By Hj. Mohamad Idrakisyah, A Member of MIM, OM 39156
Corporate sustainability, popularly known as triple bottom line, incorporates social, economic and environment safeguards that concerns for the present and cares for the future of this planet and its occupants. Businesses play an important role in the stated triple factors but global environmental impact reports, state that progress towards sustainable development has been slow, indicating that organisations needs to do more to act strategically and successfully in a sustainable manner, in a way that it creates value for society, business and nature. Naturally, contributions from individuals, societies and nations across the globe, however small, are crucial for sustainability orientated development to take place.
Many sustainability related initiatives have taken place in past with limited success from the lack of strategic orientation with regards to the introduction and implementation of sustainability processes and goals. With the right strategies in place, coupled with diligent reinforcement, corporate sustainability management could be made a norm in organisations. It would help reduce the negative social and environmental damages from business activities and bring about improved economic performance of business entities.
Social Strategies of Corporate Sustainability
The number of industrial accidents reported for the manufacturing sector in Malaysia has increased from 2,780 cases in 2012 to 3,702 in 2016 with close to 10% resulting in death and 5% in permanent disability. Workplace safety and health and avoidance of work-related accidents needs to become a safety culture in organisations as it obviously saves lives and money which otherwise could bleed the company of its valuable resources.
Lynas Malaysia’s continued commitment to the highest occupational safety and health standards has been recognised with a Gold Class award from The Malaysian Society for Occupational Safety and Health (MSOSH) in 2019. Commenting on the award, Lynas’ Vice President of People and Culture, Mimi Afzan Afza said: “This award is an achievement for our company and for our people who work hard every day to ensure Lynas Malaysia is a safe place to work and that we are safe for our local communities and the environment. Recently we announced that we had achieved one year ‘lost time injury free’ and this award is a further achievement for our people.”
Instead of treating employees as just employees, relating to them as partners by involving them in decision making processes would be a move in the right direction. The person tasked with the job understands it better. Groups such as quality control circles are examples of success stories, we hear from Japanese industries which other organisations across the world have emulated with equal success. These cost-free internal resources could very well be utilised for continuous improvement initiatives within the organisation.
The employee engagement in Malaysians is at 54%, making us a country with the 7th most engaged employees in the world. Studies also finds that 30% of Malaysians still intend to leave their jobs in 2 years and another 16% of Malaysians are prepared to quit their job in less than a year. These findings seem to contradict between high employee engagement percentage and employee attrition rates and instead of blaming it on job hopping tendencies among millennials, the real reason can be traced to the lack of a proper feedback system and inability to voice concerns or issues at work. If this could be addressed effectively, it would have a positive financial implication to the organisation in terms of cost savings from new recruitment, training and talent development expenses.
Ethical behaviours of the company in terms of avoidance of corruption and other acts in defiance of good moral and legal standards creates a toxic work environment for its employees. It hinders business growth and profitability as it erodes into the productivity and efficiency of the business operation that could result in the premature death of the business entity. Code of conduct and best management practices must be put in place and enforced religiously for continued business sustainability for organisations that plan to be in the game for years to come.
In 2019, Malaysia has lost some RM 47 billion from corrupt practices. The report from Transparency International Malaysia (TIM) states that, since 2013, about 4% of the GDP was lost to corruption. A PricewaterhouseCoopers (PwC) report in 2016 showed that bribery and corrupt activities amongst private entities in Malaysia rose from 19% in 2014 to 30% in 2016. Needless to say, how such fortune could have been used by organisations for nation building activities.
Economic Strategies of Corporate Sustainability
Organisations intending to expand their business both in the domestic and international markets, would need to make conscientious efforts on sustainability related R&D, by using the best available techniques and technologies to produce goods and services that are consistently superior in quality and competitive in pricing. Organisations must be mindful that money spent on R&D activities is not to be construed as expenses but rather as investment for its continued business growth.
According to the UNESCO Institute of Statistics, investments on R&D has reached a record high of almost USD 1.7 trillion. About 80% of these investments comes from 10 countries, mostly from G20 member nations and the European Union. South Korea’s amazing economic success is related to its strategy of investing in R&D, along with prioritising spending on the infrastructure and education sectors, and was essential to the emergence of large and profitable companies such as Samsung, Hyundai Motors, Hynix and GM Daewoo Auto, among others. South Korea’s ratio of R&D spending to GDP was 4.55% in 2018, the highest in the world.
Currently, Malaysia spends 1.3% of its GDP on R&D. Malaysian companies should invest a large share of their profits in R&D to ensure that their products remain competitive in the domestic and global market. The world’s largest rubber glove manufacturer, Top Glove Corporation Bhd of Malaysia, owes its success to its commitment to R&D. The company plans to increase its annual R&D allocation beyond its current RM60 million, a sum that already represents about 12% of its profits before taxes. As emphasised by executive chairman Tan Sri Lim Wee Chai, it will continue to invest in R&D because “there’s no future without research”.
The onus is on the top management of the organisation to embark upon knowledge management activities and approaches that keep knowledge related to sustainability a priority in the organisation. They have to brainstorm and produce a blueprint on ways to plan, develop, organise, maintain, transfer, apply and measure specific knowledge and improve the organisational knowledge base\on sustainability related initiatives.
A study carried out by BCG/MIT finds that 90% of executives find sustainability to be important, only 60% of companies incorporate sustainability in their strategy, and merely 25% have sustainability incorporated in their business model. In addition, the study also finds that 44% of investors say that they divest from companies with poor sustainability performance. Management needs to make sure that the strategy of the company and the sustainability efforts are aligned if they wish to attract investors for their long-term business growth.
Many of today’s leading companies like Nike, Coca-Cola, Telenor, IKEA, Siemens and Nestlé have stepped up largely as a consequence of a crisis related to adverse management issues, such as abusive labour practices, waste and pollution management issues. Moving forward, by recognising the impact of sustainability in a crisis, these companies have all developed more proactive sustainability strategies, possibly to shield them from another round of international embarrassment.
In the Malaysian context, Panasonic through its “eco ideas” economic sustainability program has edged their competition, by producing products which are energy efficient that facilitate the convenience and comfort of a modern lifestyle. General Electric in Malaysia launched “early health”, opening up opportunities for medical practitioners in Malaysia to leverage technological and biological breakthroughs to transform healthcare delivery from treating late disease to a focus on early health. This proactive economic sustainability measures have also won General Electric Malaysia a bigger market share in the medical field from their competitors, namely Siemens, Honeywell and 3M.
Environment Strategies of Corporate Sustainability
During the pre-operations stage, raw material sourced by the organisation from their suppliers had to fulfill the 3R criteria of waste management elements; reduce, reuse and recycle. With depleting natural resources and green house effects on global warming, imposing such prerequisite on suppliers is a mark of an environmentally friendly organisation. In the operations stage, organisations must gear themselves to use environmentally-friendly technologies, cleaner production system, environmentally orientated product and services, and efficient use of production facilities and infrastructures. At the post-operations stage, care must be taken on the proper disposal of waste as to avoid polluting air, water and soil as hazardous waste has a negative impact on biodiversity, that could make life on earth unbearable to all its inhabitants.
According to the survey respondents conducted in Malaysia in 2019, global warming or climate change was the leading environmental concern with 45%, followed by air pollution at 33%. Currently, the pressing environmental concerns in Malaysia are escalating carbon dioxide emissions from the transport sector, deforestation, open burning, excessive waste production and river pollution. These issues must be addressed with urgency as Malaysia is committed to the UN Convention on Biological Diversity and the Paris Agreement of the United Nations Framework Convention on Climate Change (UNFCC), and it has committed to 45% emissions reduction by 2030 in relation to its 2005 GDP.
Sime Darby realises the importance of trees in our environment. Therefore, despite inevitable deforestation for housing and development, they are aware of the implications and have chosen to offset that with the “Plant A Tree Program”. Everyone knows that flying is not good for the environment. Malaysian Airlines System (MAS) has however taken steps to help diminish this problem. It has strived to reduce fuel consumption by flying more direct routes at the most economical speed, practicing continuous descent approaches and flying lighter and cleaner aircraft to improve fuel efficiency. Aeon Co., which owns the JUSCO chain of supermarkets, is making a conscious effort to go green. As part of its green agenda, Aeon has launched a campaign to encourage JUSCO customers to say no to plastic bags and instead use reusable shopping bags or bags. They have set an example by reducing the usage of plastic bags in their supermarkets and general merchandise sections. Jusco also started using business cards made from recycled paper.
The studies conducted by Zenith Malaysia in 2016 finds that Malaysian consumers are becoming more socially and environmentally conscious. The poll revealed that 69% of the population preferred to buy brands committed towards creating a positive social and environmental impact which concludes that brands could not profit at the expense of the environment. In fact, from the companies quoted above, it is proof that there is a direct co-relation between sustainable business practices and profitability.
Businesses are key players in any societal transition towards corporate sustainability. However, even though concepts such as social, environment and economic sustainability management have been subjects of discussion for many years, the advances that have been achieved are still limited. In fact, to date, only limited progress towards sustainable development has been observed. The lack of strategic orientation in corporate sustainability management is one major reason for lack of progress in this field.