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SCG, ASEAN's sustainable leader

Article - July 26, 2012
World-class corporate governance and a long-term strategic focus are at the heart of SCG, ASEAN's foremost company
As Southeast Asia’s foremost geo-political organisation edges closer towards economic union with the inauguration of the ASEAN Economic Community in 2015, Thailand’s SCG has emerged as the pre-eminent industrial conglomerate in the ASEAN region.
Established in 1913 under royal decree from King Rama VI, SCG has evolved from its origins as the Siam Cement Group into one of the largest enterprises in ASEAN. Initially a cement manufacturer, SCG has expanded into a diversified group of industrial operations whose five core business units focus on the production and distribution of chemicals, paper, cement and building materials along with an integrated distribution business. 

World-class standards throughout SCG’s diverse portfolio of operations are at the heart of the company’s multi-award-winning growth trajectory towards its establishment as ASEAN’s pre-eminent regional business. Adherence to fairness, dedication to excellence, belief in the value of individuals and concern for social responsibility are the four business philosophies that have guided SCG’s leadership across borders and industrial sectors for the past century.

SCG’s President and CEO Kan Trakulhoon says, “When I joined the company in 1977, we already had an environmental improvement committee and a community relationship committee. I was one of the active members who visited the villages. This continued generation by generation and means that corporate governance and the mindset were already in place. Some 40 years ago we used the phrase ‘social responsibility’ before CSR came in as a fashionable concept.”

‘We are probably the only
company in the world to have
put the word ASEAN in our
vision statement.’

Kan Trakulhoon,
President and CEO of SCG
A commitment to the best international levels of corporate governance has led to SCG’s continued success alongside its growing profile as one of Southeast Asia’s fairest and most ethical enterprises. Its board of directors is widely acknowledged as having the best ethical credentials in Thailand, while the board-appointed Governance and Nomination Committee proactively seeks out the best international standards of corporate governance and applies them to SCG’s internal processes.

Environmental challenges have a firm place on the company’s radar, as elucidated by Mr Kan: “The concept of sustainable development that focuses on achieving a balance among the economy, society and the environment under the principles of corporate governance will be the answer that enables mankind to live together sustainably and happily.”

SCG’s 3R’s ethos of ‘reduce, reuse/recycle and replenish’ defines how it is making a sustainable future reality for its operations and surrounding communities. SCG is also the first Thai organisation to have a self-declared environmental labelling of its products and services under the ‘SCG eco value’ label since 2009. The employed criteria are in accordance with the ISO 14021 standard, Environmental Labels and Declaration-Self-Declared Environmental Claims, in parallel with the needs of stakeholders and analysis of the product life cycle including product design, reduction in raw materials, energy and water consumption during production and use, the use of renewable materials and energy, recyclability, waste reduction, and emission of greenhouse gases. SCG eco value product now has a portfolio of 54 environmentally sustainable products, for which its sales are expected to grow from representing 13 per cent of revenues today to more than 33 per cent or one-third by 2015.

On top of internal product development, SCG has taken a myriad of steps towards ensuring environmental sustainability, such as its zero use of landfill strategy by the end of 2012 and the green procurement strategy pioneered by SCG in Thailand. As a result, SCG has been ranked Gold Class for four consecutive years and awarded Sector Leader in Building Materials and Fixtures in 2011 on the Dow Jones Sustainability Index (DJSI) by Sustainable Asset Management (SAM).

Innovation through research and development (R&D) constitutes one of SCG’s core corporate strategies to increase revenues from high value-added (HVA) products. Thailand’s government has made moving industrial development further up the value chain one of the country’s core economic strategies and private sector companies such as SCG are making this happen. Mr Kan says: “In becoming ASEAN’s sustainable business leader, we will not copy anybody; we need our own technology and technical expertise. In 2004, SCG spent just $1 million on R&D, with 4 per cent of revenue coming from HVA sales. In 2011, our sustained R&D investment was increased up to $36 million. The revenues from HVA sales in the first quarter of 2012 increased to 34 per cent.”

Inevitably, SCG’s focus on world-class standards throughout the business has translated today into real shareholder value. Despite the devastating floods of 2011, SCG maintained its dividend commitment, resulting in 55 per cent of earnings going to shareholders. With $1.5 billion cash reserve, Mr Kan says, “Financially, we are very strong. We like shareholders to be happy and we work hard for them to enjoy the dividends.”
SCG is now unrivalled in its connectivity and presence throughout the region. Mr Kan adds, “SCG’s vision is to be the sustainable business leader in ASEAN by 2015. We put the word ASEAN in our vision statement and we are probably the only company in the world to have done this. One of our main strategies is to invest in ASEAN, to establish factories, distribution networks and associated industrial infrastructure. The market is opening up, so you will be going from a market of 65 million to 600 million people. ASEAN is not new to us; we have been here since the 1990s.”

SCG’s regional strategy places particular emphasis on expanding its trading and investment network throughout the enormous potential housed within the rapidly emerging economies of Indonesia, Vietnam and the Philippines. The company’s total revenues in ASEAN excluding Thailand grew 17 per cent in 2011 and in Q1/2012 represent 6 per cent of its total. Also, its ASEAN assets outside Thailand now represent 14 per cent of the group’s total overall.

Looking to the inauguration of the AEC in 2015, SCG is well positioned to be one of the leading industrial conglomerates contributing to both infrastructure and socio-economic development across the region. As an ASEAN corporate citizen, SCG will be actively helping to capitalise on the opportunities as well as resolve the challenges that increased integration between neighbours presents.