Is CSR a threat to companies?

IT IS not by coincidence that the Prime Minister spoke on the importance of instilling the virtues of social responsibility "into the DNA of every company" in his speech at the Prime Minister's Corporate Social Responsibility (CSR) Award ceremony.

Indeed, the issue on social responsibility remains one of the primary agenda and priority of every developed country across North America and Europe.

Recently, the issue has taken a new dimension with the introduction of an international standard, ISO 26000 for social responsibility, that actually extols, for the first time, strategies that should be adopted towards becoming a socially-responsible organisation. It is expected to be fully adopted and enforced by October 2010.

In my capacity as a committee member of the National Mirror Committee for ISO 26000, I recently participated in a meeting attended by prominent industrialist representatives to discuss the way forward towards implementing ISO 26000 in Malaysia. Unfortunately, I was left with the impression that many entre-preneurs actually perceived it as an economic threat, especially for small and medium enterprises (SMEs).

In the past, large western multi-national corporations never hesitated to impose harsh trade conditions on less-developing economies as evident in the adoption of ISO 140001. Meeting the standards involves several concerns for the SMEs. For instance, one of the concerns raised is the issue on costs.

Indeed, the fear of incurring additional costs is real and many small firms may not have the resources to justify the returns. To circumvent this problem, firms should incorporate CSR into part of their corporate strategy, internalising it as part of their budget, and gradually into its corporate culture.

On the long run, CSR would be able to reduce operating costs by eliminating unnecessary wastages and cutting off unnecessary expenses. For example, by adopting a comprehensive green policy could gradually reduce the expenses on electricity, petrol and stationery expenses. Having good human resources policy will also boost productivity and reduce attrition rates.

Another concern is the lack of information on the new standard. Most organisations in Malaysia are not even aware of the standard let alone adopt it.

It is a fact that the importance of CSR is gaining momentum across Europe, Japan and North America as many non-governmental organisations (NGO) are serving as watchdog to ensure compliance of its strict coded practices and guidelines. Some of these organisations are funded by the United Nations while others by large multi-national conglomerates.

The issue on CSR has also sparked intense debate among many leading business schools in the US and Europe. Harvard Business School, for example, is championing a new model called "social enterprise". Such worldwide awareness that is spreading its ten-tacles across the academia, governments and corporate sector underscores the importance of CSR internationally.

In Malaysia, the Prime Minister was right to stress the importance of CSR as a "significant catalyst" towards sustaining Malaysia's economic development. The inclusion of "sustainability" as part of the focus in the New Economic Model has certainly raised the role of CSR here.

The concern now is on the ability of our local businesses to cope with this development. More importantly, will such global trend affect the future of our exports if local businesses failed to incorporate social responsibility in their c agenda?

Although, CSR may be regarded as a relatively new term for many local businesses, it has actually been in existence for quite some time in Malaysia. Perhaps what is lacking is the will to disseminate its importance and practices.

Indeed, awareness is the first step that should be "embedded" in every entrepreneur's mind. ISO 26000 should be viewed as a guide, not a threat, towards such a process.

To achieve this objective, government agencies such as Companies Commission of Malaysia or SME Corp should play a more prominent role by providing incentives to orga-nisations in conducting training programmes on social responsibility.

Tax incentives, corporate grants and additional monetary reliefs should also be introduced to help small and medium-sized companies to offset the costs associated with adopting the standard.

The wave of change is coming and Malaysian firms will have no choice but to embrace good corporate governance by embracing CSR concepts whether through adopting ISO 26000 or by other means. It is also advisable to adapt rather than adopt good practices so as to put local firms at a competitive advantage to embrace social responsibility as part of their culture, consistent with international practices.

Ultimately, local businesses must view it as a long-term gain that will ultimately remove any trade barriers that are likely to be imposed by developed economies once the standard is fully adopted. Enculturation will be gradual but eventual, which is why several developing countries are beginning to inculcate ISO 26000 as part of their national standard. It is now time to ask ourselves - when should we start?

The writer is a Senior Lecturer with the Graduate School of Business, Universiti Sains Malaysia and a National Mirror Committee for ISO 26000.

By Azlan Amran

Business Times