and develop employees, with a focus on succession planning and lifelong learning,
recognising the impact of international mobility

u Provide a good, safe working environment with the right work-life balance

Companies could start working on this individually without waiting for wider stakeholder
dialogue

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88 CSR Conference Breakout Group Findings

n At the individual level there was a need to:

u Get aligned with the company and national values

u Take responsibility for learning and lifelong employability

u Enter a social contract with the employer, including training and development needs and
career planning recognising the concept of lifetime contribution

The difficulties in achieving this were highlighted as follows:

n Lack of the appropriate supportive regulatory environment to ensure that all companies are
working within the same parameters and that nobody can free-ride-Not sure that a regulatory
framework will work or is needed in this area

n Lack of appropriate leadership, not measuring both financial and non financial performance
(Balanced Scorecard approach) and behaving in an autocratic style reflecting a high power
distance culture

n The need to manage expectations so that employees, employers and other stakeholders have
realistic expectations, reflecting a partnership approach

n The need to maintain profitability to support the initiatives

Appendix 1: Breakout Group Theme Identification Process

The process adopted by the breakout groups in arriving at the recommendations to be considered
was as follows:

1) Each breakout group identifies the key sub themes belonging under the topic given to the group.

2) The breakout group selects from these sub themes up to three critical topics that the
group believes are the most important or pressing issues. Getting the group to vote did this.
Each group member has three votes, which the member may allocate to each topic. The three
most popular sub themes then become the subject of discussion.

3) The breakout group identifies the obstacles that prevent the chosen topics from happening
and select the three most important. The group should brainstorm the obstacles, focusing
on creating quantity initially rather than quality. This should take 30 minutes. Once the
obstacles have been listed, the group should vote on which they believe to be the three most
important.

4) The breakout group identifies solutions to overcome the obstacles and select the three
most immediate to implement. The group should brainstorm the solutions, focusing on
creating quantity initially rather than quality. This should take 30 minutes. Once the solutions
have been listed, the group should vote on which they believe to be the three most important
that can be implemented most quickly.

CSR: Creating Greater Competitive Advantage


Corporate Social
Responsibility

Survey Findings
90 Survey Findings
Introduction
A short questionnaire was developed by Nottingham University Business School, Malaysia Campus
to provide a baseline of awareness of CSR in Malaysia and as a follow on in other countries of the
Asian region. This will be used as a comparator over time and across the region to see how
awareness of CSR develops and whether there are significant differences between countries. If
differences emerge, the results will form the basis of further research to attempt to explain them.

Some 165 surveys were handed to the delegates at the conference and 49 usable, completed surveys
were returned a satisfactory response rate of 29.7%. The questions were designed to get
respondents to

n Rank stakeholders in their order of importance

n Identify which stakeholders were believed likely to recognise CSR activities

n Identify the proportion of organisations activities in CSR

n Rank the importance of different CSR activities to organisations

n Identify the motives for CSR activity

n Identify whether organisations had people dedicated to CSR

n Identify whether staff are required to consider CSR implications when doing their jobs

Key Findings
The key findings were as follows: Respondents

n Place customers first, shareholders second and employees third, making them unlike Anglo-
American capitalists when it came to ranking stakeholders. In this regard, Malaysia is like
Singapore.

n Regard government, the community and employees equally as the most important audiences to
recognise and value CSR activities. The fact that customers came in relatively low, suggests that
Malaysia is typical of the Asian countries surveyed in the Millennium Poll on social responsibility
(Malaysia did not form part of the poll)

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Survey Findings 91
n Using a cut-off point of less than or equal to 15% below which reported CSR activities were
assumed to be unimportant, the ranking in descending order of importance, was

u Employee training (84.78% greater than 15%)

u Education (75.56% greater than 15%)

u Environment (67.44% greater than 15%)

u Health (62.5% greater than 15%)

u Social development (61.91% greater than 15%)

u Local economic development (61.53% greater than 15%)

u Sport (58.98% greater 15%)

u Arts and cultural activity (38.89% greater than 15%)

u Other (37.03% greater than 15%)

In a sense this ranking is no great surprise in that it reflects accurately Malaysias priorities as a
society

n When CSR activities were ranked by respondents, it seems that CSR is seen as a good in its own
right as opposed to something that forms part of the Marketing Mix, given that those elements
that could be viewed as part of the Marketing Mix were ranked lower than those that contributed
to the betterment of society. Of particular note was the fact that philanthropy was rated lowest
of all activities

n The motives for CSR were split into those that contributed to maximizing or maintaining the
Licence to Operate and were more important than those that could be categorised as business
building activities

n 48.98% of respondents said there was a person in their organisation dedicated to CSR

n 81.63% said they were required to consider CSR implications when doing their job.

CSR: Creating Greater Competitive Advantage


92 Survey Findings

Stakeholder Ranking
Exhibit 1 below shows the order of importance in which the respondents ranked stakeholders. (The
average shown is based on a 10 point Likert scale). The fact that customers come first, followed by
shareholders and employees suggests that Malaysian respondents recognise the importance of
satisfying customers ahead of shareholders, along the lines of Peter Druckers argument that the
purpose of business is to create satisfied customers, and that doing this successfully will guarantee
the long-term future of the organisation 41. Such an approach is different from that of traditional
Anglo-American capitalism, which puts the shareholders first, with customers second and
employees third.

Exhibit 1: Stakeholder Ranking


10
8.63 8.45 8.04
8 7.41 7.20
6.43
6.00 5.70 5.68
6
Average

4.87
4

0
Customers

Shareholders

Employees

Government

Business
Partners

Community

Suppliers

Media

Competitors

NGO

Stakeholder

CSR: Creating Greater Competitive Advantage


Survey Findings 93
Who Recognises CSR?
Exhibit 2 below shows the number of respondents rating a particular CSR activity. It is very
interesting that the highest number of respondents believe that the most important audiences to
recognise CSR activities are the government, the community and the employees themselves. This is
a surprising finding in that it suggests a three-way recognition of the importance of CSR, forming
the possible basis of a tripartite dialogue between government, the community and business in the
form of employees would be prepared to give time and energy to CSR something that the
experience of Business in the Community in the UK would endorse namely that for CSR to work
well, there is a need for tripartite engagement.

The fact that customers are ranked low suggests that Malaysia would fit well with the findings of
the Millennium Poll, showing that Asian economies score low on the percentages of people
punishing or willing to punish businesses for irresponsible behaviour (unfortunately Malaysia is not
in the Environics survey sample so cross-checking is not possible). It also reconciles with the recent
Edelman study that put CSR last for customers, given that they were more concerned with
companies getting basic things like good quality, reliable performance and safety right first. The very
low scores for business partners and suppliers suggest there is still a big education job ahead and
that this is critical for Malaysia as a part of global value chains. It appears people have yet to
recognise the impact of global supply chains on the need for organisations to ensure their partners
and suppliers have the same standards if they are to satisfy the demands of customers in the OECD
countries for example, NGOs in Europe and the US are now targeting Malaysian timber interests
as a way of cutting down on illegal logging in Indonesia. 42

Exhibit 2: Who Recognises CSR?


40
36 36 36
30
30 28 28
23
Total

20

10 9
7
5

0
Government

Community

Employees

Media

NGO

Shareholders

Customers
Business
Partners
Competitors

Suppliers

Stakeholder

CSR: Creating Greater Competitive Advantage


94 Survey Findings

The Proportion of Respondents Activities in CSR


The activities organisations could be involved in were defined as being: employee training,
environmental, educational, sport, arts and cultural, health-related, development of the local
economy, social development and other. In evaluating the results, some arbitrary benchmarks were
set: less than 15% of activity identified as belonging to a particular type is treated as not being CSR
active in practice; 1530% as being involved; 3050% as being active; more than 50% as very active.
These benchmarks may change over time as we learn more about CSR across the region, but a start
is needed. Equally, if a category (e.g. employee training) gets more than 50% of respondents
identifying that less than 15% of their activities were in that category, it is deemed to be less
important, whereas if it gets less than half, it is deemed to be more important.

Employee Training (Exhibit 3)

Nearly two thirds of the respondents surveyed (65.21%) said that employee training represented more
than 30% of their CSR effort. This is a surprisingly high percentage and needs further study.

n 8.70% said it represented less than 5% of their involvement

n 6.52% of the organisations surveyed reported that employee training represented 515%

n 19.57% said it represented 1530%

n 34.78% saying it took up 3050% of their effort

n 30.43% recorded it as representing more than 50%

Exhibit 3: Employee Training


05
8.70%
515
6.52%
1530

3050

30.43% 19.57% >50

34.78%

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Survey Findings 95
Environment (Exhibit 4)

Less than a third of the respondents (32.56%) said that the environment represented less than 15%
of their efforts in CSR. This suggests that the environmental message is getting home to most
Malaysians, especially when we see that 39.53% see it as accounting for more than 30% of their
efforts:

n 11.63% said it represented less than 5% of their effort

n 20.93% that it accounted for 515%

n 27.91% that it represented 1530%

n 20.93% recorded it as accounting for 3050%

n 18.60% as taking up more than 50%

Exhibit 4: Environment
05
18.60%
11.63% 515

1530

3050

20.93% >50

20.93%

27.91%

CSR: Creating Greater Competitive Advantage


96 Survey Findings

Education (Exhibit 5)

Education fares well. This perhaps should not be a great surprise given the general recognition
within Malaysia of the importance of human capital in creating and maintaining a competitive
infrastructure in particular as China and India loom as competitive threats on the horizon and the
growing recognition that the quality of graduates coming into business needs improving.

As a result, only 24.44% rated it below 15%, with 26.67% of respondents reporting that it represents
more than 50% of their CSR involvement:

n 2.22% said it was below 5%

n 22.22% rated it as between 5 and 15% of their efforts

n 26.67% between 15 and 30%

n 22.22% between 30 and 50%

n 26.67% at more than 50%

Exhibit 5: Education 2.22%


05

515
26.67%
1530
22.22%
3050

>50

22.22% 26.67%

CSR: Creating Greater Competitive Advantage


Survey Findings 97
Sport (Exhibit 6)

Sport does not fare too badly, though 41.02% showed it taking up less than 15% of their efforts. This
may reflect the fact that respondents may not automatically associate sport with CSR, regarding it
as a form of advertising or sponsorship though this would need to be checked.

Whatever the reason, we see

n 7.69% of respondents recording that sport is worth less than 5% of their CSR investment

n A further 33.33% rank it as taking up between 515% of their efforts

n 43.59% list it as absorbing 1530%

n 5.13% rate sport as taking up 3050%

n 10.26% showed it as consuming more than 50% of their efforts in CSR

Exhibit 6: Sport
7.69% 05
10.26%
515
5.13%
1530

3050

>50

43.59% 33.33%

CSR: Creating Greater Competitive Advantage


98 Survey Findings

Arts / Cultural Activity (Exhibit 7)

Arts and culture do not seem to feature prominently in the priorities of the respondents, which is
perhaps surprising given the efforts being made to place Kuala Lumpur on the cultural and artistic
map, epitomised by the MPO.

This may be the result of Malaysia needing to catch up in the field of arts and entertainment it is
not yet on the main circuit of international musical shows and acts and does not have an established
Western theatre tradition.

As a result, we see

n 22.22% attributing less than 5% of their efforts to arts and culture

n A further 38.89% rate arts and culture as taking up 515%

n 27.78% investing 1530% of their efforts in arts and culture

n 8.33% of the respondents attributing 3050%, and

n 2.78% recording more than 50%

Exhibit 7: Arts/Cultural Activity


05
2.78%
22.22% 515
8.33%
1530

3050

>50

27.78%

38.89%

CSR: Creating Greater Competitive Advantage


Survey Findings 99
Health (Exhibit 8)

Health features prominently among most of the respondents. Nearly two thirds of the respondents
(62.50%) regarded health as taking up more than 15% of their CSR efforts. Consequently we see

n 5.00% recording less than 5% of their CSR efforts in health-related activities

n 32.50% showing 515%

n 30.00% apportioning 15-30% of their efforts in CSR for health

n 20.00% spending 30-50% of their investments in health related CSR

n 12.50% attributing more than 50%

Exhibit 8: Health
5.00% 05
12.50%
515

1530

3050
20.00%
>50

32.50%

30.00%

CSR: Creating Greater Competitive Advantage


100 Survey Findings

Local Economic Development (Exhibit 9)

Here there does seem to be recognition that local economic development is a natural area for CSR.
Only 38.46% rated this as taking up less than 15% of their investment in CSR, with 35.89% seeing
it as involving more than 30% of their efforts.

This is a promising finding since it reflects a clear understanding that it is important for firms to
ensure that the communities within which they operate benefit from their existence. It supports the
contention made by David Halley of BITC that socially healthy backstreets lead to prosperous High
Streets. It is also perhaps not surprising given the thrust of the NDP and the recognition that the
different ethnic groups need to be treated with care.

Consequently we find that the breakdown is as follows

n 5.13% record local development as taking less than 5% of their effort

n 33.33% say it takes between 5 and 15%

n 25.64% show it as involving 1530%

n 20.51% record local development as taking 3050%, and

n A further 15.38% argue it takes more than 50%

Exhibit 9: Local Economic Development


05
5.13%
15.38% 515

1530

3050

>50
20.51%

33.33%

25.64%

CSR: Creating Greater Competitive Advantage


Survey Findings 101
Social Development (Exhibit 10)

It is encouraging that respondents seem to see that social development matters that it is the glue
that holds communities together and that it is necessary for businesses to prosper. This is perhaps
not surprising given the communitarian values espoused by the Malaysian government and the fact
that Malaysia is made up of three compact communities.

As a result we see

n 9.52% rating social development as taking up less than 5% of their CSR efforts

n 28.57% saying it represents 515%

n 26.19% recording an involvement of 1530%

n 19.05% with an involvement of 3050%

n 16.67% with a high level of activity exceeding 50% of their efforts in CSR

Exhibit 10: Social Development


9.52% 05
16.67%
515

1530

3050

28.57% >50

19.05%

26.19%

CSR: Creating Greater Competitive Advantage


102 Survey Findings

Other (Exhibit 11)

It is not surprising that 25.93% of respondents rate Other at less than 5% of their CSR efforts or
that 37.04% saw it as involving only between 5 and 15%, as this reflects the catchall nature of the
category.

The surprising result here is that 22.22% say Other reflects more than 30% of their CSR activity. It
might be worth establishing what these activities are, given their apparent importance.

It is also interesting to note that

n 11.11% felt that it represented 1530%

n 22.22% saw it as taking up 3050%

n 3.70% felt it was worth more than 50%

Exhibit 11: Other


05
3.70%
25.93% 515

1530

22.22% 3050

>50

11.11%

37.04%

CSR: Creating Greater Competitive Advantage


Survey Findings 103
CSR Activities in Order of Importance

Exhibit 12 below ranks the CSR activities in their order of importance as reported by the respondents.
From this table we can see that the most valued activity is participation in the community. This is
followed by employee involvement and partnerships reflecting a sophisticated approach to CSR
and corroborating the findings of CSR activities in the UK, namely that employee involvement is
important both externally and internally to the organisation, leading to more productive and satisfied
employees who in turn deliver a superior customer experience. Sponsorship comes next, followed by
partnerships with community, dialogue with the community and alleviation of social disadvantage.
These may reflect the communitarian nature of much of Malaysian society. What is interesting is that
philanthropy is rated last. This is surprising, given the preponderance of businesses and
businessmen in Asia who regard philanthropy as a fundamental part of CSR.

This suggests that the respondents are receptive to the argument that the most important form of
CSR relates to how the money is made before the event rather than to how it is spent once the profits
have been made.

Exhibit 12: Activity Ranking CP Community


Participation;
5.91 5.70 EP Employee Involvement/
6
5.33 5.30 5.17 Partnerships;
5 4.93 4.91 PC Partnerships with
4.67
the Community;
4 DC Dialogue with
Average

the Community;
3 ASD Alleviation of
Social Disadvantage;
2
CRM Cause Related
1 Marketing;
Sp Sponsorship of
0 Community/Cultural/
CP

EP

Sp

PC

DC

ASD

CRM

Ph

Sporting activities;
Ph Philanthropic
Activity Donations

CSR: Creating Greater Competitive Advantage


104 Survey Findings

What are the Motives for CSR?

Exhibit 13 shows the motives for CSR in descending order of importance. From this we can see that
the respondents ranked those elements that go into making up the Long-term sustainability of
business ahead of the others. What is interesting is to see the extent to which the motives for CSR
are indeed primarily ones that contribute to maintaining/maximizing the organisations Licence to
operate. Thus we have

n Government support and Community trust coming first equal, for without these the Licence to
operate will be severely constrained. It is a slight cause for concern that Government Support is
so high, in that this may reflect the dependence business has on government at a time when
government is trying to reduce its footprint in the economy

n Next come Reputation and Customer Loyalty, both key elements in building brand equity and
taking a long-term view of sustainability

n Then comes Improving Employee Morale, corroborating the findings in the UK that CSR
matters to employees, whose morale is essential to delivering customer satisfaction,
recognising that employees can deprive the organisation of its Licence to Operate by voting
with their feet

n Public welfare recognises the importance of the community and the idea that socially successful
backstreets create commercially successful High Streets

There is an additional grouping of ideas that have more to do with building capability and market
presence as follows:

n Developing employee skills is the first in this group, reflecting the importance of human capital
to Singaporean success in adapting to changing competitive circumstances

n Broadening managements perspective is relatively high in the ranking given the pressures
companies face on a day to day basis, and this is promising in that it suggests that CSR will be
well received

n Attracting investors is still low and this is perhaps not surprising given the lack of a well-
developed explicitly socially responsible investing sector in the Malaysian market unlike the US
where 16% of funds under management are explicitly socially responsible

n Market access comes quite low, perhaps as a result of the fact that many organisations have yet
to be subjected to the pressures of end-users and customers in the OECD world who are
increasingly demanding in terms of CSR if access is to be granted or maintained

CSR: Creating Greater Competitive Advantage


Survey Findings 105
n Short-term financial gain comes second to last, reflecting a good understanding that CSR is not
about quick fixes

n Avoiding regulation seems low, but this may reflect a lack of thought about the fact that the law
reflects the priorities of society and therefore is not static; once this is recognised, perhaps the
ranking might change. Alternatively it might be that people were not overly worried about the
cost of penalties they might incur.

Exhibit 13: Motives for CSR


50 LTBS Long-term Business
Sustainability;
43
GS Government Support;
40 CT Community Trust/Support;
34 34 Rep Reputation;
32 32
30 CL Customer Loyalty;
Total

25 IEM Improving Employee


22 Morale;
20 19
PW Public Welfare;
15 14
13 BMP Broadening Management
10 Perspective;
4 DES Developing Employee
3
Skills;
0 AI Attract Investors;
LTBS
GS
CT
Rep
CL
IEM
PW
BMP
DES
AI
MA
STFG
AR

MA Market Access;
Motive STFG Short-Term Financial Gain;
AR Avoiding Regulation

CSR: Creating Greater Competitive Advantage


106 Survey Findings

Responsibility for CSR

Exhibits 14 and 15 on the next pages show the proportion of respondents representing organisations
that have a) a dedicated person accountable for CSR and b) whether employees are required to
consider the implication of CSR when doing their jobs. Exhibit 14 shows that only 48.98% of
respondent organisations have someone dedicated to CSR showing that there is still some way to
go. Having a higher percentage of organisations with dedicated people to deal with CSR is, however,
not necessarily a sign of better performance, but may just reflect the fact that organisations have
departments who deal with CSR related issues as part of their public affairs and PR programmes
in effect dealing with the form of CSR rather than the substance, which is grounded in job
descriptions and individual accountabilities.

As a result it is more significant and encouraging that Exhibit 15 shows 81.63% of respondents
reporting that they are expected to consider CSR implications when doing their jobs. Based on best
practice it is more important for people to be required to consider the CSR implications of their jobs.
Indeed the companies with the best reputation for CSR are precisely those that have explicit CSR
activities incorporated into managers annual performance reviews, with rewards and penalties
attached. On this basis, the respondents appear to be already on the way to embedding CSR in their
business practices. The issue will be how such performance is measured at the individual level and
then rewarded.

Exhibit 14: Is there a dedicated person responsible for


CSR activity in your organisation?

No

Yes

48.98% 51.02%

CSR: Creating Greater Competitive Advantage


Survey Findings 107
Exhibit 15: Are you required to consider CSR implications
when you are doing you job?
18.37%

No

Yes

81.63%

41. Peter Drucker, The Practice of Management, pp359


42. Environmental activists, after mapping the trade route taken by Indonesian timber are trying to curb illegal logging by
taking aim at Malaysia, from Save-the-Trees Savvy, Far East Economic Review, August 5 2004, p 22

CSR: Creating Greater Competitive Advantage


108

CSR: Creating Greater Competitive Advantage


Corporate Social
Responsibility

Participants List
110 Participants List
No. Company Name Participant Name Designation

1 ACCA Malaysia Sdn Bhd Ms Lily Wong Manager, Marketing & Promotions
2 Actis Rick Philips Partner
3 Ajinomoto (Malaysia) Berhad YBhg Dato Hj Shaharuddin Bin Hj Haron Director
4 AKN Technology Bhd Mr Ooi Boon Leong Group CEO
5 AKN Technology Bhd YBhg Dato Ahmad Kabeer Bin Mohamed Nagoor Executive Chairman
6 Aluminium Company of Malaysia Berhad Dato Kok Wee Kiat Director
7 Amalgamated Industrial Steel Berhad Datuk Ismail Bin Hj Ahmad Chairman
8 Avenue Capital Resources Berhad Tengku Zafrul Aziz Managing Director
9 Bandar Raya Development YBhg Dato Jaganath Derek Steven Sabapathy Chief Executive Officer
10 Bank Negara Malaysia Muhammad Bin Ibrahim Director
11 BAPEPAM Mr Aditya Jayaantara Head of Drafting and Developing Accounting Standards Division
12 BAPEPAM Ms Etty Retno Wulandari Senior Officer
13 BIMB Holdings Berhad YBhg Dato Mohd Yusoff Haji Nasir Comapany Director/Chairman
14 BIMB Securities Sdn Bhd YBhg Dato Idris Bin Md Tahir Executive Director Operations
15 Bintulu Port Sdn Bhd En Nik Abd Rahman Nik Ismail Company Secretary
16 Bintulu Port Sdn Bhd En Omar Hj Salleh Senior Manager
17 Bolton Berhad Lee Hock Keat Group Finance Director
18 BP Asia Pacific Malaysia Noraini Hashim Programme Manager
19 BP Asia Pacific Pte Ltd Dr Hamidah Marican Diversity & Inclusion Manager
20 BP Korea Dr Billy Mitchell President
21 British High Commission Abdul Rashid Press Attache
22 British High Commission Bruce Cleghorn High Commissioner
23 British High Commission Edward Hobart Head of Political Section
24 British High Commission Geraldine Hennelly British High Commission, Singapore
25 British High Commission Gerry Liston Director, British Council
26 British High Commission Gordon Reid Director Trade & Investment
27 British High Commission Jeremy Pilmore-Bedford Second Secretary (Economic)
28 British High Commission Mina Patel English Language Teaching Projects Manager, British Council
29 British High Commission Raymond Chua Assistant Press Attache
30 British High Commission Rob Noble Second Secretary (Political)
31 British High Commission Steve Bates Director, English Language Services, British Council
32 British High Commission Vincent Phang Trade Manager
33 Bursa Malaysia Securies Bhd Ong Li Lee Head, Brand Management
34 Bursa Malaysia Securies Bhd Wong Kay Yong Head, Listing Compliance
35 Bursa Malaysia Securies Bhd Tajuddin Carrim Head, Group Human Resources & Administration
36 Bursa Malaysia Securies Bhd Mr Suresh N Kannan Head, Support Services Audit
37 Business Council for Mr Marcus Chee Member BCSDM Exco
Sustainable Development Malaysia
38 Business Council for Sustainable Prof Chamhuri Siwar Member BCSDM
Development Malaysia
39 Business Council for YBhg Dato Ghazali Dato Yusoff Executive Director
Sustainable Development Malaysia
40 Business Ethics Institute of Malaysia Mr S Supramaniam Deputy Chairman
41 Carlsberg Brewery Malaysia Berhad YBhg Dato Jorgen Bornhoft Chairman
42 Celcom (M) Berhad Ms Ayisha Md Arshad Executive, Corporate Communications
43 Centre for CSR Justin Wee Secretary
44 Centre for CSR Stephan Loke President
45 Chemical Company of Malaysia Berhad YBhg Dato Mohd Ibrahim Bin Mohd Zain Chairman
46 CIMB Berhad Mazlin Ismail Assistant Manager
47 CIMB Berhad YM Tengku Zarina Tengku Ibrahim Senior Manager
48 DaimlerChrysler Malaysia Frank Steinleitner President and CEO

CSR: Creating Greater Competitive Advantage


Participants List 111
No. Company Name Participant Name Designation

49 DaimlerChrysler Malaysia Jamie Wong Corporate Comm. Manager


50 Edaran Otomobil Nasional Berhad YBhg Dato Khalid Bin Haji Ismail Independent, Non-Executive Director
51 Edaran Otomobil Nasional Berhad YBhg Datuk Ir (Dr) Ahmad Zaidee Bin Laidin Independent, Non-Executive Director
52 Ernst & Young YBhg Dato Zainal Abidin Bin Putih Advisor
53 Ernst & Young Mr Lim Tian Huat Partner
54 Ernst & Young Mr Stephen Duar Tuan Kiat Partner
55 Federation of Public Listed Companies Berhad Priscillia Yap Poi Yok Chief Executive Officer
56 Gamuda Berhad Goon Heng Wah Director
57 Gamuda Berhad Mr Ng Kee Leen Director
58 Gamuda Berhad YBhg Dato Ir Kamarul Zaman B. Mohd Ali Director
59 Gamuda Berhad YAM Raja Dato Seri Eleena Azlan Shah Director
60 Genting Berhad Quah Chek Tin Executive Director
61 Glomac Berhad YBhg Dato Mohamed Mansor Bin Fateh Din Group Executive Chairman
62 Great Eastern Life Assurance (Malaysia) Berhad Mr Chan Choong Tho Chief Investment Officer
63 Guinness Anchor Berhad Theo De Rond Managing Director
64 Guinness Anchor Berhad Renuka Indrarajah Manager, Legal Affairs
65 Hanson Quarry Products Sdn bhd Koh Yew Soon, Christopher Corporate Controller
66 HSBC Bank (M) Bhd YBhg Dato Henry Barlow Non-Executive Director
67 HSBC Bank (M) Bhd YBhg Dato Sulaiman Bin Sujak Non-Executive Director
68 Idaman Unggul Berhad Datuk Che Mokhtar Bin Che Ali Director
69 Idaman Unggul Berhad YBhg Dato Ab Halim Bin Mohyiddin Director
70 Idaman Unggul Berhad YBhg Dato Annuar Senawi Chairman
71 Institut teknologi Tun Abdul Razak Dr Yahya Mat Hassan President
72 International Islamic University Malaysia Asyraf Wajdi Bin Haji Dusuki Lecturer
73 Jakarta Stock Exchange Ms Adhandariana Senior Officer
74 John Master Industries Berhad Ho Chin Hou Managing Director
75 Kementerian Luar Negeri En Mohd Tarid Sufian Ketua Penolong Setiausaha
76 KLCC Property Holdings Berhad Arlida Ariff Executive Director
77 KLCC Property Holdings Berhad En Shamsuddin Bin Ishak General Manager
78 KLCC Property Holdings Berhad Md Akhir Mohd Sharif General Manager, Finance
79 KPMG Corporate Services Sdn Bhd Jasmin Jaafar Principal Consultant
80 KPMG Corporate Services Sdn Bhd Teh Muy Chng Managing Consultant
81 KPMG Corporate Services Sdn Bhd Yeap Kok Hu Director Corporate Finance
82 Kuala Lumpur Kepong Bhd YBhg Dato Lee Oi Hian Chairman
83 Land & General Berhad Aiznin Sairi Bin Sulaiman Senior Manager (Head of Corporate Affairs)
84 Land & General Berhad Md Tarmuzi Bin Md Salleh Director
85 Landmarks Berhad M A Halim Ahmad Managing Director
86 MAA Assurance Bhd Mr Danny Choong Yick Kheong Vice President
87 MAICSA Jeremie Ting Keng Fui President
88 Malaysian National Reinsurance Berhad Anuar Mohd Hassan CEO / Managing Director
89 Malaysian National Reinsurance Berhad P Raveendren Director
90 Malaysian Resources Corporation Behad Shahril Ridza Ridzuan Group Managing Director / Chief Executive Officer
91 Maxis Mobile Sdn Bhd YBhg Dato Amdan Hj Mat Din Head of Corporate Affairs
92 Megan Media Holdings Berhad Encik Redzuan Bin Abdul Rahman Director
93 Mesiniaga Berhad Wan Mohamed Fusil Wan Mahmood Chief Executive Officer
94 Ministry of Finance Maliami Bin Hamad Principal Assistant Secretary
95 Ministry of Finance YBhg Dato Halipah Binti Desa Deputy Secretary General of Treasury (Policy)
96 Minority Shareholder Watchdog Group Encik Yusof Abu Othman (O.C.F) Chief Executive Officer
97 MKLand Lau Shu Chuan General Manager, Business Planning
98 Monetary Authority of Singapore Mohammad Nizam Bin Ismail Deputy Director,Head (Market Conduct Policy),
Market & Business Conduct Department

CSR: Creating Greater Competitive Advantage


112 Participants List

No. Company Name Participant Name Designation

99 Mulpha International Berhad Chung Tze Yen Chief Executive Officer


100 NEAC Dr K Govindan Head
101 OSK Holdings Berhad Ong Leong Huat Managing Director/Chief Executive Officer
102 OSK Holdings Berhad YBhg Dato Mohamed Din Executive Chairman
103 OSK Securities Bhd Ong Ju Yan Special Assistant to MD/CEO
104 OSK Securities Bhd Wong Chong Kim Executive Director
105 OSK Securities Bhd YBhg Nik Mohamed Bin Nik Yahya Executive Chairman
106 Pacificmas Berhad YBhg Tan Sri Dato Wong Kum Choon Director
107 Pantai Medivest Sdn Bhd YBhg Dato Dr Abdul Aziz Mahmood Chairman
108 Paos Holdings Berhad Gooi Hoe Soon Director
109 Paos Holdings Berhad Lim Tong Hai @ Lim Ah Jee Executive Director
110 Permodalan Nasional Berhad Wan Roshdi Bin Wan Musa Assistant Vice President
111 Permodalan Nasional Berhad YBhg Tan Sri Dato Hamad Kama Piah Bin Che Othman President & Group CEO
112 Permodalan Nasional Berhad Zulkafli B. Hamid Assistant Vice President
113 Pernas International Holdings Berhad YBhg Dato Seri Megat Najmuddin Dato Seri Dr Megat Khas Chairman
114 Petaling Garden Berhad Ir Jamaludin Bin Osman Director
115 Petaling Garden Berhad YM Tengku Dato Ramli Alhaj Bin Tengku Shahruddin Shah Executive Director
116 Petra Perdana Berhad YBhg Datin Nariza Hajjar Hashim Director
117 Petra Perdana Berhad YM Tengku Dato Ibrahim Petra Executive Chairman / CEO
118 Petrolium Nasional Berhad YBhg Datul Ishak Imam Abas Senior Vice President
119 Petronas Dagangan Berhad Mr Ibrahim Marsidi MD / CEO
120 Petronas Dagangan Berhad En Ikhlas Bin Abdul Rahman General Manager
121 Petronas Gas Berhad Mohd Rozaiddin Zainon Hamzah Senior Manager, Finance
122 Petronas Gas Berhad Wan Zulkiflee Wan Ariffin Managing Director/CEO
123 Phiem Asset Management Sdn Bhd Dr Tan Chong Koay Chief Executive Officer
124 Putrajaya Holdings Sdn Bhd En Azlan Bin Abdul Karim Senior General Manager
125 Putrajaya Holdings Sdn Bhd En Ismail Bin Md Taib General Manager
126 Putrajaya Holdings Sdn Bhd Pn Yusmah Binti Md Yusoff Assistant General Manager
127 Putrajaya Holdings Sdn Bhd Tuan Haji Rosli Bin Abdullah Senior General Manager
128 Putrajaya Holdings Sdn Bhd YBhg Dato Ir Mohamad Othman Bin Zainal Azim CEO
129 Reckitt Benckiser (M) Sdn Bhd Julia Chong Managing Director
130 Road Builder (M) Holdings Berhad YM Raja Dato Mufik Affandi Bin Raja Khalid Independent Non-Executive Director
131 Rolls-Royce International Ltd David A.Jones Regional Director
132 S P Setia Bhd Mr Steven Ng Poh Seng Head, Corporate Affairs
133 Scomi Group Bhd En Hilmy Zaini Group Chief Financial Officer
134 Scomi Group Bhd En Mukhnizam Mahmud Director
135 Scomi Group Bhd En Shah Hakim Zain Chief Executive Officer
136 Securities Commission Goh Yoke Tong Executive Officer
137 Securities Commission Judy Lam Cheng Mei SEO
138 Securities Commission Neetasha Rauf Assistant Manager
139 Shell Malaysia En Abdul Rahim Ismail SNR Adviros Social Investment & External Malaysia
140 Shell Malaysia Lt Col (Rtd) Ir Wahiruddin Abd Wahid General Manager
141 Shell Refining Co(FOM) Berhad Ms Lim Tau Kien Director
142 Sindora Berhad Pn Zuraini Bt Mohd Yusof Deputy Manager
143 Southern Bank Berhad YBhg Dato Dr Yahya Bin Ismail Director
144 Southern Bank Berhad YBhg Dato Syed Mohd Yusof Bin Tun Syed Nasir Vice Chairman
145 Southern Bank Berhad YBhg Tan Sri Osman S Cassim Chairman
146 Suruhanjaya Syarikat Malaysia Nor Haslinda Bt Salleh Pengurus Kanan
147 Suruhanjaya Syarikat Malaysia Pn Toh Kay Hong Pengurus Kanan
148 TA Enterprise Berhad U Chin Wei Independent Non-Executive Director

CSR: Creating Greater Competitive Advantage


Participants List 113
No. Company Name Participant Name Designation

149 TA Enterprise Berhad YBhg Dato Mohamed Bin Abid Executive Director
150 TA Enterprise Berhad Zainab Binti Ahmad Executive Director
151 Tebrau Teguh Berhad Ishak Mohd Sharif Director
152 Telekom Malaysia Berhad Rosli Bin Man Director
153 Telekom Malaysia Berhad YBhg Dato Lim Kheng Guan Director
154 Telekom Malaysia Berhad YBhg Tan Sri Dato Ir Muhammad Radzi Bin Hj Mansor Chairman
155 Tenaga Nasional Berhad Ahmad Zaki Hj Rasid Penolong Pengurus
156 Tenaga Nasional Berhad Sie Siew Bing Eksekutif Tadbir
157 Tenaga Nasional Berhad Tuan Haji Nawawi Bin Mohd Said -
158 Tenaga Nasional Berhad YBhg Datuk Amar Leo Moggie Chairman / Director
159 The Institute of Internal Auditors Malaysia Mathuraiveran Marimuthu Board of Governor
160 The New Straits Times Press (Malaysia) Bhd YBhg Dato Zolkipli Bin Abdul Director
161 Tracoma Holdings Berhad Mohd Shah Bin Abu Bakar Managing Director
162 Tradewinds (M) Berhad YBhg Dato Mohd Hanafiah Bin Omar Director
163 Tradewinds (M) Berhad Wan Salleh Bin Mohd Director
164 Transwater API Sdn Bhd Khairul Kamarudin Finance & Legal Affairs Manager
165 Transwater API Sdn Bhd Kong Seng Huat Director
166 Vest Land Real Estate Agency Sharon Yam Lee Hong Principal
167 Western Digital (M) Sdn Bhd YBhg Datuk Syed Husian Al-Junid Director, Business & Sales Support

CSR: Creating Greater Competitive Advantage