Time to walk the talk
Thai companies are embracing CSR but few are embedding its core principles very deeply in their business strategy and planning
- Published: 9/09/2013 at 11:45 AM
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Awareness about the importance of sustainability and corporate social responsibility among Thailand's top companies has improved by leaps and bounds over the past decade.
But all too many companies have yet to move beyond superficial gestures to a more substantive, strategic view of sustainability and their long-term business model, according to Bandid Nijathaworn, the president and chief executive officer of the Thai Institute of Directors (IOD).
“Awareness among listed companies has certainly increased. But there's still lots of variance in actual practice,” he said.
“It's no longer an issue of whether one should or should not consider sustainability. The question is whether companies are ready to pay attention.”
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Dr Bandid said a number of factors were increasing pressure on corporate management and directors to pay attention to CSR and sustainability. They include regulatory pressure and added disclosure requirements, market pressure from clients, investors and customers, and an overall increase in understanding among participants.
Generational change is another key factor, as younger, more “enlightened” professionals gradually ascend to the ranks of “C-suites” and boardrooms.
“Take the IOD's Director Certification Programme. When we began a decade ago, the average age was close to 60. In one recent class, it was 47. We are seeing a new generation of ownership,” Dr Bandid said.
The IOD was founded in 1999 with the goal of promoting good governance practices among local companies. The non-profit organisation has trained thousands of top executives and directors over the past decade, and helps play a key role in the Thai capital market in advocating for improvement in corporate governance, anti-corruption and corporate best practices.
In the years since the 1997 Asian economic crisis, Thai companies have made gradual process in improving their governance, said Dr Bandid, pointing to recent surveys by organisations such as the World Bank showing positive gains.
The integration of Southeast Asian markets under the Asean Economic Community will further increase pressure on companies to change as they compete for capital.
“If a foreign partner can choose between similar companies from Malaysia, Vietnam or Thailand, what are the key factors? The key will be the differences in their innovation, sustainability and corporate governance,” Dr Bandid said.
While Thailand's private sector as a whole has improved, a huge gap still exists between the most enlightened businesses and the rest.
Key areas of governance such as recognition of the role of stakeholders and the responsibilities of board directors also lag those of regional peers.
“When considering form versus substance, companies need to move away from simply ticking the box,” said Dr Bandid. “For instance, consider the process of director appointments. A company might have a process, but rarely do they explain how it's actually done.
“If you ask, do companies have CSR policies? Yes. But when they disclose what it is they actually do, you see lots of different practices.”
Even the ways companies define CSR activities show tremendous variance, Dr Bandid said.
“Some treat CSR as public relations, some see it as part of human resource development, while others really do it to contribute to society,” he said.
“I see CSR really more as a tool aimed at driving long-term growth, while sustainability relates more to one's business structure, and its impact on society, the environment and stakeholders. Sustainability deals with the future trajectory of a company.”
Thai companies, Dr Bandid said, still have much room to improve in embracing and incorporating sustainability issues within their business models.
Directors and management need to do more to consider the long-term consequences of their companies' actions, the process involved, their long-term viability and risks and how they are executing their policies.
“How are these issues being implemented? Many companies write their [CSR] reports well. But they fall short of disclosing what actually has been done,” Dr Bandid said.
Sustainability, he said, must be part and parcel of a company's strategy to create value, embrace opportunities and mitigate risk.
“As companies morph into this mode, sustainability becomes part of their day-to-day operations. Overall, sustainability addresses the question of the future of a company, while CSR is more of a tool aimed at specific concerns,” he said.
The recent oil spill in the Gulf of Thailand at an offshore platform run by PTT Global Chemical highlights the importance for companies of maintaining well-designed sustainability plans.
Cases such as this put pressure on companies to have procedures to assess responsibilities and risk, implement business continuity plans and manage communications with affected communities, clients and other stakeholders. All these issues, said Dr Bandid, represent the responsibility of corporate directors.
He said he believed the greatest challenge to further progress was convincing corporate leaders of the importance of change.
“How to [implement sustainability] is less of a challenge. After all, we are not the first. But companies need to recognise the need to do it,” he said.
“The hardest part is getting that leadership from the top.”
About the author
- Writer: Chiratas Nivatpumin
Position: Managing Editor