Corporate Social Responsibility (CSR) is a recent development in Pakistan. Although individuals and businesses have been indulging in philanthropy and voluntary giving since long, the concept of CSR and its allied practices are relatively new to the socio-economic development scene.
Already, there are certain pronounced trends and types we can find emerging with respect to Corporate Social Responsibility in Pakistan.
THREE TRENDS IN CSR ARE MOST VISIBLE:
COMPETITION TO COOPERATION Instead stand-alone departments undertaking end-to- end project, partnership with NGOs development agencies is on the rise. This is also an acknowledgement of the contributions made by the development sector in recent years. The corporations recognise that delivering social services is a specialised field with its own dynamics. While they retain the right of monitoring and oversight, they are letting partner NGOs deliver the services. In effect, the businesses then become "funding agencies."
COMMAND TO DEMAND ORIENTATION Instead of corporations determining what is best for the community or society and then supplying that service, there is marked awareness to be responsive to the need of the people whom CSR is supposed to serve.
This trend is also evident from the way project selection is done. Far from the target population, the Board of Directors decides the social service to be provided. In certain cases the company consults the local politician or power lord to determine the "beneficiaries' needs".
We can roughly compare this approach to Soviet-style command economy, where the Kremlin would decide what Tajikistan needed 5000-miles- away. The ideas of participatory planning, stakeholders' analysis, community involvement, volunteerism were alien to the corporate CSR strategy and implementation. It must be acknowledged that with the passage of time the corporate thinking is coming of age:
CSR is now more demand- driven. Not only there is recognition of proper demand analysis but also there is greater community involvement, lesser reliance on "politicians' advice," and greater confidence in NGOs and local CBOs to carry out much of the planning and implementation on behalf of the corporate sponsors.
OUTSOURCED VERSUS IN-SOURCED FUND MANAGEMENT Economic liberalisation, since the mid 80's, has led to very good growth in fortunes of businesses and the industry. At the same time, confidence in government's ability to deliver social services most needed by the public has been waning.
Corruption in the higher echelons of political governments during the last two decades was one major factor that prompted businesses to rethink their own contribution to the society. The phenomenon of setting up an in-house foundation or a welfare trust is not new. Business houses and empires have been using this provision of law for genuinely paying back to the society sometimes, but mostly for unscrupulous tax evasion and mere eyewash, not only in Pakistan but all over the world.
Recent trend of setting up own foundations and trusts seems to be quite different from the practices of the past. There is genuineness about the purpose and as a result serious efforts are being made to address most pressing social issues that have come about due to failure of governmental ability to deliver public good.
A famous fast food chain Cupola Foundation, has set up its own foundation to take care of its employees after some of its workers were burned to death in religious frenzy. Pakistan's largest newsgroup, Jang Group of Publications, has the Mir Khalilur Rehman (MKR) Foundation that played a most commendable role in earth- quake relief. PICIC Bank has set up PICIC Foundation for employee welfare and promotion of higher education.
In addition to genuine philanthropic reasons, in-source fund management is also driven by sound business logic. Governments' taxation regime allows tax relief to businesses if they spend on social development. The tax burden of large business empires runs into millions of rupees.
Tax relief when calculated on such huge tax liability is found enough to justify creation of a family foundation or trust, which in turn might partner with larger NGO network working for the socio-economic development.
These trends are influencing CSR practices in Pakistan. If we analyse the motivations and the CSR practices in Pakistan, distinct patterns can be observed, based on which we can identify four separate types of CSR strategies:
POLITICALLY MOTIVATED CSR STRATEGY Under this type, a company's CSR strategy is aligned with current political slogan which seldom, if ever, captures a real grass-root need. Social spending by most public sector organisations falls in this category. CSR funds are neither allocated based on any analysis of people's needs nor are they aligned with any espoused social value as part of long- term corporate strategy.
Instead, the CSR allocations can be likened to a "slush fund", discretionary money available to top management and the CEO, who can spend it as they please. The shrewd CEO senses which way the political wind is blowing or going to blow and then moulds the CSR money accordingly to the ongoing political thrust.
The result is more support for the CEO or the company from the power corridors of politicians, generals and bureaucrats. In the decade of 90's, few notable nationalised banks sponsored, with great fanfare and media coverage, IT training centers in interior of Sindh.
The then-Prime Minister inaugurated these centers in Nawabshah and Larkana and praised the sponsors' sense of social obligation. Today, as one would expect, the centers are no more there! One of the sponsoring institutions has gone bankrupt and the other is partially privatised.
This is not to say that politically motivated CSR is specific to our national companies alone. It happens even in advanced countries like UK, Sweden, Denmark to name a few.
The reigning monarchs, who are now more of a figurehead in their countries, have set up welfare foundations for their subjects. The businesses generously donate funds to such non-profits in order to build relationship with the powerful, draw public goodwill and extract political mileage.
GLOBALLY ALIGNED CSR STRATEGY Many multinational corporations, MNCs, operate in Pakistan. They are in pharmaceutical, consumer goods, manufacturing and services sector of our economy. Invariably all MNCs operate under the policies of their head offices in Europe and US.
It must be mentioned here that many MNCs are now larger than most developing countries if we compare their earnings with the latter's national income. Like a government, an MNC has certain central policies decided by the head office; Corporate Social Responsibility is one of them.
Parent company is aligned with a value or social development theme, which all offices follow world-wide. A central CSR makes good economic sense for the MNCs. It lowers the cost of implementation and it maximises benefits. By promoting a defined social cause or services implementation becomes easy in terms of choosing partners, lower administrative costs, and designing a common promotion strategy. Maximum benefits accrue to the MNC as it is recognised supporting a cause across all cultures, which results in global branding.
Historically, local MNCs have been following the strategy of parent organisation. A pharmaceutical company, Johnson & Johnson, under its global CSR commitment, is very well- known for its generous and genuine support for the cure of breast cancer among women.
No doubt, the company has done a marvellous job by highlighting and fighting the problem of breast cancer through its "Pink Ribbon" campaigns in the US and Europe, where this scourge of women's health is more common and hence its CSR more relevant. The local office of the company cannot deviate from the central commitment.
So, only very recently has its CSR strategy become relevant in Pakistan as compared to its significance, dating back to the 50's, for the US and European womenfolk. Another example is of Hewlett Packard, which, through the Packard Foundation, is globally supporting reproductive health under its CSR strategy.
Following the central CSR strategy, therefore, carries the risk of miss-or-match with genuine local needs. The resulting CSR commitment is likely to be inflexible and, there- fore, less responsive to the host society.
Some MNCs are realising the need of, and benefit in, being responsive to local needs. As a result, they are opting for a broad policy for social development at the head office level and giving more autonomy to their local country offices to decide to spend CSR funds under the broad central policy.
For example, a software giant has chosen education and health as its global social development responsibilities. It allows local offices to support such programmes that are most needed by the society. This variation could be called "global CSR", a broad thematic central support that results in need-specific response at the local level in a host country.
EXTERNALLY IMPOSED CSR This CSR-type takes two forms: legally-imposed and trade- imposed CSR. Regulatory environment of business in Pakistan consists of many newly formed bodies such as the Securities and Exchange Commission of Pakistan, Oil and Gas Regulatory Authority, Pakistan Telecommunication Authority etc.
In addition to these many existing watchdogs such as Labour Courts, National Industrial Commission and Environment Protection Agency etc also operate. These regulators serve as custodian of public good and are man- dated to ensure that public safety and rights of people are not trampled upon by businesses and industries.
The regulators have the force of law behind them and corporations have to comply with the provisions of law. The compliance is an unavoidable cost of doing business in our economy. Some businesses just do bare minimum to meet the legal requirements and some try to beat the law. Still there is an ethical minority, which goes beyond the bare-minimum of law and willingly do more than just complying with regulations.
Federal government requires big businesses to divert a portion of their earning towards social development of the area in which they are located. Oil and gas exploration licenses are particularly tied with conditions which require energy companies to spend a fixed percentage of their investments on socio-economic uplift of the concession areas granted to them for explorations. Invariably the companies have a dedicated department to comply with regulatory CSR requirements. Such departments vary from being very effective source to simple window-dressing mechanisms for community development. The departmental effectiveness solely depends upon the value-system and commitment of the top management towards socially responsible behaviour.
The Pakistan government and business sector also have comprehensive policies on the elimination of child labour. The Constitution of Islamic Republic of Pakistan states:
"No child below the age of fourteen shall be engaged in any factory or mine or in any other hazardous employment." In addition, it states that "All forms of forced labour and traffic in human beings is prohibited." However, the enforcement of these provisions is a different story as is the state of willing compliance to these laws by businesses. A number of laws contain provisions prohibiting child labour and regulating the working conditions of child and adolescent workers.
The most important laws are:
-- The Factories Act 1934
-- The West Pakistan Shops and Establishments Ordinance 1969
-- The Employment of Children Act 1991
-- The Bonded Labour System Abolition Act 1992
-- The Punjab Compulsory Education Act 1994
Pakistan has ratified ILO Convention 182 and has accepted the obligation to increase the age limit to 18 years to control the worst forms of child labour. The labour policy of 2002 reflects this obligation. In turn, the business sector has also adopted the policy and the written statement "anyone below the age of 18 years is not employed in this factory/business" can be seen close to the entrance gate of most business entities.
Another variant of Imposed CSR is when corporate behaviour is amended because of pure business compulsions imposed by the buyers or customers. For example, Pakistani exporters seek SA8000 certification to gain and retain market access to European countries.
Social Audit 8000 certification, if implemented in earnest, ensures that the business is being conducted in a socially responsible manner; its operations are transparent and free from labour malpractice's. Increasingly, importers from the USA and Europe have been becoming stringent in imposing good responsible behaviour on companies in Pakistan. How cosmetic or real the behaviour change is, again, really depends on the intentions of the top management.
Trade-imposed CSR has proven good for Pakistan at least in one case. Andre Gorgemans has documented a case study of multi-stake- holder initiative to eliminate child labour in sports goods industry around Sialkot.
World Federation of the Sporting Goods Industry (WFSGI) is an independent association formed in 1978 by sports industry suppliers, national manufacturers' associations, and well-known brands such as Nike, Adidas, Reebok, New Balance, Puma, and others.
Under one of its committees, the Committee on Ethics and Fair Trade (CEFT), the members cooperate in promoting free and fair trade and ethics, and work to improve the well-being of mankind through sports.
Around 1995, FIFA, UNICEF, ILO, local NGOs and Chambers of Commerce and Industry joined hands to address some of the more complex issues coming to light around ethical business practices and to establish a venue for the industry to understand, analyse, and act upon a wide range of issues of corporate social responsibility.
WRITING IN EJOURNAL USA: Economic Perspectives, Andre Gorgemans comments on the results and impact of the programme "...The Pakistan programme has a wonderful record of tangible accomplishment. Some 90 manufacturers from Sialkot, Pakistan, are now enrolled in the programme, and more than 95 percent of export production is regularly monitored and certified child-free.
More than 6,000 working children have been phased out of production and put back on the education track. The programme's Universal Primary Education component focuses on all children aged five to seven to prevent the entry of new children into the labour market.
Leaders of the India Sports Manufacturer and Exporters Association and the Sports Goods Foundation of India have adopted the Pakistan model to fit their unique circumstances." He finally concludes most aptly, "International bodies like WFSGI can facilitate collaboration, but we have no illusions that... industry's national leaders are the backbone of any successful programme (of responsible corporate behaviour)".
PHILONTHROPIC AND RESPONSIVE CSR Some times CSR does not seem to follow a well-defined objective; rather it is based upon a broad "Do Good" principle. A sum of money is reserved for "doing good" and funding takes place on as-requested basis. Corporate donations to the Shaukat Khanum Cancer Hospital, the Kidney Centre, Aga Khan University, Sindh Institute of Urology and Transplant and various other outfits especially health and education institutions fall in this category.
Highly successful business families have spent millions of rupees on philanthropy. Recently in Karachi, the Tabba Institute of Cardio Care has been set up at a cost of Rs 200 million by the Tabba Family. Dewan Mushtaq Centre of Nephrology and Transplant has been fully funded by the Dewan group to the tune of Rs 350 million. Similarly generous corporate donations to The Citizens Foundation are illustrative of philanthropic CSR.
The general principle of "doing good" attains a particular focus to become responsive CSR. The CSR funds are aimed at addressing a particular and defined social service need of the community or people. The need is genuinely felt for by the business and becomes a value for the company. Lyton Rahmatullah Benevolent Trust (LRBT) focuses exclusively on free cutting-edge eye care for the poor.
A car manufacturer in Bin Qasim found people in the area suffering from eye diseases caused by poor drinking water, so its CSR is focused community health and hygiene. It provides for drinking water, waste management and free eye care to people in the surrounding villages.
The largest private power generation company in Pakistan, Hubco, operating in near-by industrial city of Balochistan is responding to the community need of clean drinking water and basic education for the people of the area.
Karachi Chamber of Commerce and Industry joined hands with the City District Government's health department to spray and fumigate various localities against the Dengue fever. A local chemical company pro- vided disinfectants for the treatment at very low costs.
Jas Ahmed of Middlesex University Business School published, in May 2006, findings of a comprehensive survey on CSR practices in Pakistan. Jas's research captures the trends and types of CSR discussed here. With due acknowledgement, his findings are reproduced as summarising this article (parentheses added):
-- Western-style corporate social responsibility is clearly a nascent concept in Pakistan
-- The motivation for CSR, the types of CSR emphasised, and the relative importance of different CSR activities are influenced by cultural values, religious belief, and (personal interests)
-- There are external pressures driving the adoption of CSR values and practices in the country
-- There is evidence of financially substantial CSR activity in Pakistan both in the corporate sector and by high net worth businessmen
-- A considerable proportion of activity is directed towards socio-political causes such as health, education and social welfare (indicating government's failure in providing social services)
-- Social responsibility appears to be limited to concepts of corporate and personal philanthropy (limited to giving money for good causes such as health and education)
-- Some industries are setting standards of ethical and socially responsible behaviour Inconsistencies prevail and there are considerable gaps between best practice and common practice - including examples of socially irresponsible behaviour
Corporate Social Responsibility has the potential of becoming a major source for socio-economic uplift of the people in our country. The development sector has grown to an extent where NGOs are seen as providing specialised services and are respected for their contribution.
Traditional mistrust between corporate, government and non-profit sectors is receding and is being replaced with co-operation and mutual understanding. Need for home-grown, culturally valid and widely replicable CSR models, however, remains unmet.
Only public awareness and consumer pressure can make the industry behave in more socially responsible manner. CSR concept, principles and practices will come of age then: all CSR-types other than the truly responsive CSR strategy would cease to exist because they become socially unacceptable.
Courtesy NGORC Journal
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