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Introduction
We have choose two companies such Malaysian International Shipping Company (MISC) and
MAERSK to prepare our report and to compare and analyze the sustainability and corporate
responsibility (CSR) profile of these two companies operating in a same industry.
2.0. Corporate Social Responsibility
CSR as situations where the firm goes beyond compliance and engages in actions that appear to
further some social good, beyond the interests of the firm and that which is required by law.
However, this is just one interpretation of CSR. Numerous definitions of CSR have been proposed
and often no clear definition is given, making theoretical development and measurement difficult.
CSR activities have been posited to include incorporating social characteristics or features into
products and manufacturing processes example aerosol products with no fluorocarbons or using
environmentally-friendly technologies), adopting progressive human resource management practices
example promoting employee empowerment, achieving higher levels of environmental performance
through recycling and pollution abatement example adopting an aggressive stance towards reducing
emissions and advancing the goals of community organizations example working closely with
groups such as United Way. Researchers are moving beyond just defining and identifying CSR
activities, to examine the strategic role of CSR in organizations.
2.1. Corporate Social Responsibility of MISC
For more than half a century, the MISC Group has been about value and performance. It is what
keeps them agile, successful and thriving. Working together with the best maritime as well as oil &
gas customers and partners have taught them what really matters to be the reliable and trusted
partner in delivering solutions to our customers.
Through the years, they have built our reputation with every client contact. Across more than 10,000
employees in all corners of the globe, we share the same passion of delivering the best service.
Backed by an exceptional workforce and leading technology, they are committed to creating new
value and contributing to the sustainability of the industry.
At MISC, they align their revenue goals with responsible operations, creating an organization that
empowers all of its stakeholders, from shareholders and employees to customers and others with the
energy for progress.
Pulling together our collective talent and passion, we balance our time between building the business
and building our people, industry and community starting with ongoing sustainability initiatives,
continuous workplace improvements, carbon footprint reduction, right up to the role we play in the
community at large.
Their Corporate Responsibility thrust falls under four main sections such health and safety, code of
conduct and business ethics, environment and community. Under health and safety, there are four
categories such as MISC Policy on HSE, MISC Policy on Drug and Alcohol and Health, Safety and
Environment Requirements for Contractors. Under code of conduct and business ethics, there are
three categories such MISC Code of Conduct and Business Ethics, MISC Code of Conduct and
Business Ethics Guide and MISC Code of Conduct and Business Ethics, Country Supplement:
Malaysia. Under environment categories, there are two categories for instance Energy Efficiency
Operational Indicator (EEOI) and Green Certificate Award. Lastly is community. There are three
categories for namely MISC Cadet Sponsorship Programme, Developing Futures and Employees
and Community.
2.2. Corporate Social Responsibility of Maersk
Maersk Group has four core businesses which include Maersk Line, APM Terminals, Maersk Oil
and Maersk Drilling. Through these companies and several others, the group employs roughly
89,000 people, and generated 47 billion US dollars in revenue in 2013.
As a group, their business success is built on a number of strengths: our size and global reach, their
financial strength, their talented employees, their time honored values, their approach to
sustainability and their drive to innovate. Combined, these strengths form a unique platform for their
continued success and future growth.
There are four categories of corporate social responsibility in MAERSK for namely global labour
principles, diversity and inclusion, community involvement and human rights framework.
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of stakeholders whom he defined as any group or individual who can affect or is affected by the
organizations objectives (Freeman, 1984).
First, stakeholder theory is descriptive in that it describes a corporation as interacting with a wide
range of groups with different interests and demands. Although the maxim of neoclassical economics
constructs the firm as a profit maximizing entity with a sole focus on enhancing shareholder value,
most large corporations have some sort of community engagement or philanthropic program.
Second, stakeholder theory is instrumental in that it provides a basis for exploring a relationship
between a firms CSR activities and other corporate performance parameters like profitability,
revenue, return on investments and so on. There is an assumption that a corporation that takes into
accounts the needs of its entire stakeholder will also be successful in traditional performance criteria.
Third, stakeholder theory is normative in that it recognizes that groups other than shareholders,
employees, suppliers and customers who may not have contractual relationships with the firm are
also legitimate stakeholders. Normative justification of stakeholder theory is typically based on
Western philosophical and moral traditions such as utilitarianism, social contracts, fairness and
reciprocity, fundamental human rights and respect for human beings.
Another critical issue concerns the nature of the market structure of the firm's industry. A key
conclusion of the McWilliams and Siegel (2001) paper was that, in equilibrium, firms that engage in
CSR will earn the same rate of profit as firms that do not engage in CSR. We refer to this finding as
the neutrality result. This finding was misinterpreted by Piga (2002) as implying that CSR can only
occur in monopolistically competitive industries, since some oligopoly models of vertically
differentiated markets predict that (in equilibrium) firms selling the higher quality product (in our
case, the firm that sells a good with a CSR characteristic) reap abnormal profits. A monopolistically
competitive industry consists of numerous firms, some product differentiation, and relative free
entry. Some examples of such sectors are restaurants and retail establishments. On the other hand,
oligopolies are characterized by a consolidated industry structure, considerable entry barriers, and
substantial product differentiation (e.g. autos, computers).
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In their globalization quest, they will seek opportunities in regions of the world where they can
create value. They will work with existing and new partners who share their values, philosophy and
business approach.
To this end, they aspire to achieve superior financial and operating results while adhering to the
highest standards of business conduct. These objectives provide the foundation for their commitment
to those with whom they interact.
They are committed to creating and enhancing long-term shareholder value using the principles of
value-based management. The high caliber of their workforce is a valuable competitive advantage.
To build on this human capital they will strive to hire and retain the most qualified people available,
offer them good and competitive terms and conditions of service and maximize their opportunities
for success through training and development. They are committed to maintaining a safe work
environment enriched by diversity and characterized by open communication, trust, fair treatment,
and respect.
Success depends upon their ability to consistently satisfy changing customer preferences. They
pledge to continuously provide products and services that conform to requirements of both their
internal and external customers. They will seek mutually beneficial relationships with their
counterparts, contractors, suppliers, financial institutions and other entities with whom they do
business.
They pledge that MISC will be a responsible corporate citizen wherever it operates and will take into
consideration the needs and aspiration of local communities. Their measures of success are the
extent to which they meet these commitments, the long-term value they create for our shareholders,
the pride of our employees in their accomplishments, the satisfaction of our customers and all those
with whom we do business, and the extent to which communities, both local and international, judge
our activities as beneficial.
4.2. MAERSK
In recent years, they have worked to implement formalized principles and forge partnerships that
integrate social responsibility more tightly into their business and their operations. For example, they
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have created and implemented the Maersk Global Labour Principles, a code of labour standards that
applies to all their employees, wherever they work in the world.
They have also taken significant steps in the areas of diversity, disaster relief and community
involvement including forging partnerships and establishing new entities and roles within the
company. All of this work underscores our deep commitment to responsible corporate behavior and
good citizenship around the world.
This work is and will remain an on-going journey for Maersk, where they enhance and adapt earlier
initiatives an embark on new ones. In 2011, for example, they established the Maersk Human Rights
Framework which is based on the new UN Guiding Principles on Human Rights and Business and
will serve as a platform for their work in this area.
Under global labour principles, based on international conventions and designed to provide a single
set of standards for employees across diverse cultures and regulatory environments, the Maersk
Global Labour Principles span their operations worldwide, covering every Maersk employee in
every Maersk business unit. The principles ensure decent and fair labour conditions for all their
people and provide systems and processes for employees to raise concerns about their workplace.
They believe they help reduce the risk of workplace disputes and they enhance their ability to attract
the talent they depend on throughout the world.
Under diversity and inclusion, MAERSK are committed to providing positive, productive and
supportive working environments where all employees are valued and inspired to be the best they
can be. They base their diversity and inclusion work on the principles that diversity benefits business
results that they will treat every employee with respect and dignity and that they will not tolerate
discrimination or harassment of any kind. Employment related decisions are based on a variety of
relevant factors such as qualifications, skills, performance and relevant experience.
Their Human Rights Framework also developed on the basis of the gap analysis mentioned above,
sets out the groups action plan for 201213 in the areas of mapping and integrating measures to
prevent human rights risks, investigating the UN principles as they apply in extreme risk countries,
setting up an operational-level grievance mechanism and looking at legal and contracting processes.
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In all this work, they aim to know and show their impact across the group and to close gaps
wherever they find others.
5.0. Sustainability of the companies based on triple bottom line
5.1. Maersk
5.1.1. Environmental
They recognize the risks that climate change poses to society and their business as well as the need
to shift to a low carbon economy. Climate change is the key environmental issue across the Maersk
Group. Primarily due to the direct and indirect CO2 impacts related to running an oil business, as
well as the significant levels of CO2 emitted by our fleet of more than 500 container ships.
The Maersk Group has achieved an 17% improvement in CO2 efficiency since 2010, mainly driven
by large improvements in their container business. Both their relative and absolute CO2 emissions
decreased in 2013. The improvements are mainly due to Maersk Line's advancement in energy
efficiency. While CO2 emissions have received more media attention in recent years, sulphur,
nitrogen and particulate matter emissions are also sources of pollution. In addition to CO2, ships also
emit sulphur oxide (SOX, nitrogen oxide (NOX) and particulate matter (PM), and these emissions
cause local air pollution such as smog, acid rain and soot.
5.1.2. Less smog on the horizon
Smog is a mixture of fog or haze and air pollutants, with the main culprit being sulphur dioxide.
Originating in the residual sulphur found in fuel, SOX is emitted in exhaust gases expelled from
internal combustion engines. The amount of SOX emitted is directly linked to the amount of sulphur
in the fuel. We expect and welcome increasingly strict anti-smog legislation in the coming years.
In 2006, they implemented a breakthrough fuel switching programme in California, where vessels
approaching key ports switched to low-sulphur fuel. The initiative resulted in a 2,400-tonne
reduction in cumulative sulphur emissions between April 2006 and December 2008. In September
2010, backed by experience in California, Texas and elsewhere, they launched a fuel-switching
programme in Hong Kong the first of its kind in Asia.
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4.1.7. Socially
Their priorities for social responsibility include labour, human rights, diversity and disaster response
and community involvement.
In recent years, they have worked to implement formalized principles and forge partnerships that
integrate social responsibility more tightly into their business and their operations. For example, they
have created and implemented the Maersk Global Labour Principles, a code of labour standards that
applies to all their employees wherever they work in the world.
They have also taken significant steps in the areas of diversity, disaster relief and community
involvement including forging partnerships and establishing new entities and roles within the
company. All of this work underscores their deep commitment to responsible corporate behavior and
good citizenship around the world.
This work is and will remain an on-going journey for Maersk, where they enhance and adapt earlier
initiatives an embark on new ones. In 2011, for example, they established the Maersk Human Rights
Framework, which is based on the new UN Guiding Principles on Human Rights and Business and
will serve as a platform for their work in this area. When a company enters a community, it creates
jobs and pays taxes but also provides a wide range of indirect benefits.
5.1.8. A lifeline for communities
From energy production and shipping to harbour terminals and inland freight, their global web of
businesses can be a lifeline for the communities where they operate. For example, a recent study of
APM Terminals operations at Apapa, in Nigeria shows that 72% of the companys 2009 turnover
was channelled back into society. The resulting economic growth in these communities can in turn
create new opportunities for them.
5.1.8.1 Donations and social investments
Donations and social investments are another way of giving back to the communities that have given
them a chance to do business. Their group has a long tradition of community involvement that is
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highly decentralized and primarily carried out by their business units close to the communities
themselves.
One example of their community involvement work is their participation in the Logistics Emergency
Teams (LET) programme under the United Nations World Food Program. This forum enables them
to use their logistics expertise and equipment to assist communities when disaster strikes.
5.2. MISC
5.2.1. Environmental
They are committed to do their part to help conserve and protect the environment. To remain
sustainable and being environmentally conscious, they continued with their initiatives to reduce their
carbon footprint as they aim to further their stewardship towards a cleaner, greener MISC.
5.2.2. Energy Efficiency Operational Indicator (EEOI)
They are on a relentless quest to ensure that the energy efficiencies of their fleet are optimal and on
par with the worlds best practices. Working together with Universiti Teknologi Malaysia (UTM),
they conduct yearly studies to determine the Energy Efficiency Operational Indicator (EEOI) of
selected MISC ships.
EEOI is a mechanism developed by the International Maritime Organisation (IMO) and the Marine
Environment Protection Committee (MEPC) in an effort to reduce greenhouse gas (GHG) emissions
within the international shipping industry. The EEOI is for ship owners and ship operators to
evaluate the performance of their fleet with regards to CO2 emissions, and enable the effects of
emission reduction measures to be monitored. EEOI enables the ratio recording of mass CO2
generated per unit of transport work.
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The results of the study have shown that EEOIs of MISC ships in operation are generally lower
when compared against similar studies by IMO and other worldwide fleets. A lower EEOI value
indicates a more efficient ship, where the average CO2 emissions per tonne of cargo carried per
nautical mile is lower.
5.2.3. Green Certification Award
MISC remains committed and dedicated towards achieving high safety and environmental standards.
To date, four of our Seri B Class MISC LNG tankers and two of our A Class MISC Chemical
tankers have been accredited with Green Awards, while our Petroleum fleet has been accredited
since 2005.
The Green Award Foundation is a non-profit foundation incorporated in Netherlands and its
membership
includes
reputable
industry
bodies.
Certification
was
ascertained
through
comprehensive audits that cover a broad aspect of leadership, environmental focus, crew training
and development, vessel maintenance and Health Safety & Environmental aspects.
Ships that are Green Award certified reap various financial and non-financial benefits including a
considerable reduction on port tariffs at ports in Belgium, Canada, Netherlands, Oman, New
Zealand, Portugal and South Africa. Increasingly, other ports in the Asian region, including
Singapore and Hong Kong, are also beginning to show interest.
5.2.4. Socially
Navigate Your Career (NYC) is our unique youth development programme, dedicated towards
preparing high school students for the upcoming challenges and realities of the marketplace. The
programme features a one day interactive workshop which is designed specifically to explore the
concept of personal development, confidence building, leadership, team building and team synergy.
5.2.5. Bridging Communities
MISC employees are given ample opportunities to contribute to the local community through
Outreach Programmes. These unit driven initiatives allow for community care from within and play
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a role in enhancing their presence in the surrounding communities. Most of the programmes are
focused on reaching out to underprivileged children and improving access to education.
5.2.6. Lending a Hand
Over the years, MISC has also been involved in many philanthropic events organized by numerous
associations in the countries we operate in.
6.0. Recommendations for the changes in corporate practices and strategies from a perspective
of improved levels of CSR
Milton Friedman (1970) expressed the same sentiment and added that the mere existence of CSR
was a signal of an agency problem within the firm. An agency theory perspective implies that CSR is
a misuse of corporate resources that would be better spent on valued-added internal projects or
returned to shareholders. It also suggests that CSR is an executive perk, in the sense that managers
use CSR to advance their careers or other personal agendas.
Nature
Author(s)
of
theoretical
perspective(s
Key argument/result
)
Friedman
Agency
(1970)
theory
Freeman
Stakeholder
(1984)
theory
Donaldson
Stewardship
theory
Donaldson
Stakeholder
and Preston
theory
and
Davis
(1991)
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Nature
Author(s)
of
theoretical
perspective(s
Key argument/result
)
(1995)
Jones
Stakeholder
(1995)
theory
based
Jennings
and
Institutional
Zandbergen
theory
Baron
Theory of the
(2001)
firm
and
Theory of the
Gilligan
firm
Theory of the
firm
McWilliam
Resource-
based
al.
consumers
(2001)
et
Feddersen
(2001)
competitive advantage
organization
(1995)
s and Siegel
of the firm
McWilliam
ResourceHart (1995)
view
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Nature
Author(s)
of
theoretical
perspective(s
Key argument/result
)
(2002)
Waldman et
al. (2004)
of the
Theory of the
firm/strategic
leadership
Having a good definition of CSR, with a common terminology, would aid us in modelling the role of
organizational culture and leadership in determining the importance of CSR within an organization.
Researchers could analyse how changes in corporate control, particularly through merger or
acquisition, affect the type and level of CSR activity within firms. Alternatively, changes in top
management (CEO or team) might be examined to determine whether leadership style and
characteristics are more important than corporate control/culture for predicting CSR activity.
Understanding the role of leadership could be extended to understanding the decision making
process and how decisions about CSR activity are affected by demands from multiple stakeholders.
Asymmetric information makes it difficult to study the antecedents and consequences of CSR.
Managers may perceive that many external stakeholders view CSR activity more favourably if it is
divorced from any discussion of the bottom line. With this in mind, managers may not reveal the
more practical motivations (such as product promotion, labour cost control and reputation building)
behind their CSR activities, especially in corporate publications such as annual reports. This lack of
candid information has made it difficult to distinguish and discuss the different motivations for CSR,
which may be private or social.
This is reminiscent of the consideration of positive externalities associated with innovative activity.
An externality is defined as the impact of an economic agent's actions on the well-being of a
bystander. Pollution is a classic example of a negative externality, while innovation (whose benefits
cannot be entirely appropriated by its creator) is a classic example of a positive externality. While the
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private returns to innovation (or those that accrue to the company) may be high, the social returns to
innovation (through the creation of new or improved products and processes) may be even greater.
Researchers need to use more direct methods, such as interviews and surveys, to tease out less selfserving information about the motivations for CSR activity and improve the precision of
measurement of the private and social returns to CSR.
In addition to understanding the motivation for the provision of social benefits, we need to
understand how the provision of these goods, through strategic CSR, affects society. An example of
strategic CSR is when a firm links the provision of a public good to the sale of their (private)
products (e.g. eco-labelling). Bagnoli and Watts (2003) model this behaviour and find that the
propensity of firms to engage in strategic CSR depends on two factors: the intensity of competition
in the market and the extent to which consumers are willing to pay a premium for social
responsibility. The authors conclude that there is an inverse relation between intensity of competition
and provision of CSR. That is, in more competitive markets, less of the public good will be provided
through strategic CSR. Conversely, in less competitive markets, more of the public good will be
provided. This is easy to understand, since more competition results in lower margins and, therefore,
less ability to provide additional (social) attributes or activity. Conversely, less competition leads to
the potential for higher margins and more ability to provide additional attributes or activity.
An analysis of the provision of public goods by private firms is a welcome addition to the
management literature on CSR, which has been primarily concerned with answering the following
question: do firms do well by doing good? Showing that a firm does well by doing good is often
referred to as making the business case for CSR. While understanding the relation between firm
performance and social performance is of primary importance in the management literature, a more
thorough understanding of the CSR phenomenon requires that we take account of other stakeholders
as well. These stakeholders include: customers, employees, governments, suppliers, taxpayers,
community groups, and underrepresented groups.
Our understanding of CSR should be extended to an examination of the strategic use of CSR
activities. Fombrun and Shanley (1990) established that investing in CSR attributes and activities
may be important elements of product differentiation and reputation building. McWilliams and
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Siegel (2001) suggest that CSR activities be included in strategy formulation and that the level of
resources devoted to CSR be determined through cost/benefit analysis.
Analysis of the strategic implications of CSR is hampered by cross-country or cultural differences in
the institutions that regulate market activity, including business, labour and social agencies.
Institutional differences lead to different expectations and different returns to activity. For firms
operating in multiple countries/cultures this complicates the process of determining which activities
to engage in and how much to invest. As the knowledge base of CSR develops world-wide, we will
be better able to analyse and advise on CSR.
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7.0. Reference
i.
Abowd, J., Milkovich, G. and Hannon, J. (1990). The effects of human resource
management decisions on shareholder value. Industrial and Labor Relations Review, 43,
ii.
20336.
Aupperle, K., Carroll, A. and Hatfield, J. (1985). An empirical examination of the
relationship between corporate social responsibility and profitability. Academy of
iii.
iv.
v.
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