Contextualising Corporate Social Responsibility in Singapore

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Lee Kuan Yew School of Public Policy
Working Paper Series
Contextualising Corporate Social Responsibility in Singapore
Melissa Ong
Research Fellow
Lee Kuan Yew School of Public Policy
National University of Singapore
Email: mong@nus.edu.sg
September, 2009
Working Paper No.: SPP09-16
Keywords: corporate social responsibility (CSR), Singapore, sustainability, public roles of
private corporations, governance, private sector.
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Contextualising corporate social responsibility in Singapore
Melissa Ong
Centre on Asia and Globalisation, National University of Singapore
ABSTRACT: This article argues that the context in which business operates plays a
large role in whether and to what extent a particular firm adopts corporate social
responsibility (CSR). In Singapore, this context is shaped by government, private
sector and civil society relations, partly characterised by pervasive government
presence in all aspects of society including the private sector. The article examines
the level of awareness of CSR issues amongst selected publicly listed or governmentowned
companies and the extent to which CSR policies are incorporated into their
business practices. It goes on to look into the pressures that exist for companies to
adopt CSR and the challenges that they face in the implementation of these practices.
The results of the research show that the areas where companies in Singapore showed
the most progress in their CSR practices were also the areas that the Government is
most active in offering incentives and support. We conclude by establishing that the
companies in Singapore face top down collaborative pressure to adopt CSR practices
that is distinct from the European and North American experience, where bottom up
pressures from consumers and civil society groups are more prevalent.
Keywords and phrases: corporate social responsibility (CSR), Singapore, sustainability,
public roles of private corporations, governance, private sector.
Since the 1990s in Europe and North America, the corporate social responsibility
movement has been in full swing. (Florini 2003) Today, the number of Fortune 500
companies that are producing CSR reports is rising annually, voluntary standards,
disclosure models and certification schemes to help businesses with CSR abound.
There are more companies working with governments and civil society to address
social and environmental issues. CSR can also include a whole new sector called
‘Creative Capitalism’ that describes companies that use their skills to start successful
businesses that serve people that have been marginalised. (Gates 2008)
While the CSR trend is burgeoning globally, Asia will not be left untouched for a
variety of reasons. Firstly, Asia’s growing economic strength is pulling it inextricably
into the global arena as Asian multi-national companies (MNCs) become more
international. One of the factors that might explain the Asian interest in CSR is that
these companies will have to abide by international standards on a host of social and
environmental issues that go beyond their country’s regulation, if they want
unrestricted access to market and to be considered global players. Although cases are
as yet few and far between, transnational Asian companies are starting to be subjected
to the same kind of scrutiny that their western counterparts have been afflicted with
for decades, either by transnational civil society or investors. With increasing
integrated economies, Asian small and medium enterprises, which make up the
majority of the market share, will also be affected by the global CSR trend as they are
increasingly operating and supplying on an international scale. Whether it is a factory
in Malaysia that sells products to Nike, a Singapore MNC that is looking for
investment by an international financial institution or a Chinese company that wants
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to list on the New York Stock Exchange, these companies will face pressures to go
beyond domestic regulation and pay some attention to CSR issues.
However, since there is a dearth of literature and academic studies of CSR in
Southeast Asia, it is difficult to tell how significant this CSR trend is in reality. This
article attempts to fill a gap in this knowledge by addressing CSR in Singapore and in
doing so, tries to understand a bit more about CSR as it unfolds in Asia. It addresses
questions such as – what is understood by CSR? Are companies discussing or
practicing CSR? Is there any resistance against what has been considered a western
concept? Is there an indigenous approach to CSR that is beginning to evolve given the
context that business operates in? Does CSR provide the government with an
additional potential governance tool to influence the private sector?
CSR in Singapore is largely shaped by the context in which business operates. This is
characterised by a pervasive presence of the government in all aspects of society
including the private sector and civil society, a lack of political space that restricts
groups from organising civil society campaigns, and a collaborative approach to
working with the non-governmental and private sectors that is particular to Singapore.
Therefore business faces top down pressures to adopt CSR rather than the bottom up
civil society pressures more familiar in the Western experience, substantially affecting
what CSR issues are on the business agenda. In addition, the other drivers setting the
CSR agenda in Singapore are business-to-business pressure on companies to adopt
practices that fulfil the requirements of a client or partner in Europe or North America
(the West) as well as reputational and regulatory risk.
Definition of CSR
Since CSR in Singapore is still at a nascent stage, for the purposes of this essay, we
will define CSR as a progressive continuum. This will enable to us to identify the
stage that a company is at when we assess them for the project. At the very basic end
of the scale, we will start with corporate philanthropy, then move towards a more
strategic and integrated approach to operating in a socially and environmentally
sustainable manner in the middle, with new business opportunities and models at the
opposite end. A strategic and integrated approach refers to firms that adopt and
incorporate responsible business practices that take into account their stakeholders
and minimise any negative impacts that may arise from their activities (Nelson 2008).
Methodology
The research focuses on publicly listed and government linked companies that have a
large impact on the private sector. Due to the availability of information, these
companies make good research subjects and we are able to compare them with
literature from firms studied in Europe and North America. There are currently a total
of 13 companies in our sample. At least one company falls into each section of the
Singapore stock exchange’s 12 categories of industry sectors (multi-industry,
manufacturing, construction, commerce, hotels/restaurants,
transport/storage/communications, finance, properties, services, agriculture, mining
and electricity/gas/water). In addition to analysing publicly available information, the
project interviewed individuals from companies in a semi-structured method. It
assessed the companies on factors including the understanding of CSR displayed by
the interviewee, the CSR management structure the company has in place,
employment and environmental practices, supply chain policies and systems, the level
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of corporate philanthropy that the company engages in and any new business
opportunities that arose from the company’s CSR policies. In addition to examining
how large corporations in the sample are discussing and implementing CSR, we also
interviewed government agencies, non-governmental organisations (NGOs), social
enterprises, and financial institutions that invested in socially responsible investment
(SRI) funds.
Global History and Context
The concept of CSR started long before the inception of the term, when as early as in
the 19th century, British industrialists like Sir Titus Salt relocated his factory from
Bradford and built a whole new industrial community called Saltaire. This included
850 houses for his workers, a park, a school and a hospital (Smith 2003). Although
this is one of the earliest examples of CSR, it was very much the exception as for
many years after this; private companies regarded their social responsibility fulfilled
when businesses donated some of their profits to charity. At the most basic level,
many companies still consider corporate philanthropy to be the main thrust of their
CSR efforts.
The history of corporate social responsibility in Europe and North America is littered
with examples of bottom up pressure in the forms of civil society campaigns,
consumer activism and public protest over irresponsible business practices of one
company or another. Many campaigns have pushed corporations to implement or
change policies to modify behaviour. In 1995, Greenpeace launched a campaign to
prevent Shell from dumping the Brent Spar oil storage platform into the ocean,
thereby taking on the world’s largest oil company and the British government. The
campaign gained support all over Europe and sparked off a series of consumer
boycotts. Finally the company bowed to public pressure and reversed its decision,
instead it dismantled and re-cycled the platform on land (Greenpeace 2008).
In the last few decades, Western companies have been able to take advantage of the
relatively lower cost of production in countries with lax regulation on labour and
environmental standards. By moving their production offshore, they could pay less
attention to the social and environmental costs. At the same time, civil society
organisations were launching campaigns against corporation for practices outside
their own country.
Public pressure has led Nike to change the way they conduct their business. NGOs
launched a campaign against Nike for poor working conditions in factories making
their products. At first, Nike asserted that it had no control over its sub-contracted
factories. However, as the campaign persisted, Nike reversed its position and
announced that three Indonesia suppliers would be terminated over poor working
conditions (Smith 2003). It went on create its own codes of conduct stating that it
would meet environmental, labour or human rights standards that exceeded the
domestic laws of the country that their supplier was located (Florini 2003). Most
recently, a factory producing Nike goods in Malaysia was caught violating Nike’s
code of conduct by housing foreign workers in squalid housing, deducting wages for a
government levy and withholding their passports. However, the Malaysian Human
Resources Minister S. Subramaniam told reporters that the factory did not breach any
labour laws (Associated Press 2008) in a classic case of Nike’s standards going above
the law. In order to police the supplier and make sure that it was adhering the to
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codes, Nike put in place a compliance team whose responsibility is to monitor these
factories to ensure that they are not violating any of Nike’s standards. Nike is now
committed to supply chain transparency and publishes the list of all its factories so
that other parties can also monitor their practices.
Reputational risk was the motivating factor for both Nike and Shell to modify their
behaviour. The other factor that is pressing companies in the West to adopt CSR is
regulatory risk. Companies tend to prefer to self-regulate rather than wait for
governments to legislate. For example, Dupont took the lead in developing CFC
alternatives before the use of CFCs was banned. As the CSR movement gained
interest and popularity, NGOs and private companies created a plethora of codes of
conducts, disclosure models, and labelling schemes to assure the consumer that the
products were made while meeting certain standards. At the other end of the scale are
companies that create a business opportunity by distinguishing their CSR practices
from their competitors. Brands like the Body Shop and Ben and Jerry’s established
their competitive advantage by making responsible business practices part of their
business model.
In recent times, civil society organisations are much more creative in using the
increased number of avenues open to them to put pressure on corporations. NGOs are
buying shares in companies to engage in shareholder activism to flag issues that
matter to them. Improvements in technology and the internet mean that any corporate
violations can be reported almost in real time. Activists are targeting institutional
investors like funds and financial houses to urge them to put pressure on companies to
adopt more responsible practices. All this means that it is likely that businesses today
face increased bottom up pressure from civil society.
The context in which Singapore business operates
The business environment in Singapore differs from the West in several ways that can
affect the focus and extent of CSR in the private sector. In an attempt to make
Singapore as business friendly as possible, the government is reluctant to legislate on
issues that could otherwise be voluntarily addressed by companies either through the
guise of CSR or otherwise. One of the reasons for this is that the government does not
want to hamper business activities by increasing business costs. Instead, it favours a
mixture of consensus building and the carrot approach, with awards for good
corporate behaviour and voluntary guidelines to help companies get there. The heavy
presence of the government in all aspects of society has the potential to make the
government the key actor in shaping the CSR agenda that can encourage companies to
implement what it considers the most important aspects. It interacts with the private
sector through two primary channels, through direct engagement with companies and
through the presence of government linked companies (GLCs) in the market. These
are companies where the majority share is held by Temasek Holdings, one of
Singapore’s two sovereign wealth funds. These GLCs can have further influence on
the rest of the business community by exerting pressure on their supply chain of small
medium enterprises (SMEs) to adopt certain CSR measures.
The other main distinction between Singapore’s context and that of the West is the
virtual absence of bottom up pressure on businesses to adopt CSR. This is partly due
to limited political space that restricts the presence of a robust and vocal civil society
to educate and organise consumers around social issues. These restrictions, such as
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the Public Entertainment and Meetings Act, which requires individuals to apply for a
permit to hold gatherings of more than five people in an approved area, make any
civil society mobilisation difficult. Activism of any kind has never been tolerated,
which might explain the lack of consumer activism aimed at companies to adopt CSR
(Tan 2008). It was no surprise that the areas where the government had the most
number of guidelines and standards, such as the environment and employment
practices, were the areas that have had the most media attention and therefore where
companies put the most emphasis.
Another sphere of influence that the government could use to raise awareness of CSR
issues is through the domestic media which is all owned by GLCs (Freedom House
2008). By collaborating with civil society groups on campaigns and talking about the
issues at public events, they can increase media coverage on the subjects that it would
like the business community to be cognisant of, such as environmental sustainability
or being a good employer. However, the use of the media by civil society to publicise
civil society campaigns intended to put pressure on companies to adopt more
responsible business practices is likely to be frowned on as this would contradict the
government’s plan to make Singapore a business friendly hub. This limitation extends
to the international media, which realise that there is a need to exercise caution when
reporting on business matters in Singapore, particularly when it involves GLCs
(Rodan 2005).
The relationship that the government has with trade unions and the private sector is
another distinguishing feature in the Singapore context. The Singapore model favours
the tripartite approach, which refers to collaboration between the government,
business and the National Trade Union Congress (NTUC). All but five of the 64
unions are affiliated with NTUC, which is closely allied with Singapore’s ruling
party, the People’s Action Party (PAP). This enables the government to influence
NTUC’s agenda as illustrated by the following statement made by Senior Minister
Goh Chok Tong at the 2004 May Day rally. "We (the PAP) have the same objective -
a better life for all. NTUC focuses on the workers while the PAP, as the Government,
looks after the interests of all Singaporeans. Through good and bad times, workers
and unions have strongly supported the PAP to make it the ruling party. The PAP, in
turn, as the party which forms the government, ensures that NTUC has the resources
to look after the workers."
Singapore civil society organisations that attempt to engage with the private sector on
issues that their mandate requires them to advocate on, take an approach that differs
from their counterparts in the West. NGOs and advocacy groups in Singapore favour
working closely with business, often with the support of the government in a
communicative and collaborative approach rather than adopting a more contentious
posture. This consensus-building approach is favoured by the government in dealings
with all stakeholders.
However, government involvement is not the only factor in setting apart the private
sector in Singapore. Ownership is another aspect where many publicly listed
companies in Singapore differ from their counterparts in Europe and North America.
In Singapore, most of the companies in our sample that are not GLCs are still
operated and majority-owned by the family that started the company. This can mean
that the pressures to engage in CSR are different from the western model, where many
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shareholders put pressure on managers to make a business case for any CSR
initiatives taken. Whereas in a family-owned Asian company, there is often a
paternalistic way of doing business, where there seems to be an implicit obligation to
“give back” to the community, which in turn, has implications for the depth and focus
of a company’s philanthropic activities.
Despite these differences between Singapore and western contexts, as both economies
are linked by trade therefore Singapore companies are also affected by western
pressure. The global economy is more integrated today than ever and many of the
companies that we assessed want to be regarded as global players. There is a sense
amongst these companies that there is a trend placing emphasis on responsible
business practices with the perception that the company would lose out if it does not
conform to some degree. This is particularly important in Singapore’s context, given
the value of the export economy. Singapore’s non-oil domestic exports for the first
quarter of this year totalled $42.5 billion out of the total GDP of $64.3 billion, which
equals 66% of GDP. (Ministry of Trade and Industry 2008) In order for Singapore
companies to access all markets, including those in the EU and USA, they will have
to conform to higher standards than in their home country. The government
recognises this and is making plans to support companies in their CSR efforts to
maintain their competitive advantage and keep Singapore’s reputation as a ‘trusted
brand’.
In our research of CSR in Singapore, we start off by assessing the level of awareness
of CSR issues that the interviewee displays as well as establishing what kind of
structure the company has in place to deal with CSR. This enables us to gauge how
the person in charge of CSR is empowered to deal with issues and how serious the
company is about its CSR, by looking at how much they invest in this area. Then we
go on to see how this awareness translates into creating policies and implementing
systems by examining the extent to which the company is using the traditional tools of
CSR, such as philanthropy, disclosure, codes of conduct and public-private
partnerships.
Level of awareness of CSR issues
One of the purposes of the research is to find out, if CSR is not noticeably being
implemented, whether it is being discussed within companies in Singapore. And if it
is, then what does it mean to Singapore firms versus firms in countries with a more
mature CSR agenda? Therefore, we assessed the level of awareness of the person that
we interviewed, which in most cases was the person in charge of CSR within the
company. The level of awareness ranged widely. At the most basic end, the
understanding of CSR was limited to philanthropy while at the other end of the scale
the interviewee could speak fluently on all CSR issues and relate them to the business.
CSR Management Structure
This assesses how CSR is managed within a company, which gives us an indication of
how important it is in the strategic context of the company. We looked at whether
there wass a dedicated CSR Manager, who they reported to and how many staff they
had in their team. Within our sample, this varied a great deal. Four out of thirteen
companies have dedicated CSR managers and teams, while at the other end of the
scale, other companies have a member of the corporate communications team that
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oversees CSR. We found that these individuals had a lower level of awareness than
the dedicated CSR Managers.
Corporate philanthropy and community investment
In almost all cases both in the West and Asia, CSR traditionally began as philanthropy
– giving donations to local charities, schools and parks. This has, over time, evolved
to the idea that companies should widen their sphere of accountability to extend
beyond shareholders to stakeholders including employees, the community, suppliers,
local government and NGOs (Skapinker 2008). All companies in the sample practiced
corporate philanthropy in one form or another. At one end, this involved supporting
charities in an ad hoc and haphazard manner. This is characteristic of older family
founded companies that felt a sense of obligation to continue supporting the charities
that they had been giving donations to for decades even it did not really fit into their
current core business or corporate strategy. The next category is where a company’s
corporate giving is focussed on an area but one that has nothing to do with their core
business strategy or competency. At the other end of the scale, there are companies
that are strategic in their community investment. One hotel group, for example,
invests in conservation projects that enhances their appeal to consumers and protects
the environment that their customers are attracted to.
Disclosure
Disclosure of non-financial information, such as environmental or human rights
performance, is regarded by many as an important step in incorporating CSR into
one’s business practice. Publishing a CSR report is becoming more common amongst
many of the world’s largest companies. KPMG International conducted a survey of
CSR reporting in 2005, where they found that over 50% of the top 250 companies
listed in the Fortune 500 Global produced standalone sustainability reports (Baue
2005). These efforts are supported by initiatives like the Global Reporting Initiative
(GRI), which is a framework for sustainability reporting that companies can use to
benchmark non-financial performance against norms, laws, codes, standards and
voluntary initiatives. The idea is to standardise economic, environmental and social
reporting to a level where it is comparable to global financial reporting. A more
specific model such as the Carbon Disclosure Project (CDP) is also available to
companies who wish to disclose carbon emission information.
Disclosure allows stakeholders to hold the company accountable for things that it say
it do or refrains from doing. By analysing the annual reports of the companies in the
Singapore sample, we found that the level of non-financial disclosure amongst them is
still very limited. Two of the companies in the sample produced separate
sustainability or CSR reports while one published a standalone environmental report.
Of all the other CSR sections within annual reports, only one had other had
substantial non-financial information. The rest of the reports focussed nearly solely on
corporate philanthropy with less attention given to some employee development and
welfare initiatives. This lack of disclosure is one of the main problems confronting
socially responsible investment funds (SRI) investors and analysts when assessing
Singapore companies on their environmental, social and governance (ESG)
performance. However, we have seen some improvements in the extent of nonfinancial
disclosure in annual reports between 2006 and 2007, which could reflect that
awareness of ESG issues is increasing and companies are building up their capacity in
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that area. We have also observed an aversion to disclosure amongst some of the
companies that they would then be expected to fulfil what they had disclosed.
Although Singapore differs from Europe, North America and even Japan, due to the
limited non-financial reporting, this could be due to the lack of legislation that
requires it to disclose this information. It is possible that there will be increased levels
of disclosure as there are initiatives being made available by Association of Chartered
Certified Accountants (ACCA) and Singapore Compact, a network that was set up by
the government to promote CSR, as well as other CSR training organisations that
provide training on GRI compliant reporting. Five companies responded to the CDP
this year, an increase in the total number of two that responded last yet.
Environmental Performance
Many of the companies that we assessed have chosen to concentrate their CSR efforts
on the environment. To this end, these companies had a number of initiatives either in
place or in the pipeline. Four companies disclosed environmental performance and
initiatives information either as a separate environmental report or within their annual
report. In addition to this, they had separate environmental departments or teams that
would set targets, implement systems to track energy consumption and the amount of
waste produced. The two property development companies in our sample had made it
their policy to include a number of green features on their properties that would entitle
them to a Green Mark award that is given out by the Buildings and Construction
Authority (BCA). However, some of the companies that performed best in this area
had different practices when operating out of Singapore. Only one company had
global policies on their environmental practices.
While there are other companies that had not gone as far in their investment into this
area of CSR, they had started think about how to look at their own environmental
performance, firstly by establishing an environmental committee chaired by a senior
executive. The other category of companies that we assessed had given this area no
thought and had no plans to implement any environmental initiatives.
So at this point, we have to ask why the focus on the environment and what kind of
top down pressure is there on companies to be more environmental. At a highest level,
the government has formed an Inter-Ministerial Committee on Sustainability
(IMCSD), co-chaired by Minister for National Development, Mr. Mah Bow Tan and
Minister for the Environment and Water Resources, Dr. Yaacob Ibrahim and includes
Minister for Finance Mr. Tharman Shanmugaratnam, Minister for Transport Mr.
Raymond Lim and Senior Minister of State for Trade and Industry, Mr. S Iswaran.
The IMCSD will focus on three priority areas – resource management, pollution
control and the quality of the physical environment. To achieve this, the committee
will emphasise encouraging people and industry to adopt sustainable practices and
developing new technologies to optimise resources and improve environmental
performance. Since its establishment in February this year, the IMCSD has been
engaging leaders from NGOs and the private sector in focus group discussions, to
inform its report that will be released next year. (Ministy of the Environment and
Water Resources 2008)
Different government agencies have put their efforts into pushing the green agenda
within the private and public sectors. BCA and the green mark scheme is one
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example. It encourages property developers to incorporate green features into their
building and gives awards in three categories: gold, gold plus and platinum based on
five criteria: energy efficiency, water efficiency, site and project development and
management, good indoor environmental protection and quality and innovation. In
May this year, the Government announced that it will enhance the scheme to include
architects and engineers that incorporate green features into building designs from an
early stage (Lim 2008).
The Government can exert pressure on the private sector by using civil society
organisations. It has a collaborative relationship with NGOs and will work with them
and business to encourage businesses to modify their behaviour. Programmes such as
the packaging agreement are good examples of this relationship. The government
recognised that waste management is a large problem for Singapore. It consulted with
one of the main civil society organisations, Singapore Environmental Council (SEC),
gave them the necessary support to draft a voluntary packaging agreement for food
manufacturing industries that would commit these companies to reducing the amount
of packaging they used. When the agreement was ready, SEC gathered all food
producing companies to present the draft and encouraged them to sign it. This was
underlined with the point that if the businesses did not commit to this voluntarily then
the government would be forced to legislate. This whole process was conducted with
strong support from the government.
In addition to raising awareness on the topic in the media by speaking about it
publicly, the members of the government are able to emphasise the importance of this
area through engagement with the GLCs either privately or through the boards. They
are also able to engage with ‘thought leaders’ in the private sector to encourage more
discussion on green issues. The focus on the environment falls in line with
Singapore’s plan to be an environmental hub.
Employee and Labour Welfare
Employee welfare is an area where many of the companies that we interviewed have
many initiatives. In addition to what is legally required, we found that companies had
codes of conduct, fair employment policies, family friendly and work-life balance
initiatives such as flexible time schedule, remote working options and recreational
facilities provided for employees.
The following statement made by Yong Ying-I, Permanent Secretary of the Ministry
of Manpower and Chairman of the Singapore Workforce Development Agency in a
speech given at the Hewitt’s Best Employers in Asia Awards 2005 illustrates the
government’s policy on employee welfare and relations. “Our employment
regulations in this country are very light-handed. We have believed in using nonlegislative
means and close social partnership to build consensus to tackle our
problems.” The myriad of guidelines and awards that are available to the private
sector if they followed certain guidelines on fair employment, work-life balance,
family friendly organisation, suggests that the government works very hard promote
better CSR practices amongst companies without legislating. Tripartite Guidelines on
Family Friendly Workplace Practices; Tripartite Guidelines on Non-Discriminatory
Job Advertisements; Tripartite Guidelines on Flexible Work Schedules; Tripartite
Guidelines on Best Work-Life Practices are a few examples. Awards that are intended
to encourage better employment practices are also common, such as the work-life
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excellence award, family friendly organisation award and workplace safety and health
awards.
This reflects the government’s political agenda for keeping more people in the
workforce as it leads to greater economic growth. Awards for family friendly
organisations and guidelines for flexi-time are designed to keep more women working
and to encourage working women to have more children (also on the political
agenda). Companies are encouraged to embrace diversity and to re-hire mature
workers. Amongst the companies interviewed, there was progress in employment
practices. However, companies that had adopted family-friendly practices in our
sample were still in the minority and employment policies in Singapore are still
trailing behind international standards set by European and American companies.
(Ethical Investment Research Services 2007).
In addition, Singapore has a proliferation of migrant labour, known as guest workers
in many key industry sectors. Although their welfare is covered by employee law,
there are many aspects that are not explicit in the legislation. The companies in our
sample that used guest workers did not have any policies with the sub-contractor that
ensures a minimum welfare standard. Across the board, no thought had been given to
this as a CSR initiative.
Voluntary standards and certification
Signing on to voluntary standards is one way for companies to self-regulate, which
would be well suited to a context that is not heavily regulated like Singapore. In
keeping with the focus on the environment, a handful of companies or business units
within companies had fulfilled the requirements to achieve ISO14,001 Environmental
System Standard certification. One particular company that we looked at is currently
pursuing an industry specific certification scheme that will be awarded by the
Roundtable on Sustainable Palm Oil (RSPO), which it is a member of. The RSPO is a
good example of industry self-regulation that also includes the equal participation of
other stakeholders along the entire palm oil value chain. Palm oil growers seeking
certification for sustainable palm oil are subjected to audits of all their plantations by
third party auditor who will then report their findings to the RSPO. Once certified, the
company will be able to command a price premium for its oil when it has been
certified. It will also be able toaccess the global markets, including European
companies like Unilever that has committed to only using certified palm oil.
Other CSR initiatives
Many global companies with trans-border operations have been exposed and
reprimanded on supply chain issues by NGOs. Most recently one of Nike’s subcontractors
in Malaysia has been accused of poor labour practices, even though Nike
is a company that already has the necessary systems in place to monitor these issues.
The lack of bottom up pressure from civil society is a plausible explanation for the
lack of attention given to this area by the Singapore businesses that we interviewed.
Only two of the companies had considered their supply chain: one requires their
building contractors to sign a code of conduct with environmental, health and safety
criteria. The other has implemented a third party monitoring system to ensure the
quality and safety of the products that they are procuring.
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Private-public partnerships are becoming more common in countries with weak
institutions and poor governance structures and in more developed countries as well.
This is relevant to companies in Singapore insofar as they operate in such countries. A
few companies had engaged in public-private partnerships as part of their community
investment programme, where they worked with governments to provide education or
healthcare to children in countries that they operate in. However, these tended to be ad
hoc and isolated instances.
New business models
Most recently, some businesses regard CSR as a business opportunity to generate
additional revenue through developing innovative products to take advantage of new
markets. Examples of this include Philips Electronics producing energy saving light
bulbs, Citibank investing in microfinance and Unilever producing small sachets of
shampoo so that women in poor rural communities can afford the product. Only two
companies that we interviewed viewed that adopting a CSR agenda could include new
business opportunities. One company has been putting in measures to reduce its
carbon emissions at a few of their palm oil refineries, which under the Kyoto
Protocol, allows it to generate carbon credits that can be sold on the carbon trading
market. The other company is a bank that has development specific loan packages that
are favourable for social enterprises, a sector that the Singapore government has given
some attention and encouraged the growth of (Social Enterprise Committee 2007).
However, the person that we interviewed at the bank offering the loan package had a
limited level of awareness of CSR issues and did not regard this product as part of
their CSR efforts.
Business-to-business pressure
One pressure on companies to adopt CSR has been business to business pressure,
where one company in the sample was questioned on policies and strategies by
another company that it supplies to. Examples include airlines with corporate
accounts and suppliers of raw products. There are quite a few examples of companies
adopting CSR or disclosing ESG because of requests by other companies that do
business with them.
Investor pressure
Socially responsible investment (SRI) funds located in America and Europe are
growing in popularity each year, with more than US$4 trillion under management in
2005/2006. Funds are becoming more interested in Asia in an effort to diversify their
portfolio. The FTSE4Good, one of the world’s most prestigious sustainability indices,
covered Singapore for the first time last year. A major European bank has positioned
an SRI analyst who is analysing Asian companies for environment, social and
governance performance (ESG) performance in Singapore for the first time this year.
The Singapore Stock Exchange (SGX) has realised the potential growth in SRI funds
and is conducting some initial research into this area. Although funds in London are
increasingly considering ESG performance in their analysis of Asian companies, there
is little evidence that this has trickled down to requests for such information from
companies in Singapore, except in a few isolated instances. The growth in SRI funds
might have been one motivating factor in pushing a company to improve their ESG
performance, however there has been little evidence of this.
Conclusion
12
The Singapore government is exerting top down pressure through different
stakeholders to advance the CSR agenda amongst the business community. This is
possible due to the reach and influence that it has within society and because it takes a
consensus building approach to advancing the CSR agenda. However, since there
have been some changes in regulation to allow more political space, this may create a
more conducive environment for bottom up civil society pressure on the private sector
to adopt more responsible practices. While at the same time, the risk of regulation is a
driving force behind a company’s willingness to adopt CSR. The upstream demands
of the global supply chain are also pushing companies towards addressing CSR
issues.
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