Corporate Social responsibility (CSR) within two companies

Introduction

Corporate social responsibility (CSR) implied that “the firm’s consideration of, and response to, issues beyond the narrow economic, technical and legal requirements of the firm and to accomplish social benefits along with the traditional economic gains which the firms seek.”(Husted 2003). The inception and framework of CSR was first created by the European Union in promoting the CSR to the environment and society that is related to business. European Commission (2001) defined CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” that by developing awareness and responsibility that leads to enhance the success of the business.

CSR implementation can be divided in two areas which are Internal and external. In internal area, CSR practices basically deals with the people that are related to the business internally such as employees and any other issues that is involved to the management of the production and resources such as safety environment and health assurance in investing in human capital. On the other hand, in external area, the socially responsibilities involved a large range of stakeholders to the company business such as suppliers, customers, government and shareholders.

CSR is defined as open and transparent business practices that are based on ethical values and respect for the community, employees, the environment, shareholders and other stakeholders. It is designed to deliver sustainable value to society at large. CSR supports Triple Bottom Line reporting which emphasizes the economic, social and environmental bottom-line wellness. CSR goes beyond compliance to laws. And we wish to emphasizes this. It is important to avoid a legalistic way of thinking when considering CSR. There is no universal approach to CSR. Companies are free to adopt what suits them. However there are some basic concepts that cut across all definitions and these should be considered in crafting a company’s CSR vision. CSR is not about compliance or philanthropy or public relations. It often involves cultural transformation in a company as it integrates CSR concepts into its operations and decision making. Vitally, CSR involves communicating the company’s actions to its stakeholders and encouraging their feedback. Only in this way can a company have a dynamic and relevant CSR vision.

Literature Review

In Malaysia, the disclosure of CSR on annual report is voluntary. The choice of social issues disclosed tends to reflect the Malaysian Government’s priority or the particular obligations which companies have. Corporate Social Disclosure (CSD) may have the potential to strengthen stakeholder relationships as reporting promotes corporate transparency and instills greater confidence and trust amongst stakeholders. CSD represents an additional channel for engaging stakeholders in a dialogue, and it enables companies to identify and address key issues of concern to their stakeholders. CSR disclosure has been the subject of substantial academic accounting research (Farook and Lanis 2005; Gray, Owen and Maunders 1987), however, while there has been research relating to annual reports in general, little has been undertaken focusing on CSR disclosure by PLCs, which can influence many people in society, view their social responsibility, and if indeed they discharge their social accountability by voluntarily disclosing CSR information (Gray, Kouhy and Lavers 1995).

Announcement of YAB Prime Minister’s Budget 2007 has stated the requirement for all Public Listed Company (PLC) to disclose any CSR activities in the Company Annual Report and to adopt and manage the CSR activities in their own business practices. There is also stated the Bursa Malaysia’s CSR framework for PLC’s guideline in promoting CSR practices. Bursa Malaysia CSR framework has outlined 3 critical elements in CSR practice. The first element is the establishment framework created from the national policies and aspirations, so that the establishment of CSR is towards to national goals and objectives. The second element is the flexibility of the disclosure framework. PLCs are required to disclose CSR statement in the company annual report. The framework gives opportunity to PLCs to practice CSR in their own creativity and action as they manage the best action for the company. Lastly, this framework is not just a step by step prescription but it is a guideline for the PLCs in promoting CSR practices. This is important for the company to establish efficient CSR practices and policies. Every PLCs need to create their own creative and effective CSR practices relevance to the framework guidelines.

The Bursa Malaysia CSR Framework looks at 4 main focal areas for CSR practice. They are the environment, the workplace, the community and the marketplace, in no order of priority. In the environment area, CSR focus on a variety of issues such as the use of energy on how the company allocates its usage effectively and to reduce any damages that can adverse effect to environment. In the community area, the relation of the company and the community is a two way communication. For example supporting employee involvement in community issues enriches the community and the company. Companies can be creative in looking at how they can contribute to children, youth development and the under-privileged. The opportunities for company interaction with the community are vast. In the marketplace area, the important stakeholders such as shareholders, suppliers, and customers can be identified so that companies can interact responsibly with this group in a number of ways, such as raising the standards of Corporate Governance within the company so that it meets shareholder expectations is a further consideration. Lastly, is in the workplace area. Employees are drawn from society and so everything that related to staff needs to be socially responsible, whether we are dealing with basic human rights or gender issues. A quality work environment and health & safety are obvious considerations in inculcating in the employees and the values which the company holds dear if the CSR is practiced in that company.

A company should focus on areas such as economic, environmental and social when developing sustainability strategy (Szekely & Knirsch 2005). Sustainability strategy development can be based on legitimacy, economic and social theories. These theories explain social disclosures pattern by organizations (Haniffa & Cooke 2005) and thus, practicing of CSR. Legitimacy theory is whereby corporate social disclosures were motivated by the corporate need to legitimize activities (Hogner 1982). This is where corporate management will react to community expectations (Guthrie & Parker, 1989). Thus, companies are expected to carry out activities that are acceptable by the community. Corporate social disclosure can be used to appease some of the concerns of the relevant publics and also as a proactive legitimation strategy to obtain continued inflows of capital and to please ethical investors (Haniffa & Cooke 2005). Second, economic theory reflects the degree of association of CSR and financial performance by taking consideration of cost-related advantages, market advantages and reputation advantages (Chamhuri & Wan Noramelia 2004). In the business, CSR is concerned with employment, lifelong learning, consultation and participation of workers, equal opportunities and integration of people towards restructuring and industrial change to promote quality and diversity in the workplace and health and safety strategy. Lastly, the social issues include the benefits offered in terms of training related to safety, health and environment, donations, education scheme, medical benefits and others. (Chamhuri & Wan Noramelia 2004). Environmental issues emphasize on preserving and conserving natural resources such as conducting recycling activities, water and process treatment and compliance with authority regulations and requirements. Many enterprises recognized the importance of their responsibilities towards the environment and take them seriously by setting targets for continually improving their performance while ensuring the compliance with all relevant legislation.

Organizations also have a range of impacts on the communities within which they operate and in at least some measures, disclosed these issues in their own CSR reports and information. CSR social activities may include charitable contributions to local and national organizations such as fundraising, donations and gifts in areas where it trades and others like regeneration of deprived communities, reclamation of derelict land and creation of new regeneration jobs. Development of strategies and programs on social and environmental issues enabled firms to gain close relationship with community. Firms could take initiatives by conducting campaigns, seminars, workshops and giving donation to the society. This way enables a company to meet its CSR commitment and indirectly acts as a marketing and promotional strategy. As the result, higher market share can be obtained, which lead to higher revenues from larger sales.

Policies, strategies and programs that are associated with social activities can be used to indicate the level of CSR’s commitment of an organization. Organizations too, need to meet the customer’s demand and expectations. As to maintain good relationship and attract more customers, enterprises are taking initiatives to fulfill the demand of providing such information. For instance, eco-labeling is a way of communicating organization’s social responsibility to public. Besides, CSR is also concerned with employment, equal opportunities and integration of people towards restructuring and industrial change. Employees who feel protected and appreciated will increase their productivity in production and thus, achieving economies of scale.

Comparable in CSR Perspective of KFC Holdings (M) Bhd PJ Development Holdings Bhd

KFC Holdings (M) Bhd

KFC Holdings take into account the priority of CSR by continuing put a great emphasis on conducting business in a responsible and ethical way. From improvement on their products and services to helping the communities in which they operate, they continue to seek out ways to enrich the responsibility to their stakeholders. In ways of strengthening local communities, promoting equal opportunities in the workplace, developing human capital, enhancing customers’ experience and improving the lives around the company.

The Board and management at KFCH will continue to adhere to the values of responsibility, integrity and compassion in all areas of our business. In doing so, they are determined to make a positive contribution to society while building confidence and goodwill among stakeholders. To achieve this they adhere to wide-ranging Corporate Social Responsibility (CSR) programs spread out over six pillars. These are, to champion the Halal cause, to improve educational standards, to encourage entrepreneurial development, to promote a healthy lifestyle, to foster a sense of national unity, and to help the less fortunate.

KFCH has disclosed their CSR activities in Annual Report 2009 by following the 4 main local area as stated by Bursa Malaysia’s CSR Frameworks.

The first area is community. KFCH remains committed towards giving, whenever the opportunity arises, to anyone in need of a helping hand and recently, KFCH proposed the incorporation of Yayasan Amal Bistari, a corporate foundation which will be the means through which CSR activities, endeavours and programmes of all KFCH entities and brands are carried out. Projek penyayang is held by giving KFC to the less fortunate, the elderly and orphans throughout Malaysia, every quarter of the year. KFCH also held Walk For Charity and giving aid where needed in support of Hunger Relief 2009. KFCH, Johor Corporation and Bistari young entrepreneur Sdn Bhd (Bye), the developers and marketeers of Catur Bistari, signed a Memorandum of Agreement (MOA) that will allow KFC to sell the Cilik Bistari board game, a simplified version of Catur Bistari for younger children, at all its outlets. The KFC sailing team raced alongside other competitors at every regatta organized by the Malaysian yacht Association. Elsewhere, KFC futsal teams competed with the best in the JKing Futsal Challenge Johor 2009, as well as i-Futsal championship organized by Harian Metro. KFC also involved with International Kite Festival in Pasir Gudang, Johor and Bintulu, Sarawak. KFCH also held Annual Buka Puasa session at Ayamas Port Klang in 2009 and saw a turnout of over 2,500 employees and were joined by 400 orphans who received goodie bags and food from KFC and RasaMas. KFCH had the privilege of sponsoring two episodes of Tijarah Ramadhan, a television program dedicated to featuring companies which donate to the underprivileged.

Second area is marketplace. KFCH interacts and communicate with customers, suppliers, governmental and non-governmental bodies and observe how corporate initiatives and products affect the communities and the environment. Marketplace CSR initiatives include programs towards improving Halal standards and building future entrepreneurs. KFCH participated in the World Halal Forum, which participation was in the form of sponsorship and product showcase. KFCH once again participated in Malaysia’s largest food and beverage exhibition and the world’s largest international Halal trade fair by setting up a booth and promoting Halal certified products and services to the thousands of visitors from all over the world. KFCH also participate in Halal Food Standards Realisation (Hafstar) event organized throughout the country to promote Malaysian Halal Standards and to regularise and discuss the standard procedures of handling, processing and storing of food based on Shariah and Malaysian Standards. The Gerak Usahawan Siswa initiative was undertaken in the hope of imparting an interest in business and entrepreneur development amongst university students. The Group collaborates with the Bistari Young Entrepreneur Sdn Bhd in mentorship programmes and educational lectures that help develop young Malaysian entrepreneurial talents. This includes the Tunas Bistari, Didik Bistari and Siswa Bistari Entrepreneur Programmes.

The third area is workplace. KFCH has more than 18,000 employees go to work every day striving to be the best in the business. KFCH implement varios of activities to create individuals who are the best-in-class in their awareness, capability, proficiency and drive for success. KFCH implement Pedoman 2009, the annual event to appreciate their employees’ loyalty and effort. The one day event was attended by all Restaurant Managers from KFC, Pizza Hut, RasaMas and Kedai Ayamas, as well as support staff from all over the country. KFC and Pizza Hut organized the National Champs Challenge in Kuala Lumpur with the best of the best from Restaurant Managers and staff coming together to play off intensely in the final rounds, competing to emerge as National Champions and represent Malaysia at the Regional Champs Challenge. KFCH also carried out the Management Associated Program to recruit new graduates who have now become part of our permanent staff. KFCH also held annual Hari Mekar competition as teams from throughout the Group battled it out in various categories in an effort to be crowned the Overall Champions. The winners then represented KFCH at the Grand Finals of Hari Mekar organised by Johor.

The last area is the environment. KFCH conscious of the responsibility towards the environment and as such have taken steps to understand and minimize the impact of ther business on the environment without compromising operational standards or shareholder value. A major environmental challenge that has been undertaken continues to be in the area of waste water management. This waste water management measure has been undertaken by KFCH plants that have problems with waste water such as Ayamas Port Klang, Ayamas Bandar Tenggara, Johor, Bakery Outlet at Kompleks KFC Glenmarie and Region Food Industries. These KFC plants and outlets have been treats the final discharge waste water in compliance with the DOE Standard for discharge. KFCH also agreed with proposed treatment process will use the Biological Treatment System, which uses a UASB (Up-Flow Anaerobic Sludge Bed) and AICAR (Alternative Intermittent Cyclic Reactor) and also using a chemical and bio treatment continuous processor, the plant treats 250 cubic meters per day.

PJ Development Holdings Bhd

On the other hand, PJHD outlined the CSR events in their annual report 2009. These CSR activities are Bukit Bintang Central Gotong Royong, Charity Christmas Carolers, Charity Outreach Project to Trinity Children’s Centre, Christmas Cheer with House of Joy, Beach Gotong Royong, Mooncake Festival Celebration, Earth Day, Turtle Conservation Week, PJD Green the Day, PJD Kid’s, Tree Planting, Charity Buka Puasa, Blood Donation Drives and Provision of Garbage Compactor & Recycle Bins. Corporate Social Responsibility (CSR) activities for PJD Group have become more focused in the last financial year under review. PJDH efforts in becoming a more responsible corporate citizen have led us to contribute more towards the well-being of the community surrounding us.

In community area, PJDH held activities such as outings and festive cheers with orphanages continue to be on each of our division’s CSR agenda. On a Group basis, they organized an outing with 4 orphanages, namely the Sinthamani Divine Life Ashram, Rumah Amal Baitul Kasih, Lifesprings Children’s Welfare Home and Good Samaritan Home and other charity drives raising over RM40,000.

In workplace area, the Group also organized several Blood Donation Drives throughout all its office locations nationwide. The blood donation drives conducted at our head office, branches, factory and hotels were well participated by employees, friends and public alike and that will be a regular activity on PDH CSR agenda.

In environment are, the Group still maintains its CSR programs to protect the environment such as provision of garbage and recycle bins, recycling rain water, recycling excess concrete in our construction sites and championing the localized version of the United Nations Local Agenda 21 Waste Management Project within the Bukit Bintang, Kuala Lumpur area and Green Tree Planting Day.

PJD Group now has an internal CSR portal where all CSR activities are shared amongst all office locations. Given the fantastic response, this portal has proven its role in encouraging employees to contribute ideas toward developing initiatives that benefit the Group and its stakeholders in line with our CSR slogan, “Together We Build a Brighter Future”.

Conclusion

Both of the company fulfilled the CSR’s frameworks as stated by the Bursa Malaysia which are the environment, the workplace, the community and the marketplace except for PJDH that did not disclosed any marketplace area of CSR