Individuals and companies aiming to be socially responsible can adopt policies that promote well-being of society and the environment, while lessening the negative impacts on them.
WHY is the government not able to solve problems? This is perhaps one of the most common grouses people across the globe have towards their respective governments.
While it is a question, one should bear in mind that governments hold behemoth tasks that take time and effort from individuals who - just like any other person, have their own mindset and are affected by behavioural biases - to overcome.
This brings us to another question - is there a need for mindset shifts amid this age of transformation and sustainability?
Yes, there is when there’s progress to be made starting from the grassroots, all the way up to governance.
As mentioned in the first part of the cover story, Sweden’s recent legislation mandates the separation of food waste for both households and businesses, while all local authorities in Sweden are required to establish systems for the separate collection of food waste. Given that the Swedes have been practising food waste separation for some time, it’s safe to say the country’s efforts have a high chance of success.
Yet, the same cannot be said in the Malaysian context.
Who is that “someone else”?
All humans have been guilty of committing the “if I don’t do it, someone else will’’ behaviour at some point in life. This relates to a phenomenon called diffusion of responsibility, which is similar to the bystander effect. Simply put, it occurs when each individual assumes someone else will take up the responsibility and act on it, but no one actually does.
This mindset comes into play with pressing matters the world currently faces, such as climate change, human rights, destruction of nature’s assets (natural resources, environment and animals).
If each person pushes responsibility to the next person, who is going to be the “someone else” that would do the right thing - no matter how small the act - that could ripple into larger-scale change in society?
For efforts in driving a sustainable future to work, people, businesses and government are required to change their mindset and take up some form of social responsibility to achieve social sustainability that can benefit society as a whole.
According to the World Bank, communities and societies that are more socially sustainable are more willing and able to work together to overcome challenges, deliver public goods, and allocate scarce resources in ways perceived to be legitimate and fair so that all people may thrive over time.
Comprising four key components - social cohesion, inclusion, resilience, and process legitimacy - social sustainability is fundamental in addressing today’s development challenges and is the social counterpart to environmental and economic sustainability.
Social responsibility boosts sustainability
Social responsibility is defined as an ethical framework whereby an organisation or individual, has an obligation to act for the benefit of society at large. It is a means of achieving sustainability as adopting key social responsibility principles, such as accountability and transparency, can help ensure long-term viability and success of organisations or systems.
A research titled The Impact of Environmental, Social and Governance Practices (ESG) on Economic Performance: Evidence from ESG Score has shown that businesses with low corporate social practices (CSP) have higher financial performance than firms with moderate CSP, but firms with high CSP have the highest financial performance. This supports the theoretical argument that stakeholders can transform social responsibility into profit.
Stewardship Asia Centre chief executive officer rajeev Peshawaria opines that more business leaders should see themselves as “steward leaders” of planet earth and humanity. steward leadership is an intentionality to do well by doing good.
The paper conceptualises CSP into a three-dimensional concept - corporate social responsibilities, (economic, legal, ethical, discretionary), corporate social responsiveness (defence, reaction, accommodation, pro-action) and social issues (consumers, environment, product safety, employee discrimination/safety and shareholders).
According to the research, CSP can also be defined as a construct that emphasises a company’s responsibilities to multiple stakeholders, such as employees and the community as a whole, in addition to its traditional responsibilities to economic shareholders.
Another study conducted by Singapore’s Nanyang Technological University titled Institutional shareholders and corporate social responsibility disclosed that institutional shareholders (a company or organisation such as hedge fund, mutual funds that invests money on behalf of clients or members) can generate real social impact.
The research highlights that institutional shareholders mainly drive improvements in CSR issues that are financially material to firm values. Furthermore, higher ownership is found to specifically reduce certain negative CSR issues that might lead to lawsuits or regulatory penalties due to gender discrimination, unsafe workplaces, non-compliance with environmental regulations, or improper marketing.
Meanwhile, the report also mentions prior studies have shown that individual investors could derive utility by investing in accordance with their social preferences for social responsibility.
Shifting mindset
From “if I don’t do it, someone else will” to “we want to do it” is the mindset shift that is needed now in advancing sustainability efforts. Stewardship Asia Centre (SAC) chief executive officer Rajeev Peshawaria opines that more business leaders should see themselves as “steward leaders” of planet earth and humanity.
“These steward leaders pivot from seeing sustainability as a cost compliance or risk problem to a win-win-win growth opportunity. Yes, they want to make money, but they do it by addressing the most pressing human problems today,” says Rajeev in a radio podcast regarding SAC’s recently published Boards as Stewards of Sustainability report.
Stewardship Asia Centre is a non-profit organisation established by Temasek dedicated to help business and government leaders, investors, and individuals accelerate leadership action on environmental and social challenges through catalytic knowledge and advisory.
Rajeev shares that steward leaders have set their mind to inculcate good values into their organisation’s DNA.
“The first is interdependence - the more we do for society, the more the business is going to succeed. Second is the long-term view - to think in generations not in quarters or years.
“Third is they adopt an ownership mentality - taking ownership to do business and make money by solving problems. Fourth is creative resilience, which is all about innovation.”
He notes that the four values mentioned above are embedded into the company culture so that everybody behaves with these values, even when no one is looking.
“It’s not easy to do, but by walking the talk, steward leaders create that culture. They also articulate a purpose which differs from the normal purpose - which is to make money and not break the law while doing it.
“A stewardship purpose differs from normal purpose in the sense that it creates a collective better future for stakeholders, society, future generations, and the environment. We call it the steward leadership compass.
“Then through the lens of this compass, make decisions from strategy to pricing, execution, to hiring. When this is done, you’re going to make money in the long run and stay profitable for hundreds of years, not just quarters,” he says.
He adds that the board of every company plays a crucial role in pursuing steward leadership.
“Steward leadership, more than anything else, is an intentionality to do well by doing good. It is something anyone can acquire without training. You just need to keep your eyes and ears open to see what society and our planet is going through.
“Steward leaders want to do well by doing good. I want my life to matter, my business to matter,” says Rajeev.
To sum up, adopting the right mindset is crucial in practising social responsibility but one must also keep in mind that nothing can be achieved without consistent action.
