Is Asia Taking Corporate Social Responsibility Seriously?

Chris Tobias, Reuters 7 Nov 09;

Corporate social responsibility (CSR) is a critical issue across Asia. From local companies to multi-national conglomerates, how successfully business interacts with its environs and community is of supreme importance.

The recent CSR-Asia Conference held in Kuala Lumpur, Malaysia gave some worthwhile perspectives in a region home to roughly 60% of the world's population. But how many of the case studies demonstrated a genuine portrayal of companies doing good work, and how much was at best blatant greenwash? What countries, industries, and companies are emerging as leaders? What are they key issues facing the region?

Aviation Industry's Climate Woes

One of the bright spots included a refreshingly honest account from Cathay Pacific's Mark Watson. Working in the area of environmental management and CSR, Watson detailed the airline's efforts in many areas like improving fuel efficiency (23% improvement over the last decade), investigation of biofuels, and redesigning their jet fleet with suppliers like Boeing and Rolls Royce.

Cathay is also proactively working with industry groups like IATA to set clear carbon related policies for the aviation industry leading up to Copenhagen's climate negotiations later this year. Watson was frank in his admission that, "Airlines do not have the abatement options of other industries. There is no silver bullet for aviation emissions."

While aviation emissions are around 2-3% of the global total, due to the altitude at which they occur, they pose a disproportionate effect on the climate as they affect the complex chemistry of Earth's upper atmosphere. Watson outlined Cathay's attempts make a clear, level playing field for airlines to take responsibility for their carbon emissions, and noted that the upcoming climate negotiations in Copenhagen later this year would be difficult.

Developing Nations, Climate Negotiations, and CDM

"Countries like Brazil, India, and China are against the equal treatment of emissions across countries and industries worldwide," Watson said. "Instead, they push for the common but differentiated responsibility treatment." Within United Nations negotiations, this essentially means that so-called developing nations get different treatment and are not liable in many of the same ways as developed nations. This is a likely sticking point for many countries coming to a cohesive agreement, and with carbon atmospheric levels already over 380ppm, timing is critical to correct the problem.

Countries taking this position on emissions has knock on effects for their national industries, such as aviation. Some countries such as Singapore are crafty in how they straddle both sides of the fence: for business and investment, they position themselves as developed nations; on climate and carbon issues, they wish to be seen as developing countries to avoid major emissions liability.

Recently, Singapore has been especially vocal on avoiding emissions cuts , rather than taking a critical leadership role in Southeast Asia- to much disapproval from more informed citizens. [Side note: with such national tactics afoot, it's not surprising that Singaporean companies rank low on CSR-Asia's Sustainability Rating, near the bottom of the list with countries like Pakistan.]

While Cathay Pacific seemed to be toe-to-toe with other aviation leaders like Air New Zealand and Continental, Watson noted that the bulk of the industry were laggards on many climate and environmental issues. "Because aviation survives on very low margins, any company not taking the cost of carbon emissions, fuel costs, and efficiency into serious account faces massive risk," he said. On the fuel and climate change fronts, the aviation industry seems set for a continued shakeout of poorly managed companies in the years ahead.

The good news is, on the subject of carbon trading and CDM projects [clean development mechanism], Business Development Manager Richard Mao from First Climate shared some promising information. "According to recent research, carbon markets are rapidly developing. The 2009 volume is expected to double that of 2008, and countries with the greatest number of CDM projects are topped by developing nations like China, India, and Malaysia," he said. So while at one level, big developing nations might be swatting off responsibility, on the ground level there is a lot going on to reduce emissions.

Regardless of whatever happens in Copenhagen climate negotiations, Mao noted that the EU was prepared to take a leadership role, and aim for 20% reduction emissions targets if no international agreement took shape. If other countries worldwide got on board with sweeping cuts, the EU was going to commit to a 30% reduction against their 1990 emissions levels.

The Thrust for Transparency and Better CSR Policy in Asia

The Malaysian Bursa Stock Exchange is trying to foster better CSR in Malaysia. In terms of policy and governance issues, Bursa is taking a lead by requiring that all listed companies have at least a basic CSR policy.

While specific criteria around what is contained in the policy has not yet been established, CEO Yusli Mohamed Yosef has publicly stated that companies need to include CSR criteria in their operations as "the new business as usual."

Coupled with the Malaysian government's recent announcement of a 100 million Ringgit fund to support CSR development in companies across the country, these are promising developments in Southeast Asia, and indeed the larger global context.

Summing up the state-of-play, CSR-Asia Chairman Richard Welford indicated that one year ago as the financial crisis was in full effect, he was concerned for the future of CSR in Asia.

However, he stated "That due to the financial meltdown, CSR has been pushed to the forefront as a part of the serious debate and discussion around the irresponsibility of business." He highlighted that trust, governance, transparency, accountability, communication, and disclosure will need the utmost attention going forward to rebuild public trust in business. It is likely CSR will become more deeply imbedded in the business landscape as a result.

Has the Financial Industry Learned Anything?

Speaking of the financial meltdown, while the recent crisis has meant some advancement for CSR, has the attitude of financial institutions actually changed? Are any of the underlying attitudes and causes for the crisis being addressed? If the rhetoric from Chief Risk Credit Officer Paul Norton at HSBC is any indication, there is still a lot to be desired.

While glossy overview was given on HSBC's environmental and social policy, very little emerged when boiled down to the details. Citing client confidentiality, Mr. Norton declined to answer several questions around HSBC's dealings with several forestry related projects and remained vague overall in terms of how policy was actually executed.

From the point of view of external scrutiny, here wouldn't be much to examine; again the issue of transparency and open disclosure remains elusive. This was in spite of him talking at length about the strength of their policies towards responsible forestry. While policy might put HSBC ahead of some other banks on irresponsible lending practices, the exercise came across more as a slick PR exercise than CSR initiative.

What was also concerning about his talk was an air of overconfidence, the candor of banking business as usual, the same pre-crisis rhetoric. Interestingly, a lunchtime keynote speech by Irene Dorner, Deputy Chairman and CEO of HSBC Malaysia maintained the same self-assured, all knowing tenor.

With the banking industry having gone through the throes of major crisis, one might expect something more humble and transparent. As with the Wilmar case, perhaps HSBC can be given some points for effort, but the proof is in the pudding.

In many ways, these case studies reveal the complex nature of the global issues facing us as a human race. Most of these examples demonstrate the need to look at issues in terms of larger context, not quick fix solutions or short-term profit motives. If we are going to get anywhere on issues like climate change, we will need to adopt this sort of thinking and design in all of our solutions. CSR or no CSR, there is literally a world of work left to do.

Chris Tobias is Celsias Editor-at-Large and Lead Strategist at Forward

Reprinted from Celsias.com