Transcript
Page 1: CSR Study FinalReport November

September 2005

EVALUATION OF THE STATE OF

CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

FOR

SECURITIES & EXCHANGE COMMISSION OF PAKISTAN

And UNITED NATIONS DEVELOPMENT PROGRAM

PAK/98/011 PARADIGM-UNDP

B y

Ambreen Waheed

Page 2: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

2

DISCLAIMER

The views and comments in this report are the consultant’s and do not necessarily represent

those of the United Nations Development Program (UNDP). The UNDP, hence, does not bear

responsibility for the findings and recommendations found herein.

Page 3: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

3

CONTENTS 1.0 PREFACE........................................................................................................................................................ 5 2.0 INTRODUCTION................................ ................................ ................................ ................................ ............. 6 2.1. Why Map CSR in Pakistan?................................ ................................ ................................ ............................. 8 3.0 WHAT IS CORPORATE SOCIAL RESPONSIBILITY?................................................................................... 9 3.1. How CSR Has Evolved through History ......................................................................................................... 10 3.3 How it is Currently Defined and Understood .................................................................................................. 13 4.0 HOW IMPORTANT IS CSR IN TODAY’S WORLD?................................ ................................ ..................... 15 4.1. Global Principles, Local Application............................................................................................................... 15 4.2. Insurance against Bad News ......................................................................................................................... 17 4.3. Risks of Non-Compliance............................................................................................................................... 18 4.4. Factors Driving CSR Growth.......................................................................................................................... 19 4.5. World Trends in CSR Demand & Supply....................................................................................................... 20 4.6. CSR and WTO Requirements........................................................................................................................ 20 4.7. Business Case ............................................................................................................................................... 21 4.7.1. Access to Markets.......................................................................................................................................................................................................................21 4.7.2. Improved Financial Performance .........................................................................................................................................................................................21 4.7.3. Slide in Operating Costs..........................................................................................................................................................................................................21 4.7.4. Brand Image and Reputation .................................................................................................................................................................................................21 4.7.5. Growing Sales and Customer loyalty .................................................................................................................................................................................22 4.7.6. Productivity and Quality Enhancement..............................................................................................................................................................................22 4.7.7. Employee Retention...................................................................................................................................................................................................................22 4.7.8. Less Scrutiny by Regulatory Bodies ...................................................................................................................................................................................22

5.0 HOW DOES CSR FIGURE IN THE PAKISTAN CONTEXT? ........................................................................ 22 5.1. CSR Practices in Pakistan ............................................................................................................................. 23 5.2. Initiatives by Support Organizations in Pakistan ............................................................................................ 24 5.3. In Search of Competitive Advantage................................................................. Error! Bookmark not defined. 5.4. CSR in the Light of Isl am............................................................................................................................... 26 6.0 IS THERE A CSR ROLE FOR GOVERNMENT? .......................................................................................... 26 6.1. Examples from the World............................................................................................................................... 26 6.2. Meanwhile, In Pakistan…............................................................................................................................... 27 7.0 WHY THIS STUDY AND HOW...................................................................................................................... 28 7.1. Methodology.................................................................................................................................................. 28 7.2. Benchmarks................................................................................................................................................... 30 8.0 RESEARCH FINDINGS................................................................................................................................. 31 8.1. Data Analysis................................................................................................................................................. 31 8.2. Response Analysis........................................................................................................................................ 31 9.0 GENERAL PERCEPTION ............................................................................................................................. 34 10.0 STATE OF CSR............................................................................................................................................ 39 10.1. CORPORATE GOVERNMENT ................................ ................................ ................................ ................ 39 10.2. BUSINESS ETHICS PRINCIPLES ................................ ................................ ................................ ........... 41 10.3. ENVIRONMENTAL COMPLIANCE.......................................................................................................... 42 10.4. SOCIAL COMPLIANCE............................................................................................................................ 44 10.5. DISCLOSURE AND REPORTING............................................................................................................ 48 10.6. PRODUCT INTEGRITY............................................................................................................................ 49 10.7. CORPORATE GIVING OR COMMUNITY INVESTMENT ........................................................................ 50 10.8. STAKEHOLDER INVOLVEMENT ............................................................................................................ 52 10.9. SUPPLY CHAIN SECURITY.................................................................................................................... 53 10.10. FINANCIAL PERFORMANCE .................................................................................................................. 54 10.11. LEVELS OF COMPLIANCE OF CSR PRINCIPLES................................................................................. 56 11.0 BRIDGING THE GAP .................................................................................................................................... 57 12.0 CONCLUTION............................................................................................................................................... 59 13.0 RECOMMENDATION FOR CSR STRATEGY............................................................................................... 60 14.0 REFERENCES .............................................................................................................................................. 92

Page 4: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

4

ACKNOWLEDGEMENTS

I would like to record my sincere appreciation to the Securities and Exchange Commission for their commitment to CSR and their proactive role in leading the way towards a culture of

Corporate Social Responsibility in Pakistan. Initiating this research is a worthy first step toward

this objective. It would not have been possible without Dr. Tariq Hassan’s personal interest and commitment. I would also like to acknowledge the support, facilitation and feedback provided

by Ms. Jaweria Ather.

RBI’s partners of the Asia -Pacific CSR Centres Group , the Global Responsible Leaders Initiative at the European Management Development Foundation and Global Compact Learning

Forum deserve my gratitude for their expert advice in the design of this research through

extensive discussions. Their inputs added a meaningful perspective to the study.

This task would have been impossible without my team at RBI; Jamil Anwar for coordination,

Maryum Zaidi for data collation , Saad bin Tariq, Mohsin Bashir, Ahmed Hassan and

Muhammad Hussain, for their dedicated efforts throughout the study. Thanks to all of them, and to Dr. Faiz Shah for reviewing the data analysis and facilitating the stakeholder workshop despite his busy schedule.

Ambreen Waheed

Lahore, September 2005

Page 5: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

5

All of us

– the private sector, civil society, labour unions, NGOs, universities, foundations, and individuals –

must come together in an alliance for progress.

Together,

we can and must move from value to values, from shareholders to stakeholders,

and from balance sheets to balanced development.

Togethe r,

we can and must face the dangers ahead and bring solutions within reach.

– Kofi Annan

UN Secretary-General

1.0 PREFACE

Corporate Social Responsibility (C SR) is now moving towards Responsible Competitiveness, a

precept that implies that there is a role for business in influencing policy for business

success. The global CSR movement has passed through varied phases in time and in concept with regard to the implementation of CSR. Initially grounded in corporate philanthropy, it

moved on to solidarity movements or environmental activism with citizen sector movements

taking on business. At the same time governments and

courts have laid down more stringent parameters of corporate behaviour, compelling business towards legal

compliance, damage control for ci vil society and

consumer reactions, and then on to efficiency gains and

differentiation for competitive advantage.

Over the last ten years there has been a shift from antagonistic activism to positive engagement between

companies and their stakeholders. In Europe business organizations and their stakeholders are taking

collaborative actions for debating and creating CSR

policies and strategies to achieve a competi tive

advantage at a national stage and to move towards the next wave of responsible competiti veness which is

innovation, sustainability and future focus.

In the Asia Pacific most of the countries are riding the so-called second wave of CSR, which is efficiency-centred and market focused. They have reached conceptual clarity and are looking

at the impediments to CSR implementation. In Pakistan, however, we have just started our

journey and are struggling with the first wave i.e. of philanthropy and legal compliance which is

society and government focused.

CSR is “the integration by enterprises on a voluntary basis of the social and ecological concerns in their business transactions and their relations with the involved parties” .CSR is a dimension that should be part of the strategic orientation at the basis of enterprise and should therefore interact with all spheres of company management: with the financial aspects, wi th production, with marketing, with Human Resource and more generally with

corporate strategies and policies.

Page 6: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

6

In Pakistan’s immediate neighbourhood, w e see that during the last decade or so India and Sri

Lanka have gained competitive advantage due to their pro-activeness and future market-centred policies. Pakistan’s early promise in the wake of the widely recognized Sialkot

Partnership against Child Labour has lost momentum . Now, another opportunity is coming this

way in the emerging manufacturing hubs created by the various upcoming enterprise zones

and so-called “textile cities”, which can market themselves by adopting a demonstrable CSR strategy. Pakistan can either let this opportunity pass it by or swing into action in case a crisis

like the Sialkot child labour crisis hit, or Pakistan could act to embed a national CSR strategy

into decision-making and business practice through effective policy, incentives and a system of

credentialing that can assure overseas buyers of the country’ distinct position as a socially responsible supplier country.

Has the Pakistani enterprise arrived at a stage where it can learn from experience around it and

take a jump forward to catch the third wave of differentiation and competitiveness built on responsible business practice? Is the Pakistani enterprise mature enough to assess its own

processes against global CSR benchmarks and then turn shortcomings into differentiators to

capture future markets, which are surely steered by responsible and ethical business

practices? Sadly, barring a few notable exceptions, the answer to these questions is in the negative, as indicated by the findings of this research.

Taking Pakistan into the current wave of CSR means building responsible competitive ness, and

to do so require a collaborative effort that supports a culture of compliance and an environment that enables responsible thinking and practices . This is only possible by underscoring CSR as

a priority of national policy, followed by the development and implementation of a national CSR

strategy supported by all important stakeholders. From this first step CSR practices need to

evolve through an institution for CSR dialogue that responds to ever changing market demands. An example of such an institutional arrangement would be the formalization of a CSR policy and learning group comprising individuals representing relevant stakeholders.

Beginning as a semi-formal working coalition, possibl y under the aegis of SECP itself or an

academic or CSR research institution , this group can evolve into an independent organization if the situation demands.

2.0 INTRODUCTION

Does CSR have a value to corporate and national competitiveness as well as to society at large? Is there at all, a role for business in working with policy makers to create an enabling

environment for responsible and ethical business to flourish? Does business have a

responsibility for raising awareness, building capacities, and affecting change in ways that

impact national competitiveness in a globalizing world? Does Pakistani business have anything to contribute meaningfully to the global CSR debate and how it influences it?

CSR is no longer a new phenomenon for business, but these are some of the questions that

Page 7: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

7

confront policy makers as they determine the need for and the direction of a national CSR

policy. Governments are reviewing regulatory frameworks to integrate CSR into routine corporate disclosure regimes. Who would have said ten years ago that a random debate in the

citizen sector would nudge the world into a new paradigm of corporate behaviour?

As we know it today, CSR has its roots in consumer consciousness and solidarity movements in developed consumer societies that saw elements of social and environmental exploitation in

the behaviour of major global enterprises, whether they were mining or natural resource

exploration companies or retailers sourcing consumer goods and produce from cheap labour

markets in the developing world. From initial finger pointing and confrontationist strategies spearheaded by NGOs and civil rights activists to the blossoming of a host of sustainability

partnerships between these same NGOs and their erstwhile corporate foes, CSR has definitely come a long way.

Yet, even as the sustainability motive drives cooperation, lingering concerns about corporate

intentions and NGO agendas continue to muddy the discussion, especially in the case of brand

supply chains in the developing world to avoid labour practice norms or the environmental

impact of obsolete plants relocating to countries with less stringent safety or environmental regulations. Thus the CSR discussion now impacts supply chains of multinationals (MNCs)

even in their remotest reaches . As a result, with an eye on their stakeholders to safeguard

repute and often attracted by the competitive advantage it brings, MNC’s are in the forefront of

demanding “responsible behaviour” from their suppliers or sub-contractors. This side of CSR has of late been strengthened by initiatives from influential organizations like the World Trade

Organization (WTO).

Thus, multiple variables like stakeholder awareness, government initiatives, globalization and localization patterns, and the highly volatile business scenario, all have had a role to play in determining the centrality of CSR in today’s business environment. But, contrary to

expectation, CSR is not a defined code or a toolkit to be employed in the manner of an

operating manual. Rather, CSR is often a vision based on particular sets of values that business leaders often aspire to, and as such is more of an ever-changing philosophy, quite

open to interpretation and re-thinking of business strategy based on decisions related to ethical

values, legal compliance, respect for stakeholders, and supporting communities or nurturing

environment.

Increasingly, CSR is being interpreted as the expectation society has of business. CSR is the

leadership vision that is more than occasional gestures, marketing oriented initiatives,

enhancing public relations or business affiliations etc. In contrast, it’s a comprehensive set of policies and programs enriched with the urge for developing a better society.

Page 8: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

8

This report presents the prevailing state of corporate social responsibility in Pakistan. The

report has been compiled on the basis of information shared directly by companies as well as by extensive literature review from variety of public sources such as newspapers, books, on-

line services, reports from various NGOs, academic studies and international conferences and

dialogues between governments, industry, academics and civil society. Starting with the brief

back ground about how the CSR roots were planted, the report explains the growth and expansion apart from the need to conduct this type of research in Pakistan. The driving factors

have been discussed along with the influence in the countries like Pakistan. The research

methodology explains the de velopment of the questionnaire catering the set parameters and

the data collection strategy. A detailed analysis has been established over the data collected from variegated business sectors in Pakistan including the multinationals as well as the small

and medium enterprise. At the end we have proposed the strategy to fill up the gaps in the CSR implementation and the steps essential for Pakistani businesses to compete their international

competitors by increasing their repute and maintaining their quality.

2.1. Why Map CSR in Pakistan?

CSR is now a mainstream business management issue the world over. A growing body of

research is enriching the business case for a socially and environmentally responsive corporate sector. This was not always so. The nineties are believed to be a watershed in pushing CSR

towards the top of the agenda following a groundswell of consumer concern about standards of

corporate behaviour along product supply chains criss-crossing the globe. From product

integrity issues confronting brands like Nike and Martha Stewart, to process integrity issues highlighted during the Shell and Barings episodes, the ethical dimensions of an enterprise’s

conduct became a focus of debate not only within citizen sector organizations where it had

originated, but among top decision-makers in Government.

Lobbyists and legislators, especially in Scandinavia and Western Europe were quick to echo civil society’s demand for corporate accountability and disclosure. Enron drew in the USA into

the CSR debate as well, followed by tougher regulations on co rporate disclosure. Other than

for a handful of corporations, this nexus of consumer demand and legislation has meant a paradigm shift. The new millennium has seen companies in over-drive, rallying to present their

humane values in sharp relief to their traditional competitive qualities. The “stakeholder” had

finally arrived to share the boardroom agenda with the “stock-holder”.

This burgeoning demand for socially responsible business behaviour has been matched step-

for-step by a number of credible supply side efforts that help the consumer or investor

objectively differentiate between “good” corporate citizens and everyone else. With beginnings

in diverse contexts, raging from inter -faith groups to labour unions to watchdog organizations, a set of globally acknowledged yardsticks are now available for establishing credentials of any

enterprise that wishes to be judged for its impact on society. These, including the ISO 14000

standard for environmental management systems, the SA 8000 social accountability standard,

Page 9: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

9

and more recently, the Global Reporting Initiative guidelines for sustainability reporting, all

emerged in response to the need for a global set of implement-able CSR standards. The UN Global Compact and the Johannesburg World Summit on Sus tainable Development both

validate this trend for CSR. Closer to home Securities and Exchange Commission of Pakistan

(SECP) has made a first contribution with its Code of Corporate Governance, and the 2002

Trade Policy articulated for the first time the government’s intent to mainstream international industry benchmarks through appropriate institutional support.

Pakistan itself has had to learn quickly in adapting to the CSR paradigm. The country’s carpet

industry suffered almost a billion dollars of damage through the 1990s as a result of the Iqbal Masih case, while the sporting goods industry stepped away from the brink only after the

Sialkot Partnership led by industry associations brought together the government, ILO and citizen sector organizations to combat child labour. Since then the nation’s textile and edible

products export industries have continued to face demands by international buyers for CSR credentials

Within this environment, it is unavoidable for Pakistan to actively consider evidence -based

strategy development as a first step towards creating a well-directed and meaningful CSR culture in Pakistan. We have numerous examples of corporate philanthropy, which are

regularly presented as CSR. To explore how deeply corporate values are embed ded in

organizations and to examine the role values are playing in Pakistan’s context, this study

emphasizes:

- how companies define Corporate Responsibility and Corporate values

- the relationship of values to

business performance - to identify best practices for

managing corporate values.

3.0 WHAT IS CORPORATE SOCIAL RESPONSIBILITY?

Allan Hammond of the World Resources Institute says, “I don’t know of any developing country

government that can deliver services in a million places at once everyday. If we want to solve

AREAS OF FOCUS FOR THE STUDY

1. The Need for CSR in Pakistan 2. CSR approaches being practised in Pakistan 3. Factors driving CSR, like reputation, loyalty etc. 4. Barriers to implementation of CSR 5. WTO requirements 6. Assessment of potential threats & opportunities 7. Policy or regulatory measures to support CSR 8. Outputs/targets industry can set to report on CSR 9. Identify best practices 10. Strategy for effective implementation of CSR

Page 10: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

10

some of these social problems, one of the best ways we could do it is to hire the right global

companies.”

3.1. How CSR Has Evolved through History

Corporations use natural and human resources from their environment to run their business

and generate profits , and they are responsible for the depletion of these resources and the

negative impact caused by running of their business to environment and the community around their business. The CSR concept evolution started with the concerns related to the

damage created by business on environment and society at large by way of activities linked to their business operation. Business are expected to clean up the mess they have generated to

the environment, Until 1980’s CSR was considered same as corporate philanthropy. The current CSR concepts started formulating in early 80’s. In 1980’s and 1990’s examples like

Shell spoiling the environment and violating the human rights in Nigeria, started a new wave of

criticism which triggered a complete different thinking on CSR and hence many CSR

definitions emerged during this period.

On the other hand, companies like Nike and GAP Inc were hit by the bad repute of their

suppliers violating labour laws and exploiting poverty and promoting discrimination. When the

activist groups and governments felt that current laws governing environment, health, and safety and consumer protection are weak to handle multinationals, the United Nations took the

initial step by providing a code of conduct for such trans-national companies. This step failed

due to the lack of support from governments and opposition from different organizations. As a

result a voluntary initiative, World Business Council for Sustainable Development (WBCSD) was formed in 1991. This initiative was attacked because critics said that CSR actions should be mandatory instead of voluntary. Critiques argued that voluntary CSR cannot hold corporate

operations accountable .

As a further development social auditing was introduced by third party verifiers to evaluate the

compliances and the social state of businesses. Social reports emerged as a result. In the late

80’s Ben & Jerry's ice -cream led in voluntary social auditing, opening up their records and

processes for evaluation and inspection. But because in these early days the process lacked the rigour or standards against which performance could be measured, it did not create a major

following. Social and environmental standards began to be developed to cope with this

situation. Certification programmes have been emerging since all through the 1990’s. Several

certification-centred groups like Social Accountability International, Forest Stewardship Council, Fairtrade Labelling Organizations International, and a host of others have continued to work on

different social aspects of CSR. Lately they have joined hands in the form of the International

Page 11: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

11

CSR Approaches • Business Ethics • Cleaner Production • Environment • Fair-trade • Human Rights • Labor Practice • Workplace Safety • Occupational Health • Quality Management • Supply Chain Integrity • Triple Bottom line

Social and Environmental Accreditation and Labelling (ISEAL) group with a view to oversee

standard identification and standard implementation.

Hence, CSR has continued to evolve rapidly over the last thirty years. Even though it is still

favoured by corporate leaders, the old model of corporate philanthropy is looked upon more as

a self-actualization gesture than as socially responsible attitude. For example Andrew Carnegie, the steel magnate who built libraries, universities and museums as a philanthropist

polluted towns with smoke and debris and dealt harshly with workers as an industrialist even

employing armed guards to shoot at strikers. In today’s environment libraries or universities

might not accept funding from a business known to pollute or be socially irresponsible. In 1999 students from a number of major US universities formed the Workers Rights Consortium (WRC)

to protest against Nike and its sponsorship programmes because of human rights allegations.

Customer expectations and demand for “clean and green” companies have led to a number of benchmarks and guidelines, such as the Sullivan Principles, the UN Global Compact and the

Organization for Economic Cooperation and Development (OECD) guidelines on multinational

enterprises. During the last decade, the adoption of the codes of conducts by the organizations

is an encouraging act. Several examples exist in the leather, footwear and apparel industries establishing codes of conduct and monitoring programs not only due to the prestige and

competition but also with the aim to contribute towards society. Quite a few pharmaceutical

companies have reduced the prices of the drugs direly needed in the underdeveloped

countries.

The evolution from CSR theory to CSR practice can be broken down into several phases.

1. Pressure building up against the businesses 2. Wave of awareness by the society and the

stake holders

3. Realization of the responsibility by the businesses 4. Development of Policies and identification of

best practices

5. Implementation of the policies

6. Development of several programs to implement CSR Performance and Compliance Evaluation

Page 12: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

12

3.2 A Chronology of CSR

CSR Drivers Year Crisis Focus

Pressure & Enabling Organizations Business action & Reaction

Civil Society Action & Reaction

1960 Amnesty International1l, WWF2and OECD 3 founded

1962 “Silent Spring” by Rachel Carson exposed DDT 4

1962 Cuban Missile Crises 1969 Friends of Earth founded 1970 First Earth Day Celebrated in USA 1971 Green Peace founded 1973 Seveso Disaster, Italy, chemical reactor

ruptured and infected the ecosystem. 5 1973 Watergate Scandal USA 1975 End of Vietnam War 1978 2nd Oil Crises

1960-1979 • Pressure

building against the Governments and Business

1979 Iran revolution / Soviet invasion of Afghanistan

• Denial • Information hiding • Environmental

disaster • Damage control

• Pressure Building • Voice Raising • H/C Rights Awareness • Criticism for Gov. &

Business • Demand for policies for

compliance • environmental and natural • resource limits • NGOs and environment • ministries formed • Demand for Compliance • Environmental NGO

1984 Bhopal Disaster, India 1986 Chernobyl Disaster, Ukrain 1987 Montreal Protocol, intl. agreement designed to

protect the stratospheric ozone layer 1988 Green Consumer Guide Launched 1989 Exxon Valdez Oil Spill, Alaska 1989 Fall of Berlin Wall, East Germany 1989 Tiananmen Square Massacre, China 1990 Nelson Mandela Freed 1990 20 Anniversary of Earth Day 1990 SustainAbility formed 1991 First Gulf War 1992 First Earth Summit, Brazil 1994 Triple Bottom Line 1995 Shell’s Brent Spar issue 1995 Shell’s Nigerian Scandal 1996 Nike Sweatshops, Consumers boycott Nike 1996 Mad Cow Disease

1980 – 1997 • Human

/labor right violati ons

• Corruption • Environment

Negative impacts

1997 Kyoto Protocol6

• Business responsibility

• Process Implementation

• Strategies development

• Policy development

• Efficiency • Risk management

• Capacity Building • Societal Awareness • Legislation development

Strategies development • Auditing • Accounting • Human Rights formulated • Collaborations/forums • Consumer actions

1999 Battle of Seattle 2000 World Social Forum held - the WEF’s failure7 2001 9/11, terror attack changes the world history,

highlighting security and civil human rights 2002 World Summit on sustainable development,

USA 2002 Enron Scandal 2002 American Invasion on Afghanistan 2003 3rd Gulf War, UN credibility shattered 2003 Parmalat Scandal, Italy 2004 Iraq Turmoil, Abu Ghareeb human rights

scandal 2004 Madrid Train bombing, Spain 2004 Shell reserves controversy 2004 Tsunami Catastrophe , Indian Ocean

1998 – 2005 • Globalization

• Demand for Responsibility in behavior & actions to SH.

• Security

• WTO

• Economic imbalance

• Governance

• Accountability

2005 London bombing, UK

• Accountability • Transparency • Governance • Global

Collaborations • Security • Stakeholder

involvement • Collaborations with

academia

• Demand for SR also from other Stakeholders especially from Government

• Diversity • Global Social

Responsibility • Responsible

Competitiveness • Governance • Capacity building • Enabling

Adapted Table 3.2

Page 13: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

13

3.3 How it is Currently Defined and Understood

Over the period of the past thirty years, the term CSR has continued to adapt to the changing situation in businesses world over. The concept continues to go through its evolutionary march

and so does its definition. No one definition describes CSR, but each of the following reflects a

value-driven expectation that a business generates within its customers. A sampling is given

below:

“CSR is the organizations social license to operate, and is important to legitimize business

activity, particularly in the global activity where businesses are accused of practicing soulless

capitalism.”8 Corporations need to have powerful vision and highest values to go further than compliance with current regulations and best practice .9

“Corporate Social Responsibility is achieving commercial success in ways that honor ethical

values and respect people, communities, and the natural environment”10.

“CSR means addressing the legal, ethical, commercial and other expectations society has for

business, and making decisions that fairly balance the claims of all key stakeholders”

“CSR when well practiced is about sound business practices and good management that

deliver value to businesses and their shareholders, as well as to society at large. This vision of

business hardly suggests that profits should take a back seat to other considerations” 11

“Globalization creates risk as well as opportunity and business leaders have considerable

responsibility to help make it a constructive rather than a destructive force. Responsible

behaviour toward employees, shareholders and communities is not a luxury for good economic times but a core concern at all times” 12.

“The key for corporations is that CSR activity is seen not as PR, not as philanthropy, but as

mainstream to the business – justified not just by altruism but on sound business ground”. 13

Stephen Timm’s definition above very clearly sets CSR apart from philanthropy which is

giving back to the community in some sense whether it is through funding, volunteering or any

kind donation or personal involvement and CSR involves more internally - focussed activities in terms of HR policy, Ethical Business Practices, environmental regulatory compliance.

Corporate philanthropy is an act of giving and this business practice includes the giving of cash

gifts, the establishment of non-profit foundations, product donations, and em ployee

volunteerism or In addition to charitable giving, more corporations are becoming actively involved in arts, education, culture, health and human services, and civic and community

outreach.

Page 14: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

14

A socially responsible company may include philanthropy as a part of its overall efforts to be

stakeholder-focused. However, corporate social responsibility implies a much broader obligation than philanthropy alone. Socially responsible companies will consider the community

impact of all aspects of their operations, rather than reserving community issues until after

profits are made. Shifting one-time philanthropic donations into a focused program of

community partnering can be a good first step for companies that want to develop a comprehensive approach to social responsibility.

However, it has to be made clear that CSR extends beyond the random act of generosity to

include such commonplace values as paying taxes, open disclosure, labour standards and customer sensitivity. It is time Pakistan has a mechanism for collecting and analyzing credible

real -time data on accepted CSR variables within its multi -layered corporate sector. Only then can we see CSR becoming a strategic asset for increasing industry competitiveness and a

socially responsive corporate culture.

Increasingly, companies around the world have adopted formal statements of corporate values,

and senior executives now started to identify social concerns as top issues on their companies’

agendas. The meaning of this new emphasis on social responsibility is less obvious than the trend itself.

John Zinkin of Nottingham University explains, “defining responsible behavior and getting CSR

right is difficult because it is a journey, not a destination. As countries evolve, getting richer and better edu cated, so society’s expectations of company behavior become more demanding. So

what was good enough yesterday may no longer be good enough today, and certainly will not

be good enough tomorrow.”14

CSR still is an evolving concept and has taken its shape based on different events in different geographical contexts over a period of time. We can say it has gone through different stages of

evolution over the last 30 to 40 years, which can be referred to as “generations”. After the

massive des truction of World War II, the process of rebuilding and restructuring was begun. International organizations were formed. Businesses were developed through incentives.

During the 1960’s and 1970’s several non -governmental organizations came into being, often

lobbying with governments to develop policies and laws related to human rights and fair

treatment for vulnerable segments of society 15 In the 80’s and in the mid 90’s the world economy saw several ups and downs.

Page 15: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

15

CSR Dynamism

In a perpetually changing world, there is

A constant re-evaluation of what CSR means,

individually and collectively,

Within business, for government,

For societies in which business operates

And for the environment.”

Chris Perceval

Director CSR International

Several international pacts were signed and organizations emerged to address a variety of social and environmental problems collectively. Corporate governance and responsible

investment emerged as key areas of regulatory concern as a consequence of highly publicised cases16. Concurrently, and perhaps as a consequence, several advocacy or enabling

organizations and initiatives have come into being in the face of the growing need for corporate disclosure and social accountability17. The Fig (3.3) elaborates the focus on the activities

during these three generations. We are now on the verge of the 4th Generation and importance

of CSR is still growing.

4.0 HOW IMPORTANT IS CSR IN TODAY’S

WORLD?

4.1. Global Principles, Local Application

Globally organizations, especially UN organizations,

are promoting CSR as the path to competitive

1st Generation Pressure driven engagement for pain alleviation with

localized benefits

2nd Generation Systematic engagement for

risk management and increased under-standing

of stakeholders

3rd

Generation Integrated

Strategic engagement for sustainable

competitiveness

Fig (3.3)

Page 16: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

16

The Sullivan princ iples act as a benchmark of CSR

• Express our support for universal human rights and, particularly, those of employees, the communities.

• Promote equal opportunity for employees with respect to issues such as color, race, gender, age, ethnicity or religious beliefs...

• Compensate employees to enable them to meet at least their basic needs and provide the opportunity to improve their skill and capability

• Provide a safe and healthy workplace; protect human health and the environment.

• Promote fair competition including respect for intellectual and other property rights.

• Work with governments and communities in which we do business to improve the quality of life.

• Promote the application of these Principles by those with whom we do business.

advantage and sustainable development. There is emphasis on designing projects to facilitate

less developed countries in understanding and implementing CSR.

UNCTAD is assisting developing countries18 in designing and implementing active policies

for building productive capacity

and international competitiveness based on an integrated treatment

of investment, corporate

responsibility, technology transfer

and innovation, enterprise development and business

facilitation (including transportation and information

and communication technology), competitiveness, diversification

and export capacity, to sustain a

high level of growth and promote

sustainable development’.

According to a survey conducted by PriceWaterhouseCooper to reach CEO’s around the word

to gather their view on CSR "Many Global CEOs seem to view their companies' social reputations as a work in progress. While 47 percent are resolutely proud of thei r companies for

having a positive social reputation, another 41 percent offer a qualified view -'to some extent'

The survey reported highest confidence in CSR reputation amongst North American CEOs,

with 64 percent feeling strongly that the public perceives their company as a positive social performer and 30 percent feeling somewhat guarded confidence.

Asia-Pacific CEOs have the lowest confidence in public perception of their companies as

positive social performers, with only 28 percent feeling strongly confident and 54 percent feeling more cautiously confident. CEOs definitions of CSR differ across regions. As a group,

CEOs prioritize workplace safety and responsiveness to all stakeholders, regardless of legal

requirements, as the key defining components of social reputation, with over 80 percent

support. However, North American CEOs' prioritize supporting community projects over workplace safety in their definition of CSR, while Central/South American and European CEOs

prioritize workplace safety highest. About 60% CEO believe that CSR is vital to profitability

and stress that CSR must remain a priority, even amidst the current economic downturn .

According to Nitin Desai, the UN Under -Secretary-General the evolution of corporate social and

environmental consciousness over the past decade, with corporate supporters of these

initiatives is growing from a small minority to a larger, more legitimate minority. Marketplace

Page 17: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

17

competition, as well as burgeoning environmental and social consciousness in society at large,

may create the critical mass necessary to push this minority into a majority.

Ben Cohen, founder of Ben and Jerry’s homemade ice cream and a well-known social

entrepreneur believes that businesses tend to exploit communities and their workers and he

thinks that this is not the way the game should be played. He envisions that “business has a responsibility to give back to the community because the business is allowed to be there in the

first place, the business ought to support the community, and business get community support

when they support the community.”

4.2. Insurance against Bad News

While corporations need to adopt common values that work across cultures and nationalities, they also need to be sensitive to local communities, cultures, norms and work practices. CSR

is a corporate survival issue. In the e-information age any negative news can be a Tsunami for even the most stable of organizations, Good news are short lived but negative news has a long

lasting negative impact on stakeholders. It can wreck market confidence, effect customer

loyalty and enrage general public. The media highlights corporations for their failures rather

than their successes – and unethical behaviour even if it is unproven means a blot on reputation that takes a long time to clean, even with the most strident of remedial steps. The

ensuing cost to competitiveness is not difficult to surmise.

Being proactive and embracing CSR at the earliest possible is a good risk managing strategy for a company. In today’s world social

responsibility, corporate values and community initiatives have a

major role in increasing profits through larger sale of product by

responsible companies. It’s the best management tool for voiding and mitigating business and marketing risks.

Over recent years it has become more and more evident that customers reject products

developed, made or marketed through ways that generate unethical profits, even if it generates profits for shareholders, who too are progressively becoming wary of such sensitivity.

Increasingly, there are growing legal implications linked to unethical business practices.

Corporations are finding it a challenge that is difficult to respond to. The global stakeholder

mindset reflects that mere compliance to regulation is not enough to label a corporation as socially responsible. Even

companies that appear 100%

compliant today can still land up

in trouble tomorrow because history tells us they will be

judged by tomorrow's standards

even when their past is

Whether you

“believe” in it or not,

CSR is a corporate

survival issue

CSR Opportunity

Globalization creates risk as well as opportunity, and

business leaders have considerable responsibility to help

make it a constructive, rather than destructive, force,"

DiPiazza.

Page 18: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

18

examined. There is a need for companies to be more “futuristic” and proactive in their thinking

so they can lead the market by anticipating new legislation. It is now possible for companies to make a difference not only with their products but also with their values.

4.3. Risks of Non-Compliance

Businesses had to pay a huge cost for failing to understand and integrate socially responsible values and practices in business dealings with stakeholders. There are several examples that

alarmed the business sectors over the last two decades and enforced them for a strategy

change. A company’s repute and success is dependant on the relationship with all these

stakeholders. Relationship building is a key to success of any business and it’s only possible when the business practices are the ones acceptable to everyone. Several corporate scandals

have been highlighted by the pressure agencies like NGO’s, media, internet etc.

In the 70’s and 80’s Shell was heavily criticized for continuing to carry out the business in South Africa and breaking anti-apartheid sanctions. Shell’s intimate involvement in Nigeria while a key

opposition leader was assassinated and its role in environmental damage in Ogoni-land too

brought severe criticism against the multinational. The watershed event was by many

accounts, the Brent Spar crisis in 1995. Greenpeace. Opposed Shell’s decision to dismantle and dispose of one of its oil platforms in the North Sea. Initially unmoved Shell ended up paying

a price in image and reputation, costing them more than double to what it would have cost to

decontaminate the structure and reuse or dispose of the waste on land. In the face of consumer

boycotts even a mighty company like Shell came to feel the might of the mass market, and bowed to public opinion in the new media war.

Nike, the world leader in sporting goods, was struck by controversy over their labour practices

in Asia. This too led to massive consumer boycotts, negative publicity, stakeholder and pressure group criticism, and created an emergency situation for the top management in which the company was compelled to change their policies and devise a new strategy to clean up

their supply chain and make their suppliers compliant with the standard practices. The Nike

issue acted as a catalyst to bring about a change in management policies and pointed out that consumer expectations are not restricted by geography.

The Enron scandal was another landmark in the history of CSR and built up a strong case for

its implementation. Enron came up from nowhere to become America’s largest company in just 15 years employing 21,000 staff in more than 40 countries. The company was spotlighted by its

corruption, bribery and false projection. Enron’s declaration of false profits, political lobbying,

shredding of documents and auditors inability to reveal companies unorthodox business

practices are just a few of the major charges. The Company had to face criminal investigation and law suits and bad repute; transparent reporting then emerged as a solution to avoid such

corruptions in future which emphasizes the ethical dimension of CSR. Enron’s latest report on

Page 19: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

19

environmental and social situations outlines this as a measure taken and how the company is

gearing up to address human rights, environmental problems, and health & safety issues etc.

4.4. Factors Driving CSR Growth

The changing scenario of business across the world due to globalization has instigated

governments to regulate business and develop policies compliant to this emerging situation. These policies target traditional corporate performance variables such as environmental

performance, working conditions and marketing ethics etc. According to its promoters

globalisation is promoting democracy as well as economic growth. Companies can work with

local communities for sustainable development programs by conveying clear values and principles, and accepting responsibility for workplaces and workplace conduct, companies can

not only build trust and mutual understanding with stakeholders, they can also support the role of governments. As for its detractors, globalization can be contained by encouraging CSR as a

foil for runaway commercialism and exploitative business practices. This is a rare convergence in support of CSR from completely opposing perspectives.

Customers can be bo th from businesses or consumers. Studies have shown that their interests

and purchasing decisions are linked with social criteria, especially judging the

environment and human rights. Awareness

of various stakeholders including

shareholders and the general public has increased over the period. This awareness

has increased the expectations they had of

businesses thus creating a pressure on the

businesses to adapt to the social and economic well being. Increasing interdependence of shareholder values and

the corporate values have brought up a

strong case for top management about CSR. There is increasing awareness among business leaders in the developed economies that

practicing corporate responsibility affects their corporate reputation and brand image.

Demand for disclosure has increased over time from the customers , investors, regulators, community groups, environmental activists, trading partners which have resulted in a variety of

social audits that explains the social performance of an organization. NGO’s have also played a

major role in turning the spotlight on the corporate practices creating pressure for the non-

compliant organization and boosting the activities of the organization practicing or planning the CSR strategy. Also there has been a rapid growth in the ‘CSR industry’ of consultants and

accounting firms who are driving the social reporting trend, while representing that the driving

force actually comes from the organization’s stakeholders. Companies that base their business

Global CSR Trends CSR is now a mainstream business principle

Triple Bottom Line is an accepted tool

Voluntary disclosure is gaining ground

CSR departments are now commonplace

CSR is now seen as an investment not a cost

SRI Indexes are outperforming others

Business schools teach CSR at PhD level

© Responsible Business Initiative-2003

Page 20: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

20

decisions on profit margins alone and ignore their impact on stakeholders can pay a heavy

price in both the court of public opinion and the stock markets.

The Nike experience was a catalyst for bringing supply chain issues into the spotlight, that

consumer expectations from their favourite brands business are not geographically restricted to

their home country but based on universal principles reinforced by the fast expanding information society that links all manner of stakeholders. Nike’s misfortune was that it becam e

the symbol of what every other global brand seemed to be doing – disregarding their

responsibility to exploited workers or an endangered environment. But Nike has also ended up

having to lead the pack in changing their previous business practices at hea dquarters as well as along their supply chains in developing countries.

HOW IS CSR CHANGING WITH GLOBALIZATION?

4.5. World Trends in CSR Demand & Supply The European Commission has established a “European Multi-stakeholder Forum” to exchange

best practices and explore the European approach to CSR. Corporate progresses towards

greater responsibility has always been the result of both push and pull forces. Business

leaders pulled their organisations to higher standards and, their counterparts in society pushed for change.19 Pascal Lamy, EU’s Commissioner for Trade strongly advocates that in order to

extend the limited societal benefits of CSR practices it needs to be integrated into broader

strategies and public policies.

4.6. CSR and WTO Requirements

CSR is one of the responses to the imbalances resulting from

the acceleration of the globalization process. Imbalance

between the advanced governance system in industrialised countries, who dispose of a highly sophisticated set of economic and social regulations, and the lack of such

governance in developing countries as well as at international

level.20

International growth of business and the efforts of WTO to remove global barriers has also

pressurised the smaller economies to become competitive. Big business entities are not only

concerned about their CSR strategies, companies are also keen to ensure that their suppliers, distributors and even consumers are informed about the company’s ethical and social

performance.

Investment groups have also started pressing the companies on their social issues. They require disclosure on wide range of CSR issues including environment responsibility, workplace

policies, community involvement, human rights practices, ethical decision making and corporate

governance.

To make CSR into a business case, companies have to under-promise and

over-perform. ©Responsible Business

Initiative-1999

Page 21: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

21

4.7. Business Case

Our research also focuses on different definitions and benchmarks being used globally in major

regions and at how business is being impacted in terms of their profitability and productivity by

implemented CSR practices. The business case for CSR is now a reality proven through a number of researches. Case studies of organizations all over the globe have clearly identified a

linkage between socially responsible practices and greater financial gains21. In Pakistan, on

the whole, the business case for CSR is yet to be understood in terms of competitiveness and

business advantage. If we assume that business schools teach what they determine as useful to their pupils, then this finding is reinforced in the lack of importance being given by them to

CSR. Moreover, we find that companies often feel that resources expended on mandatory social or environmental compliance is CSR. And that their donations to charity are CSR costs.

The challenge is to create companies that have the vision and capacities to create socially and

environmentally responsible business models that can outperform competitors who do not

accept this challenge. Some of the proven benefits to business are discussed below:

4.7.1. Access to Markets

According to socialinvest.org SRI funds have increased from 40 billion US dollars in 1984 to 2

trillion US dollars in 2003. Socially Responsible Investments have risen by 7% over the past

year even as the total volume of investments has declined 4%. Companies addressing ethical, social and environmental responsibilities have growing access to capital.

4.7.2. Improved Financial Performance

Several academic studies have shown the connection between socially responsible business practices and positive financial performance. It’s found out that unethical corporate behaviour directly affects the stock prices.

4.7.3. Slide in Operating Costs Environmental stewardship and workplace safety initiatives help improve work place practices,

and processes, reduce wastes, and resource consumption. Thus they improve productivity and

reduce costs. Enhancement of social standards and benefits result in employee retention which

saves hiring and training cost and increase profit by improved productivity through stable work force.

4.7.4. Brand Image and Reputation

Companies or brands with good image and clearly defined strategy on corporate social responsibility attract a large number of customers. A socially responsible organisation can

benefit from its good reputation amongst its customers and is also recognised as a respectful

entity in their business community. Increasing their ability to attract investment and trading

Page 22: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

22

partners. Saves revenue on advertising to restore brand image and increase financial viability

through increase share prices.

4.7.5. Growing Sales and Customer loyalty

The common concerns of the customers include price, quality, appearance, taste, availability

safety and convenience. CSR has created potential incentives for entrepreneurs who can now cater a growing market segment of ethically motivated consumers who are inclined to value

based criteria. A good example from Pakistan is Saga Sports, whose investments in

community infrastructure and socially responsible manufacturing made it the world’s largest

soccer -ball manufacturing company despite a business environment fraught with child labour allegations

4.7.6. Productivity and Quality Enhancement

Companies that invest in the working conditions and environmental friendly atmosphere and also involve the employees in decision making tend to have an increase in productivity.

Employee loyalty and dedication results in effective man hour utilization and hence increase in

quality.

4.7.7. Employee Retention

Companies perceived to have strong CSR commitments often find it easier to recruit

employees, particularly during tight labour markets. Retention levels may be higher, too,

resulting in a reduction in turnover and associated recruitment and training costs.

4.7.8. Less Scrutiny by Regulatory Bodies

Another important advantage observed in case of organizations practicing corporate social

responsibility is that they are less scrutinized by the regulatory authorities and are given prompt treatments and extra benefits.

5.0 HOW DOES CSR FIGURE IN THE PAKISTAN CONTEXT?

In the West CSR has become a touchstone of Corporate trust and a predictor of business longevity. In Pakistan, CSR is still a buzzword for most of the organizations and individuals.

Businesses are in a process of attaining the internationally accepted norms of corporate social

responsibility often either misunderstanding the true philosophy of CSR or ignoring it. The

multinationals in Pakistan are ahead of this wave, due to their international linkages and are actually adopting the standards followed in their

head-offices in the developed countries . The birth of

several NGO’s working for CSR related issues have

expedited the awareness process. The pressure raised by their voice has actually instigated the

government and the businesses to develop

strategies complying with the international

Need for change

Systemic change is needed. Discontinuities

will lead the core of the global economic

system — i.e. the financial community — to

value the material importance of sustainability

management.

Ernst Ligteringen, GRI

Global Reporting Initiative, Netherlands

Page 23: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

23

standards. Still there is a need to involve civil society and the academia to make a powerful

CSR strategy for Pakistan that can be implemented in addition to a strong national body that can enforce the regulations.

Multinationals and quite a few large nationals have policies committing to environmental, social

and ethical compliances and they have also invested in community projects which includes welfare, primary education, adult literacy and health sector projects, media awareness and

vaccination campaigns, establishment of hospitals and diagnostic centres. Some focus is also

on cultural programmes such as, charity shows, sports events which are mainly initiated to

enhance brand image and product publicity.22 All these corporate activities are cyclical and reflect a non -strategic and non -business approach to very good societal investments. These

activities are a useful component of CSR, referred to as Social Investment. It is mostly a step that makes a difference, but companies can create an even larger impact towards sustainable

development if they consider strategically sound CSR investments.

5.1. CSR Practices in Pakistan

State of CSR in Pakistan is still in its infancy. Only few companies have an existing CSR

strategy and mostly they are the multinationals who follow their own CSR policies and S standards. Unfortunately, the local industry is either unaware of the benefits brought by CSR or

they feel that even if they do not adopt such policies, they are not in any state of danger. The

apathy of the local business sector was highlighted in the 1996 by the breakdown of the local

carpet industry and the threat of damage to Sialkot’s sports industry. Labour exploitation, child labour, inadequate employee benefits and unsuitable working environment were few areas

pinpointed by the international eye. Though taking the reactive measures, the joint effort of the

industrialists saved the greater damage foreseen, but not much has been done to take more

proactive measures. In 2003 a multi stakeholder forum

“Pakistan Compliance initiative” was

launched with support from international buyers, the textile sector,

and the Ministry of Commerce. A draft

national standard was developed for

use as compliance standard approved by Government to replace many

International social and environment

compliance standards and buyers code of conduct. The result of this effort was inclusion of

social compliance in the trade policy and initiation of a project proposal by Ministry of Science and Technology to European Union for encouraging SA800 implementation by subsidizing

consulting and implementation cost.

Why we need CSR Strategy in Pakistan...

- Money is better spent for preventive interventions

- It costs less over time to fix the process

- It costs more over time to fix “end-of-pipe”

- One-off philanthropy is good but not sustainable

- Business goals are better achieved if linked to CSR aims

- CSR leaders enjoy entrepreneurial advantage too

©Responsible Business Initiative -2000

Page 24: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

24

In Pakistan CSR is frequently equated with corporate philanthropy, the terms being often

mistakenly used synonymously. Some consider CSR to be a simple compliance with law. This creates a difficulty because top management is still uncertain about the true meanings of

CSR. This indicates the need for a mass awareness campaign supported by the government,

targeting businessmen, entrepreneurs and customers so that they are able to appreciate CSR

and also the general perils of non-compliance in today’s environment. Frequent and open discussion defining and understanding CSR, detailing its nature and promoting and developing

methodologies on how local businesses adopt and manage their CSR obligations would be a

useful first step.

5.2. Initiatives by Support Organizations in Pakistan

Since the inception of the concept of CSR and the awareness, several organizations have

evolved over the period of time that have played a major role in creating the awareness, pointing out the issues and fighting the injustice. In Pakistan this activity has not been

encouraging so far. Since the idea is hardly a decade old, few organizations have been formed

to work on different issues incorporated in CSR. The table-5.2 elaborates the initiatives taken

by different organizations and the key areas they are working on.

There is a slow growth of the ‘CSR industry’ of consultant firms who are charging highly to

corporations who want to ride the CSR bandwagon. They pose a risk of misguiding

corporations to get involved in “green washing” by doing token efforts or replicating policies and projects done by other Global Corporations or their competitors without realizing the real

impact of their initiatives. These corporations sometimes claim that the dri ving force actually

comes from their stakeholders.

- Academia Academia has a very important role in shaping the future Business Leaders in Pakistan. As an

extension of this study, RBI asked faculties, departments and institutions recognized by the

Higher Education Commission whether they taught CSR as a course or whether it was a subject for faculty or student research. The study found no CSR department or unit in any

institution within the sample and no faculty member carrying out primary research on CSR

issues. Also, with the exception of the Institute of Administrative Science at the Punjab

University where a special elective is offered, this study found no CSR courses being taught.

There are examples of conferences where CSR is made a topic for panel session, but it is often

observed that the focus of these presentations labelled as CSR tends to examples of corporate

philanthropy and the examples cited as CSR best practice often describe charitable acts by companies. In a situation where there is a lack of both theoretical and practical CSR

knowledge and experience, this attitude invariably goes unchallenged.

Page 25: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

25

- Media

The Media plays a large role in consumer awareness and in creating demand for responsible behaviour from business on globally accepted parameters. In Pakistan the Tele Media as well

as newspapers are often silent on these issues. We see a few programmes or interviews on

some television channels, but the focus is often limited to elements like labour rights or

environmental compliance. A few supplements on related topics like environmental reporting and CSR best practices mainly write about the odd corporate community project or

environmental reports. Main CSR parameters are still missing from media.

Organization Initiative Focus ACCA – Association of Chartered

Certified Accountants

Reporting Award Environment

GTZ – German Technical Cooperation Partnership for awareness European social standards

ILO – International Labour Organization Monitoring for child labour

compliance

ILO code, child labour, labour

rights, Decent Work conditions

LEAD-Pk – Leadership for Environment

& Development – Pakistan

Component in overall training

programme

Environment

Corporate Philanthropy

Corporate investment

NCP Cleaner Technologies Environment

NPO Productivity Environment, Trade

PCI – Pakistan Compliance Initiative Criteria development Social Compliance

Pakistan Centre for Philanthropy NGO Certification

Community work

Philanthropy

Corporate giving

Organization Initiative Focus

RBI – Responsible Business Initiative Research, awareness

Capacity building,

Standard/tools development, Strategy building

Stakeholder Dialogue

Training/Teaching

International Linkages

Impl. & Impact assessment

Global CSR policy

Tools development

CSR-10 pillars, T ripe Bottom Line,

Global Responsible Leadership

Initiative, Social auditing, GRI UN Global Compact, SA8000,

UNCTAD/ISAR, AA1000,

Accounting Standards

Responsible Entrepreneurship

Sustainable consumerism

Responsible competitiveness

SECP – Securities and Exchange

Commission of Pakistan

Codes development

Research, Regulation

Corporate Governance

CSR

UNDP – United Nations Development Program

Research projects Corporate Governance Environment, Global Compact

UNCTAD – United Nations Conference

on Trade & Development

Reporting Standards Corporate transparency

UNIDO – United Nations Industrial

Development Organization

Triple Bottom Line project

Cleaner production centres

Efficiency, sustainable business

principles

GCF – Global Compact Foundation

Pakistan

Compact signing GC principles

Table (5.2)

Page 26: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

26

5.3. CSR in the Light of Islam Islam favors fair and ethical business as the best source of income. It aims to promote mutual

benefit in business interactions. Islam reinforces transparent and corruption free written

contracts, acceptable working conditions, fair exchanges for both natural resources and human

effort. It advocates “Tazkiyah”23, through active participation in this life and by behaving ethically in the midst of the tests of this dunia (world). Muslims prove their worth to Allah by

upholding Huquq-ul-Ibad (Individual Rights) and care for society, and sharing wealth with poor

and underprivileged. Actions and decisions are judged to be ethical depending on the intention

of the individual. God is omniscient, and knows our intention completely and perfectly. Good intentions followed by good actions are considered as acts of worship. Halal (good) intentions

cannot make haram (bad) actions halal)24. Islam allows an individual the freedom to believe and act however he/she desires, but not at the expense of accountability and justice.

The Shariah (Islamic law) defines codes of social behaviour, and business ethics according to

which today’s business investors can invest in socially responsible companies. One example

of applying the Shariah in socially responsible investment is the Dow Jones Islamic Fund –

IMANX – which invests in Shariah -compliant companies to encourage muslims seek a blend between financially rewarding and faith -compatible investment opportunities. Thus it makes a

strong business case for companies in Pakistan to adopt Islamic business principles as part of

a national compliance code and support a disclosure and verification system to validate

performance against it.

6.0 IS THERE A CSR ROLE FOR GOVERNMENT?

6.1. Examples from the World

Governments can play a unique and powerful role when it comes to corporate responsibility. It’s widely accepted that countries and governments that respect human rights have more open and transparent laws and financial systems, less corruption, a better-educated workforce, more

stability and more security. In order to establish the global rules and regulations imposed by the

international organisations, and making their businesses compliant to the international law and

practices;

- Governments should pursue their traditional function of promoting trade and business

through a proper policy. Supporting economic growth establishes a support for democracy. The strongest foundations for the stability, predictability, and security

necessary for a sustainable business environment are democratic governments that

protect human rights and labour rights.

- Government must work with companies to promote strong corporate values which

promote legal and ethical behaviour as well as respect human rights and labour rights.

Page 27: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

27

- Governments should support and facilitate public-private efforts to promote corporate

responsibility bringing seemingly disparate groups together for serious efforts to address mutually recognized problems. The Voluntary Principles and Social Accountability

International are two good examples of such efforts.

- Governments should support existing international standards and adopt them in their policies to delegate them to their local businesses making them readily competitive for

the international market.

- Governments should help civil society, business, academics, NGO’s and unions to join hands together and craft credible solutions for their day to day problems and help them

implement that throughout the business chain.

- Governments can promote the CSR agenda through legislation, media and create awards to encourage the organizations to adopt the changes.

The importance of CSR for United Kingdom is depicted by the

fact that they have a Minister for CSR. Stephen Timms, Minister for Corporate Social Responsibility, welcomed a social

responsibility investment index saying, “Corporate Social

Responsibility has a vital role to play in our society. It's living

proof that economic and social goals do not have to be in conflict. And it can address some of the toughest challenges our

society faces”.

6.2. Meanwhile, In Pakistan…

The conduct of for-profit businesses in Pakistan is regulated through comprehensive principal legislation in the form of the Companies Ordinance, 1994, overseen by a statutory body like the SECP, and business interests are represented by duly recognized representative bodies such

as trade associations or chambers of commerce. This structured and supervised mechanism

imparts strength to the concept of process integrity by instituting transparency and accountability. .

- SECP is reviewing corporate governance legislation and regulations that will bring into

focus elements of corporate disclosure, sha reholder liability and transparent accountability.

- NAB has unveiled a national anti-corruption strategy that lays down parameters for

corporate compliance.

- The State Bank has outlined new regulatory frameworks on financial responsibility and probity.

- Internationally recognized guidelines such as SA8000 is getting support from

Government

“Role of Business in Society is the 21st century's most important and

contentious public policy issue”.

Simon Zadek CEO, AccountAbility

Page 28: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

28

- In 2003 “Pakistan Compliance initiative” was launched with a draft national standard as

a compliance standard approved by Government. - Compliance was declared a priority in the national trade policy, however, little progress

was seen at the practical level.

- PNAC initiated awareness seminars on SA8000, social compliance standards in 2003

at all major chambers of commerce in the Punjab. - A proposal was made by Ministry of Science and Technology to the EU for subsidizing

SA800 certification among Pakistani suppliers and companies

Corporations, people and innovative CSR initiatives need Governments support, in terms of policies and acceptance of the initiative, more than financial investment.

GAPs

- There is no evidence of the various tenders, requests for proposal (RFP’s) or terms of reference (TOR’s) for government contracts advertised or initiated by its departments or

agencies specifying any CSR-related parameters25 as criteria for selection. This could help

in promoting the management aspect of CSR.

- There is no confirmed information on any clearly articulated tax incentives or recognition from Government for good business practices and innovative initiatives like research &

development for sustainable technologies.

- The research could identify no work in progress on the development of CSR-related

policies based on emerging global requirements to facilitate Pakistani companies in improving and expanding export and trade in international market.

7.0 WHY THIS STUDY AND HOW

7.1. Methodology Based on available data, a universe of companies was identified, stratified and randomised into

a representative cohort of about 100 companies. A detailed survey instrument was designed in

keeping with the data requirements articulated in the TORs, with due reference to current international CSR trends and issues and benchmarks. This instrument was based on the RBI

“Pillars of CSR” model within the context of the “4-Ps26 of CSR embeddedness” in a

Knowledge, Attitude and Practice (KAP) format. It was administered to identify stakeholder

respondents.

A ten-level multi phased CSR performance grid was used to inform the survey instrument and a

triangulation methodology was adopted for administering the survey involving a three-step

process. First, respondents were identified within the subject organization through a signed letter of intent and baseline information acquired. Second, an information pack was sent out

with the survey instrument directly to individuals identified as respondents. Third, a trained data

Page 29: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

29

collector personally validated the response in discussion with the respondent. The

methodology was kept adaptable and flexible

This research is specific to the current state of corporate social responsibility that is being

practiced in Pakistan. Questionnaires were dispatched to over 100 organizations from 10

sectors, a mix of multinationals and national companies, including small and medium enterprise. The sectors include

1. Textile

2. Tobacco

3. Pharmaceuticals 4. Fuel & Energy

5. Chemical & Fertilizer 6. Cement & Building

7. Financial Institutions 8. Leather & Footwear

9. Telecom & IT

10. Sugar & Food

11. Consumer product & services (misc.)

A detailed literature review was conducted to inform the context and the approaches currently

being followed and the type of organisational best practices relevant to Pakistan. This led into

a comprehensive super -set of questions, which was shared with SECP for review. This set of questions for assessing respondents’ CSR aw areness, practices and performance was then

split into three separate questionnaires, to be used in three steps.

The first questionnaire served as an introduction between the questioner and the focal person

from the organization. Getting the initial details about the company, its strengths , locations and practices, the second questionnaire acted as a detailed evaluation on the state of corporate

social responsibility. It judged the organizations on the basis of several essential parameters of

corporate social responsibility. These parameters

include:

1. Corporate Governance

2. Business and Ethical Principles

3. Environmental Compliance 4. Social Compliance

5. Disclosure – Environmental and Social

6. Product Integrity

7. Corporate Giving & Community Investment 8. Stake Holder D ialogue

9. Financial Performance

10. Supply Chain Security

Questionnaire 1 sought general information about the respondent organization’s business, human resources and systems. Questionnaire 2 asked for detailed CSR information based on the KAP approach according to the RBI’s 10 parameters and global benchmarks. Questionnaire 3 asked for the CEO’s direct views on CSR and the success or failure of their various initiatives, if any.

Page 30: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

30

For each parameter a set of KAP questions was devised. The questionnaire was purposely kept very detailed to instigate respondents’ thinking. The two-fold purpose was firstly to get

detailed understanding of the respondent’s CSR aspirations, issues, impediments and

expectations and to have evidence -based qualitative data for a designing future strategy.

Secondly, it was to facilitate participating organizations in understanding CSR and assist in a gap analysis of their respective CSR practices as a result of the question-answer process. The

questionnaire served to also standardize the information exchange in line with a framework

based on a global benchmark. Sample questionnaires are attached as appendices (

APPENDIX A). Responses to all three questionnaires were cross linked and integrated for an In-depth qualitative analysis. Recommendations were prepared for taking action toward a

National CSR Strategy. The research findings and recommendations were presented for validation to the leaders of the participating companies and other major stakeholders through

an Apex Consultation process. The consultative process created larger awareness and generated interest for actions . (see minutes attached- APENDIX B)

7.2. Benchmarks

The RBI Pillars and the Perception model is derived from the consultant’s local and overseas

experience, of developing business and social standards, fair trade criteria, CSR and reporting indicators independently and as a team member with International organizations such as

UNCTAD, SAI, GRI, Accountability, FLO, etc. Additional benchmarks being used in different

regions were also reviewed to include all the various perspectives relating to the fast-evolving

thinking on CSR. A number of CSR experts from RBI’s international collaborating partners were also consulted to get a balanced approach while designing the three questionnaires.

The Table (7.2) introduces some of the well recognized organizations from different regions

who have pioneered and developed or are in the process of developing CSR tools and

Benchmarks. These include guidelines, criteria, indicators, benchmarks, frameworks for facilitating and implementing CSR

.

Table (7.2)

REGION BENCHMARKS by

EU UNCTAD,GRI, FLO, ILO, Transparency

UK Accountability, BIC ,FTSE4Good US BSR, GC, SAI, OECD

Asia Pacific BIC, CSM, CCSR, IBL,PBSP27,RBI

South Africa AICSR South America Ethos

Measurement Frame work

AA1000- process framework Brands - CoC FTSE- FTSE4 good index Keidanren- Quality standards Global Compact- COP GRI Reporting guideline ILO- Resolutions on HR ICCR- Code for ethics SA8000- Social standard RBI- CSR management Transparency- BP for Bribery

Page 31: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

31

8.0 RESEARCH FINDINGS

8.1. Data Analysis

Ongoing debate on how countries are gaining competitive advantage using CSR as a

management tool reflects the importance this approach has for companies continuously seeking the next formula for success. There is evidence that national strategies are being developed to facilitate corporations overcome impediments that prevent them fulfilling their

corporate social responsibilities.

If CSR is to be regarded as an integral part of business decision–making, it merits a place in a company’s core mission, vision and value statements, succinctly related to its business goals.

This research found “quality” and “customer satisfaction” as aspiration values occurring

frequently in corporate statements, owed no doubt to the consumer demand for such attitudes

from business and the realization that they affect the bottom-line. Likewise, perhaps as an indication of the changing paradigm, mission or vision statements of companies aspiring for a

“socially responsible” image frequently refer to going “beyond mere profit” or “creating social

value for stakeholders”.

Results of this study, discussed below in detail show that Pakistani corporations, barring a handful of enterprises, remain outside of the CSR mainstream. CSR thinking is still confined to

a select few who often believe philanthropy to be responsibility. CSR leaders responding to

queries in connection with this research stress that Pakistani businesses must learn fast to ride

the CSR bandwagon. Otherwise others in the region would benefit from the gains in competitive advantage.

From the findings of this research what appears to be a priority is a clear and realistic

appreciation of the business case for CSR and the systemic advantages it bestows on the day to day running of a company. SECP’s recent efforts indicate that it may be best placed to

provide the leadership for achieving consensus on a National CSR Strategy developed through

a consultative process and the active involvement of the corporate and citizens sectors, and the

patronage of government ministries directly working for trade promotion.

8.2. Response Analysis

Over 100 companies were invited to participate in this survey. They represented the following sectors: 1. Textile

2. Tobacco

3. Pharmaceuticals

4. Fuel & Energy 5. Chemical & Fertilizer

6. Cement & Building

7. Financial Institutions

Page 32: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

32

8. Leather & Footwear

9. Telecom & IT 10. Sugar & Food

11. Consumer product & services (misc.)

Fig (8.2)

Of the companies invited to participate, about 35% responded to the survey questionnaire.

Multinational, fuel and energy, and financial institutions showed 70% response which is so far

the best percentage. None of the pharmaceutical companies responded to our call. Based on

our frequent interaction with companies, we found the following factors responsible for lack of participation:

1. Lack of Interest: The general perception elicited from respondents about research is that it

is an academic exercise which has no direct benefit to their business. These perceptions seem to be based on respondents’ experience of previous research surveys that have a

tendency for ending up in reports and research papers with limited practical outcome.

Respondents overwhelmingly said that th ey consider surveys as a mere waste of time28.

2. Lack of Awareness: For a majority of respondent organizations CSR is a new and alien

concept and it appears there is significant resistance towards adopting CSR best practices

particularly among family owned businesses. Respondents confirm that there is a

perceived apprehension of “getting exposed” with regard to their relatively low compliance

0 10 2

0 30

40 5

0 60 7

0 80 9

0 100

Textile

Tobacco Pharmaceuticals

Fuel & Energy Chemical & Fertilizer

Cement & Building Financial Institutions Leather & Footwear

Telecom Sugar &Food

Consumer & Services

Response %

LLeegg aall rreeqquu iirreemmeenn tt oorr CCuussttoommeerr IImmaagg ee ddrr iivveess CCSSRR

Page 33: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

33

with even existing mandatory requirements, and aspiring to major CSR benchmarks

increases this feeling of vulnerability.

3. Lack of Learning: Most of the companies who agreed to participate in the survey

expressed difficulty in responding to the questionnaire because either the questions on

CSR were not understood within the context of business or specific data were not available in a reportable form. RBI team members personally visited corporations and were always

available on the telephone phone to backstop the process of completing the

questionnaires. Respondents who took this as a learning opportunity later conveyed how

the process helped them build awareness on CSR precepts.

4. Lack of Trust: There seems to be no culture yet of corporate disclosure, and while a number of the respondents were ready to verbally communicate their information with the

research team, they expressed a reluctance to share anything in writing. Respondents referred to incidences of misuse of corporate information by competitors and others,

indicating a general lack of trust even for research that may ultimately prove beneficial to

their companies.

5. Lack of Documentation: Lack of documented information and absence of proper systems

to generate decision data about company’s policies and practices invariably hinders

companies in participating actively in CSR initiatives. Among the respondents there

appeared to be no considered effort by management to invest specifically in CSR-led information systems that make data available for decision-making and strategy.

6. Lack of Leadership: Like all other innovations, the success of CSR activities too depends

to a large measure on strong, visionary leadership. In the case of this research, even though invitation letters from the Chairman SECP were addressed to CEOs, only a small number were able to commit personal time to oversee the collection or validation of their

respective company data. At times the task was handed down to executives who seemed

to have limited time, knowledge or interest in the study.

7. Lack of Coordination: In a number of respondent companies, despite top managements

interest, the feedback process was very time-consuming, and in the odd case the study

questionnaire got lost between departments. It was clear that in the absence of clear demarcation of responsibility for CSR assignments within the corporate structure, there was

insufficient coordination between departments as well as layers of top and middle

management.

8. Lack of Commitment: In a number of cases the research team faced a general gap in

commitment from people to whom the task of completing the questionnaire was assigned.

In a small number of respondent companies assigned personnel went for leave or left their

Page 34: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

34

jobs without handing over the task. A general paucity of the right CSR knowledge and skills

at the management or supervisory tier to which the task was assigned also may have contributed to the overall quality of the questionnaire in a small number of responses. RBI

had to recheck and validate a number of such data instruments.

9. Lack of Stability: The research team were unable to get timely feedback from a num ber of highly committed corporate leaders and company managements because of the transitional

process underway within their companies due to re-structuring, privatization or mergers and

acquisitions.

9.0 GENERAL PERFORMANCE

1. Perception

1. Before a discussion of the different key factors for CSR awareness and implementation it is important to get a general sense of perception of CSR among corporations in different

Industrial sectors in Pakistan. Each participating company was to define CSR based on their

own perception, knowledge and understanding of CSR. The responses are compared to the

globally accepted parameters based on interaction with Global CSR initiatives on a scale of 1 to 5. Each of the parameters was given weights and ranking based on its relevance to the CSR

concept.

Fig (9.1)

IInntteerrnnaattiioonnaall eexxppoossuurree ccrreeaatteess bbeetttteerr uunnddeerrssttaannddiinngg ooff pprreecc eeppttss

FINAN

CI

CONSUM

TELEC

TEXTI

CEME

OIL & GA

FOOT

WE

FINAN

CI

TOBAC

SUGA

SER

VIC

CHE

MIC

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Average understanding of definition of CSR on a scale

of 1 to 5

1Sectors participating in the survey

Financial

Textile

Cement

Oil and gas Footwea

r Suga

r Tobacc

oChemical

s Telecom

Consumer Products

Services

Page 35: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

35

From the responses, it is evident that companies from consumer products and oil & gas sectors have a greater awareness about current CSR concepts. This is perhaps because of

international exposure and consumer pressure in the case of the former and relatively stringent

legislation and regulatory requirements for the latter. Responses of certain companies also

show that they do have programs to contribute to the communities, but they are more of philanthropic endeavours than activities to contribute to actual CSR spirit.

The service and the financial sector show moderate awareness towards principles of CSR.

Their detailed responses reveal that they are either now starting to focus on policies and procedures for implementing CSR or they are developing strategies and frameworks for such

initiatives. However, these companies reveal an unmistakable focus on marketing and business-development as a derivative of CSR interventions. In any case companies in this

category appear to have accepted that CSR is here to stay and they now show evidence of being in the process of developing, documenting and implementing CSR policies and code of

business ethics.

The cement, footwear manufacturing, sugar, chemicals and telecommunication sectors still appear to be lagging behind in assimilating CSR precepts and their importance to their

business. Their relatively fuzzy perception of CSR means they typically do not have well formed

initiatives to develop CSR strategies in their organizations. Data provided by respondent

companies in these sectors show that companies are unable to relate their business practices and community interface with CSR, nor is there widespread evidence of any substantial

constructive activity to develop a CSR infrastructure in these organizations. Responses reveal

that certain companies feel their philanthropic endeavours are CSR initiatives.

Pakistani companies have an unfocussed perception of business ethical principles. Few have certain bribery control policies which they think encompass the complete business ethical

principles red book. Textile, footwear, and cement industry typically lack tailored policies to curb

corruption, which can be a possible setback for quality in business. The fuel & energy sector acknowledged corporate governance, business ethical principles and product integrity as the

parameters of primary importance in CSR.

On average companies are shy of admitting their pursuit towards business and financial

benefits for the fear of being perceived as not being “socially responsible”. Similarly environmental and social commitment towards internal factors like employees, management,

workplace environment is not reflected in many companies’ definition of CSR. And qui te

understandably, company responses show a general lack of awareness about the emerging

global prospective of CSR.

Page 36: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

36

2. CSR Policy

Of the companies providing data, most are engaged in CSR as a minimal compliance requirement or in response to specific client demand. Often it is possible to draw the

conclusion that CSR activity in a company is involuntary and as such driven not by corporate

values but by necessity. However, companies do declare philanthropic projects, some of which

are in place for decades, as evidence of their commitment to CSR. Interpreted within the current paradigm, these otherwise admirable acts do not make a company fall in to the CSR

compliant category.

In addition, there are companies who have just begun adverting to CSR, and can be termed as being in the “Awareness” stage. These may often be companies who have traditionally

supported community projects but have only recently been introduced to CSR as an umbrella term that implies community giving. Often these companies find themselves in the process

learning what CSR actually means, and why it is important for their management practice and corporate image.

3. CSR Practices

Less than 50% of respondents fall into the “Compliance” category, a stage where a company exhibits a general awareness of CSR principles, objectives and benefits. These companies

typically take interest in training their management about CSR and are found focusing on

developing CSR policies. They are seen reviewing their philanthropic activities and evaluating

their community impact within their renewed CSR orientation. Companies at this stage show that they are becoming more conscious of environmental and social impact issues arising as a

result of their industrial activity. Most are contemplating or actually implementing measures to

improve their CSR impact. The textile, financial, leather & footwear, cement & building, and

telecommunication sectors, all appear at this stage of CSR development. In terms of adopting company-wide CSR policies or strategically implementing CSR, this study

finds only multinationals or large nationals with international affiliations actively engaged at the

practical level. This is primarily because of global policy uniformity among international businesses, designed to bring overall conformity with head offices overseas. These companies

exhibit a focus on internal stakeholders. Some are in the process of customizing their head

office policies to Pakistan’s local environment. Amongst national companies, those belonging

to the chemicals, oil & gas and those operating in the service sector are in the early stage of CSR development. These companies reveal a desire for developing their CSR strategies and

are in the process of doing so. They show well-formulated business ethics policies, regard for

stakeholders, and generally good reporting structures. They often have projects which

contribute to the community and environment, e.g. waste minimization, recycling and pollution prevention. They also show evidence of encouraging compliance to CSR standards among

their subcontractors and suppliers.

Page 37: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

37

Multinational companies in the fuel & energy, and consumer sectors appear to be implementing

CSR policies to a relatively greater extent as compared to their peers. They provide indications of addressing environment-related issues, implementing employee-related best practices and

community support programs.

4. CSR Performance This study can state with reasonable confidence that only a handful of respondent companies

seem to be concerned about the long term impact of their CSR policies, such as corporate

governance, anti -corruption measures, disclosure, and process- and product integrity. This

research could not find widespread evidence of reliable and verifiable measurement processes to gauge these impacts, or stakeholder feedback mechanisms that can help improve on or

change the nature of these activities. The 4 P’s

The adoption of CSR starts with clear understanding and right perception of Global CSR debate, knowing what actually Corpo rate Social responsibility really means and why it is

important to adopt CSR practices. Once a company has a clear concept the first step is to the

show commitment and have CSR reflected in their mission and vision so it progress to the

stage of developing CSR policies to guide management in implementing them and to create awareness among employees to adopt these policies. Having clear and related policies is not

enough for a successful CSR program. The third and most important stage is the “practice“ of

implementing well established systems to follow the policies for integrity, governance,

marketing practices, social and environmental compliances, disclosure and other CSR parameters. The success of a CSR program and initiatives needs to be measured to improve

the ongoing CSR practices and projects, thus the performance needs to be obvious and

transparent. Very few companies at present are seen to be at the fourth stage where they are

able to reap business benefits of their efforts.

Page 38: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

38

Fig (9.2)

The Fig (9.2) illustrates the stages in which different organizations participating in this study are seen in. The Figure maps the sectors-wise general state of CSR on perception, policy,

practice and performance. Participating sectors have been colour-coded and placed in

overlapping bubbles which represent different states of CSR the “4-Ps 29 of CSR embedded -

ness. Companies in textile, telecom and financial sectors are in the overlapping areas between Perception and Policy which indicates that they are in a transition between the two stages.

They have developed a perception about CSR and are currently contemplating to develop a

CSR Policy. Companies in technology and services sector fall in the overlapping region

between Policy and Practice. It is indicative of the fact that these companies have developed policies to bring CSR in their organizational infrastructure and are currently struggling to deploy them. Consumer goods manufacturing multinationals are in the middle section of the figure

which indicates better perception, policies and some practices in place and trying to gauge their

performance. Tobacco is weak in perception but has a place in the performance circle as it has

tried to evaluate interventions through social reporting and attempts to measure the impact of their interventions through stakeholder Involvement and assessment.

MMoo sstt CCoommppaanniiee ss aarree ss ttiill ll iinn tthhee iinnii ttiiaa ll PPooll iicc yy DDeevveelloo ppmmeenntt ssttaaggee

Perception Knowledge and understanding

of CSR

Policy Developing a CSR policy Practice

CSR policies implemented to

improve organizational

Performance Measuring Impact

company competitive edge

Financial Footwear Telecom

Textile Sugar Consumer

Cement Tobacco Services

Fuel & Energy Chemicals Technology

Page 39: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

39

10.0 STATE OF CSR

RBI’s “CSR Pillars” were used to benchmark the state of CSR in Pakistan. Each parameter

was further assessed against globally acknowledged standards, evaluation tools, evolving CSR

definitions and indicators, as well as learning through interaction with International business

and CSR organizations. Questions gauged company knowledge; attitude and perceptions (KAP) related to each “parameter”, validated through existing codes, rules, policy, standard

operating procedures (SOPs) and implementation.

RBI’s CSR Pillars

CG Corporate Governance BE Business Ethical Principles

EC Environmental Compliance

SC Social Compliance DR Disclosure & Reporting

EP Product Integrity

CC Giving & Community Investment

SH Stakeholder involvement FP Financial Performance

SS Supply Chain Security

10.1. Corporate Government

Corporate Governance is the most important pillar of CSR. It acts as the umbrella for all CSR

activities and ensures that the corporation is directed, administered or controlled fairly by its

shareholders, management and the board of directors. Corporate Governance is concerned with holding the balance between economic and social goals and between individual and

communal goals. The corporate governance framework is there to encourage the efficient use

of resources and equally to require accountability for the stewardship of those resources. SECP

already has in place a Code of Corporate Governance that all listed companies must comply with and report in the mandatory annual report.

Corporate governance is commonly referred to as a system by which organizations are directed

and controlled. It is the process by which company objectives are established, achieved and monitored. Corporate governance is concerned with the relationships and responsibilities

between the board, management, shareholders and other relevant stakeholders within a legal

and regulatory framework. In today’s fast paced corporate and industrial growth, there is a global appreciation of the corporate governance principles of responsibility, accountability, transparency and fairness.

Page 40: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

40

Fig (10.1)

This research shows that companies have a fair understanding of the need to conform to the

corporate governance parameter in order to become responsible. More than 50% of the respondents gave corporate governance the highest priority as a CSR measure. Consumer

products and chemical manufacturing companies showed a stronger conceptual understanding

of corporate governance along with the necessary infrastructure, documentation, policies and

procedures in place. They showed confidence that strong corporate governance policy helps in beating corruption and as a result improves business as well as image.

The financial sector assigned topmost priority to corporate governance and business ethics

principles. Corporate governance and business ethics principles go hand in hand in any professional setting. Business ethical principles provide a framework of behaviour to the

professional. Integrity in all professional and business relations, fair dealing and truthfulness

should be shown by a professional with commitment uncorrupted by self-interest. One should

strive for objectivity in all business judgments, display necessary competence to fulfil assigned tasks and should carry out delegated professional work with due skill, care and diligence with proper regard for the technical and professional standards expected.

This research shows that companies do have a clear understanding of the need to conform to this particular CSR parameter. More than 50% of the respondents gave corporate governance

the highest priority as a CSR measure.

SSEECCPP’’ss CCooddee iimmpplleemmeennttee dd ffaaii rr llyy uunnii ffoo rrmmllyy bb yy lliiss tteedd ccoommppaa nniieess

Median on 1-5 scale

Outlier

Fin

anci

al

Text

ile

Cem

ent

Oil

an

d g

as

Fo

otw

ear

Su

gar

To

bac

co

Ch

emic

als

Te

lec

om

Co

nsu

mer

Pro

du

cts

Ser

vice

s

0

1

2

3

4

5

State of Corporate Governance on a

scale of 1 -5

Participating Sectors

Page 41: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

41

Conclusively, Corporate Governance looks at the institutional and policy framework for

corporations - from their very beginnings, in entrepreneurship, through their governance structures, company law, privatization, to market exit and insolvency. The integrity of

corporations , financial institutions and markets is particularly central to the health of our

economies and their stability. Our interaction with companies in different sectors allowed us to

evaluate that many companies do not have a corporate governance strategy; rather they need direction to fit them into CSR definition.

10.2. Business Ethics Principles

Government and corporate corruption cost billions of dollars throughout the world that could have been used to improve the lives of countless people. Corruption is against the spirit of

competition. Business efficiency improves when conducted in an environment of fair

competition supporting stake holder’s confidence.

Companies generally understand that employees tend to engage in behaviour that is rewarded

and avoid behaviour that is penalized. The system of recruiting, hiring, promoting,

compensating and publicly honouring employees all can be designed to promote CSR. Most respondents to the questionnaire include ethical behaviour as part of their general code of

conduct. However, this study did not find an instance where a company acknowledges an

employee’s individual contribution towards maintaining an ethical environment. Thus research

appraised companies on two key parameters:

• Existing policy that penalizes workers in case of unethical behaviour

• Existing policy that rewards workers on abstinence from unethical behaviour

In the following graph, companies were rated on a scale of 1 to 5. Almost a third of the respondents were hesitant to share information on their initiatives or practices in ethical

behaviour. Shown as “0” on the scale, this reflects lack of importance given to implementation

of ethical values or codes mentioned in their mission, vision or codes of conduct.

Page 42: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

42

Fig (10.2)

27% of the companies, rated 2 show that they neither have an effective business ethics policy

in place to motivate employees to abstain from unethical behaviour nor any incentive to induce

practice of ethical behaviour. 20% of the respondents have penalties for unethical behaviour,

such as bribery or other misdemeanours. These commit to a verbal declaration that exhorts avoidance of unethical behaviour in the organization. Only 7% companies declare a clearly

articulated code of behaviour for employees that aim to promote an ethical work environment.

Not surprisingly, all respondents in this category are multinational companies with well-

formulated organizational structure and policies in place. The research findings confirm that national companies sti ll do not have a clear enough

perception of ethical principles relevant to their respective processes. A few do commit to

bribery control policies which they think encompass the complete business ethical principles. Textile, footwear, and cement industry typically lack tailored policies to curb corruption, which can be a possible setback for quality in business.

10.3. Environmental Compliance

Environmental compliance means that the organization makes health, safety, and environment considerations a priority in its business decision-making and processes. This implies that there

are mechanisms in place to promptly report any hazards or incidents that put the environment

or life at risk to authorities or other stakeholders, along with any recommended protective

measures. It also means that a company shares learning on the impact of its process to outside parties and assures by the management of its waste materials that it is doing its best to

safeguard the environment and protect life.

EEtthhiiccss nnoott lliinnkkeedd ttoo CCSSRR iimmpplleemmee nnttaattiioonn iinn cc oommppaannyy

0

1

2

3

4

5

Company attitudes clustered by response performa? response

Impo

rtanc

e gi

ven

to e

thic

al b

usin

ess

Pra

ctic

es in

com

pany

pol

icy

& P

ract

ices

prac

tice

Respondents not named

Page 43: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

43

An organization's aim is to Identify assesses, rank and control all health and safety risks for their employees and contractor staff. Generally human error is the primary cause of work-

related accidents and incidents, high priority should be assigned to raising health and safety

awareness by providing appropriate training to the workers and employees and raising their

consciousness, and caring about environment. There is a need for changing behaviour through briefings, instructions, training and appropriate tools.

It is the responsibility of the management to make sure they have proper policies and that their

work force is familiar with health and safety policies, and they are briefed on all potential hazards and risks in the workplace. Employee involvement and training is necessary to actively

manage and minimise health and safety risks.

Health and Safety performance should be measured in terms of accident frequency and severity. Three aspects are of incremental importance in safety reporting: industrial safety,

personal safety and time lost.

Fig (10.3)

The Fig (10.3) maps the measures taken by corporations in different sectors to improve their Environmental Compliance. The light shade reflects some awareness raising trainings and

initiatives, the darker shade shows that a company has policies relating to environmental and

health & safety compliance, the darkest shade reflects that a company has future plans for

improving their health & safety, environmental training, improvement on policies and

CCoommpplliiaannccee vviissiioonn iiss pprreedd oommiinnaannttllyy ssiittuuaattiioonn aall nnoott ssttrraatteeggiicc

Page 44: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

44

im plementation. Finally the opaque shade shows that the company feels the importance of

environment risks and have employed personal specially to look after environmental issues and initiatives. This research reflects that fuel and energy sector and multinational companies have:

• Environment, health and safety and accident management policies in place.

• Future improvement for current projects

• Personnel to support train and manage employees for environmental compliance.

• Protective gears available for workers working with hazardous chemicals. These corporations owe these measures to international consortiums and petroleum products

regulatory authorities’ laws pressing upon them. Multinational chemical manufacturing

companies also display a competent level of environmental compliance and health and safety

management of their employees, although their existing departments are handling these issues.

As a best practice work -related accidents should be recorded in a central database and

periodically analyzed. A uniform system should be employed for reporting accident figures and the figures published for future reference and preventive tactics. Health and Safety

performance should be measured in terms of accident frequency and severity.

Majority of the respondents in our survey do not provide or support any organized environmental awareness training, health and safety training procedures and proper record

keeping mechanism for documenting frequency and causes of accident for future analysis and

risk management.

The research identifies very low focus on waste management, recycling, energy efficiency or an

emphasis on finding innovative ways for employing green energy and sustainable technologies.

Only 25% of the respondents were seen to have taken an initiative towards improving

environmental conditions. 30% said they give consideration to energy-efficient and environmentally friendly products while choosing office appliances or raw material. Only 12%

said they are recycling a proportion of their waste material.

10.4. Social Compliance Like shareholders, employees of a company too have demands on a company to be treated in

a socially responsible way. In developed countries, employees are seeking contracts that not

only define wages and working conditions, but also their employer’s social responsibility. It is becoming evident that a corporation’s reputation for social responsibility can attract and retain

better quality employees. One study shows that more than ninety percent of MBAs in the relevant sample were willing to forgo financial benefits to work for firms with better reputations

for corporate social responsibility. 30 Employees derive satisfaction from being associated with

responsible firms.31

Page 45: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

45

This study finds that none of the respondent companies include a reference to CSR in their employee contracts. Social compliance being recognized as the backbone to corporate

citizenship, involves policies, procedures and practices that relate to the impact of the

organization on the society in general and the workplace in particular. Workplace security,

wage and work hour’s related issues, human resource development, abolition of child labour, labour welfare and social protection and the right for the employees to organize as unions and

bargain collectively are importa nt aspects that come under the bracket of social compliance.

This indicates a significant knowledge gap that requires immediate attention.

Like shareholders, employees should insist on socially responsible behaviour from employers

both by contract and by choice of work. Employee’s contracts should have clauses on responsible behaviour, along with the mandatory ones on wages and working conditions,

including provisions for social and human capital development through shared learning, knowledge enhancement, human capacity building and opportunities for future growth. A

corporation’s reputation for social responsibility can attract and retain employees.

All companies sampled agreed that the employee is the backbone of their organization, and that competent, satisfied and healthy employees are invaluable assets. 100% Companies

accept that they can attract best human capital by providing employee rights, employee

benefits, growth potential, and a safe and healthy workplace. But less evidence is found for

practice relating to systematic approach and enabling environment for flexibility and employee knowledge enhancement. The questionnaire for this research included a number of parameters

to determine the state of social compliance in the respondent companies .

Pakistan’s industry has lagged behind the transformation of the economy and must now ‘catch up’ if they are to play a meaningful role in national and enterprise development. New approaches to cooperation between workers and employers at enterprise level are of particular

importance with the purpose of encouraging genuine bilateral dialogue.

Social compliance encompasses the introduction of norms and implementation of policies to

ensure basic rights like equal treatment and non-discrimination, the absence of forced labour,

and the absence of child labour. Safe working conditions including minimum wages and above

minimum wage issues, allowances and benefits, hours of work, over time work, rest breaks and leave arrangements, including annual leave, sick leave and special leave issues, and job

security provisions. Working environment includes protection against the effect of hazards in

the work place involving issues of work safety as well as protection from work related diseases

and illness. Social security includes protection against the effects of economic and social hardship resulting from a reduction in earnings due to work accidents, work illness,

unemployment, or retirement.

Page 46: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

46

Our survey questionnaire consisted of different parameters which help in determining the state

of social compliance in different companies in Pakistan. Among the major employee benefits provided by our participating organizations are: annual leave and medical insurance and annual

bonus and sports and recreation. Primary benefit given to women in all sectors of Pakistan

industry is the maternity leave. The goals of maternity leave policies are to support family work

and child rearing and to create an incentive for women not to leave the labour force when children are very young. These policies are made to facilitate women's work outside the home

and help reconcile work and family life by protecting and promoting the well-being of children

while their parents are in the labour force.

On average, respondent companies are willing to let a mother have 2 months paid leave. The

question about paternity leave grant was avoided by companies in general. It can be concluded that it is not the norm in Pakistani companies to give paternal leave. Maternity rights affect the

time a mother spends out of the labour force after a birth and the probability that a mother returns to her pre-birth employer rather than starting a new job. The provision of paid leave can

help to protect children’s health and development by enabling financially constrained mothers

to remain at home for longer period following childbirth.

There is one company in the financial sector that gives female employees 130 days paid leave

for Iddat32, which is commendable. This can serve as an indicator of best practices bein g

followed employed by companies in Pakistan with a vision to facilitate workforce and to improve

their overall performance and commitment.

Benefits like subsidized food and transport facilities are uncommon. Except for one company,

stock options are no t offered to employees. Employees unions are typically discouraged by

companies who do not cater to the international market. Multinationals allow workers to form works councils and unions, as stipulated under law, which allow for negotiating worker demands with the management.

Page 47: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

47

Fig (10.4)

Companies do not focus on areas like subsidized food and transport facilities. Multinational

companies allow employees to have work councils and unions which protect their rights and

negotiate worker demands with the management. They can elect their representative

independently and have the right to voice their concerns, to improve working conditions. Employees unions are not allowed by local companies or even by exporting companies whose

international buyers insist unions or works councils as a major CSR compliance issue.

According to the responses received about 50% of the companies do not approve of employees joining unions, and associate unions with strikes and coercive practices. However,

companies seem to favour works councils and often opt for “workers’ committees” to represent

workers for issues and complaints to management for solution. Half of the respondent

companies do not even support such in-house representative structures.

There is always the potential for conflict to arise in a workplace. Conflict creates an

environment of tension and if not properly managed can harm morale and productivity. A work

related grievance might flow from any aspect of a staff member's work experience that they believe to be unfair, unjust or unreasonable. 80% of the companies in Pakistan lack articulate

grievance procedures. Companies rely on verbal employee-management interactions to deal

with conflicts and problems. There are no complaint document management systems and no history is kept to review on an annual basis.

Management and staff should understand that having a grievance procedure provides a

process for resolving conflicts and can help facilitate the effective use of resources, maintain

x x x x x x x x x x x Paternity leave

ü ü ü ü ü x ü ü x ü ü Maternity leave

x ü x ü x ü x x X x ü Stock options

ü ü ü ü ü ü ü ü ü ü ü Bonus/profits

ü ü ü ü ü ü ü ü ü ü ü Recreation etc.

ü ü ü ü x x ü x ü ü x Free transport

ü ü ü ü x ü ü ü ü ü x Free Meals

ü ü ü ü ü ü ü ü ü ü ü Insurance

ü ü ü ü ü ü ü ü ü ü ü Annual leave

Services Consumer Telecom Chemicals Tobacco Sugar Footwear Oil & Gas Cement Textile Financial

BB eenn eeff iittss ffoollllooww mmiinniimmaall lleeggaall rreeqq uuiirreemmeennttss oorr lleeaa ddeerr’’ss

Page 48: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

48

good working relationships, and support a positive overall experience. Multinational companies

operating in the region have strong, well-maintained grievance procedures. Most companies did not share detailed information to enable us to assess the kind of support documents and

procedures in place to ensure effective response of worker issues. An effective procedure

operates as an early warning system and alerts management to potential problems before they

escalate. A grievance procedure should be part of a larger effort to enhance communication. Make clear and timely communication a priority.

10.5. Disclosure and Reporting

Reports are used as means of management (creating and documenting systems). The main benefits that come out as a result of maintaining a reporting system is the ease of comparability

of the organization’s social and environment al performance. Like Business Principles, reports also reduce conformance cost by providing quick views on operational procedures and their

outcomes and also to monitor ongoing processes.

The research showed that reporting is not given a high priority in adaptation of CSR by any

sector. For most of the organizations, it was given a priority value greater than 6 on a scale of 1

to 16 where 1 was the highest priority and 16 the lowest. In general, none of the sectors is releasing reports on a voluntary basis. The sectors like Financial and Textile are doing this as

per requirements by government or their customers. None of the organizations have mentioned

any benefits obtained from reporting , even as 6% of the respondents have already published

CSR reports , of which one is based on the GRI reporting format. 20% of the respondents have in the past disclosed environmental and social initiatives either in their annual report or in

newsletters or company supplements.

Cross-checking company procedures allowed us to realize that reporting is not being given substantial importance in any sector in Pakistan. Reporting being done is often focused on lighter issues and contains factual information concerning the organization. Often there is little

correlation between CSR and other business variables highlighted in company annual reports.

In recent years, however, interest among corporations for reporting environmental initiatives has grown due to ACCA-WWF Environmental Reporting Award, but the quality of information

presented is still quite elementary compared to global standards.

The scope of CSR information in the financial report should cover information which is material to the economic performance of the company. In order to properly capture CSR-related

financial risks there is a need for a cross disciplinary approach including both the financial and

the CSR manager of the company. Moreover there is a need for definitions which define e.g.

environmental costs and investments and a need to develop appropriate verification standards for CSR information.

Page 49: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

49

Apprehension of benefit-seeking outsiders is another factor that seems to compel companies to

avoid complete disclosure financial information in their reports. Textile, Financial institutions, cement, leather and technology sector companies in Pakistan are run as family businesses

rather than publicly owned companies. At present private enterprises are not mandated by law

to publicl y declare such information.

10.6. Product Integrity

Product integrity is actually a part of product quality. In a business sense, having Product

Integrity means a company ensures that the product reaching the consumer is the same as it

was promised in the advertisements and other commitment statements like quality standards etc. It is an outcome of the supply chain monitoring as well as in-house quality systems. It

encompasses a wide variety of issues like environmental and social impacts of the production process. An organization needs to pay attention to the following issues regarding product

integrity. - Environment is not being damaged in any way during the production process (effluents,

emissions, pollution)

- Harmful materials are not being used in the process (chemicals, machinery that is risking

production crews’ life or health) - workers are not being pressurized in any way during the production process (forced labour,

whistleblowers)

- There should be no harmful effects of the product. (chemicals that cause allergic or corrosive

reactions on human body, products that deteriorate human health and quality of life) - Technology being employed should be sustainable and efficient. It should be at par with

modern safety and production standards. Product finishing should be to ensure that it is not

harmful for end user.

- Product being produced should be biodegradable. If it is not biodegradable then what mechanisms are available to dispose of it after use.

- Channels of research should be well-developed with personnel impl ying a role of improving

standards of product not only in terms of quality but also increased health and safety

standards.

The research monitored Product Integrity through several ways, including the priority assigned

to it as a part of the CSR strategy by each company and the emphasis on Product Integrity

upon purchase of raw material. The emphasis of the company on ethical advertising was also added to the criteria for evaluation of Product Integrity. We found that there is a serious lack of

appreciation regarding this factor. Respondents were not aware of any specific initiative on

part of government to enforce policies regarding product integrity. Participants in the survey did

not show much interest in this section of the questionnaire which is an indication that companies lack awareness in this area. A contributing factor ascertained by the research to

this state of affairs may be the relatively weak consumer lobby in the country, even as there is

an abiding interest in quality management systems an d certification in all sectors.

Page 50: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

50

The Fig (10.6) shows the priorities ((1-10) assigned to Product Integrity by organizations in different sectors. The sectors not shown in this chart lacks proof of efforts made for the

integrity of their products

. Fig (10-6)

Across all products, avoiding confusion with labels and labelling statements should remain a

priority for all companies. Use of environmental labels on products, clear mentioning of product

ingredients and possible side effects should be mentioned clearly on each product label. Tobacco sector showed commitment that their policy is to provide their customers with all the

necessary information to help them choose the product that is right for them. In this regard

ministry of health has also made an effort to prohibit sale of tobacco to minors and to clearly

state the harmful effects of tobacco on the label. Financial sector has also shown responsibility towards fair trade, proper labelling of financial products and ethical marketing procedures. A

Few companies in the oil & gas sector are trying to improve their product’s negative

environmental impact.

10.7. Corporate Giving or Community Investment

Companies clearly give a lot of importance to community philanthropy and show a trend of

significant spending towards services and amenities to communities around their geographical

boundaries. However, these are mostly one -off activities, with companies allocating resources

based on their own perceptions, marketing needs or following peers or competitors. Respondents reveal that the typical motivation stems from a desire for competitive advantage

8 7 6 5 4 3

2

1

AAwwaarreenneessss lliinnkkeedd ttoo mmaarrkk eett iimmaagg ee aanndd ccuu ssttoommeerr sseennssiittiivviittyy

Textile Fuel & Energy Tobacco Telecom Services Cement Financial

Page 51: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

51

and positive public relations impact. Corporate giving seems to be equated with good

corporate citizenship by a significant number of companies, including multinationals.

A number of companies reflect a readiness to actively contribute towards the welfare of poor

communities around them by providing education, health services, and technology access. Yet

most often, these efforts are independent of a considered strategy that reflects the felt needs of the communities concerned. This appears as a gap in strategic planning the industrial sector in

relation to CSR precepts. The potential for leveraging the enormous potential of corporate

sector to alleviate poverty in specific terms is not generally recognized, and appears as a key

area for government policy direction.

We are part of society and have a responsi1bility to the world in which we operate. This is not a matter of charity but of investment, because our continued success

depends on, among other things, the progress of the communities in which we work. 33

The Fig (10.7) below shows the various community initiatives disclosed by the respondent

companies.

Fig (10.7)

Education, health and water & sanitation are the most frequently addressed areas in community initiatives. Organization -run schools, primary education schemes, educational

trusts, scholarships, free dispensaries, health camps, hospital set-ups, tube wells and tankers

to provide drinking water and sanitation projects are a few examples of this community

investment activity. However, this study did not encounter any initiative being taken by the

28%

9%

12%12%

6%

6%

21%

6% 0%0%Education

Technology

Water & Sanitation

Environment awareness

Sports

Capacity building

Health

Micro credit

Enterprise Development

Citizen Rights

GG iivvii nngg ffoo ll lloo wwss HHiigg hh VViiss iibb iill ii tt yy && sseerrvv iicceess tthhaatt aatt tt rraa cctt aa tttteenntt iioo nn

Page 52: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

52

corporate sector to improve citizen rights or generally redress environmental deterioration. Also

the most important areas for sustainable development like technology research and human capacity building have the lowest priority.

10.8. Stakeholder Involvement

CSR implementation is not possible in its essence without stakeholder involvement. All over the world, corporations

are generally beginning to realize the importance of the

stakeholder perspective and are becoming clear about their

primary and secondary stakeholders. Increasingly, mechanisms are being put in place for meaningful corporate

interaction with stakeholders. In Pakistan, however, companies still seem to be relatively aloof from their

stakeholders and need to understand the importance of stakeholder dialogue as the basis of CSR initiatives.

Fig (10.8.1)

This research reveals a low understanding of the importance of Stakeholder Involvement to a

company’s social responsibility. Likewise, the study found no large-scale evidence of any

systems and procedures installed by companies to elicit stakeholder feedback for CSR related activities. In general, there seems little organized interaction between the five key stakeholders,

namely the board, employees, customers, buyers, and the community at large.

This study found evidence of stakeholder interaction in the chemical and tobacco sectors with specific reference to the environment. The reason for this appears to be the perceived dangers associated with the product in question with regard to the environment, and relatively high

media sensitivity. Apart from this one finding, companies generally reveal insufficient

understanding of the role of the stakeholder in their social interface. The Fig (10.8.1) indicates a colour-coded comparison, which shows that Stakeholder Involvement is prioritized by

chemical manufacturing, telecommunications, consumer products and the service sectors.

They demonstrate the existence of varying degrees of reporting mechanisms and

communication channels with relevant stakeholders. Quite clearly the service and telecommunication industry puts customer communication quite high as a priority and show that

they have policies and practices to satisfy them.

Page 53: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

53

Another interesting finding is the importance of stakeholders by corporations in general. The Fig(10.8.2) shows stakeholders order of priority given to them by the corporations.

a

Fig (10.8.2)

10.9. Supply Chain Security

As stakeholders take a growing interest in corporate social responsibility, many companies are

finding that they not only are responsible for their own CSR performance, but also for the CSR

performance of the companies upstream and downstream, that is, a company’s suppliers as well as its customers and even its customers’ customers.

Board Emp

l Mgt.

Gov

Stock H

Cust

Env..

Comm

Emp F.

Supplier

Buyert.

C S.

Comp Media

.

Acd

Page 54: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

54

Fig (10.9)

In this research we have focused policies and practices which organizations expect from their subcontractors and their suppliers only. Suppliers that manufacture, components and products

used by any industry must comply with all national and other applicable laws and regulations,

and they require their suppliers do the same (including labour agencies). They should uphold

the highest standards of ethics, sound human rights practices and treat workers fairly with dignity and respect. They should strive to provide a safe and healthy working environment for

their workers. They should conduct business operations in a way that protects and sustains the

environment and maintain management systems that measure, improve and communicate their company's labour, health & safety, environmental performance. Companies in Pakistan working on permanent contract with international buyers especially in the consumer product sector take

particular care of suppl y chain security standards. Supply chain standards in Pakistani service

sector companies who have based their operational procedures on similar companies working

abroad have trickled down automatically.

10.10. Financial Performance

It has been a much-believed fact now that CSR compliant companies perform better worldwide.

CSR helps companies develop new competencies because it engages employees, organization-wide, calls for a forward-thinking managerial style, and leaves responsible firms

better prepared for external changes, turbulence, and crises. It builds reputations and

enhances relations with bankers and investors. It helps firms attract better employees and

increase employee goodwill. It helps firms run better.

SSuu pppp lliieerr pprraa ccttiicceess ccoonnssiiddeerreedd lleessss rreelleevvaann tt ttoo ccoommppaann iieess’’ oowwnn pprraa ccttiicceess

Median on 1-5 scale

Outlier

Fina

ncia

l In

stitu

tions

Text

il eC

emen

t and

Bu

ildin

g

Fuel

and

E

nerg

y

Foot

wea

r

Sug

a r

Toba

cc o C

hem

ical s

Tele

com

mun

icat

io n

Con

sum

er

prod

Ser

vice

s

S

0.0

1.

2.

3.

4.

5.

Participating sectors

Page 55: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

55

A study commissioned by the UK Environment Agency concluded companies with sound

environmental policies and practices are highly likely to see improved financial performance ♣. The analysis looked at 60 research studies over the last six years, finding that 51 of them (85

percent) showed a positive correlation between environmental management and financial

performance.

UNIDO’s TBL approach is unique in that it adds to the traditional TBL elements of evaluation and reporting a

third element of continuous improvement34. Fig(10.10)

The report on UNIDO demonstration project on Triple Bottom Line in four countries including

Pakistan35, very clearly demonstrated the link between social viability and environment stewardship on the financial bottom line of the companies.36 Good social performance leads to

good financial performance which contributes to making sound reputation for the organization. Organization can reap long term profits and have sustainable growth in turn.

The survey questionnaire asked respondents to provide information on buying decision to

ascertain cost savings through durable, energy efficient products, recycling, reusing and selling

waste. The organizations who are able to record these data demonstrate the link between

social and environmental stewardship to their financial bottom line. Only 5% of sampled companies expressed this level of consciousness. They also revealed that their efforts towards

CSR compliance did not take away from their financial viability. The rest of the companies did

not respond to the question.

VALUE ADDED

Taken by Customer

Taken by Enterprise

Customer Loyalty / Retention

Customer Acquisition

Customer 'Margin'

Plant / Process Efficiency

'Eco-efficiency'

Machine Efficiency (downtime)

Process Efficiency (cycle time)

Social Efficiency

Employee

Revenue Growth

Customer 'Share of Wallet

Cost Efficiency

Productivity

Loyalty & Availability

Employee

Page 56: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

56

10.11. Levels of Compliance of CSR Principles

Summarizing the findings of our study we have developed the following matrix P-P representation of the state of CSR compliance in each participating sector. Each tile shows

state of compliance for each sector divided into separate columns for different states of CSR

embedded ness, Perception, Policy, Practice and Performance. Based on the evidence from

the study we have highlighted the existence of each state against the 10 pillars of CSR as devised by RBI.

Fig (10.11.1)

Page 57: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

57

All the sectors mapped on 10 parameters of CSR identifies the gaps for each sectors on CSR

parameters.

CG Corporate Governance EP Product Integrity BE Business Ethical Principles CC Corporate giving’s /Community investment EC Environment C ompliance SH Stake holder Involvement SC Social Compliance FP Financial Performance DR Disclosure Environmental & Social Report SS Supply Chain Security

Fig(10.11.2)

11.0 Bridging The Gap

This study aimed at a realistic assessment of where Pakistani business stands with regards to

its awareness and attitudes on CSR in relation to the world at large. The assumption is that

learning from this study will help policy makers find ways to tackle the Global challenge our business is going to face bec ause of a change in market perception.

Consumer value perception has moved beyond a simple

“price-quality” focus to one where buyers seek “value-integrity” that reflects a company’s sensitivity to

environmental and social stewardship. It seems Pakistani

businesses need to gear up to respond to this challenge.

Analysis of data collected against available global CSR good practice benchmarks shows:

0

1

2

3

4

5 CG

BE

EC

SC

DR EP

CC

SH

SS

Financial Textile Cement Oil and gas Footwear Sugar Tobacco Chemicals Telecom Consumer & Services

HHiigghhllyy vvaarriiaabbllee CCSSRR pprraaccttiicceess iinnddiiccaattee nnoo ffiixxee dd ggoo aall --ppoossttss oorr mmeecchhaanniissmmss

Business needs to develop clear strategies to implement

the method of giving or volunteering that best suits

their goals and desired image.

Page 58: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

58

1. Incomplete Conceptual Understanding

This study confirms that most companies still see CSR as a “philanthropic obligation”, or as “imposed compliance” with buyer-led social standards. Moreover company efforts are typically

“feel good” activities that often betray a low consideration for their long-term impact on

sustainable development. This reflects a shaky perception regarding the scope and scale of

CSR as a business strategy and management tool among the average Pakistani business.

2. Less Focus on Competitive Advantage

It appears from the results of the study that most CSR initiatives being implemented by

respondents presently are focused on short term economic benefits. There seems a lack of understanding of how business can contribute to create sustainable development models that

promote economic growth, creating more business opportunities for corporations. Respondents mention no investment and resource allocation for research and development on

cost effective models and efficient technologies that help bring production costs down and also decrease environmental impact in future. However, two companies mentioned bringing their

costs down by using recycled material and environmentally safe raw materials. They also

declare they are tracking their savings through these initiatives.

3. Inadequate Stakeholder Communication

Companies appear to seldom engage directly with stakeholders other than those that are in

some way connected to their marketing activity. This study found no examples of any

organized communication mechanisms between companies and their stakeholders for 95% of the respondents. Examples shared were somewhat scattered and random, which indicates

that while positive role models do exist, there is a need for a more systematic approach to

documenting best practices.

4. No Nationally Recognized CSR Benchmark Respondents in the study were rightly not able to point to any nationally recognized definition or

benchmark according to which they could design compliance or implementation programmes.

A number of international CSR benchmarks were cited, such as GRI, SA800037 or the Sullivan Principles, etc, which revealed the ambiguity such tools pose to the average business.

Implementing these, therefore, remain for businesses a factor of customer demand. Hence,

this study confirmed that customer-specific social compliance codes were a priority for

businesses primarily as a selling proposition, and not necessarily as an intrinsic organizational value.

5. Uneven Official Incentives

Respondents revealed a relatively limited awareness of laws, codes or government policies

related to CSR. There ap pear to be no clearly understood incentives for socially responsible behaviour, high labour standards or environmental performance, as there are for corporate

philanthropy or charitable donations. As such respondents are not able to link incentives or

enabling factors from Government to profits. SECP’s recent requirements for disclosure on the

Page 59: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

59

Code of Corporate Governance too are not presently matched by tangible performance-related

incentives to motivate businesses.

6. Unclear Strategic Approach

Even among companies that show a relatively higher appreciation of business ethics issues,

this study finds a low incidence of consistent strategic CSR programme direction. In most respondent companies that exhibit a demonstrable degree of environmental or social

compliance, data reflects community or philanthropic responses that appear to be the result of

situational decisions by or a projection of personal causes of the leadership.

7. Absence of National Platform

Respondents were not aware of any forum or platform, whether created by the Government, representative trade bodies or any other institution that is currently able to provide a uniform or

credible level of awareness, information or guidance on CSR to interested individuals or companies. Compared to some countries where such neutral platforms bring major

stakeholders together with CSR experts to discuss issues, identify solutions and frame policies,

the Pakistani business environment functions in somewhat of a vacuum.

8. Disclosure

This report confi rms the general impression that Pakistan has still to develop a culture of

Disclosure. Over 60% of companies approached for this study declined to provide complete

information on their respective social and environment performance. A key reason for this is the low trust companies have of any outsider asking questions. A second reason is the low

priority given to documentation and reporting in the typical business enterprise unless it has to

do with mandatory requirements. A third reason is the relativel y low professional capacity and

allocated resources for such reporting. This can be overcome firstly by encouraging an environment of trust between companies and regulatory agencies. Secondly, the development of user-friendly formats to document and dis close social and environmental performance,

backed up by an effective orientation programme, ideally via internet or call centre solutions,

can quickly turn around the present state of information vacuum. Government can be supported in this activity by its citizen sector counterparts.

12.0 CONCLUTION

It is clear from the above findings that Pakistani businesses need to be supported in bridging

the gap between their present state and the rapidly evolving CSR environment that is creating

new benchmarks of corporate performance and customer acceptance. Pakistan needs to

leapfrog from its present level of CSR into the current paradigm. The upside of this is that we have global standards to guide such a leap and professional linkages to help along the process

over a relatively short timeline. Experts reflect on CSR as the main hedge against the negative

Page 60: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

60

tendencies of globalization. With a well-considered strategic CSR action plan Pakistan can

emerge from being a potential victim of globalization to a potential beneficiary. In placing Pakistani business in a competitive place with regard to CSR, every stakeholder has

a role to play and would need to be cultivated as an ally. On behalf of the Government, this

requires the creation of an enabling statutory and regulatory environment, clear policy

guidelines, fair and transparent rating and reporting mechanisms and tangible incentives and penalties for companies who wish to demonstrate their commitment to sustainable

environmental or social investments.

Business on the other hand needs to abandon the subsidy-seeking culture of the past and embrace competitive ways that build capacities, efficiencies and customer friendly practices as

a basis for market advantage. This requires adopting a culture of compliance, integrity and technological research as dictated by current

CSR precepts. And finally both government and business need to include civil society as

represented by academia, consumer groups,

enablers, the media, and experts in their

activities to build a multilayered social consciousness that quickly rewards ethical

behaviour by business in the marketplace and

just as readily condemns irresponsibility.

This study recommends the following immediate

actions to build into a strategic response to CSR

that can leapfrog Pakistani businesses into the

mainstream of business achievement in today’s world:

13.0 RECOMMENDATION FOR CSR STRATEGY

There exists a dire need to improve the quality and quantity of corporate social responsibility. A

wide-ranging and multi -tiered awareness campaign needs to be organized in order to make the

various stakeholders and businesses understand the necessity and advantages of CSR and remove any misconceptions related to it. Flowing from this improved awareness, cross-

stakeholder dialogue between governments, business, civil society and academia is a

necessity. A relevant and enabling CSR policy needs to be developed by Government with the

involvement of all stakeholders.

An effective regulatory authority is key to this strategic thrust, having the requisite capacity to

implement guidelines and monitor progress38. Also crucial are facilitator organizations that can

There is a dire need for a dialogue b etween the government, business and the citizen sector to develop a win-win for every one. Outcomes from this dialogue must inform

policy, which then must Such policies should be strictly observed by regulator s, certifiers, academia and the media. Companies have

to feel encouraged to adopt CSR, know that it helps achieve profitability, human

development and progress, and that regulators, government authorities, investors, shareholders and labour representatives all

value accountability and transparency. Businesses need to know that in a

competitive international market, CSR adds value and builds image. CSR is not an option, it is a condition of survival for our businesses,

and ultimately, our society.

Page 61: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

61

help groom small and medium enterprise in building socially responsible process, and advise

the larger businesses in leveraging the advantages of CSR and sharing lessons and best practices. And to come full circle another important area that needs investment in terms of

money, time and education is consumer awareness, providing credible information beyond

social investments and corporate citizenship initiatives.

All this is achievable, but requires a strategic approach and a step-by-step process so Pakistani

businesses can emerge stronger in the current CSR paradigm. Below is a summary of what

this research has highlighted as areas for immediate attention within the context of a CSR

strategy. Each of these areas has the potential to becoming a distinct hub of programme activity or project:

1. Build Strong Conceptual Knowledge

The first step towards a national CSR initiative must be a considered effort to build awareness and knowledge on what comprises minima for CSR performance in Pakistan. A task force

could be formed with representatives of Government from SECP, Business and select CSR

experts to suggest a Pakistan-specific “definition of CSR” with accompanying policy guidelines

for Government to implement and Process indicators for business to assess their initiatives and concept and frameworks to be included in business schools curricula. These could then be

introduced gradually, with the requisite opportunities for national debate, into legislative and

regulatory mechanisms. To guide CSR perceptions in the right direction media claims and

“green-wash” activities need to be watched through appropriate Government institutions like SECP and representative bodies such as chambers, associations and stock exchanges.

2. Link CSR to Competitive Advantage

Businesses in Pakistan, especially the small and medium enterprises that form supply chains of major businesses need to make the connection between CSR and profits so they can become more efficient and pass on savings and value all along to the customer. CSR focus needs to

shift to improving internal efficiencies using CSR as management tool. This can be achieved

through linking SMEs with their larger corporate counterparts in knowledge transfer and capacity-building partnerships that develop responsible cost effective solutions to create a

ripple effect. Institutions like SMEDA and Technology Institutes and engineering firms could be

linked into such programmes, along with trade associations and chambers of commerce.

Companies could contribute with their thinking and financial capabilities supported by government incentives and facilitating policies .

3. Enhance Effective Stakeholder Involvement

CSR needs to be introduced as a topic in business discussions starting right from business and commerce education to the highest level of trade negotiations. This area requires perhaps

the widest stakeholder involvement, with academia, lobbying groups, the media, Trade Unions

etc, all taking up the agenda in their inquiries, debate and dissemination activities. Social

Page 62: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

62

Investments needs to be based on community and societal needs assessed through

stakeholder’s involvement at community and national level. All community projects and social investments needs to be assessed for both negative and positive impacts, Incentive like tax

breaks and awards for sustainable programs with larger economic and social impacts. Also

Learning from successful and unsuccessful investments can provide feedback into more

relevant policies and procedures .

4. Harmonize and Standardize CSR Performance

The most urgently required is a CSR tool based on considerations of our national limitations

and strengths for gaining competitive advantage with a focus on Global CSR debate and to get it recognized globally. It would be appropriate to immediately embark upon the task of

instituting this national CSR standard or at least a voluntary best practice guideline against which companies can benchmark them and be accepted in the global market. Companies

going beyond compliance would more readily gain competitive advantage . Over time and through a calibrated process of national dialogue and technical appraisal these guidelines could

be inducted as a national standard on which companies can be graded for performance and

for bestowing incentives. Simpler CSR reporting guidelines need to be devised and

encouraged through CSR Report Awards by Government agencies like SECP in collaboration with civil society organizations having technical expertise in CSR reporting standards.

5. Define and Promote Clear Incentives

At present the Government allows for tax exemptions and preferential treatment of businesses that contribute to philanthropic causes. Other incentives include awards and public recognition

of individuals and companies bestowed by the government, representative bodies, trade

associations and public benefit organizations. All this promotes business interest in certain

activities and allows for interested individuals to aspire to higher standards. CSR must be marked for such incentives too. Social reporting can be encouraged through instituting minimal disclosure requirements as part of the licensing and compliance process for companies.

Benefits and recognition akin to those proposed for exemplary taxpayers by CBR could be

extended to transparent and accountable companies. Social investments can be recognized as tax-relief contributions and finally official recognition of CSR as a corporate responsibility must

be matched by public rewards instituted officially or through trade associations and civil society

organizations.

6. Promote a Shared Strategic Vision

With all the above initiatives building the context for action, the country needs a clear and

compelling strategic vision for CSR, articulated convincingly by champions who practice what

they preach. SECP in its regulatory role has a key responsibility in steering other stakeholders towards such a vision. Pakistan has many a notable example of socially responsible

entrepreneurs, CSR experts and conscientious citizens who can help promote the national

Page 63: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

63

CSR strategy. Again, a task force of such citizens hoste d by SECP would be well placed to

take this forward through the active collaboration of academia, CSR experts and the media.

7. Promote “Business” Thinking for CSR Projects

CSR interventions that seek to respond to community needs such as health or sanitation or

education are often not seen by their corporate sponsors as social investments and as such not open to the kind of scrutiny reserved for financial investments. This is a reason why such

projects often do not last long. Businesses need to be convinced that social investments are

not too different from financial ones and thus have to be measured like them. A real

contribution to CSR that business can make is to go beyond providing resources and instead impart “business” thinking to their social interventions. This will encourage social enterprise

models that bring sustainable economic competitiveness to projects and lead to community building through profits and entrepreneur skills. An approach towards this goal would be to pair

large, compliant organizations in mentoring relationships with smaller local companies that are part of the large companies’ supplier network, leading to a gradual ratcheting up of socially

responsible thinking that is not averse to profits but to unethical practices. Good mentoring

programmers can be recognized and replicated. Examples can be documented and covered

through the media. An advice help-line and newsletters can provide basic CSR information and a CSR induction kit for businesses can be developed and disseminated on a cost-recovery

basis.

8. Seed a Vibrant National Forum CSR has fast emerged as key management concern for businesses, and thence for

government, due to a widespread citizen movement and

action by activist judicial systems. Recent years have

witnessed a spate of convictions of world renowned business leaders for un ethical practices, which indicates the shape of things to come. However, the world has also seen

that confrontation between erstwhile antagonists among the

corporate and citizen sectors is now changing to joint action and strategic partnerships for sustainable development.

Governments and corporations now regularly partner civil rights and development groups

guided by CSR experts to develop and implement sustainable interventions in an ever widening

range of environmental and social themes. In Pakistan too there is room for a national CSR forum where knowledge can be shared informally and good practice honed to take the country

into the next plane of CSR performance. SECP can lead this forum, with secretariat housed in

an institution such as the Institute of Corporate Governance, or any another academic

institution, or a suitable citizen sector organization. The forum could become a membership body and take over the tasks described above, such as publishing newsletters and

disseminating good practice val ues culled from a regular series of national dialogues.

“True, from the consumer society perspective, but telling

philanthropy from responsible business is still a conceptual leap for our businesses that prevents them contributing to sustainable

development. “

CSR in South Asia, India 2001 ©RBI

Page 64: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

64

9. Groom Future CSR Leaders

There is no dearth of innovation leaders among Pakistan’s corporate and citizen sectors. These innovative corporate leaders can be the best resource and act as a catalyst fo r creating a larger

pool of future leaders. These leaders need to take a leap forward to educate themselves on

CSR issues and then showcase ethical behaviour within their own organization, collaborate

with other responsible leaders and provide a learning forum for young leaders. Over time and through a considered stewarding approach, possibly through the forum suggested above, it

would be possible to create a culture of competition based on innovation and socially

responsible behaviour in all aspects of business. These young leaders can be encouraged

through rewards and recognition by representative bodies, such as chambers of commerce, SECP, business schools or CSR enabling organizations .

THE WAY FORWARD

Fig (13)

HHooww ttoo lleeaappffrroogg iinnttoo tthhee gglloobbaall CCSSRR mmaaiinnssttrree aamm ffoorr ccoommppeettii ttiivvee aaddvvaannttaaggee

Government

Society and Environment

CSR Expert

Multinational Corporation

Large National Corporation

Funding Agencies

Business School

Technology Institute

Sustainable

Technology Small and Medium Enterprise

Page 65: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

65

APPENDIX A CSR-Q1 RBI-SECP 2005 As the first step to CSR Benchmarking Research, this data sheet will help create a baseline that correctly categorizes your organization.

The information you collect below will be utilized only for the research and will not be shared with anyone outside without your Company’s formal consent. Please contact RBI for clarifications or help in completing this data sheet. Thank you.

Sector: _______________________

1.0

ORGANIZATION

1.1 Registered Name

1.2 Brand Name or DBA

1.3 Incorporation 1.3.1 Public Limited Company 1.3.2 Private Limited Company

1.3.3 Partnership 1.3.4 Sole Proprietorship 1.3.5 Non-Profit Company 1.3.6 Other (_____________________)

1.4 Status 1.4.1 Subsidiary of larger group 1.4.2 Independent Company 1.4.3 Domestic Joint Venture 1.4.4 International Joint Venture 1.5 Address 1.5.1 Head Office 1.5.2 Selected Facility

Telephone Fax Email Web

Facility Address 1.6.1 1.6.2 1.6.3

1.6 Other geographic locations

1.6.4 1.6 Human Resources #

%

# %

1.6.1 Top Management:

1.6.2 Mid-Management:

1.6.3 Technical:

1.6.4 Labour:

1.6.5 Permanent:

1.6.6 Contract:

1.6.7 Part Time:

1.6.8 Other (____________):

1.6.9 Male: 1.6.10 Female:

Total Employee

Page 66: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

66

1.7

CONTACT PERSON/s 1.

2.

Designation Telephone Mobile Email 2.0

PRODUCT/SERVICE

2.1

Exporting/ since: 2.2

Percent Exported:

2.3

Major Product/Service Range

2.3.1 2.3.2

2.3.3 2.3.4 2.3.5 2.3.6

2.4.1 2.4.2 2.4 Export /market

Destinations 2.4.3 2.4.4 2.4.5 2.4.6

2.5 Major Brand/ Clients

2.5.1 2.5.2

2.5.3 2.5.4 2.5.5 2.5.6

3.1

Product Cycle 3.2

Output/value added

3.1.1 3.2.1 3.1.2 3.2.2

3.0

PROCESS

3.1.3 3.2.3

3.1.4 3.2.4

Reporting Period: Month /Year From To

4.0

DISCLOSURE 4.0.1

Reporting Currency: (Conversion rate)

4.1

Outputs by Product /Service Class

Product Volume

Units Value

4.1.1 4.1.2 4.2.1 4.2.2 4.3.1 4.3.2 4.4.1 4.4.2

Page 67: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

67

4.2 Process Verification/ Certification

Inspection Type

MOV

Date Verifying Org.

4.2.1 Internal 4.2.1.1 4.2.1.2 4.2.2 Fee-for-Service 4.2.2.1 4.2.2.2 4.2.2.3 4.2.3 National Body 4.2.3.1 4.2.3.2 4.2.3.3

4.2.4 International 4.2.4.1

4.2.4.2 4.2.4.3 4.2.5 Buyers/Agents 4.2.5.1 4.2.5.2 4.2.5.3 4.2.6 Other 4.2.6.1

4.2.6.2

4.3

Liability/Risk Management Ref. Type Coverage

4.3.1 Org. Policy 4.3.2 Internal SOPs 4.3.3 Insurance

4.3.4 Other 5.0

CSR TASK TEAM

Name

Designation

Dept.

Contact Information

5.1

5.2

5.3

5.4

Page 68: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

68

CSR-Q1 RBI-SECP 2005 This survey is the first endeavour by the Securities & Exchange Commission of Pakistan to directly collect information concerning current and expected trends in CSR. This questionnaire is based on RBI’s “CSR Pillars CSR” model and aims to collect CSR perception and practices among Pakistan’s Industry. We are happy to acknowledge that your company is among a group of respondents who show a commitment to CSR We appreciate your response to the detailed questionnaire below. It is understandable that your company may not have all the information asked for. Please fill in as much as is possible, with the knowledge that this data will help define Pakistan’s corporate policies. Should you be interested, we would be happy to share with you the initial overview of the findings of this survey. The final report may be published by SECP. Please be assured that all the information will be kept confidential and used exclusively for the purpose of this research. The project team and CSR community thank you in anticipation for your time and effort.

0.0 What does the term “Corporate Social

Responsibility – CSR” mean to your company? Summarize your understanding briefly in the space provided.

1.0 Responsibility Priority Interaction with SH Yes/No/Not sure 1…..16 Type of interaction

(Hotline, survey, focus group etc.) Frequency (Monthly, Quarterly etc)

1.1 Stockholders 1.2 Board 1.3 Employees 1.4 Management 1.5 Government 1.6 Customers 1.7 Community 1.8 Environment 1.9 Media 1.10 Buyers 1.11 Academia 1.12 Competitors 1.13 Civil Society 1.14 Suppliers

Do you think your organization has a responsibility towards any one of the stakeholders named? If yes what specifically do you

consider your organization

responsible for?

How important are these Stakeholders to your organization? Rate them by priority on a scale of 1 to 16 where 1 stands for the highest priority.

1.15 Employees. Family 1.16 2.0 Do you have a Verbal Written Under process Reference Main statements or issues addressed (give at least 3) 2.1 Vision Statement 2.2 Mission Statement 2.4 Business principles standards 2.5 CSR Strategy

Page 69: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

69

3.0 Preference 1- 10 **see

Policy Practice Performance

Comments/reference

CG Corporate Governance BE Business ethical Principles EC Environment compliance SC Social compliance DR Disclosure Environmental & social report EP Product Integrity CC Corporate giving’s /Com munity investment SH Stake holder dialogue FP Financial performance

Which of the following shows that a company is socially responsible? Quantify your views on a scale of 1 to 10, where 1 shows the highest value. Which of the following if performed will in your view help you make a good corporate citizen Which of these is followed by your organization? (** See instructions for # Q3 below…) SS Supply Chain Compliance

The initiative/project carried out in partnership/collaboration with Name and describe Community Initiatives your organization is involved in

Description of initiative/project

Amount spent On initiative/project

Employee/company time/ effort spent Local NGO Gov Intn.l NGO Business Buyer Academia

CC1.1 Education

CC1.2 Technology

CC1.3 Water & Sanitation

CC1.4 Environment awareness

CC1.5 Sports

CC1.6 Capacity building

CC1.7 Health

CC1.8 Micro credit

CC1.9 Enterprise Development

CC2.0 CC1

CC2 % Of pre tax profit used as corporate giving Year $ Spent

CC3

Page 70: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

70

Time spent by your

Initiative Amount/Wt. $ Spent S. Mngt. Employee

$ Saved (if any)

Re cycling Reuse EC1.3 Product safety

EC1

Give details of any initiatives taken by your organization to improve Environmental conditions/impact

EC1.4 Waste minimization

EC2.1 Paper EC2.2 EC2.3 EC2.4

EC2 List of major recycled /reused items/products

EC2.5 EC3 Has your organization ever been

fined for environmental violations? Year $ Fine Other fines Actions taken Impact on

Business Comments

FP When you buy FP1 Purchasing decisions are based on

Products Raw material Office appliances Comments

EP1.1 Energy efficient products EP1.2 Environmental friendly product EP1.3 Recycle ability FP2 Consideration for product quality EP2.1 Durability EP2.2 International standards for products &

services

EP2.3 Products meet customer requirement EP2.4 Customers and consumers rights FP3 You have policies/procedures/practices for policies Procedures Practices References /examples Comments EP3.1 Ethical Marketing EP3.2 Fair trading EP3.3 Fair advertisement and labelling. EP3.4 Products with clear, specific warnings

Page 71: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

71

BE1 Is employee performance linked to ethical practices Senior Management Middle management Staff Un skilled workers Comments/explanation references BE1.1 Employee punished for

BE1.1.1 Unethical behavior BE1.1.2 Taking bribery BE1.2 Employee rewarded for BE1.2.1 Refusing bribery BE.1.2.2 Ethical behavior

CG

CG1

Does your annual report include code of corporate Governance

CG2 Do you think Good Governance help in anti corruption

Give 5 main clauses of code of corporate governance you are following or want to follow

Voluntary Regulatory Issues faced during implementing

CG3.1

CG3.2

CG3.3

CG3.4

CG3

CG3.5

Total Number Minority share holder Comments CG4 Do you have independent directors on your board

CG5 Do you conduct regular management reviews

CG6 What are the main sources of information for management

CG7 Do you have any feedback mechanism in place (describe/give reference)

Page 72: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

72

SC SC1 Which of the following benefits (or equivalent) are availed by your

Employees Senior Management Middle

management Staff Un skilled workers Comments/explanation

SC1.1 Annual leave SC1.2 Life/medical insurance (L/M) SC1.3 Free/subsidized food ( F/S) SC1.4 Free transport SC1.5 Company organized re creation/sports SC1.6 Bonus/profit shares SC1.7 Stock option SC1.8 SC2 Is your organization an equal opportunity employer?

Policy anti-discrimination, diversity

Practice /example

SC2.1 SC2.2 SC3 Do you provide maternity/ paternity leave? Paid Unpaid How long SC3.1 SC3.2 SC4 Do you provide childcare facilities? On site Offsite Charge Free SC4.1 SC4.2 SC5 Are unionization or works councils allowed Unions Work councils SC5.1 SC6 Any event, of work-related disruption in your organization. Reasons for

disruptions Date/ear Name SH who

were involved in the event

How the situation was handled (By management)

SC6.1 Industrial disputes SC6.2 Employee strikes SC7 List if you provide any environmental awareness trainings Formal Informal Internal External SC7.1 SC7.2 SC7.1 SC8 Do you have a grievance procedure to follow Verbal Written implemented Since when SC8.1 SC9 Result of internal and external monitoring publicly available We b Printed report On demand SC9.1

Page 73: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

73

SH1

Stakeholder 1 Stakeholder 2 Stakeholder 3 Stakeholder 4 Stakeholder 5 Stakeholder 6 Do you have regular Interaction with Stakeholders

SH1.1 Type of interaction

SH1.2 Sources of information

SH1.3 Feedback mechanism

SH1.4 Action

SS

Require from supplier to have a policy

Require from supplier to demonstrate compliance

Monitoring/controls/audit procedures for verification

Comments/reference

CG Corporate Governance BE Business ethical Principles EC Environment Compliance SC Social compliance DR Disclosure Environmental & social

report

EP Product Integrity CC Corporate giving’s /Community

investment

SH Stake holder dialogue FP Financial performance

For which of the following you demand compliance from your suppliers / subcontractor

SS Supply Chain Compliance

Page 74: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

74

C1 List down the Government

Laws/codes you are aware related to the following

1 2 3 4 5 Do you comply How do you comply

C1.1 Stakeholder Involvement C2.2 Good Governance C2.3 Ethical practices C2.4 Environment Compliance C2.5 Social Compliance C2.6 Product Safety C2.7 Corporate giving’s

/Community investment

C2.8 Disclosure/sustainability reporting

C2.9 Financial Compliance

1 2 3 Reasons Name any three most Socially Responsible Organizations in

AW

AW1.1 World AW1.2 Pakistan

AW1.3 Your Sector

Name any three unethical Organizations the

AW2.1 World

AW2.2 Pakistan

AW2.3 Your Sector

Page 75: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

75

Do you have Separate ____________

Pt1

For

Department Manager Coordinator Training/awareness plan

Pt1.1 For CSR Pt1.2 For Environment Pt1.3 For Community Work Pt1.4 Health & Safety Pt1.5 Product research Pt2 Most of the initiatives under

following category are result of P: Pressure by A: Awareness program by J: Jumping the bandwagon

Government Local NGO Employee/worker International NGO

Media Internal/risk management

International Buyers

Pt2.1

Good Governance

Pt2.2

Ethical practices

Pt2.3

Environment Compliance

Pt2.4

Social Compliance

Pt2.5

Product Safety

Pt2.6

Disclosure/sustainability reporting

Pt2.7

Stakeholder Involvement

Pt2.8

Financial Compliance

Page 76: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

76

Impact Reference to report/document Pf Is there significant positive change in literacy rate, knowledge, or health, employment and local economy?

Activity Example Social Financial Report

Name/# By Org name

Pr.1 Pr1.2 Pr1.5 Pr.1.4

I.e. job created Life saved Children educated

Pr Relationship/Reasons for joining UNGC GRI

Pr1 International or national CSR initiatives such as

Responsible Care

Global Mining Initiative

WWF

Pr2 Sectoral initiatives

Forest Stewardship Council

RBI

BSR

APCSRC

Is your organization a signatory or member of any of the following:

Pr3 CSR associations/ organizations?

Page 77: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

77

How to answer Question number 3.0 Explanation of the terms/headings in question 3 ** “Preferences” “Policy” “Practice” “Performance” aa Already implemented, actively supported pi Planning to implement, resources allocated ar Agree to as value addition, ready to act ii Insufficient informati on to judge ua Unaware of or don't approve in Initiative has a negative effect on CSR wo Will oppose if demanded na Not applicable

Written /formal F + document number Verbal/informal I Provide as attachments: 3 Major objectives 3 Main points of the policy

Reference to SOP’s or trainings Provide List of 3 Main activities related to the implementation of these policies

Value added to your Business because of these policies or activities Example of Impact on other Stakeholders.

The information provided is correct to best of our knowledge and can be verified from external sources. Name: Organization: Designation Signature: Date:

Page 78: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

78

CSR Q-3 Thank you for your time to provide us with your organizational information for RBI-SECP Research on “State of CSR”. We are encouraged by your interest in this national initiative and would now like to have some personal views on following CSR related issues. Your Leaders point of view and suggestions will add value to the analysis.

We appreciate detailed response to the few questions below by the Chairman/CEO/ED/President/MD/Head of the organization. Please try to be as candid as is possible, with the knowledge that your response will help define Pakistan’s corporate policies. Please be assured that all the information will be kept confidential and used exclusively for the purpose of this research. The project team and CSR community thank you in anticipation for your time and effort.

1. List the benefits your organization has gained by implementing/practicing CSR. Choose from below or give your own Benefits Reason Reputation Cost saving Better Access to market Motivated employees Quality product/ brand loyalty 2. Briefly describe any major opportunity/opportunities you got by implementing CSR

Page 79: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

79

3. Do you think socially responsible organizations will have better opportunities within the WTO regime? Reason/comments Yes No 4. What in your view are the main impediments or barriers in imp lementing CSR in your organization? Barriers Reasons/suggestions 5. Do you see any link between socially responsible behaviour of a company and gaining competitive advantage?

Page 80: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

80

6. What collective efforts can you suggest for promoting CSR in Pakistan? 7. Who plays or can play a major role in promoting CSR in Who How Pakistan In your industry 8. What three main things can you do to improve Social Responsibility in your organization. Initiative Comment

Page 81: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

81

9. What three main things can you do to promote social responsibility in your sector. Initiative Comment 10. How do you report on CSR activities undertaken by you To Through /How How frequently Board of directors Government Shareholders General public 11. For the purpose of reporting, do you follow Brief description Standardized reporting

requirements

Benchmark targets for your sector 12. What role a leader can play in promoting Corporate Social Responsibility in his/her organization

Page 82: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

82

13. What Qualities are essential for a responsible leader 14. What can Business schools do to produce more responsible leaders ( those who are equipped to promote CSR Globally) Name: Designation: Signature: Organization: Date:

Page 83: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

83

APPENDIX B APEX DISCUSSION FOR CSR STRATEGY

Date: 26 th September 2005 Time: 2:30 pm – 6:00 pm Venue: Shalimar Room, Hotel Pearl Continental Lahore 1. AGENDA

14:30 Participant Registration RBI/SECP associates & staff 15:05 SECP’s CSR Initiatives Ms. Jaweria Ather, Director SECP 15:15 Research Brief & Findings Ms. Ambreen Waheed, Executive Director RBI 16:00 Reflections & Way forward Dr. Faiz H. Shah, Advisor RBI 17:15 Closing Remarks Dr. Tariq Hassan, Chairman SECP 2. Registration: Participants were registered at the registration desk by RBI volunteers and were provided with a folder containing details of the seminar, a summary of research findings, a feedback form, information material by SECP and a souvenir 3. Delegates: 30 participants representing a wide array of stakeholders, including Government, business & industry, and the citizen sector were represented at a senior level. Dr Tariq Hassan, Chairman SECP presided over the session. 4. Opening and Welcome: Ms Jaweria Ather, Director SECP, welcomed participants to the seminar and explained the context and significance of the research being presented and its relevance to the emerging importance of Corporate Social Responsibility (CSR) in conduct of business. She shared with the audience SECP’s objectives for commissioning a national baseline study of the state of CSR in Pakistan. Ms. Ather said this research, conducted by RBI on behalf of SECP, is the first of its kind in the country and was going to help fill the gap that exits regarding credible information on which to base national policies. SECP feels an evaluation of the current state of CSR in Pakistan would facilitate and improve transparency and accountability, and help businesses compete better within the WTO regime. She said that as a result of rapid globalization in the past decade the expectations of customers are now greater than ever before, and that in order to thrive, companies today must also be mindful of how their businesses impact their social, economic and environmental context – the so-called triple bottom line – instead of just their financial outlook. She explained that enhanc ed corporate reputation, brand image and satisfaction at being “good” corporate citizens are just a few basic benefits to be gained through the principles of CSR. 5. Introductory Session: Ms. Ambreen Waheed, Executive Director RBI made a presentation outlining the background, context, methodology and findings of the baseline study, followed by a gap analysis of CSR in Pakistan. She said that since the successful implementation of the Code of Corporate Governance, SECP was now engaged in conveying to all the organizations it was charged with regulating the emerging importance of a viable strategy for CSR in Pakistan. She expressed her concern on Pakistan’s slow progress rate as compared to other countries and urged that CSR could be used as a tool to gain competitive advantage in a rapidly changing global trade environment.

Page 84: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

84

• She informed participants that from a cohort selected by location and size from within 10 industrial sectors over 100 companies were invited to participate in the study.

The response rate was about 35%, which can be considered a fair response rate for a study of this kind even though the expectation was for a higher response. All invitees for research were followed up by RBI, who clarified elements of the questionnaires in response to their respective queries and backstopped their information needs. Ms. Waheed highlighted the “CSR Pillars” framework against which the research has been carried out: Ms. Waheed shared with participants the research techniques used for the study and a brief overview of the three questionnaires developed for data collection. She then discussed the levels of analysis based on “Thought-to-Action” transition model comprising the “4-Ps” of “embeddedness”, namely Perception, Policy, Practice, Performance. She revealed that there is a lack of understanding of CSR precepts and it is still equated to Philanthropic gestures and corporate giving in general. In terms of policies the fuel & sector and the tobacco industry were amongst the high scorers in proper choice and compliance of environment, social, quality and occupational standards where as Services and goods sector. She said that there is overall lack of CSR implementation against most of the CSR pillars and little effort or evidence of assessment of impact and linkages of CSR activities to financial performance. She expressed concern that in the new Global market environment these industrial sectors would face the most pressure to adopt CSR concepts or risk losing business to other countries. In her discussion Ms. Waheed pointed out the glaring lack of proper channels of stakeholder communication, absence of benchmarks, the urge to hide information with a culture of non disclosure, and lack of a strategic approach as major causes of concern in implementing the precepts of CSR. To overcome these she proposed a “Collaborative Model” that aims to bring together the government, multi-national corporations and funding agencies to support citizen sector and media synergies to develop constructive dialogue and appropriate technologies to help build sustainable business. Towards the end of her discussion, she reiterated that to leapfrog into the global mainstream and gain competitive advantage it is essential to for Pakistan to develop and then work in unison within a CSR strategy that focuses on awareness and dissemination of CSR prospects, encourages CSR practices through factual information, creates opportunities for sustained stakeholder dialogue, maintains focus on sustainable development priorities and paves way for benefiting from global market opportunities. She presented the gaps identified during the research and presented her recommendations for CSR Strategy as a way forward and basis of the Panel discussion in the next session 6. Cross Stakeholder Panel Discussion:

Taking up the facilitation of the session, Dr. Faiz Shah, Advisor RBI, began the session by showing participants the United Kingdom’s official CSR website, and informed them about steps that are being taken in a number of countries to mainstream CSR as a day-to-day management issue. He said that the importance of CSR as a national business issue in the UK could be gauged from the fact that the country had a minister for CSR. He set the context of the discussion by comparing current global trends in CSR with the situation in Pakistan, referring to the findings presented by Ms. Waheed. He highlighted SECP’s emphasis on corporate governance as a positive contribution to CSR. He pointed to the need for a national consensus on CSR and the importance of a practical national CSR strategy developed with inputs from all major stakeholders. For this purpose Dr. Shah reiterated the 8 issues identified by the research and initiated discussion on them one by one as follows:

Page 85: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

85

1. Build strong conceptual knowledge 2. Link CSR to competitive advantage 3. Enhance effective stakeholder involvement 4. Harmonize and standardize CSR performance 5. Define and promote clear incentives 6. Promote a shared strategic vision 7. Promote “business” thinking for CSR projects 8. Seed a vibrant national forum

A Representative from NGO said that CSR as a concept was relatively unknown to the NGO sector and as such there was a need to educate the civil society organizations about its precepts. She asked how these precepts could be made relevant and applicable to the not-for-profit sector, especially those organizations that are registered under section 42 of the Company’s Act. Dr. Tariq Hassan responded to the question saying that section 42 not-for-profit companies have a mandate and objectives specific to such aims as social welfare and corporate philanthropy. He explained that such organizations were already performing some of the functions intrinsic to the CSR model described by Ms. Waheed. He said that most of such organizations did realize the importance of CSR but still needed to build on this knowledge to develop their specific CSR plans. Dr. Hassan informed the participants that SECP and the Institute of Chartered Accountants of Pakistan (ICAP) are currently in the process of developing a standard for social auditing, especially for not-for-profit companies to make sure that they spend their funds responsibly and for the purposes received. He said that there was a dire need for creating awareness for those to whom the concept is completely new so that everyone is involved, thus validating the notion for building strong conceptual knowledge. Representative from oil sector asked how long it would take SECP to develop such guidelines and how long it would take companies to develop the capacity and systems to comply. Dr. Hassan explained that companies would need sufficient time to prepare for social compliance, which would be provided. He underscored the need for practical steps to be taken in this regard and assured participants that the SECP w ould soon take the initiative of going beyond verbal CSR to prepare such guidelines. Representative of a professional association shared his observations on the current state of legislation in the country and stressed that a strong action plan was needed to properly disseminate the CSR concept. He expressed concern over the lack of responsiveness of officials responsible for matters such as workers welfare, social health and security and compared it with the 1960’s and 1970’s when new social security legislation was created to effectively dealt with these matters. Speaking from his knowledge of tax laws, he said that on average 35% of company incomes actually goes into workers’ benefits and for ensuring worker health and safety etc. However, when these companies file their returns these very expenses are disallowed by tax authorities. This amounts to a strong disincentive for companies to spend on labour and workplace benefits. Dr. Tariq Hassan agreed that government incentives were less than perfect, but noted that CSR is not a completely new concept and had existed for many years in a number of forms. He narrated his recent visit to a leather factory, where the owners have installed a water treatment plant, indicating that even if they are doing it at the behest of clients, such industrialists are cognizant of the concept of CSR.

Page 86: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

86

A Civil Society representative pointed out the inadequacy of laws relating to CSR, and said that they require immediate attention on the part of government. Referring to the findings of a recent study that finds Rupees 19 billion being generated through charity, he expressed his concern that in spite of being ranked 6th among the countries demonstrating high levels of private philanthropy, Pakistan still did not rank as a socially responsible state. He agreed with the observation made earlier about the necessity of communicating to businesses and individuals alike that philanthropy is but one cornerstone of CSR, which embraces a much wider thought. He advised the use of taskfor ces, newspapers, TV channels and conferences to further the CSR concept. Workers-Employers Council representative, pointed out the weak base of the CSR concept especially when related to Small and Medium Enterprises (SMEs). He further noted the lax efforts of the government to rise up to the occasion and face the challenge head on. Small and Medium Enterprises Development Authority (SMEDA) representative articulated that if CSR was to register a sufficiently deep impact it was necessary to develop a collaborative front involving the ministries, civil society as well as the academia to make a joint effort for the spread of the CSR concept. A representative of chemical industry, presented her idea of targeting the stock exchanges as mediators for CSR among listed companies in Pakistan. A participant representing oil and gas sector stressed on the need for creating a platform to help companies achieve social standards compliance, along with a mechanism to allow for an independent monitoring authority. Another participant from Oil and Gas sector said there was a need to study the prevailing CSR benchmarks in countries such as the UK and France, and incorporating these into a nationally relevant system. He said that SECP should act as the umbrella organization to maintain liaison with CSR organizations in other countries, as well as the media and high profile organizations, which should be invited to support CSR efforts to strengthen the awareness base nationally. Representative from pharmaceutical industry reiterated the necessity for the government to create benchmarks and incentives to act as catalysts for a socially responsible business culture. She elaborated by giving the examples of organizations which some years ago were subsidized by the government for achieving compliance and certification to quality management standard ISO 9000, and as a result of which a large number of companies attained a higher quality rating. She said those companies or sectors should be targeted first, which are likely to be better motivated through such incentives. They will be more prepared to accept the concept of CSR because it serves their business interests. Others will follow suit. A participant from a multinational, said multinationals that normally have to follow policies of their global parent companies, including CSR guidelines can be encouraged to share their practices and well developed procedures with the local organizations for creating motivations. A civil society member said that according to a survey conducted by PCP in Pakistan on corporate citizenship:

- 67% companies consider it to be extremely important, - 16% companies believe it to be important, - Only 6% think otherwise

Page 87: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

87

Other findings from this study reveal that out of the Rs. 19 billion generated through charity, Rs. 600 million was contributed by the corporate sector. He said that in order to better channel all these resources the government must introduce social reporting guidelines and provide incentives such as awards for corporate philanthropy. He cautioned, however that since these donations are voluntary, government intervention should be minimal yet effective. Representative of w orkers/employee council was of the opinion that the government, as of yet, has failed to take the initiative in this scenario, but must now make amends by giving the scheme its due attention otherwise things were likely to deteriorate. On a more positive note he insisted that whether the government plays its part or not, all the various stakeholders present in the room should make a unified effort to propel the cause of CSR forward. A Civil Society organization member, mentioned an incentive scheme being run by WWF-Pakistan in collaboration with the Association of Certified Chartered Accountants (ACCA), called the “Pakistan Environmental Reporting Award”, which recognizes environmental reports from among entries in three categories, namely, “best multinational”, “best local listed company” and “best unlisted company”. Reports from companies are evaluated for their clear communication of a company’s environmental responsibility performance by a panel of judges that includes Ms. Jaweria Ather and Ms. Ambreen Waheed. The award aims to encourage the development of an environmentally responsible culture in Pakistan. 7. Reflections on the Way Forward: Dr. Faiz Shah drew the attention of the participants to the agenda for the apex consultation and invited precise comments from the delegates on the 8 issues identified in the research as requiring attention in terms of a nationally relevant CSR strategy. Comments by the participants appear below, against their relevant action heading:

1. Build Strong Conceptual Knowledge Participants unanimously supported a national CSR awareness campaign, which should be developed with the help of a cross-sectoral national task force formed by SECP with the possible involvement of academia and the media. Participants suggested the starting up of a periodic newsletter and the use of private TV channels to disseminate awareness about CSR. SECP agr eed to take the initiative in this and to bring together representatives of CBR and other stakeholders to discuss these options. Member representing workers/employee offered their services to in this regard. Dr. Hassan commented that the recently established Institute of Corporate Governance could be asked to provide a home for this task-force since they have adequate resources and because volunteer organizations are represented on the institute as well. He pointed out that although a CSR culture is not too widespread yet, it does appear that companies are interested in knowing how they can accept greater social responsibility. He urged participants, SECP and RBI to assist meaningfully in building conceptual knowledge.

2. Enhance Effective Stakeholder Involvement There was unanimity again among participants for a national initiative to involve business and its various stakeholders, utilizing the good offices of representative bodies such as trade associations, chambers of commerce, labour unions, NGOs, media groups and educational institutions, so as to build mutual appreciation of each others perspectives and work towards synergies in the context of competitive advantage.

Page 88: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

88

Participants put forward a number of practical suggestions, including: - Regional CSR roundtables, with representation from government, business, and civil society - Industry CSR forums, bringing buyers, suppliers and traders together with consumers - Expert Working Group developing CSR content for mainstream media programmes - NGO coalition propagating CSR through their respective channels - Orientation & Training programme on “Pillars of CSR” for all above groups A participant informed the participants about the national CSR roundtable pilot project being implemented by GTZ –German Development Cooperation, which brings together all stakeholders. Dr. Faiz Shah suggested that since this pilot would end in December 2006, SECP could consider taking over the institutional support of the roundtable. He also shared with participants that a draft set of national CSR guidelines had been developed under an initiative supported by EPB and leading export companies in 2004, which could be used as an agenda for further discussion under the aegis of the Corporate Governance Institute. Dr. Tariq Hassan agreed that stakeholder participation was necessary, and that as with all recommendations emerging from this consultation SECP would consider this option.

3. Harmonize and Standardize CSR Performance

In response to this recommendation, one participant said that CSR needs are different for different businesses, and in his opinion it would not be possible to develop a nationally relevant set of CSR guidelines. Dr. Shah reminded participants of a number of existing standards such as those for quality, environment or social reporting, which are cross-applicable, but also quoted the example of the Global Reporting Initiative (GRI) which in addition to core parameters, has also released industry-specific supplements. A general consensus emerged among participants that a national CSR code, sensitive to the particular requirements of Pakistani industry would be a positive outcome of SECP’s interest in CSR. However, participants were also conscious of the cross-stakeholder participation, expertise, time, resources and institutional commitment needed to develop standards or codes that aspire to national and international legitimacy and acceptance. Ms. Ambreen Waheed, Executive Director RBI mentioned her continuing involvement with GRI and informed participants that GRI is now in the process of developing a reporting standard for emerging markets, and as a member of the organization’s governance structure invited participants to become involved in the development and testing of such evolving tools for measuring and reporting CSR performance.

4. Define & Promote Clear CSR Incentives

While participants were unanimous in agreeing that government should introduce concrete incentives in the form of tax benefits, subsidies, recognition, awards and benchmarks, duly supported by the business sector, it was clear that there was a lack of information regarding what the government was already offering as compared to what would be required to promote CSR among companies.

There was general agreement that the situation required a detailed study of present laws and regulations that govern the conduct of business, resulting revenues, taxes and oversight. Such a study would be required to ascertain what incentives are presently available in Pakistan, identify what other countries are providing in similar conditions, assess what stakeholders see as positive motivators for CSR, and analyse what would be a realistic mix of CSR incentives that promote corporate interest, government confidence and civil society acceptance.

Page 89: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

89

5. Promote Shared Nation-wide CSR Vision

When asked to identify a national perspective on CSR, participants agreed that there was none. However, everyone agreed that it would be beneficial to have a national vision along which to develop a comprehensive CSR strategy, which could then guide various programmes as are required for various stakeholders and industry sectors.

Dr. Tariq Hassan said that businesses need to have a common vision centred on “enlightened self-interest”, a situation where companies would serve community-specific needs and safeguard the environment knowing that such actions generate greater well-being among existing as well as potential customers, and as a direct consequence generate greater business opportunities. Ms. Waheed mentioned that companies are taking up social service delivery or strategic partnerships with government or NGOs to address specific social or environmental issues as “corporate social investments” (CSI). Some multinationals are keen to interact with counterparts who it can explore effective partnerships in CSI. Participants expressed enthusiasm for this concept as a way to build shared vision at the national level and for working with local communities, educational institutions, NGOs) and other capacity-building stakeholders.

6. Promote “Business” thinking for CSR interventions

Leading off from the preceding views on enlightened self-interest, participants agreed that as yet there was insufficient realization of the fact that social investments are part of business thinking. There was agreement that transferring value perception and relationship-building are central to sustaining a business, and social services and projects contribute to cementing them. This is something that is evident even among successful non-profits and NGOs. Yet, it appears that NGOs and businesses see social investments quite differently. Participants agreed that this perception gap needs to be bridged, possibly through multi-stakeholder orientation and also by developing need-based community service programmes.

7. Seed a Vibrant National CSR Forum

The Chairman SECP impressed upon the delegates that sustainable, strategic partnerships must be sought between business and government or civil society. He agreed with the potential that a strong national CSR dialogue would have on building awareness. He said that SECP would do all it can to support all meaningful attempts towards developing a socially responsible business sector in Pakistan. And he was sure that with an empowered environment, participants and their companies would not shy away from their responsibility as corporate citizens, and instead lend a hand in building a culture of CSR.

Ms. Waheed committed RBI’s technical capabilities to any initiatives by SECP, companies and NGOs, which can further CSR and corporate citizenship in the country and in her capacity as an active member of international CSR networks such as the UN Global Compact, UNCTAD and GRI, offered to continue backstopping them. She accepted the suggestion from a number of participants and said RBI would commit its technical resources and staff to run CSR orientation sessions for companies and key stakeholders in concert with SECP. Taking this further, representatives from SMEDA and WEBCOP offered to organize such seminars among their respectiv e networks.

Dr. Faiz Shah reviewed the comments hared by participants on the 8 outcomes of the study and asked for any further thoughts from them before closing the plenary.

Page 90: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

90

In response it was suggested that a full-scale need assessment on CSR should be conducted at company level to see how much CSR was an intrinsic part of company plans. He said that if done professionally, it would help companies realize that CSR is here to stay as a priority. The Chairman SECP stressed the need to develop stakeholder synergies so as to fully exploit the advantages that can possibly be derived from pursuing a well-thought out CSR strategy. He reiterated SECP’s wholehearted support towards this goal and invited others to join the initiative. A number of delegates voiced full alignment with SECP’s views and committed support for any initiatives that SECP would develop in future. 8. CONCLUSION:

Closing the plenary, Dr. Tariq Hassan reiterated SECP’s commitment to see CSR establish itself firmly as a priority area in Pakistan’s policy environment and emphasized again the importance of stakeholder ownership and commitment for any CSR strategy initiative to succeed. He said it was a pleasure for him to be able to attend this apex consultation because he learnt from it and thanked all participants who had come from all over the country to attend. He appreciated the enthusiasm exhibited by the participants, the high quality of their feedback and the commitment they had shown in bringing about a CSR compliant culture in Pa kistan.

Dr. Hassan thanked Ms. Ambreen Waheed and appreciated the hard work of the RBI team for conducting the country’s first CSR study and for successfully organizing the consultation. He thanked Dr. Shah for facilitating the session. He said he was looking forward to the final draft of the report, following which he hoped to consider a media campaign with the help of various stakeholders to achieve the outcomes outlined in the day. He urged every corporate citizen to recognize their responsibility and make efforts to work towards realizing social values in enlightened self-interest.

He said CSR was a movement which must go beyond workplace health and safety, and take into account the consumer protection aspect so as to win the very hearts of the community. He expressed satisfaction at the outcomes of the consultation, which he felt was a quantum leap towards fostering a socially responsible environment.

Ms. Ambreen Waheed thanked the participants for their interest in the study and for their valuable inputs while validating the recommendation on the CSR Strategy outline presented

Dr. Hassan referred to CSR as, “a process of generalizing what we have, prioritizing what we want, and carrying it forward with actions in a meaningful manner”, and once again urged everyone to shoulder responsibility.

“We are fully committed to CSR. We will not shy away from our obligations.

But for this we need widespread partnerships.” Dr. Tariq Hassan Chairman SECP

Page 91: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org

© Responsible Business Initiative

Ambreen Waheed

91

APEX CSR DISCUSSION WORKSHEET Lahore – 26th September 2005

# TARGET ACTIVITY LEAD ROLE TIME ASSUMPTION 1. Build Strong Conceptual

Knowledge - Task force - National Campaign - Private TV channels - Annual CSR Event - Newsletter

- SECP - Pak Inst. Of Corp. Governance - RBI

12-18 months

CRI Message development

2. Link CSR to Competitive Advantage

- formal CSR guidelines - Corp. Index Card -

- SECP - EFP - RBI

3. Enhance Effective Stakeholder Involvement

- CSR Roundtable - Outreach

- SECP - GTZ/RBI - NGO Coalition - Industry Forums - Media campaign

4. Harmonize and Standardize CSR Performance

- Industry-specific norms - Develop frameworks

- RBI Consider GRI as norm

5. Define and Promote Clear Incentives

- Tax break - Govt. co-funding - Recognize performers

- CBR

6. Promote a Shared Strategic CSR Vision

- enlightened self-interest - PICG - NGO Coalition -Corporate reps

7. Promote “Business” Thinking for CSR Projects

- design need-based programs - Business - CSR Centre

8. Seed a Vibrant National CSR Forum

- take reps from existing committees forum

-SECP - CSR Expert

9. Link Taxes to CSR performance – tax reform

-

10. Review laws and draw together supportive elements

-

Page 92: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

92

14.0 REFERENCES

1 AI’s vision is of a world in which every person enjoys all of the human rights enshrined in the Universal Declaration of Human Rights and other international human rights standards.

2 WWF World Wide Fund for Nature was officially formed and registered as a charity on 11 September 1961. WWF planned to work, wherever possible, with existing non-governmental organizations, and

base its grants on the best scientific knowledge available a policy which has been adhered to ever since.

3 OECD Organisation for Economic Co-operation and Development -Organization groups 30 member countries sharing a commitment to democratic government and the market economy. The work covers

economic and social issues to trade, education, development and science and innovation. http://www.oecd.org

4 Carson Rachel, “Silent Spring” -exposed the hazards of the pesticide DDT raised question on humanity’s faith in technological progress and helped set the stage for the environmental

5 The company tried to hide that instead of sharing and overcoming the disaster

6 International treaty on global warming risk management

7 The WEF’s failure to deal with the social and environmental issues in the agenda .

8 Dr Vivian Balakrishnan, Minister of State for Trade and Industry and National Development, Singapore

9 Business for Social Responsibility, USA

10 Defined by “Business for Social Responsibility”

11 Business for Social Responsibility

12 Samuel DiPiazza. CEO Price Water house Cooper

13 Stephen Timms MP, UK Minister for CSR

14 John Zinkin, Associate Professor, Nottingham University

15 Amnesty International and OECD was formed by thirty countries to monitor economic development and foster good governance, V The World Wide Fund for Nature (WWF) came into being to protect

natural resources. Greenpeace was foun ded to fight against the pollution and the hazards caused due to human ignorance.

16 Promonent recent example have involved leading businesses like Enron, WorldCom, Parmalat, Shell and Nike.

17 Prominent among these are a wide array of international interventions including Global Reporting Initiative, SARB SouthAsia Alliance for Responsible Business, the Asia Pacific CSR Centres Group and

the Globally Responsible Leadership initiative, and a slew of national ones like the Pakistan Institute of Corporate Gove rnance.

18 São Paulo Consensus of UNCTAD XI

19 Mark Goyder, Director, Tomorrow’s Company

20 Pascal Lamy, Commissioner for Trade, European Commission

21 A by FTSE 350 index undertaken by the Institute of Business Ethics found above average financial performance for

companies with CSR policies.

22 “CSR Supplement”: Financial Post , 20th September

23 According to Islam.com, Islam emphasizes a conscious effort to avoid “hypocrisy, caprice, heedlessness, and everything else that keeps a Muslim serving God for His sake alone. This purification of the

soul is called tazkiyah”.

24 Raymond A. Klesc “Business Ethics in Islam”, Part III, Muslim Executive and Expatriate Newsletter, Volume 1 Issue 3

25 For example, a set of business ethics principles, disclosure requirements, product integrity specifications or identified social & environmental compliance standards

26 4-Ps- Perception, Policy, Practice, Performance

27 Bench marking Corporate Citizenship Practices 2003 Report, Philipines Business for Social Progress

28 This could also be a key reason for the relatively low response -rate for this particular study

29 4-Ps- Perception, Policy, Practice, Performance

30 David B. Montgomery and Catherine A. Ramus, "Corporate Social Responsibility Reputation Effects on MBA Job

Choice" Stanford GSB Working Paper, May, 2004 .

31 See Aguilera, et al, supra

32 Iddat (also pronounced IDDAH) is the period of waiting mandated upon widows after the death of their husbands during which they may not remarry. Iddat is established from the Quran and Hadith.

mubaarak.netfirms.com/iddat.htm

Page 93: CSR Study FinalReport November

EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

September 2005

www.RBIpk.org © Responsible Business Initiative

Ambreen Waheed

93

33 Lord Browne of Madingley, Group Chief Executive of BP, 2001

♣ Holy Grail Found, Absolute, definitive proof that responsible companies perform better financially; Marjorie Kelly,

34 Shah Faiz, Waheed Ambreen “ Triple Bottom-line Demonstration Project in South Asian Countries–Pakistan”,

Project Report: World Summit on Sustainable Development, Johannesburg, South Africa, 2002

35 Waheed Ambreen “GRI Potential at the Grass roots: Applying the Triple Bottom-line to Export SMEs in Pakistan”

Paper presented at the GRI Regional Symposium, Kuala Lumpur, Malaysia, 2002

37 http://www.iso14000.com, http://www.sa-intl.org

38 Strong regulatory authorities are exemplified by such institutions as the State Bank , SECP, Monopolies Control Authority, PEMRA, NEPRA etc.


Top Related