ACCOUNTING AND FINANCE: UNIT 3A

TASK 5

JULY/JANUARY INTAKE

Type : Research

Topic : Corporate Social Responsibility

Marks : 20 marks

Weighting : 10% of 3A coursework

Date Assigned: 6 May 2011

Time Allowed : 1 week

Group : ACF 7

Names : Ramya a/p Balachandren, Andrew Sachdev a/l Manjit Singh,

Poh Jack Sen, Yue Hon Mun

1. Write an account of the CSR achievements or shortcomings of the company you have
researched. 6 marks

Corporate Social Responsibilty (CSR)Petroliam Nasional Berhad, also known as

PETRONAS is a government-owned company that is a fully integrated oil and gas company.
Although PETRONAS has gained world-wide recognition, they have still managed to
incorporate CSR achievements into most of their projects.

Under health, according to the Annual Report of PETRONAS for the year 2010, they
carried out the Personal Health Management Programme, whereby health campaigns were
conducted for employees in order to check their health. Apart from that, when working on
projects, PETRONAS implemented a set of guidelines for employees to comply with, which
is called the Zero Tolerance (ZeTo) Rules, which is a set of rules implemented in order to
reduce fatal accidents among the employees. The Annual Report 2010 showed that in 2010,
both the Total Recordable Case Frequency (TRCF) and the Lost Time Injury Frequency
(LTIF) (which are measures of recording the total number of harmful incidents throughout the
year) improved as compared to 2009 by 30 per cent and 11 per cent respectively.
Additionally, PETRONAS has also contributed to the Malaysian AIDS Foundation (MAF) in
by sponsoring the “Malam Amal AIDS”, the Red Ribbon Gala, and also countless other
awareness-building campaigns and fund-raising projects. These activities have enabled
PETRONAS to achieve not only increase in labour efficiency due to improved health level of
employees, but also gain support from organizations such as MAF for future projects.

In terms of education, every year, PETRONAS carries out Sponsorship Programmes,

which are the Foreign University Sponsorship, the Universiti Teknologi Petronas (UTP)
Sponsorship and the Malaysian University Sponsorship. In 2010, PETRONAS offered a total
of 158 million worth of academic scholarships to deserving students. PETRONAS also has a
global outreach as every year; PETRONAS gives out UTP scholarships to students from
Egypt, Sudan, Vietnam and Turkmenistan. Another CSR activity is the Bakti Programme that
was launched in 2002, where they adopt schools and provide tuition classes for students in
need of tutoring. Based on the Annual Report 2010, 3000 students partook in the
programme and achieved great benefits out of the programme. Furthermore, PETRONAS
launched the PETRONAS Mobile Library project in 2004 in Sudan, where they visit schools
by buses equipped with books. In 2010 alone, 44 schools consisting of over 55000 students
benefitted from this particular project. The aforementioned activities have enabled
PETRONAS to achieve good diplomatic ties with other nations, allowing them to carry out
future projects smoothly in order to gain large profits. Furthermore, the sponsored scholars
will contribute towards the generation of profits in PETRONAS as they will become future
employees of PETRONAS.

PETRONAS also pays close attention towards caring for the environment by projects
like the Putrajaya Wetlands, which is a man-made freshwater wetland that treats polluted
water and provides the biodiversity needed for wildlife habitats to flourish. They also make
efforts through the bioremediation of produced water, a process of clearing up harmful
chemical substances through the use of natural microbes that live in the soil. Besides that,
PETRONAS makes it a point to manage oil spills through the International Maritime
Organisation Tier 1 Oil Spill Response training modules and Oil Spill Response Capability
Assessment. By conducting such activities, PETRONAS will not only manage to respect the
environment, but also achieve a more ethical business conduct by acknowledging the
problems caused by their business such as the oil spills and making efforts to overcome it.
Additionally, they also save the hassle of interruptions of their business activities from
environmental organizations like Greenpeace with a more ethical business.

Community Projects have also been a part of PETRONAS activities. For example,
the National Consumer Campaign that was carried out in 2010 had 14,584 participants and
was conducted to increase awareness of rights, responsibilities and financial awareness.
Besides that, in 2010, PETRONAS launched the ‘Know Our Children’ campaign, which is an
awareness campaign to equip parents with knowledge to prevent substance abuse among
children. PETRONAS has achieved giving back to society through such projects and by
doing so; they have managed to gain consumer satisfaction.

Based on all the achievements aforementioned, it is evident that PETRONAS has

definitely been doing their part in giving back to society and various other aspects by living
up to their Corporate Social Responsibility. Apart from all the other achievements stated
above, in 2010, PETRONAS received the PM’s CSR Award for three categories- Best
Overall CSR Programme, Education, and Culture and Heritage. After extensive research, it
is obvious that such recognition is undoubtedly well-deserved.
2. ‘It has been argued that the obligation of a business to make profit is incompatible with
corporate social responsibility.’ Do you agree? 4 marks

Many businesses often overlook the need of Corporate Social Responsibility (CSR) due to
the hassle of adopting new ways and the unforeseen losses that can be incurred. The
statement can be agreed upon because firstly, the costs of making efforts to carry out CSR
activities are often high. For example, the efforts taken by PETRONAS to give out
scholarships and to carry out other projects such as the Putrajaya Wetlands may bring about
unnecessary extra costs. This can be related to the concept of opportunity cost. In order
carry out the CSR, PETRONAS will have to forego the cheaper alternative of just allocating
the resources used for those projects to other profitable projects. This will indeed cause their
possible profits to decrease. Apart from that, training programmes conducted by businesses
as part of their CSR will also incur high costs, which will in turn reduce the net profit of the
business.

However, the statement can also be highly objected as there are various ways in
which CSR activities can contribute to the profits of the businesses. Firstly, employee morale
practiced by businesses while carrying out CSR activities causes employees to be motivated
to increase productivity as they are aware that their welfare is being taken care of. Higher
levels of productivity will in turn result in higher profits caused by increases sales.
Additionally, CSR activities also increase consumer loyalty. This is because consumers will
be keener on supporting businesses that give back to the community. As such, increased
support leads to increased sales, which increases profits. Furthermore, the statement can
also be opposed because CSR activities, especially those to help save the environment, can
reduce production costs as efforts are taken to reduce energy consumption and to reduce
wastage. As such, costs are saved and the net profit gained by the business will tend to
increase as well.

Thus, it can be said that there are both pros and cons to the implementation of CSR
activities in terms of money-making. However, the fact that CSR activities are highly
important cannot be denied simply because various aspects of the world itself are improved
due to the recognition of CSR.
REFERENCES

1. PETRONAS, Community, viewed 11 May 2011,

http://www.petronas.com.my/community.aspx

2. PETRONAS, Education, viewed 11 May 2011,

http://www.petronas.com.my/education.aspx

3. PETRONAS, Environment, viewed 11 May 2011,

http://www.petronas.com.my/environment.aspx

4. PETRONAS, Schools Outreach, viewed 11 May 2011,

http://www.petronas.com.my/education/schools_outreach.aspx

5. PETRONAS, Annual Report 2010, viewed 11 May 2011,

http://www.petronas.com.my/downloads/AnnualReports/AnnualReport2010.pdf