5/12/2011 Corporate Social Responsibility in Mala…

Corporate Social Responsibility in Malaysia

Last updated: 18/01/2011 // The Emb assy has written a report on different aspects associated with corporate social
responsib ility in Malaysia: (See the side menu for the Norwegian translation.)

Corporate Social Responsibility (CSR) - Malaysia

The focus on CSR in Malaysia has increased in recent years, in line with international trends. Although several companies have
CSR programs that go b ack many years, in some cases decades, it has in recent years b een possib le to identify an increased
awareness of the issue.

CSR Framework
Malaysian government's increasing focus on CSR has resulted in the development of new frameworks for implementation of
CSR initiatives for the country's b usinesses. The most important of these is "The Silver Book", pub lished b y the Putrajaya
Committee for GLC Transformation (PCG) in Septemb er 2006, containing guidelines for Government Linked Companies
(GLCs). Khazanah Nasional Berhad, a management authority for state investments, has the responsib ility for monitoring that
the GLCs implement CSR measures in accordance with the framework. There is, however, no information on what possib ilities
for sanctions that Khazanah holds if the guidelines are not followed. Moreover, in Septemb er 2006 Bursa Malaysia, the country's
stock exchange, launched a framework for the implementation and reporting of CSR activities of listed companies. In
accordance with this, all listed companies are required to disclose their CSR activities, b ut it is stressed that all activity occurs on
a voluntary b asis.

In the ab ove framework the CSR concept is used to describ e actions that go b eyond philanthropy or compliance with
applicab le laws. CSR describ es the activities that safeguard the environment, communities, employees, shareholders and
other affected parties’ interests as an integral part of the operation, to the extent that it lays the foundation for long-term,
sustainab le value creation. Such an understanding of CSR corresponds largely with the Norwegian definition, as it emerges
from Stortingsmelding (White Paper) No. 10.

Human Rights
Malaysia has ratified the UN Human Rights Conventions no. 8 and 11, which deal with the Elimination of Discrimination against
Women, and Children's Rights, respectively. The country has, however, opposed ratifying conventions such as:

• 3. Ab olition of all Forms of Racial Discrimination

• 4. Clause on Economic, Social and Cultural Rights
• 5. Clause on Civil and Political Rights
• 9. Comb ating Torture and Other Forms of Inhuman Punishment

The authorities' commitment to safeguarding human rights in some areas may b e questioned. Exemption legislation such as
the Internal Security Act (ISA) gives police the right to imprison indefinitely without charge or trial. Moreover, there are clear
limitations on freedom of speech and freedom of association. The situation for refugees is difficult, b ecause the Malaysian
authorities do not distinguish b etween refugees and illegal immigrants.

Working
Malaysia has ratified five of the ILO core conventions. The following three conventions are not ratified:

norway.org.my/…/Bedriftenes-Samfun… 1/4
5/12/2011 Corporate Social Responsibility in Mala…
• 87. Freedom of Association and the Right to Organize
• 105. Ab olition of Forced Lab or
• 111. Ab olition of Discrimination on the Basis of Occupation

There are many restrictions in connection with the right to organize, b oth in legislation and in practice. In principle, workers have
the right to strike, b ut also in this area there are restrictions. Discrimination of women in employment is prohib ited b y law, b ut
women are underrepresented in job s with decision-making authority. Child lab or is not widespread, b ut occurs among small
family firms. Forced lab or is prohib ited b y law, b ut does occur, often in connection with illegal employment and trafficking.

Environment
The past decades of rapid economic growth in Malaysia has caused environmental challenges like air and water pollution, solid
waste management, long term water supply and energy efficiency. Internationally, prob lems regarding deforestation, and
connected challenges like corruption and indigenous people’s rights, have received special attention. In this connection, the
EUs FLEGT (Forest Law Enforcement, Governance and Trade) initiative is working to estab lish certification for Malaysian timb er
to b e sold in the European market. The Malaysian government has also shown interest in sustainab le forest governance
through Reduced Emissions from Deforestation and Degradation (REDD) mechanisms.

Malaysia has b een a memb er of United Nations Framework Conventions on Climate Change (UNFCCC) since 1994, and
ratified the Kyoto Protocol as a non-annex 1 country in 2002. Malaysia has therefore not committed to specific greenhouse gas
(GHG) reductions, b ut can participate in the development of Clean Development Mechanisms (CDM). The Prime Minister
announced a target of 40% reductions in GHG emissions b y year 2020, and the so-called carb on credits will b e important in
achieving this. As a step to comb at greenhouse emissions, the government is currently working on a ”National Policy on
Climate Change”. The government strongly supports CDM activities and has implemented an institutional framework. There is
b elieved to b e a sub stantial CDM potential in Malaysia, and at the present the country has 143 projects in the pipeline, with a
large share within palm oil production.

Corruption
One of the b iggest prob lems related to fighting corruption is the lack of pub lic disclosure, as law permits a high degree of
secrecy in government agencies. Furthermore, there is a prob lem that the media is largely controlled b y a small group of
companies with strong ties to the government, limiting the press' role in uncovering corruption. According to Transparency
International's "Corruption Perceptions Index", Malaysia fell 24 spots, from 32nd to 56th place, in the period 1999-2009. In TI's
"2010 Glob al Corruption Barometer", Malaysian respondents consider corruption to b e most prevalent among political parties
and police. 46% of the respondents b elieved the level of corruption had increased the last three years, while 35% and 19%
respectively b elieved it had stayed the same or increased. According to the b arometer, corruption also seems to exist at the
local level; nine percent of the respondents answered that they have paid some form of b rib e during the last twelve months.

Paradoxically, Malaysia's corruption prob lem has increased in the same period as the government has implemented measures
that were supposed to lead to the opposite. One of these is the estab lishment of the Malaysian Anti-Corruption Commission
(MACC) on January 1st, 2009, with the goal of increasing efficiency, independence and accountab ility in the anti-corruption
work. However, MACCs independence and role has b een questioned after several controversial issues. Apparently, the agency
has a tendency to prosecute minor cases where oppositional politicians are involved, while the larger issues that involve
government policy-makers are not investigated to the same degree.

CSR-Related Initiatives from the Authorities

The government of Malaysia has introduced tax incentives to b usinesses that implement b road CSR programs. This could, for
example, apply to support for arts and cultural programs, reduction in greenhouse gas emissions and investing in local
communities. In addition, the government has estab lished a fund of 50 million RM (ab out 83 million NOK) to promote CSR
activities. Moreover, the Malaysian government has announced that state-owned investment funds will include CSR as a
criterion in connection with future investments.

Emphasis on Various CSR Dimensions

The focus on CSR may vary a lot depending on the company's character. The Malaysian Institute of Management (MIM) found in
a survey conducted in 2009 that 85-90% of multinational companies, large local companies and GLCs engage in CSR
norway.org.my/…/Bedriftenes-Samfun… 2/4
5/12/2011 Corporate Social Responsibility in Mala…
activities, while the corresponding proportion for small and medium-sized enterprises is 58%. Total ¾ of the respondents had
some form of CSR programs, and ab out half of the remaining fourth part was planning to initiate a program in the near future.
However, it is worth noting that the ab ove survey was sent out to 2000 companies, of which only 110 responded.

Furthermore, there is considerab le variation across different dimensions associated with CSR. Programs aimed at the
employees of the enterprises are widespread, and often come in the form of education and training in HES. Provisions of
education grants are common among the larger companies. Bursa Malaysia found in a survey that measures aimed at
employees is the CSR aspect with the highest priority among listed companies. This can in particular b e attrib uted to HES-
related measures.

Market-oriented CSR activities have b een given increasing awareness among companies in Malaysia as consumers have
b ecome more aware of how b usiness activities affect society and the environment. This applies especially to companies that
are active in European markets, as European consumers have shown willingness to punish companies that ignore social and
environmental considerations. Among the listed companies, it is especially those operating in the so-called "high risk" sectors
that are active in the market-oriented CSR activities. This includes companies working on the extraction of natural resources
and those with a special need to justify their own b usiness; companies involved in tob acco, alcohol, gamb ling, etc.

When it comes to activities aimed at local communities Malaysian CSR programs have a long tradition of b urden sharing
b etween b usinesses and communities, which is an integral part of the country's cultures. Initiatives from the b usiness side,
however, often b ear signs of philanthropy rather than real interaction. EUMCCI calls for more focused activities aimed at local
communities, with fewer and larger donations directed to very specific projects. Bursa Malaysia point to the same prob lems in
connection with listed companies, and calls for long-term programs with increased levels of performance measurement rather
than individual donations.

Activities aimed at preserving the environment as much as possib le, is perhaps the CSR aspect given the highest priority
among European companies. This aspect, however, is given less weight among companies in Malaysia, where the environment
has for many years come secondary compared to the economic b enefit of the b usinesses. In Bursa Malaysia's survey of listed
companies, a quarter of the respondents lack data as they do not register data ab out how the b usiness affects the environment.
The general trend among the remaining companies shows very low scores for the environmental dimension. This is due to lack
of awareness among companies ab out how their activities affect the environment, and what tools are availab le to reduce the
b urden. Crafts, plantation and the industrial sectors are slightly b etter than average, while the construction sector ends up in the
other end of the scale. The EUMCCI reports, however, that the focus on the environment is on the increase among companies in
Malaysia and points to new initiatives to reduce energy consumption and cut emission of greenhouse gases, also in the
construction industry.

Other Initiatives
The Glob al Compact Network Malaysia (GCNM) is a network that works to promote the United Nations Glob al Compact (UNGC)
ten principles concerning human rights, rights of workers, the preservation of the environment and anti-corruption among
companies in Malaysia. By connecting to the network, b usinesses are given the opportunity to showcase their CSR activities
internationally as well as an arena for interaction with organizations and other b usinesses. By August 20010, 62 companies and
organizations had joined the GCNM, of which the majority of the companies were multinational companies. DiGi
Communications, in which Telenor has a controlling stake, is one of the companies that are affiliated with the network. As
emphasized b y GCNM, DiGi is the only Malaysian company that has signed the "Caring for Climate" initiative.

The consulting firm OWW has, in cooperation with the newspaper Malaysia Reserve, created a Socially Responsib le Investment
(SRI) index, with the aim of attracting investors which include CSR in their selection criteria for new investments. The index
consists of companies with CSR programs that stand out as particularly good. The 100 most valuab le companies listed on
Bursa Malaysia are given scores for engagement in relation to different dimensions of CSR, as well as corporate governance
and the respect of human rights. The scores are prepared in accordance with the CSR policy, how this is b eing implemented
and what effect it has. The share prices of companies with comprehensive CSR activities are monitored and compared with
other listed companies in order to create a picture of how CSR activities affect companies' market value. The index shows that
from June 2006 to June 2009 companies with good CSR programs give 19.3% higher dividends than other companies. This
shows that focusing on CSR is not necessarily an ob stacle to companies' core b usiness in Malaysia.

norway.org.my/…/Bedriftenes-Samfun… 3/4
5/12/2011 Corporate Social Responsibility in Mala…
Bursa Malaysia launched its Business Sustainab ility Programme in Novemb er 2010, in order to have the Malaysian pub lic-
listed companies integrate sustainab ility into their b usiness strategies. The program includes the pub lication of a sustainab ility
guide for company directors and the introduction of a Sustainab ility Knowledge Portal on Bursa Malaysia’s web site. In addition,
they have announced that an Economic and Social Governance index should b e ready b y 2012.

Of others that are involved in the implementation of CSR in Malaysia, Caux Round Tab le Malaysia, CSR Asia and EUMCCI are
worth noting.

Potential for Improvement

Although attention to CSR has increased in Malaysia in recent years, there is undoub tedly a need for improvement in several
areas. The necessity of increased focus on implementation of environment-keeping programs has already b een mentioned,
and a growing corruption prob lem indicates that there is a need for measures to counteract this trend. Inadequate reporting of
implementation is another prob lem as stated CSR policies are not necessarily followed in practice. Glob al Reporting Initiative
(GRI) reports that very few companies report their activity according to the organization's policies, and that these reports often
are deficient.

The Association of Chartered Certified Accountants (ACCA) Malaysia reports many of the same prob lems as the GRI, and
emphasizes that CSR framework to a greater extent must b e followed up with detailed reports on how these are implemented.
The organization also writes that many b usinesses that do not report justify this with the cost of more comprehensive reporting.
ACCA argues, however, that there are some signs of improvement; the organization's annual awards ceremony where
innovative approaches to reporting are awarded, has experienced a sub stantial increase in contrib utions since the start in 2002.
Moreover, the quality of the contrib utions was generally b etter than in previous years, and many former contrib utors continued
to report despite the difficult economic times.

Initiatives from Norwegian Companies in Malaysia

DiGi Communications (Telenor) integrates CSR into its b usiness through the focus areas Empowering Communities Through
Connectivity; Climate Change; and Responsib le and Safe Business Practices. The company has set a goal to reduce its
"carb on footprint" b y 50% b y 2012. The company launched "Deep Green Challenge", a program in which teams from Malaysian
universities are competing to design the b est program for the use of renewab le energy in rural areas with limited energy supply.
The company has also implemented several initiatives that utilise mob ile communications to empower local communities,
including estab lishing Community Broadb and Centers in rural areas and carrying out SMS donation drives for charitab le
causes.

Other major Norwegian companies that are active in Malaysia, such as Aker Solutions, DNV, Jotun and Wilhemsen, have also
developed CSR policies that integrate into their respective b usinesses. Norwegian companies in general seem to b e CSR-
conscious and operate on the b asis of guidelines from their headquarters in Norway.

Activities Organized by the Embassy

As a follow-up of White Paper 10, there will, in cooperation with the Ministry of Foreign Affairs, b e held a seminar on CSR in
Kuala Lumpur in January 2011 where Norwegian companies also will b e included.

Back to top Share on your network |

norway.org.my/…/Bedriftenes-Samfun… 4/4