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Asia’s Progress with Corporate Social Responsibility: Is Business Really Taking the Issues Seriously?

Chris Tobias_crophead

Today’s Guest writer is Chris Tobias, Celsias  Editor-at-Large and Lead Strategist at Forward.  He has been creating a positive future for our planet in the sustainable development/CSR space for five years.

 

 

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 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 Burning Issue of Palm Oil

While some countries like Malaysia have a lot going on with CDM, the issue of palm oil remains a very hot topic.  Organizations like the WWF lauded Roundtable on Sustainable Palm Oil (RSPO) might have added some legitimacy to the idea of sustainable cultivation of the valuable commodity, the reality reveals problems on both social and environmental grounds. 

For instance, several conference attendees were buzzing about the developments of Sime Darby.  One of Malaysia’s largest palm oil companies and member of the RSPO, the company recently gaining concessions in Indonesia and the African country of Liberia to develop plantations on hundreds of thousands of hectares of existing forest land.  This means that yet more “forest conversion” projects will occur: old growth forests with all their biodiversity, native cultures, and other economic opportunities (medicine, eco-tourism, etc.) will effectively be obliterated to make way for mono-crop plantations. 

Palm oil is a highly valuable commodity used in making food, hygiene, and biofuel products.  Merely weighing the commercial value of these products and the carbon sequestration value of the plantations is missing the point.  Any justifiable sustainable land use strategy should not favor the destruction of large swaths of high conservation value forests.

While the language around conservation is better understood and nailed down in other industries, such as agro-forestry and the Forest Stewardship Council (FSC) program, several conference attendees commented the RSPO’s guidelines are much more loosely worded.  This allows less scrupulous members such as Sime Darby room for how they define “high conservation value” forests.  The RSPO and Sime Darby both have some explaining to do in their November Roundtable meeting.

Land Rights of Native Peoples in Jeopardy

Also on the subject of palm oil, it’s not just forests that are at stake, but also the native peoples inhabiting those lands.  Dr. Marcus Colchester of the Forest Peoples Program delved into the complexity of the issue, using Indonesia as one extremely difficult example.  In Indonesia, land titles significantly lack the structure of government oversight.  Land rights are not clearly defined in the country, and in many areas, traditional customary rights (e.g. land that has been inhabited by native forest peoples for generations, but not formally demarcated) are not always recognized.

Now into this blurry situation comes industry, including palm oil companies.  While some companies act with some amount of integrity to engage with local communities around development opportunities, and work with free prior informed consent (FPIC) guidelines set forth by the UN, others keenly exploit this grey area and the naivety of locals. 

Andrew Ng, of Malaysia Nature Society noted, “Sime Darby has a substantial number of on-going cases of social conflict in both Sarawak [Malaysia] and Kalimantan [Indonesia]. Though some of them were ‘inherited’ when they took over two other companies to become the largest company, they have not demonstrated leadership on addressing conflicts as would be expected from the self-claimed ‘sustainability leader’. In fact, their track-record in plantations and social conflicts makes the tag-line ironic humor.”

Historically, some companies have bribed local officials or tribal leaders to essentially evict people from their own land.  According to Dr. Colchester, these human rights abuses have lead to some 526 palm oil conflicts up to January 2009.  Some of these clashes have been armed conflicts, with government troops being called in to squash resistance. 

Community Engagement as Part of the Solution

Needless to say, more ethical companies know abusing human rights is not only bad practice, but the negative publicity is also bad business.  Simon Siburat, Sustainability Co-ordinator for Wilmar International, a major industry player, has gone to great lengths to engage communities in areas it intents for palm oil development.  The company negotiates with the many groups concerned, involves their leadership at different levels, and allows for self-determination of the outcome.  Effectively, if the people decide not to sell up, the company moves on to other areas and approaches other groups. 

While the Wilmar International presentation seemed thorough of their practices with communities, returning to the land use and “forest conversion” question yielded some interesting questions.  Mr. Siburat indicated that much of their development took place on denuded land, including some of the millions of hectares destroyed by 1997 fires that raged across Indonesia. 

Some presentation images however revealed thousands of straight lines of palm trees giving way to the occasional patch of what appeared to be fairly established forest and mature canopies, perhaps still inhabited by native owners who had not sold out. 

Even if a landowner is left on their piece of property, what becomes of the biodiversity of such a plot when the surrounding ecosystem is destroyed for palm oil?  There would be clear impacts both to the health of the land as well as a massive shift to the lifestyle of a native culture dependant on a thriving ecosystem for survival. 

One is left wondering if all is as clear on this topic as Siburat suggests.  Still, compared to many other players, Wilmar International deserves some points for transparency. 

The Thrust for Transparency and Better CSR Policy in Asia

The Wilmar International example is exactly the kind of effort that the Malaysian Bursa Stock Exchange is trying to foster.  In terms of policy and governance issues, Bursa is taking a lead by requiring that all listed companies have a 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, there 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.

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Posted by on Nov 15 2009. Filed under Carbon Footprint, Climate Change, Sustainable Development. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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