Csr Final

Table of Contents Executive Summary.............................................................................................................1 Introduction..........................................................................................................................1 History..................................................................................................................................2 CSR in Pakistan...................................................................................................................3 Delivery mechanisms...........................................................................................................5 CSR Projects........................................................................................................................5 P&G.................................................................................................................................5 PSO..................................................................................................................................6 Kashif Trading Corporation.............................................................................................7 Some Facts and Figures Regarding CSR Donations............................................................8 ..............................................................................................................................................8 ..............................................................................................................................................8 Laws regarding CSR in Pakistan.........................................................................................9 Ethics of CSR.......................................................................................................................9 Marketing Value of CSR....................................................................................................10 Why companies should take part in CSR activities?.........................................................11 Problems ...........................................................................................................................12 Recommendations..............................................................................................................14 Appendix............................................................................................................................15

Corporate Social Responsibility

Marketing Issues in Pakistan

Executive Summary

CSR has become the latest ‘buzz word’ in the corporate sector. Many people and organizations are seen flaunting this term without really understanding the true meaning of CORPORATE SOCIAL RESPONSIBILITY. During our research we found that most people are blatantly unaware of the requirements and benefits of CSR. In this report we go about correcting some of these misconceptions and present the current status of CSR in Pakistan. We discuss some problems regarding CSR and also suggest recommendations that can make it more effective in Pakistan.

Introduction Corporate Social Responsibility (CSR) is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the environment in all aspects of their 1

Corporate Social Responsibility

Marketing Issues in Pakistan

operations. This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large. Basically CSR is a term generally used to express the idea of a continuing commitment by companies to behave ethically and contribute to economic development of the country, while improving the quality of life of their workforce, their families, the local community and the society at large. 1

History 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. Businesses are expected to clean up the mess they have generated to the environment. Until the 1980’s CSR was considered same as corporate philanthropy. The current CSR concept started formulating in early 80’s. In 1980’s and 1990’s events like Shell spoiling the environment and violating the human rights in Nigeria, started a new wave of criticism which triggered a completely different thinking on CSR and hence many CSR definitions emerged during this period. 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 etc. Hence, CSR has continued to evolve rapidly over the last thirty years and companies now all over the world are expected to engage in CSR activities to be recognized as a socially responsible company that not only looks after the interests of itself but also after the interests of the society.

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Wikipedia.com

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Corporate Social Responsibility

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CSR in Pakistan At present the general perception of a corporate organization in Pakistan especially of local organizations is that it is out just to make money, without giving due consideration to the consumers. Therefore this perception has to be changed and a relationship between corporate citizenship and the consumers has to be established. Unfortunately in Pakistan, except for a few, there is a general lack of sincerity in the concept of Corporate Citizenship and CSR is used as a gimmick to enhance the image of the Corporation. Most corporations just believe in lip service and cosmetic contributions which project their organizations or their products. CSR in Pakistan seems to focus on how much donations an organization contributes to health, environment and education programs, but overlooks its obligations and commitments to the consumers. If corporations do not serve society and their consumers in letter and in spirit, then there will be a gradual breakdown of trust and respect for corporations and we will witness an "anti corporate" movement. To protect consumers from unscrupulous manufacturers, good manufacturing practice and corporate social responsibility must be encouraged. Such organizations must step forward and be the leaders and set an example and voluntarily observe the Principles of Business Ethics by providing quality products at a fair price to the consumers. The state of CSR in Pakistan is still in its infancy. Only a few companies have an existing CSR strategy and mostly they are the multinationals who follow their own globally defined CSR policies and 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. Labor exploitation, child labor, inadequate employee benefits and unsuitable working environment were few areas pinpointed by international HR watchdogs. Though taking the reactive measures, the 3

Corporate Social Responsibility

Marketing Issues in Pakistan

joint effort of the industrialists saved the greater damage foreseen, but not much has been done to take more proactive measures. 2 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. 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 to make companies more aware about the benefits of CSR. In Pakistan, most multinational companies that engage in CSR activities do so through two channels. • •

Corporate CSR Brand CSR

Corporate CSR: The company as a whole engages in CSR activities without specifying any of its particular products or services. The objective for the campaign is to promote the image of the company and improve their credibility. 2

Evaluation of the state of CSR in Pakistan by Ambreen Waheed

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Brand CSR: When the company engages in CSR activities to promote a particular brand. Here, the company tries to associate its brand with the positive image of their CSR efforts so that whenever the customers look at the particular brand they will remember the CSR project as well. This creates a certain level of differentiation for the brand in the minds of the customer.

Delivery mechanisms Most Pakistani local companies give directly to the people they think are worthy. In most cases this remains on the discretion of the CEO or MD of the company. Companies do not reserve certain percentages of their budgets to be spent on CSR activities. There is no planning or plans of action devised to handle different scenarios. Situations are dealt with as they arise. We must have a more structured approach to CSR. The lack of planning and scrutiny of the whole process greatly decreases the effectiveness of the campaigns. MNC’s often form partnerships with NGO’s or government agencies to work on their CSR campaigns. In this way they don’t have to allocate a lot of their own resources and still get the job done.

CSR Projects P&G3

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‘Khawabon Se Aagey’ is an initiative by P&G in association with PMA (Pakistan Medical Association). It aims to help save the lives of newborn babies by providing lifesaving equipment and training to hospitals across Pakistan. Between 15 Dec 2007 and 15 Mar 2008, a portion of the sale proceeds of the 8 participating brands (Pampers, Ariel, H&S, Always, Safeguard, Pantene, Oral-B and Vicks) will be used to donate the equipment and conduct trainings for the medical staff.

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‘Safe Schooling for Building Future’ is another initiative taken by P&G. they are working in association with the largest indigenous

Interview

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NGO ‘READ Foundation’ to build Seismic Compliant Schools in the areas affected by the massive earthquake of 2005. A 38 classroom school for boys, girls and young kids aged 4-16 in main Muzaffarabad city, capital of Azad Jammu & Kashmir (AJK), marks the beginning of this project. •

Always School Education Program educates female students about good health & hygiene practices. The program reaches 250,000 girls, 1400 schools/ colleges, in 3 cities of Pakistan.

PSO4 PSO in its commitment to CSR is working in the following sectors: •

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Education: Institution of gold medals, cash awards and scholarships in top institutions like IBA, UET, NED and LUMS. Health Sector: •Provision of financial assistance to MALC (Marie Adelaide Leprosy Center) Gawader. •Aided Chipa Welfare Association in the purchase of a fully air conditioned ambulance. •Supported Dowites Operation Theatre Society (DOTS) in the construction of an integrated operation theatre complex at Civil Hospital Karachi.

• Community Building: •Children Welfare: PSO has generously supported Institute of Special Children Quetta and Pakistan Institute of Deaf Children of rural areas Kamoke, Gujranwala to upgrade their equipment to facilitate imparting of education to the special children •Women Empowerment: supported Behbud Association and Rashid Welfare Organization to impart technical training and education for the uplift of female segment of society. •Sports Development: Sponsored world class tournaments in sports like Squash, Boxing and Football which are very much neglected in Pakistan. •Relief Activities: recently in 2007 when a cyclone crippled life in southern coastal areas of Pakistan in Balochistan, PSO was in the forefront to dispatch the much needed food and other supplies to the 4

Interview

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affected areas. Also PSO has helped in relief works when a severe earthquake hit Pakistan’s northern areas.

Kashif Trading Corporation5

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Gave money and presents as ‘Eid’ during the month of Ramazan to all of their employees.

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Occasionally extending loans to those employees who require some quick cash for emergencies.

Interview

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Some Facts and Figures Regarding CSR Donations6

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Article, The NEWS, 11/2/06

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Corporate Social Responsibility

Marketing Issues in Pakistan

Laws regarding CSR in Pakistan Although there are no formal laws listed anywhere in Pakistan that force companies to engage in CSR activities. However the SECP, which is the formal law making body for companies listed under the stock exchanges in the country, through its Code of Corporate Governance, encourages and rewards companies that engage in CSR activities. It frequently conducts seminars and workshops that highlight the fact that socially responsible behavior can have a tremendous impact for companies in terms of reputation, employee morale, competitive edge and productivity and in the larger context, the benefits of social development do come back to the corporations in terms of bigger, better and richer markets.7

Ethics of CSR Ethics in CSR is a very controversial issue. Many people say that purity of CSR diminishes as profitability becomes part of it. It is not ethical if the underlying motive is ‘Profit’ not the good of the society. Supporters of CSR with profitability, say that there is no harm in making a profit while achieving something positive for the society. Also, we need to have some kind of profitability attached with CSR to make it sustainable and long lasting. Entrepreneurs and corporations will only invest in a venture which shows some kind of a return. There are many researches that prove this point of view. (For details see reference material.) Sometimes associating a CSR campaign with a well known brand can substantially increase the campaign’s effectiveness. The positive brand image and brand promise are carried forward to the campaign as well. A campaign ran by Tapal is a good example. Tapal ran a public health campaign with the name ‘Ham Qadam’ but they received a very lukewarm response. Surprisingly, when they added their name ‘Tapal’ to the campaign, they received a significantly better response. Without the good name of Tapal being associated with the campaign, the initiative may very well have failed. Press Release “SECP holds Consultative Seminar on CSR Strategy in Karachi on March 22, 2006 “ 7

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Corporate Social Responsibility

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Marketing Value of CSR CSR has a substantial value for any corporation or brand. We are bombarded by numerous brands and products through the vast number of media outlets. In most of the cases the different products have very little differentiation between them. CSR is an effective method of achieving that differentiation. Consumers will prefer products that are supported by good CSR programs because they will think that just by buying such products they are doing something good for the society. There is an emotional link between consumers and the brands when the company invests in social causes that are dear to them. Consumers will want to reward such organizations so that they are encouraged to do even better in the future. Companies design their CSR campaigns in such a way that they become closely associated with their brands. Commander Safe Guard campaign is all about good hygiene and it relates with P&G’s product Safe Guard soap. Mobilink supports campaigns that are mostly ‘ICT centric’ such as SMS donation campaigns. Customers will relate the company’s integrity with their product-SMS. Companies like to build goodwill in the market so that they can use it to counter negative publicity in the event of an accident or if they are caught doing something illegal. If there is an oil spill, then the guilty company can always say that the public should forgive them because they have always been a socially responsible company and this oil spill is just an accident. CSR can provide a kind of ‘brand insurance’. Companies like Tetra Pak invest a lot of money in recycling & waste disposal campaigns designed to reduce the waste created due to their products. They understand the damage that can be caused to their reputations if the consumers ever realized the amounts of resources used and waste materials created by such companies. Tetra Pak works with a local waste disposal company ‘Waste Busters’ to mange solid waste in different localities. They also try to educate their customers about such issues.

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Corporate Social Responsibility

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Why companies should take part in CSR activities? In most cases the customers not only demand but also expect leading brands and companies to actively take part in CSR activities. Consumers prefer socially and environmentally responsible companies. We must realize that there are definite social and environmental costs of most commercial activities. It is only fair that companies return some of their profits to help reverse any damages they have caused. Governments cannot do this job all alone. Corporations have better resources and better management skills to help in such actions and they must do their part. In most cases having some kind of a CSR program is a requirement of the government or regulatory authority. Sadly, in Pakistan we don’t have such laws but the Code of Corporate Governance given by the SECP encourages companies to participate in CSR initiatives. International organizations like the UN also encourage such participation. Interestingly, it has been observed that companies that are more socially responsible also do better financially. If you look at any list of most successful companies, you will find that they also have substantial CSR programs. Consumers prefer buying from such companies. Governments help them by decreasing taxes and easing regulations. A company that invests in its surroundings has more credibility. Such companies are also able to attract and retain the best employees because people want to work in companies that reflect the same values as them. This is a new phenomenon in Pakistan. It is expected that as the economic conditions improve we will face a severe shortage of qualified personnel and a laudable CSR campaign may prove to be a valuable differentiating factor for companies if they want to attract and retain a quality work force.

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Corporate Social Responsibility

Marketing Issues in Pakistan

Problems Miss Nausheen Ishtiaq of P&G told us that the biggest hurdle in her line of work is the non-availability of a credible database on all the different NGOs operating in Pakistan. It is very difficult for them to find suitable partners for their CSR campaigns. She suggested that it will be a great help by the government if they can prepare and regulate such a database on a national level. Most NGOs are there only to make profits. There are very few NGOs which have the capability to make decent and viable proposals and then also fall through on their commitments. There are several opportunities out there but few people to make them feasible. There is not much insistence or any incentives given by the government to implement CSR. Like other developing nations Pakistanis stress on short term profitability and over look future opportunities or consequences. Mr. Vaqar A. Khan, GM Training & Org. development even says that sometimes influential people from the government try to force companies to divert CSR activities to benefit them. The apathetic attitude of the government restricts the growth of CSR in Pakistan. There is a lot of negative sentiment in our society regarding intentions of NGOs & MNCs when they initiate CSR programs like women empowerment, female education in rural areas and gender development. This adverse mindset poses a serious challenge and in some cases even a security risk. Sometimes corporations are involved in activities which they term as being part of CSR but actually they are in involved unashamed abuse of CSR. A recent example is the making of the biggest ‘Kurta’ in the world by P&G. The kurta was unveiled amidst much media hype and fanfare. The kurta will later be cut in to smaller pieces and then donated to charity. The kurta was designed and tailored by a renowned designer and the fabric was bought from one of the most expensive local cotton fabric brands. The company has termed this project as a social welfare project. To any casual observer this exercise will look like a shameless brand promotion campaign with the social factor thrown in as an afterthought. Such false claims only serve to decrease the 12

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credibility of companies. Companies must learn that they cannot term anything they do as a social welfare project. There are many commercial enterprises which are extensively damaging our environment. There is no enforcement of Environment protection laws in Pakistan and these companies do not have the social conscience to do the right thing on their own. If there had been a culture of CSR prevalent in Pakistan, such companies will have to reverse all the damage that they have caused and reduce the harm that they cause to the environment. The leather industry loses out on many lucrative contracts because international customers only want to buy from companies which do not pollute the environment and Pakistani companies never bother about such issues. It makes economic sense for them to be more environmentally conscious but they remain indifferent to the issue. Many companies do not advertise their CSR campaigns, preferring to remain in anonymity. “As Asif Qadir, CEO Engro Chemical questions, “We are not doing CSR with brand objectives. How can we link ‘save the blind dolphins’, ‘micro irrigation’, ‘mangrove management’ and tele-medicine projects to any of our brands?” Abrar Hassan, Chief Executive of National Foods, also believes in maintaining a low profile in regard to CSR. He says, “It is our responsibility to be socially responsible and I believe it is unethical to link CSR with the company image and brand mileage concepts.”

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Recommendations •

The government should take a more active part in enforcing CSR. They should make laws and also give incentives to businesses to participate in CSR.

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There should be some kind of a regulatory authority to oversee CSR activities and especially control NGOs.

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Businesses should not only consider the benefits brought to them by CSR but they should also get involved for the good of the society. We need to educate them on this issue. SECP and other such organizations must intensify their efforts in regard to increasing awareness.

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Consumers can wield their power and force businesses to be more socially responsible. They can simply make a decision not to buy products from companies that are not doing their part for the environment and society. This simple act of choice can work wonders. Consumers can prove to be most effective tool in promoting CSR.

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Employee rights also form a part of CSR. According to our research, in Pakistan no company deals with employee rights under the head of CSR. Employee rights can receive more attention if they become a part of CSR. Employers must come out with fair and just rules for their employees.

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Corporate Social Responsibility

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Appendix “The Aga Khan Foundation has set up the Pakistan Centre for Philanthropy (PCP) to study this issue in a systematic manner. According to a study commissioned by the Aga Khan Foundation, Pakistanis from diverse economic backgrounds contributed Rs41 billion (including cash and in-kind) in 1999. A significant 28 per cent was given by the lowest economic strata. In comparison, corporate philanthropy severely lags behind. A 2005 report by the centre titled ‘Corporate Philanthropy in Pakistan – 2005’ examined the role played by the public-limited companies from 2000 to 2003. According to it, 500 listed companies gave Rs227 million for philanthropic purposes in 2000. By 2003 this almost doubled to Rs496 million suggesting an improvement in the trend, but still remains significantly low compared to the overall philanthropy receipts. Average annual donations hovered around Rs0.9 million in 2003, as compared to Rs0.5 million in 2000. It is pertinent to qualify here that public-listed companies do not represent the entire universe of the business sector; they only represent the organized sector. Therefore, private companies and/or semi-formal and informal business sector’s contribution put together would be higher than this. Within the organized sector, the top 25 public listed companies account for almost two-thirds of the total donations in 2003. According to the rankings of public listed companies by volume of donations as a percentage of profit before tax (2000-2003). A closer look at the data reveals 19 out of the 25 companies give less than 8 per cent of their profit before tax for philanthropic causes. PCP data curiously does not list contributions made by the banking sector. The National Bank of Pakistan made over eight billion of profit in the recent past. There is little information available about its donations towards corporate social responsibility (CSR). Interestingly the figures show that if all public listed companies were to provide an additional one per cent of their profit before tax to CSR, the total volume of corporate sector contribution would increase three-fold.”

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