Friday 29 Mar 2024
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EVERY now and then, a bank — or for that matter, any organisation — must say no to a potentially lucrative piece of business purely on moral or ethical grounds, and I have had my fair share of such moments during crunch time.

The development project that does not meet the proper environmental guidelines, the production plant that does not adhere to fair labour policies, a construction company that neglects safety standards or the food producer that is using inferior materials for production when there are suitable alternatives — the list goes on.

Good organisations also often find themselves turning away prospective vendors as well on account of less-than-acceptable codes of conduct, discrimination, harassment and violation of minimum wages and labour practices.

Like other responsible organisations, the company I work for sets very clear standards of conduct, governing how we deal with our clients and vendors in a manner that is fair and equitable. But does adherence to these standards necessarily mean turning away a piece of business activity that clearly falls short?

Not necessarily. In fact, this is exactly where a company that is single-minded in its commitment to sustainable development is able to take the high road and attempt to turn a negative situation into a win-win proposition for all parties.

Every company maintains a certain level of influence over the way they deal with others. In any business relationship, besides targeting a positive economic outcome, one can influence the other party by seeking overt responsible corporate citizenry, either by leading or specifying the way a business should be conducted.

We have seen how this has worked in the oil and gas industry, for example, whereby oil majors maintain strict adherence to safety standards in the way they conduct their business, which has now become the gold standard for suppliers or vendors.

Banking, as an industry, can effect change beyond what used to be unimaginable in the past — from financing a more efficient boiler, assisting a client to reduce energy and wastage and aiding in the progress towards a higher level of environmental awareness to helping a client to save on operating costs. Banks are in a position to steer clear of dealing with companies that have consistently violated safety rules that result in accidental deaths at work sites as these companies have, among others, neglected their basic corporate responsibility of ensuring a safe operating environment or by not taking a stronger stance on enforcing safety rules.

Through efficient allocation of capital, banks ensure that deserving companies are assured of support and attention to grow their business, which will result in optimised profit while creating a stronger capacity for rewarding staff. The trickle-down effect is also seen in the positive socio-economic impact on society. Profitable  companies are more attuned to being responsible corporate citizens simply because they are able to do so. Clearly, there are more positives to be gleaned by the stronger leadership role that is assumed than what is portrayed at times.

Insurance companies, for example, play a vital role to promote more stringent safety standards by rewarding companies that maintain good safety records with lower tariffs or premiums.

A fine example of such socially and economically responsible practices can be seen in how United Plantation Bhd became the recipient of a The Edge Billion Ringgit Club award last year.

It is easy to see how it has espoused its role as a responsible employer by taking great pains to improve the lives of generations of workers while maintaining sustainable eco-friendly practices and achieving superior financial returns for shareholders.

I remember the story of a company that was on the verge of turning down a business deal simply because the prospect was unable to raise significant financial guarantees and lacked the capacity to build affordable homes of higher quality in an environmentally friendly manner at lower costs within a tight time frame.

It slowly became clear to the team assessing the viability of this prospect that it was not so much that it was financially incapable, but that it lacked the right funding structure, financial support and the inclusion of the right suite of financial specialists’ involvement in extended negotiations with its joint-venture partners. With these in place, the impossible became possible.

We have more than enough moral guardians out there who tell the lawbreakers what is wrong. What we need now are those who will also tell them how to right these wrongs; and to journey with them through that dark lonely path that must be trod if we are to provide help beyond the façade.


Jeffrey Teoh is head of corporate and commercial banking, OCBC Bank (Malaysia) Bhd. He sits on the four-person panel that judges the CSR section of The Edge Billion Ringgit Club

This article first appeared in Forum, The Edge Malaysia Weekly, on June 22 - 28, 2015.

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