CSR – not just about PR

I am rather surprised to discover that CSR awareness is still rather low, even among corporations in more developed countries. Corporate Social Responsibility, I think, is quite a misunderstood term among the corporate and the public.

Many associate CSR with giving and giving, mostly to the community. The more philanthropic a company is, the more CSR it is practising. No cold hard cash forked out means it is not CSR. Unfortunately, these notions are wrong.

For example, when The Star donated Ringgits to whatever cause, the CSR light blinks in the public’s eyes. When SEGi gave away scholarships, the light didn’t blink. In actual fact scholarships are a form of indirect donations especially for a private education provider. 

People tend to forget that a company is a business entity with the intent of making a profit. Then, they chastise the company for its very existence because it didn’t donate so and so amount, or because it didn’t reduce the prices of its services or products.

It’s not their fault, really. As I have learnt from delving deeper into the topic, only a low percentage of companies are aware of the true meaning and purpose of CSR. A study done by Bursa Malaysia two years ago showed that only 13% of PLCs registered with Bursa scored good points for awareness and understanding of CSR concepts as well as CSR operations.

In Singapore, a study done just last year showed that only 40% of 507 companies are aware of CSR and out of that, only two thirds practised it. The study concluded that CSR is still in its infancy there.

A recent study in Australia also shows that there is still much to be desired of company CSR practices there. Whatever initiatives were mostly more of a public relations marketing tool.

Inevitably people are left with the impression that CSR is merely a PR gimmick. Corporate Social Responsibility has three other equally important areas apart from Social responsibility as delineated in the Bursa Malaysia CSR Framework. The 4 areas listed are Marketplace, Workplace, Community and Environment.

The objective of enforcing CSR reporting among PLCs is to encourage ethical business practices that encourage sustainability of the business while taking responsibility for the aforesaid four areas which the company affects. In short, CSR is about how the company makes money and not how it spends its money.

If you look at the purpose of CSR from a bigger picture, you would find it is actually a way to create a less capitalistic economy. More often than not in the race for development and financial success there is a great tendency to neglect the welfare of workers, society and the environment. More importantly, CSR is an attempt to prevent disasters.

Take Enron for example - due to internal malpractices it resulted in the collapse of the company and caused the unemployment of thousands of innocent employees not only from Enron, but Arthur Anderson as well. This in turn set off a series of other negative consequences on the economy in the US and beyond by affecting the community supported by the affected workers and all other companies which had business dealings with Enron. That is why corporate governance, which spells out the code of ethics policy, is a part of the Marketplace focal area in CSR.

I believe it will take more than just a framework designed by Bursa Malaysia to encourage companies to include CSR into their corporate culture. To get the momentum going, other variables also play a role.

The economic situation and company performance are the most prominent. If you are already starving and you’re not a saint, would you give away food? Naturally companies will focus more on coming out of the red than caring about ethics, the environment or the community.

Another variable is market influence. In the UK there is an increasing importance put on environmental conservation. Customers and suppliers are showing a greater preference for dealing with companies that have strong CSR practices on this area. If the market does not give two hoots about caring for the environment, a company would be less inclined to include that in its corporate practices.

Currently in Malaysia, companies only get tax incentives for cash donations. Maybe Bursa needs to dangle a more appetizing carrot in front of PLCs and hopefully this will work and cause a trickle down effect to non-PLCs.

It is true that publicized CSR initiatives like donations to the needy and cleaning up a river can give companies good PR and improve branding image. However, some initiatives which are less tangible deserve due recognition as well. For instance, there is no incentive for companies that recycle its waste or for companies which practice good corporate governance.

There must be a reason why CSR has not taken off that well even in developed countries apart from lack of awareness being the reason. Perhaps it would help if the government gives incentives for non-financial contributions as well.