IN the past, businesses operating in a marketplace were driven by profit and loss, influenced by supply and demand. The Malaysian Securities Commission recently termed today’s marketplace as the “new moral marketplace” where companies are being judged by consumers, investors and employees based on the perceived corporate morality of the company.

Today’s marketplace is integrating corporate philanthropy into their core business strategies and practices.

Previously, companies showed their concern for society based on a social obligation and corporate social responsibility (CSR) activities were undertaken to respond to external pressures to be socially responsible.

Clearly, there has since been a shift from just meeting basic obligations to the careful strategising of sustainability for long-term business growth.

At a recent roundtable, jointly organised by Business Times and Philips, key players from regulatory bodies, retailers and consumer associations were invited to discuss evolving consumer trends.
It was safe to conclude from the roundtable that although price points and value-for-money were still drivers for purchase decision-making, intrinsic values that the product or company represents is very much taken into account as well.

Catch phrases and keywords which once belonged to NGOs have now become highly regarded in the conscience of consumers today.

And rightly so as consumers today are simply more aware of what is happening around the world and with the environment. With global warming at the forefront of global and local concerns, organisational eco-responsibility has now become a key topic that is of great importance and consequence to businesses in order to remain sustainable. After all, saving energy and reducing waste is not just good for the environment, it is good for business.

Addressing environmental concerns first

The global energy challenge is a significant opportunity to improve lives and deliver value. It is believed that in the next 50 years, the world population will increase to between nine and 11 billion people. Worldwide, electricity generation is expected to nearly double between 2002 and 2025.

In Asia, robust economic growth is boosting energy demands responsible for 45 per cent of the growth in global oil demand and 25 per cent growth in demand for natural gas by 2025.

In a recent CO2 reduction study by McKinsey, it was identified that energy efficiency is one of the most important low-cost solutions for greenhouse gas reduction. This, along with the growth in emerging economies, will mean energy and material consumption will grow substantially, placing additional strain on our ecosystems.

We know that climate change can jeopardise economic growth in any market because it can threaten the basic elements of life such as access to water, food and health and the use of land and the environment. Concerns such as these have prompted global leaders during the G8 summit to agree on the need for a global emission cut of at least 50 per cent by 2050.

In Malaysia, it is said that we generated 7.34 million tonnes of solid waste in 2005 alone. Environmental awareness in the country is increasing and with the Ninth Malaysia Plan (2006-2010), further emphasis has been placed on preventive measures to mitigate and minimise negative environmental effects and to ensure the country’s sustainable development.

Malaysian companies are becoming increasingly aware of the detrimental effects of global warming. Some have been actively addressing its impact via systematic initiatives over the past three to five years.

It is rewarding to see that more and more global and corporate citizens placing emphasis on these issues.

In a recent global survey on the state of philanthropy conducted by McKinsey, environmental sustainability was regarded as having the most impact on shareholder value for companies in the next five years.

While it is good that companies are acknowledging eco-responsibility as a boost to their triple bottom lines, the challenge is to translate these into actionable areas such as education, capacity building, and adopting international standards among stakeholders. Without putting in place the necessary and proper systems, it is impossible to minimise, much less eradicate existing issues and concerns.

Suffice to say, corporations need to engage stakeholders beyond delivering just environmental friendly products and services. In addition, much thought must be given to setting realistic operational targets, improving processes and delivery, restoring the environment to reverse damage already done and developing sustainable strategies, which in turn will result in business growth and value creation in the long term.

The big green picture

To achieve sustainable growth today and for the future, exploring new markets, new partnerships and new business models are imperative.

Eco-responsibility is about trying to do business in a way that is good for the environment and for the company’s business at the same time. With a strong focus on tomorrow’s challenges, companies need to take sustainable eco-responsibility and equate it with a business opportunity. These initiatives need to be designed into the way companies operate, and not be treated as an add-on cost factor.

As global business decision makers, we need to be acutely aware of our duties as a citizen of the world and the role we can play in ensuring a better quality of life for all.

A concerted action in climate change is a social responsibility and realizing real and immediate differences in the way the world thinks and acts to reduce its ecological footprint is necessary to not only create sustainable businesses, but also for a more sustainable environment.

Corporate leaders need to become eco-leaders by proving they can manage the eco-footprint of their own operations and then show others how it is done. The number of companies that have made significant eco-responsible initiatives is increasing slowly but surely, and we can only look towards more corporate leaders to take the role of eco-responsible citizens.

Like it or not, a new challenge is headed our way. Handling this new responsibility along with everything else that companies must manage will be tough, but not without its benefits. It can save money, reduce risk and demonstrate that your company is socially responsible. Being energy efficient, designing systems that use longer-lived equipment and eliminating waste can actually cost less than what you do now.

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Dr Rajah Kumar is chairman and chief executive officer of the Philips Group of Companies in Malaysia.