Reference no: EM132817260

"Wanting to 'do good' for the environment and the villagers is not enough," said Daniel Anuwat*, Sustainable Organization Manager at Siam Cement Group's (SCG) Lampang Cement Plant. "The people in the villages around the plant were threatened by the check dam idea. They were extremely resistant to our efforts to transform the deforested countryside into vital and productive green spaces." Looking through his notes from that period, Anuwat produced a letter from an NGO demanding that reforestation efforts stop immediately. Anuwat's parents emigrated to the USA from Thailand before he was born. He had visited Thailand as a child with his parents and visited again while traveling in Southeast Asia during a 30-day leave from the Navy. He felt drawn to a sense of peacefulness and balance in the country, perhaps reflecting the dominant Buddhist religion. People were caring and helpful toward one another. After completing his navy enlistment, Anuwat studied the Thai language and after graduation from college decided to move to Thailand. While improving his language skills and looking for work, he heard about the company called SCG that took great care of its employees. He applied for work and was hired as an executive assistant for a cement plant. Promotion to supervisor came after a few years, and later he transferred to the sustainability department, where he became director. As part of SCG's sufficiency philosophy, promotion from within is always the preferred way to fill manager positions. Anuwat was proud of SCG's efforts to create sustainable environment. He recalled the frustration from what appeared to be the backward thinking of the villagers. Logic and reason did not persuade them. Engaging the villagers to help themselves and their natural environment by implementing check dams was a lot more difficult than leaders at Lam-pang anticipated. Check Dams and Water Preservation Thailand experiences months of abundant rain and months of very little rain. The purpose of check dams is to slow the speed of water flow, preserve rainwater, prevent drought, reduce soil erosion, trap sediments, and allow moisture to seep deeply into the surrounding soil. Local people, using local, inexpensive and mostly natural materials, can build a check dam at low cost. A check dam might range in length from five to 50 feet across a drainage ditch, rivulet or brook. Rocks, gravel bags, bamboo pilings, wire fencing, and tree trunks or branches can comprise a check dam. An analogy would be a small beaver dam. Check dams are not permanent concrete dams because water is also needed farther down the hill or mountain. So, the dams typically need repair every year or two. See Exhibit 1 for check dam photos. Constructing a check dam as envisioned by SCG might be analogous to a small barn raising in the United States with a picnic-like atmosphere. A group of neighbors can get together to build something of value for themselves and the entire community. SCG's CEO, Roongrote Rangsiyopash, said that a team of 20 people in one day could build 20 check dams. The dams are built during the summer dry season. Given appropriate topography, check dams could exist every 50-100 feet down a sloping ravine, creating a series of pools of standing water. Periods contributes greatly to reforestation in dry areas. The moisture facilitates forest growth during dry periods. Reforestation contributes to the return of plants and animals. Added soil moisture also makes farming more productive in the area. SCG leaders believed that as rural communities mastered the principles of water preservation via check dams, a next step would be to collect water in small reservoirs for direct irrigation of farm plots.

Village Culture and Beliefs

Thai farmers usually live-in small-town farming communities. Farmers' land plots average about one acre. The Lampang area is rich agriculturally because of its location in a fertile valley. A typical village has about 100 families and maybe 600 people. Houses are typically two stories on stilts. Traditional families live in the two levels and may have livestock like pigs or ducks on the ground level. Villages have few businesses and few services other than an elementary school, so they have to go to a larger city for other services. Much of the rural population is poor and not well educated. Beliefs and values are traditional and may seem superstitious to outsiders. A Buddhist temple is often located near the village center. The temple is the village center for holidays, festivals, spiritual activities and funerals. A village headman is elected by the residents and plays an active role in a village. The headman makes announcements over a public address system each morning, helps resolve disagreements, and may even help dis-tribute mail. Farmers typically raise two crops of rice a year. Culturally, villagers have learned to burn fields and unwanted brush to get ready for a new planting of crops. Farmers believe that to get good quality soil, they have to burn away crop residue to return nutrition to the soil and pro-vide better land quality. Local people also use the forest as a source of food (wildlife, mushrooms), firewood, and fodder. A headman likened the forest to a supermarket because people could gather vegetables and other edible products and sell them locally. People might set fire to leaves and groundcover in the forest for various purposes, such as germination of mushrooms and other edible plants, and to force animals from hideouts for hunting. Local people value the use of fire, although fire does damage a forest when out of control.

Thailand's Sufficiency Economic Philosophy In the 1990s, the King of Thailand introduced the Sufficiency Economic Philosophy (SEP) to Thailand as a potential guide for corporate behavior. SEP emphasizes moderation, reasonableness and prudence in business management with the goal of sustainable wellbeing in the areas of economy, society, culture, and the environment. SEP in personal and business terms would mean giving up the need for excess or overindulgence. SEP is like the triple bottom line (society, environment, economic) or stakeholder theory in the West. The priority is to achieve balance across the needs of various groups rather than focusing only on the short-term profit maximizing (economic) goal that was dominant in Thailand. The prevalent short-term profit approach was believed to be a major reason many companies went bankrupt, and thousands of people lost their jobs during the 1997 Asian Financial Crisis.

A business illustrates the sufficiency philosophy when it implements values and morality as basic tenets, invests in the future even when it limits short-term profitability, does not take advantage of employees, customers or shareholders, creates a strong positive corporate culture, and regards employees as a key asset, retaining them even during financial loss.

SCG's Strong Culture and Values Within this national context, SCG leaders developed a strong sustainability philosophy. SCG employs about 54,000 people in three divisions (1) Cement-Building Materials, (2) Chemicals, and (3) Packaging. The three divisions have 51 subsidiaries. SCG is solidly profitable. The sales and profit figures for 2017 are in Exhibit 2. SCG's corporate structure is illustrated in Exhibit 3. The high value given to sustainability is illustrated by the CSR Committee for Sustainable Development on the Board of Directors and the community relations units in each division. Many of the 51 subsidiaries also have formal positions for both community relations and sustainable development. Leaders at the corporate and subsidiary levels have shaped a strong culture that includes robust sustainability values. The SCG corporate vision statement includes sustainability: SCG will become a regional [Southeast Asia] business leader with emphasis on INNOVATION and SUSTAINABILITY

SCG Core Values are: 1. Adherence to fairness 2. Dedication to excellence 3. Belief in the value of individuals 4. Concern for social responsibility The SCG Lampang Cement Plant Subsidiary added four commitments of its own: 1. Create jobs 2. Develop community 3. Preserve environments 4. Be a good citizen of Lamp

SCG values are not just posted somewhere and forgotten. They are posted everywhere! Waiting for an elevator, employees will see the doors covered with huge pictures of top executives illustrating one of the core values or a new sustainability project. Executives also make decisions publicly to illustrate the preference for core values over short-term profit. For example, the CEO said that he made recent decisions in which people needs were chosen over academic knowledge and employee safety was chosen over cost efficiency. In public addresses and all-hands meetings, the corporate values are repeatedly stressed, and leaders are encouraged to walk the talk. Every year a sustainability report lists hundreds of ongoing projects and the key performance indicators (KPIs) that show amount of progress. Example corporate KPI projects include reduced energy consumption, use of alternative fuels, new eco-value products and services, recycled water, green procurement, and number of check dams. Sustainable Development at SCG has its own website with current data on all projects and new projects undertaken. Moreover, the Chair of the Board of Directors' CSR committee stressed that each plant has its own set of KPIs to track progress on initiatives relevant to its local situation. One manager mentioned, "We ask employees to participate in one SD (sustainable development) project in their local community. This creates a new mindset within employees by engaging them in the SD process. We live within the community, not as outside people. Everyone participates in taking care of society." He added, "We never force anyone to perform anything for their community. We never force anyone even a little. It is their problem, and we help them find a solution that works for them." A staff engineer stressed the unique value of the strong brotherhood and sisterhood element of SCG's culture. Peers and direct reports are brothers and sisters, and bosses are older brothers. People at any level can talk directly to other departments to request help or a task order. They can respond promptly without an official order or document. During orientation, freshmen (new employees) are briefed on the brother and sister culture. Then small groups of freshmen are asked to build a check dam together, so they have the experience of bonding during a shared sustainability project.

The Managing Director of the Lampang cement plant said that during every team meeting at every level, each participant has an opportunity to mention an action that links to one of the corporate values or Lampang commitments. This was his way of keeping the culture values alive in the minds of managers and employees. Employees buy-in to the corporate values and sustain-ability development seems almost total. Another manager said the strong culture was obvious to him because there was "little disagreement anymore about making decisions that favor environmental sustainability. Everyone is for it. People who do not buy-in to sustainable development are not fired because they leave on their own. They just aren't comfortable here."

Leadership Challenges Daniel Anuwat continued his story. "SCG leaders have done a remarkable job developing a strong culture and values for sustainability. We have a reputation as a top progressive company in Thailand and are the employer of choice for millennials. Determined to follow King Bhumibol Adulyadej's philosophy of sufficiency economy, SCG top managers visited Huai Hong Khrai Royal Development Study Centre to learn how to reforest in a mountainous area. This is the place where the King had financed a pilot program with four check dams, and the results were remarkable. The dry season did not cause its usual damage in that forest. "We initially approached four villages in our area. Our approach was for our community relations person to talk with each headman. The headman would let villagers know that we wanted to talk with them and arranged a village meeting. Well, not many people showed up at the meetings. We made a presentation and when we finished the people did not respond. They just sat there. We did not know what they were thinking. "We spent some time later on revisiting the headmen and talking privately with employees who lived in the villages. We learned a bit about why the local people were so unwilling to participate. "There were also religious beliefs causing villagers to not participate with us. One belief that stands out for me was that blocking the flow of water would block the flow of spirits in the forest. The forest should be left as it is. Let nature be nature. "Another headman said that people were against the project because people 'cannot see the water.' They cannot imagine the pools of water and a thriving forest and the benefits. We explained all the benefits in our presentations and even showed some pictures, but they are not getting the picture, so to speak.

"One incident was pretty scary. Supposedly, a monk who was also a headman had a gun pulled on him for speaking in support of SCG's check dam project. Apparently, a shot was fired. No one was hurt. That kind of incident is so rare that, if true, it means someone had very strong feelings against our project. "Personally, I think check dams and reforestation in some way threatens their way of life. They burn their crop residue at the end of a growing period. They burn the forest when they feel the need. Forest fires are common during the dry season. These people are not completely wrong because a fire can produce short-term benefits for hunting and germination of bamboo and other plants. Moreover, a fire makes it easier to clear some new land for planting. "Now I have this letter from the NGO insisting that we stop our efforts toward reforestation. NGOs try to help villagers in fundamental ways, but NGOs sometimes come up with crazy ideas. I will have to investigate this. "I think I know one way to cut though a lot of this villager resistance. One of our employees suggested that we just pay the villagers for building the check dams. We could hire them to perform a job. That is what other companies have done when they wanted village participation. The people understand payments. We would not have to engage their hearts and minds in the process. Just pay them.

I discussed it with the community relations manager and a few other managers. Some are reluctant, saying that payment would destroy the community ownership we are trying to develop. I understand their point, but money would overcome a lot of resistance. A payment of 2000 baht (about $60) per check dam would buy a lot of cooperation. You can see that I am frustrated. I feel like I am letting down SCG's reputation. I am out of ideas about how to overcome their resistance and get villagers to buy-in to check dams and reforestation. "Do you have any suggestions for gaining community buy-in?"

1. Do you support the idea of paying villagers to build check dams? Why?

2. Other than paying villagers, what other approaches should the Lampang managers take to overcome the villagers' resistance to change regarding the check dams?

3. How did SCG implement a corporate culture that strongly supports CSR and sustainability? Discuss.

4. How do you think a national sufficiency economic philosophy might have affected SCG's approach to sustainability? Explain.