Tbl Issue 6 Good Governance

regulars 6 global briefs people - planet - profits

42 report: corporate governance corporate governance and corporate social responsibility

48 csr talk “the desire to not stagnate”

52 csr toolkit

my choice: a model for a sustainable future

54 survey: corporate diversity practices examining the cracks in the ceiling

57 crossword

Editorial Director Khadeeja Balkhi

60 musings

Managing Editor Rutaba Ahmed

yours humbly

features 5 notes from our founder sponsors 12 the crisis and causes the failure of good governance: how it led to the financial crisis

16 rules vs. relations pak-governance: parallel tracks

18 futuralysis: the financial crisis and csr corporate responsibility in the age of irresponsibility

20 csr in turbulent times csr now needed more than ever before

24 strategic csr

Editor-in-Chief Zohare Ali Shariff

casuality

victims and winners: csr and the financial crisis

28 governance via internet the internet: true government of the people

30 opinion csr in a recession: 10 reasons to keep doing it...

34 adult literacy pursuing a lost generation or common sense csr?

39 entrepreneurship entrepreneur, anyone?

46 global energy outlook

Research, Distribution & Development Mehfooz Aleem Zahra Baray Alizeh Shariq Raza Tahir Creatives Kamran Rauf Umair Anwar Reprint In line with our mission, we encourage reproduction of material, provided tbl and content partners are given credit Publisher Asiatic Public Relations Network (Private) Limited Printed at Nikmat Printers, Karachi Disclaimer The views expressed in tbl are the authors’ and not necessarily shared by tbl and/or APR Declaration From the office of District Coordination Officer, City District Government Karachi NO.DCO/DDO/LAW/CDGK/109/2007, Karachi Dated May 22, 2007 Subscription, advertising and feedback at: tbl:

triple bottom-line

Address:

A-7, Street 1, Bath Island, Clifton, Karachi, Pakistan. (92-21)-5837674, 5823334 (92-21)-5867103 [email protected] www.tbl.com.pk

weo calls for global energy revolution despite economic crisis

50 in hindsight bull’s-eye? revisiting ‘07’s forecast for ‘08

58 model for urban development

Tel: Fax: E-mail: Web:

Subscribe to a full year of tbl (6 issues) at the special rate of Rs.1,000 and save the cost of an issue. If you wish to subscribe to tbl, or unsubscribe, please write to us at [email protected]

tbl nov-dec 08 1

editor’s note

making a difference

W

e at tbl have developed a new respect for the management of daily newspapers. Here we are, bringing out the sixth and last issue of our publication for this year and we know what trials and tribulations we had to go through for each issue, making it all happen. And this, mind you, for a bi-monthly publication. So newspapers who manage to churn out 24 or more page editions every single day have our admiration. Quite a challenge even if we take into consideration the huge number of people who may be involved in the process.

companies with no CSR programme or strategy for the moment, so that the benefits of true CSR continue to spread to an ever-widening audience.

tbl has proved to be a unique publication in many ways. To start with, it is the first, and to our knowledge the only specialized journal in Pakistan on the subject of CSR. Then, all writing in tbl is original content, especially written for tbl. From time to time we have also re-printed previously published content from other sources, but every time permission has been sought from the source and their support acknowledged. Third, tbl is sent complimentary to a thoughtfully compiled list of recipients and the approximately five thousand people who read it are people who can make a real difference, be they from the corporate sector, government, NGOs, academia, international institutions active in Pakistan or other groups involved in any facet of CSR. At the risk of sounding self-congratulatory, I believe tbl is, by the end of its first year in print, well on its way to furthering the cause of CSR tangibly.

I cannot end this note without thanking our two founder sponsors - EBM and National Foods Ltd, whose contribution meets a fair percentage of the cost of bringing out tbl. When the tbl team first finalized the concept for this publication, it approached various companies for founder sponsor support. While several showed interest, they linked potential support to editorial coverage or laid down other pre-conditions, which we politely declined, as we were quiet clear in our vision that tbl will be a fully independent and transparent publication. Only EBM and National Foods came forward with unconditional support and we believe this reflects their own conviction that CSR knowledge needs to be spread as widely as possible. This is indeed a positive approach and if more companies extend support to tbl, or for that matter to any other awareness building initiative, then we can look forward to CSR becoming an integral part of corporate life in our country across the board.

The six issues this year have examined a range of CSRrelated issues and the writings have been both food for thought and a call for action. Practical tool-kits have espoused how companies can structure and leverage their CSR initiatives and case studies have illustrated corporate success stories that others can customize and replicate. Starting next year, with the January-February 2009 issue, we hope to build on the platform that has been established and provide guidance especially for

Behind the success of tbl is a team of dedicated young people, from researchers to designers, to sub-editors and still others. But I would like to take the opportunity of this last editor's note of the year to acknowledge the total commitment and ardour of two ladies who are truly the moving spirit behind this publication. Rutaba Ahmed, our managing editor, who is ultimately responsible for putting it all together and Khadeeja Balkhi, our editorial director and a co-founder of tbl, who is to tbl what the nervous system is to the human body.

Sincerely,

Zohare Ali Shariff Editor-in-Chief

This publication is sent complimentary to decision-makers and opinion-formers in the corporate sector, the government, NGO sector, international institutions and academia, and has an estimated readership of 5,000 plus people. Recognising that your sphere of work has the potential to compliment and reinforce the essence of our mission, we have taken the liberty to present tbl to you. It is also available at selected outlets. We would love to hear from you. Please do contact us at [email protected] with your thoughts, feedback and input from your corporate or social practices. tbl strongly believes in knowledge dissemination and sharing. Please feel free to share tbl contents with your peers and teams of course we know you’ll give tbl the credit when you share our work.

2 www.tbl.com.pk

letters to the editor

Y

our publication is a welcome new source of valuable information and subject knowledge. I can say with confidence that it is possibly the only magazine in Pakistan that comes up to an international standard in terms of content and presentation. One area of improvement that I feel you need to work on is more hands on solutions for specific problem areas in our society, specially those relating to conservation of the environment.

Toufiq Pasha Mooraj Consultant and Conservation Activist Karachi

Y

our article on Rainwater Harvesting was a very interesting read. It is indeed very sad how people in the mountainous areas have been affected by the 2005 earthquake and it is sadder still that we have not yet managed to provide them with safe drinking water. I think rainwater harvest-

ing is perhaps the best way forward as that part of Pakistan gets the most amount of rain annually. I suggest that tbl should include a contributions section for those of us who wish to offer monetary assistance to our brothers in the north who continue to suffer and are deprived of even life's basic necessities. Saira Khan Entrepreneur Lahore

T

here wasn't much I knew about CSR before I started reading tbl. The effort you are putting in to create awareness about corporate social responsibility is truly exemplary. Your last issue on Hydroethics was a real eye opener. It made me realize how we take water - this scarce resource, for granted. Keep up the good work! Sana Taimur Student Karachi

Dear readers, Thank you for sharing your valuable feedback with us, as it is indeed what keeps us all encouraged here at tbl. Mr. Pasha, we appreciate your compliments. In future issues, we will publish material on practical solutions for the environment as well as other CSR related issues in our country. Ms. Khan, thank you for taking the time to write to us. It is encouraging to read your thoughtful feedback and we have noted your valuable suggestion. Ms. Taimur, thank you for your compliments on tbl. Creating awareness about CSR is indeed our main objective. It is to give corporations a platform through which they can benefit and gain knowledge about what corporate citizenship is all about. We look forward to our readers' feedback which will help us make this platform a more effective source of debate and interaction.

tbl Special Report As we find ourselves amidst a global meltdown, this year-end edition of tbl brings to you a special report on Governance, CSR and the Financial Crisis, comprising a series of articles and reports written by eminent CSR experts and organizations from diverse parts of the world. Following our interactions with several people including writers, CSR advocates, scholars and organizations in this field, we found that a consensus may be emerging on the link between CSR and the Financial Crisis and the direction in which CSR is headed. The articles explore the global financial meltdown in depth - what are the factors that led to the crisis, what is the role of CSR and Governance, and what is the likely impact on CSR. Will CSR become more of a buzzword, used by the myriad of self-serving organizations as a veil, or will it serve as the much-needed reality check - amidst the Crisis that the world is engulfed in? In the upcoming year, tbl will bring comprehensive coverage on Pakistan's journey towards the true light of CSR - where we stand, how far we have come and where we are headed.

tbl nov-dec 08 3

editorial advisory board With this issue of tbl, we bring you the remaining profiles of our board members. We hope you are enjoying getting to know them as much as we are.

Ayesha Tammy Haq

Abrar Hasan

Member

Founder Sponsor Member

With degrees in law (London School of Economics, University of Kent and Gray's Inn, UK), Tammy is a Barrister-atLaw and, more recently, a media personality. She has practiced law in the UK, Pakistan, the Philippines and the USA and has worked on several international projects. Her area of expertise is project development and finance. In addition, she hosts a current affairs talk show on satellite television, writes opinion pieces for several newspapers and publications and hosts a radio show on one of Pakistan's FM radio stations. She currently also sits on numerous other boards, committees, task forces and was a member of Pakistan's 5 Year Plan working group in 2004. A civil rights activist, she is involved with human rights and other rights based organizations in Pakistan.

Abrar Hasan is Chief Executive of National Foods Limited, Pakistan’s pioneering multi-category food company. He joined NFL as Plant Director in 1993 and served in that position for four years. He was elected Deputy Managing Director in 1997 and then Chief Executive shortly after. Prior to joining NFL, he was Plant Director at Precision Rubber Products (Pvt.) Ltd., a sister concern, from 1990 to 1993. Abrar enjoys playing golf, squash and cricket, and is an avid reader of books on management, leadership and technology. He holds a bachelors degree in industrial management and industrial engineering from the Purdue University in Indiana. He is based in Karachi.

Habiba Hamid

Vivian Lines

Member

Member

Habiba Hamid currently works for the Dubai Government. In 2007 she worked in Baghdad's Redzone for a USAIDOFDA and UN implementing partner on emergency response and economic development throughout much of Iraq. She has worked in various capacities for local and national government and several lobbying groups in the UK. She also served in an elected capacity in organisations which contribute to educational development in the UK. Habiba holds an M.Sc in Globalization & Development (SAS/SOAS, University of London) and a B.A. (Hons) in Politics, Philosophy and History (Birkbeck, University of London).

Vivian Lines is President & Chief Operating Officer of Hill & Knowlton's Asia Pacific region. He joined Hill & Knowlton in 1984 and has worked with the company in the UK, Bahrain, Dubai, Taiwan, Singapore and Hong Kong. He has extensive experience in designing and implementing strategic communications programmes for a broad range of multinational and local clients across multiple markets. Vivian is an experienced crisis counsellor and undertakes regular crisis training and crisis assessment programmes in Asia for a range of clients. He is based in Singapore.

Anwar Rammal

Khadeeja Balkhi

Khawar Masood Butt

Chairperson

Executive Member

Founder Sponsor Member

vision and mission 4 www.tbl.com.pk

Vision: To steadily facilitate the germination of sustainable visions for organisational growth, sharing specific triple bottom-line knowledge and tools Mission Statement: To disseminate triple bottom-line knowledge to a diversified group including corporate, social development and general business groups primarily through a specialised journal, expanding in accordance with organisational capacity and market readiness

notes from our founder sponsors

T

N

Just as globalization is today a reality, whether you are a proponent or an opponent of it, so is the need to incorporate sustainable business practices.

Regrettably, the scope of Corporate Social Responsibility (CSR) which tbl strives to espouse is still largely an alien concept for a lot of corporations in Pakistan. The capacity building concept that CSR is essentially about is regularly missed altogether and CSR is most often equated with image-building, philanthropic activities and corporate tax write-offs. At the same time, it can be said that the level of interest of the larger corporate sector in CSR is rapidly rising. From this perspective, tbl is quite timely.

here can be little doubt that in the global socio-economic setup today, it is the firm responsibility of ethical companies to play a key role in enhancing and shaping the economic and social progress of the countries they are operating in. It must be understood that above all this makes good business sense, as the sustainable development of a company's business is today inextricably linked to the sustainable growth of society itself. And this can only be done by inculcating and practising core values and best practices that contribute to the prosperity of companies and hence positively impact the growth of a country.

In times to come only the best will survive, whether it is in the manufacturing or the services sector. The best will be those who strategically pursue the triple bottom line approach to business - that is a business growth model based on the welfare and growth of society at large (people), the preservation of the environment and precious natural resources (planet) and the pursuit of profitability (profits) in an ethical way. It is to be noted also that pursuing the triple bottomline by yourself in an isolated bubble is highly undesirable. The message needs to be spread widely, for knowledge shared results in benefits spreading even more widely. In this regard we were very pleased earlier this year to become one of the founder sponsors of this publication, as tbl is indeed the vehicle for knowledge dissemination that meets our own vision and values. Now several issues later, I am pleased to note that tbl is positively facilitating a sustainability-entrenched culture in the country.

ational Foods Limited (NFL) has been associated with tbl as a Founder Sponsor before its first issue was published in January 2008. We have enjoyed witnessing its growth since.

'Responsibility to society' is a misnomer. It is essential that the corporate sector recognizes that the responsibility element of a CSR strategy should principally be related to the stakeholders in real terms - by promoting sustainable enterprise between the corporation and stakeholders, thus completing the real meaning of the triple bottomline: people, planet and profits. For awareness in the right sense to be created, it is important to treat the achievement of tbl as a goal. Its accomplishment should be targeted in phases which can, for example, include: a) Knowledge and awareness-building through workshops and otherwise. b)

Correct concept definition, with real life examples.

c)

Creation of sustainable enterprise equations and, again, real life examples of measurable achievements by companies.

d)

Enforcement of the triple bottom line approach at the SECP and corporate governance levels.

The standard of tbl and its content is impressive and at par with that of well reputed international publications. It is a unique source of information and guidance for decision-makers and opinionformers across different sectors and not just the corporate sector. EBM is proud to be associated with tbl and I take this opportunity to wish the entire tbl team the very best in its future endeavours.

e)

Corporations to be held accountable for exploitation of stakeholders through some means of regulatory controls.

Khawar Masood Butt Chairman and MD, English Biscuit Manufacturers

Abrar Hasan Chief Executive, National Foods Limited

tbl is serving its Mission well and I believe that it is a catalyst which will make a tangible difference in the times to come.

It is a pleasure for National Foods to support this initiative and we shall continue to do so, enabling the tbl team to use the tbl platform to undertake a broader range of activities that support its mission.

tbl nov-dec 08 5

PEOPLE

global briefs

Barometer Launched to Measure CSR Disclosure The recently launched 'CSR Asia Business Barometer 2008' by CSR Asia, compares the Corporate Social Responsibility (CSR) disclosure of the 20 largest listed companies in Hong Kong, Malaysia, Singapore and Thailand. More companies are seeing the value of making commitments to responsible business practices and disclosing their practices. Some of the findings include: Company (codes and policies) are the most reported CSR issue (scoring 59 percent), compared with workplace and people scoring only 19 percent. This seems to imply a continued lack of transparency on Asia's thorniest CSR issue, namely labour conditions. The companies' overall score remains low (30 percent), but there is some national variation, with Hong Kong scoring best (42 percent), as compared with Malaysia (29 percent), Thailand (25 percent) and Singapore (24 percent). The top companies - China Light and Power and HSBC, both listed in Hong Kong scored 93 percent, as compared with the poorest performer - Hong Kong Land scoring only 3 percent. The top company in Malaysia was BAT (British American Tobacco) Malaysia; in Thailand, it was Siam Cement, and in Singapore, City Developments.

6 www.tbl.com.pk

Publicly available reports based on a robust data collection and reporting framework can be an excellent communication tool to inform stakeholders of CSR strategy, approach and performance.

Director of International of the Democratic Party in Thailand, stating that governments will have to tackle the systemic greed of the financial markets and overpaid CEOs if CSR is to be at all effective in future.

Shared by CSR International and CSR Asia

Shared by CSR International, an online blog dedicated to connecting and empowering corporate sustainability

Annual Summit Highlights Key CSR Issues in Asia The annual CSR summit, organized by CSR Asia, was held in November, at the Asian Institute of Technology, Thailand. Amidst a growing call for companies to engage with CSR initiatives in Asia, the event was poised to explore hot topics unique to the Asian context, which would bring new insights for businesses, governments, NGOs and other CSR practitioners.

Non-executive's Role in Corporate Governance More Crucial than Ever Independent non-executive directors should help drive corporate responsibility - but how?

The rise of CSR up the agenda in Asia was reflected in the Summit's attendance. There were over 300 participants this year. CSR Asia itself reflected this growing interest in CSR, with 25 staff in offices in Hong Kong, Singapore, Shenzhen, Beijing, Kuala Lumpur, Dhaka and Ho Chi Minh City. The event attracted a diverse group of organizational representatives not only corporate CSR types, like the head of water for Coca-Cola and supply chain for HewlettPackard - but also NGOs and consultants focusing on corruption, HIV/AIDS, climate change and labour justice, to mention a few.

Corporate responsibility has become a board-level concern for UK non-execs only recently, says Craig Mackenzie, senior lecturer in sustainable enterprise at the University of Edinburgh. "In the last five years it's become much more formally significant for nonexecs of big companies," he says.

Until fairly recently, CSR in Asia was largely equated with philanthropy and supply chain issues, specifically labour conditions. Now, there is a marked shift to environmental issues, specifically water, but also deforestation and climate change, as well as product responsibility. The relationship between the financial crisis and CSR has already emerged as a hot topic, with Mr. Kasit Piromya,

The breadth of experience nonexecs bring can be valuable in pursuing ethical business agendas, particularly in cross-fertilising best practice between sectors and bringing expertise and insight from other walks of life, head of corporate governance at the UK's Institute of Directors Roger Barker says. He adds that the increasing involvement of bilinon-execs in corporate responsity

Non-executive directors play a vital role in shaping the strategy and governance of UK companies. Independence from management should allow them to take a broad, long-term view of strategy, and gives legitimacy to their role in scrutinising management plans.

UK corporate governance guidelines require London-listed firms to report on their performance against business ethics and corporate responsibility standards - or explain why they do not. Boards are free to decide how they will manage and oversee corporate responsibility concerns, and what role non-execs play in the process.

is part of a general trend since the government-commissioned report by the late Sir Derek Higgs of 2003, which recommended expanding the non-exec director role to improve corporate governance. Citing the complex financial products in the banking sector, Barker suggests a lack of in-depth operational knowledge may inhibit a non-exec's ability to ensure ethical standards effectively. The ethical scrutiny role can create moral dilemmas for non-execs when there is a conflict between shortterm profits and doing the right thing. Some may say grappling with that moral dilemma is what being a company director, executive or non-exec, is all about. There seems little doubt that in the current economic climate, the judgment calls are only likely to become more frequent and difficult. Because it is non-exec directors who, more than any other board members, are charged with taking the longer-term view, their role is arguably now more crucial than ever. Shared by Ethical Corporation, an independent media firm

Organic Food and Farming Conference A Conference on "Managing Competing Values in Organic Food & Farming" was held in November 2008 in Bristol. The Conference focused on two key subjects including: ‘How can organic farming contribute towards the development of ‘sustainable communities’ in rural areas' and ‘How do farmers and other actors in the organic food chain define and work towards the protection of ‘non-market values’ - and what works against them?’. In this conference, eminent researchers and professors highlighted issues such as Organic farming and its

impact on the community Local or global sourcing Fairtrade The role of supermarkets UK and international perspectives This Conference was part of a sequence of five interactive, participatory one-day workshops to be held over the next twelve months. The workshops will focus on the key areas of food production, supply and retailing. Attendees from all areas of food production, distribution and retailing as well as regulatory bodies and research will contribute and share their experiences, views and beliefs. New Architecture and Urban Phenomena 'Balkanology, New Architecture and Urban Phenomena in South Eastern Europe', an ongoing exhibition at the Swiss Architecture Museum, in South Eastern Europe, explores contemporary architecture and urban design from a trans-disciplinary perspective, not just at national level as its title might suggest, it also puts architecture into a global context. Balkans generally refers to South Eastern Europe, a region with varying geographical definitions. Going beyond clichés and the pathos, the Balkanology exhibition focuses on the impact of recent socio-political changes on architecture and urban planning, drawing a variegated picture of urban development in the region and the forces that determine it.

A comparison between outstanding yet hardly known buildings of socialist modernism in Yugoslavia with contemporary architecture. Since the collapse of the socialist economic system in ex-Yugoslavia and Albania and the war that lead to the split of Yugoslavia, a new form of urbanization typified by extensive informal building activity has appeared on the territory. Inhabitants have taken the issue of housing shortage in their own hands, and they have started building new dwellings from scratch and adapting existing edifice for their own purposes. In this context, the term Balkanization takes a radically different meaning: it stands for the improvisation and adaptation skills of architecture. Some of the many questions the exhibition aims to raise include: how can a combination of governmental and social control offer the best possible basis for a successful retroactive 'post-regulation? These unregulated forms of urban developments have often bypassed the expertise of architects. This makeshift architecture has nevertheless developed its own style and culture characterized by a new intermeshing of spaces through visual worlds communicated by the media, migratory movements and cash flows. Shared by Worldchanging, a nonprofit media organization

Curated by Kai Vöckler, the exhibitions focuses on two main themes: The way inhabitants solved the lack of housing and initiated construction projects on their own account.

tbl nov-dec 08 7

PLANET Eco Redesigning for Devastated Communities Sustainability incorporates lessons leaned from history in order to improve on design to avoid fatal flaws and in this case, to prolong the lifespan of a structure as it relates to its surroundings. The brand new, modern, eco homes being erected at a rapid pace are redefining the 9th Ward and are being built for the original home owners who were displaced by Hurricane Katrina. The focus of this project is on the impressive and innovative green aspects of the project itself and how it serves as a model for building a new neighbourhood from the ground up in a sustainable way. The new home designs are by a combination of local, national, and international architects. Even though the new homes in the 9th Ward include solar panels, energy efficient everything, and other elements that we think of when we think of sustainability, perhaps the single most important feature of these homes are their stilts. If the ocean should ever intrude again, these new homes could be high enough off the ground to clear the floodwaters, a simple solution to end the debate about whether or not to rebuild the 9th Ward at all. To date, the 84th house, out of 150, has been paid for through sponsorships and donations. Shared by TreeHugger, an online media outlet dedicated to driving sustainability mainstream

Guerrilla vs. Gorilla Due to escalating violence, Congolese rangers have been run

8 www.tbl.com.pk

out of the country's Virunga National Park, threatening the safety of some 200 mountain gorillas that live there. "There are documented cases of the gorillas getting caught in the crossfire and getting killed," says a park spokesperson. "It's the chaos of war and they are right in the middle of it." Only about 700 mountain gorillas remain in the wild. The three African nations that still have mountain gorilla populations have agreed to cooperate on a new plan to save the critically endangered primates. Rwanda, Uganda, and the Democratic Republic of the Congo hatched a 10-year programme to enhance security in the parks and forests that the gorillas call home, as well as other measures. The countries have also agreed to programmes aimed at mitigating the harsh poverty in communities surrounding gorilla habitat, which often leads locals to poach wildlife and clear more land. "For the first time, the three countries have decided to protect the great apes which are threatened with extinction and insecurity in the region," said Moses Mapesa of the Uganda Wildlife Authority. The multination plan is largely seen as an important step, but plenty of challenges remain. Notably, armed militants still control a large part of the DRC's Virunga National Park where over half of the world's remaining 720 mountain gorillas live. Shared by Grist, an online environmental news magazine

World's First International Renewable Energy Agency A consortium of European governments is developing the world's first International Renewable Energy Agency. The agency, known as IRENA, will serve as a global cheerleader for clean energy. It plans to offer technical, financial, and policy advice for governments world-

wide, according to a joint announcement from Germany, Spain, and Denmark - the project's leaders. Renewable energy is on the rise worldwide as governments attempt to reduce greenhouse gas emissions and create domestic energy sources. Despite a variety of international organizations that are helping with the clean energy transition, IRENA's leaders said that no single agency addresses the local, national, and international needs of both developed and developing nations. The international organizations that currently focus on renewable energy include the International Energy Agency (IEA), World Bank, Renewable Energy Policy Network for the 21st Century (REN21), Renewable Energy and Energy Efficient Partnership (REEEP), and several United Nations agencies. In the past year, global renewable energy sources have increased dramatically. More than 250 gigawatts of capacity, excluding large hydropower, exists globally. Clean energy investments surpassed $148 billion in 2007, a 60 percent increase from 2006, according to the U.N. Environment Programme. Several countries in charge of the IRENA initiative, including Germany and Denmark, are home to some of the world's leading producers of renewable energy technologies. At a conference in Madrid last month, IRENA's 51 participating nations agreed that the agency's first projects would be presented in January 2009. The involved nations currently include nearly all of Europe as well as Australia, Argentina, Brazil, India, Indonesia, and the United Arab Emirates. Shared by Worldchanging, a nonprofit media organization

Rice Husks Generating Electricity in India's Villages There are 350 million people in India without power living in small villages; and those communities harvest 92 million tons of rice harvested every year. In a typical village, about 1500 tons of rice is harvested every season, yielding 500 tons of husk and 1000 tons of edible product, states Robert S. Katz, a Knowledge & Communications Associate at Acumen Fund. The farmers either burn the husk or allow it to rot in the fields. Rice husk is the outside of a rice kernel. Rice husk is cellulosic, which means it can be heated up and released for energy the gas released is similar to methane. It also contains silica, which is released as a waste product when burned. A rural electrification company, Husk Power Systems (HPS) is using husk to make electricity. The gas that is made out of the husk is filtered, and then run through a diesel-like engine to generate power. HPS is operating in 5 villages, and currently powers 12,000 people's homes. HPS utilizes a proprietary technology to run 35-100 kilowatt mini power plants, delivering pay-for-use electricity to un-electrified villages in India's "Rice Belt." The co-founder of HPS, Chip Ransler says, "We're using an older technology - gasification which has been around since World War II. We retrofit machines to work with multiple types of raw material - not just rice husk, but corn husk and wheat husk, too. We work with two Indian manufacturers to build gasifiers with the right specifications." According to Ransler, in the next 5 - 10 years: "We think we can power 2500 villages - 750,000 people." To date, five pilot projects have become operationally profitable within six months, delivering sustainable, environmentally-

friendly, low-cost energy that is dramatically improving the lives of over 12,000 rural Indians.

deadly repeat of the 2004 Indian Ocean tsunami that killed 168,000 people in Indonesia alone.

Innovative and Sustainable Design Structure The recently built Women's Healthcare Centre in Burkina Faso is truly an innovative structure, driven by the ideas of sustainability and ethical awareness. It has been built by FARE Studio, a design production facility based in Rome and also won the Health Category Award at the World Architecture Festival.

But even as President Susilo Bambang Yudhoyono inaugurated the system in Jakarta, officials conceded it would be several years yet before it is fully complete and the whole coastline protected.

It mixes local materials, simple technologies, careful siting and control of sun and wind to build an off-grid, solar powered facility. The entire complex is built on a raised platform to allow ventilation under and to separate it from the dust and mud. Then the buildings are constructed from a sun-dried brick cast on site. The bricks don't do well in contact with a lot of water, so they sit on the raised plane for protection from below, while above, a sun and water screen protects the buildings. Breezes can flow below the floor and below the roof, keeping the buildings cooler without mechanical ventilation. The roof also gathers rainwater. The buildings are plastered and painted, with slogans in five languages as a graphic element. The Women's Health Care Centre was built with local trades in fifteen months. Shared by TreeHugger, an online media outlet dedicated to driving sustainability mainstream

According to Thomas Rachel, Germany's parliamentary state secretary, in Jakarta: "We are starting the world's most advanced tsunami early warning system able to issue the quickest possible warnings with a high degree of reliability." Indonesia, with its 17,000 islands, remains especially vulnerable because it sits on the meeting point of three of the earth's tectonic plates, leaving 60 percent of the coastline at risk from tsunamis. The new high-speed warning system connects a series of seabed sensors that detect the earthquakes that may set of a tsunami, information that is relayed to buoys on the surface. Deep-sea pressure gauges monitor any sudden variations indicating that a tsunami is in motion, data that is enhanced by the notion of the surface buoys that carry global positioning systems. All the information is relayed by satellite to the tsunami early warning centre in Jakarta, which is connected to 11 regional hubs across Indonesia. Shared by Worldchanging, a nonprofit media organization

New Tsunami Warning System Launched Indonesia launched a sophisticated new tsunami warning system designed to give coastal residents enough time to flee or seek shelter from an impending tidal wave. The national system aims to protect the inhabitants of the archipelago's vast coast and prevent a

tbl nov-dec 08 9

PROFITS Sustainability can Enhance Competitiveness: Report In the current economic crisis, the ability of companies and countries to be competitive has never been more important. Sustainability can enhance that competitiveness, according to a news briefing published today by the Institute of Chartered Accountants in England and Wales (ICAEW). 'Competitiveness and Sustainability: building the best future for your business' has been written by leading sustainable development charity Forum for the Future. The report is the first publication in a new series, which forms part of the ICAEW's broader thought leadership programme "Sustainable Business". The series aims to offer a platform for corporate responsibility and sustainability experts to express their views on issues which will be of interest to the business community. The paper outlines three determining factors which companies will need to address: Industries at the start of supply chains will have to pay more to harvest, extract and get access to many primary products. As ecosystem services decline, the framework conditions within which businesses operate, will change. New business opportunities will emerge. Demand will grow for more efficient ways to use eco-system services for meeting needs or mitigating impacts.

10 www.tbl.com.pk

According to David Bent, Head of Business Strategies at Forum for the Future and Vice Chairman of the ICAEW's Corporate Responsibility Committee and author of this report, "The recession is a perfect storm warning of how sustainability issues are driving the context in which businesses compete. High prices for energy, food and commodities plus unsustainable levels of debt are the long-term drivers of unsustainable development. When we look at future trends it is plain that the questions of sustainability are a fundamental part the competitiveness of any company or country."

companies in the UK and other countries to make windfall profits by raising electricity prices to cover the notional cost of having to buy permits, despite receiving them free," reports the Financial Times. The government said that the auctions should not result in further electricity price increases, as the cost of permits had already been factored in.

Shared by CSR International, an online blog dedicated to connecting and empowering corporate sustainability

A late amendment to the climate change bill is expected to receive royal assent by the end of this year. This initiative will make it easier to obtain subsidies for small-scale renewable energy projects. Any project producing up to 5MW of electricity - equivalent to about three to four wind turbines - will qualify for a "feedin tariff" rather than the current subsidy system. Under such tariffs, generators are guaranteed a higher price than normal for their electricity for several years.

Auction of Carbon Permits in UK The E.U.'s first carbon-permit auction was held in November 2008, raising some $80 million, as bidders fought for the right to emit greenhouse gases. Previously, all of the emissions permits allocated to UK businesses under the European Union's trading scheme were given out free. According to the Financial Times, "the government has pledged to auction another 80m permits in the next four years, which is likely to bring in revenues of more than £1bn." The identities of bidders has not been disclosed, but electricity producers are expected to be the main buyers as they had their free allocation of permits cut by 30 percent. The government considers the auctions as a model which it hopes would be followed by other European countries. According to Angela Eagle, exchequer secretary to the Treasury, "This is the most economic, efficient and effective way of [making companies pay for their emissions]." "The free allocation of permits in the first phase of the scheme, from 2005 to 2008, enabled power

The UK is pushing for power generators to have to pay for all of their carbon permits in the third phase of the EU scheme, from 2013, arguing that electricity producers tend to be well-insulated from international competition.

Greening the Supply Chain in Emerging Markets A Report by the World Environment Center, titled "Greening the Supply Chain in Emerging Markets: Some Lessons from the Field." looks at successful strategies for improving the performance of supply chains throughout the developing world. The report is second in the new GreenBiz Reports series by thought leaders in the green business arena. It examines the definition and scope of "Greening the Supply Chain" initiatives, discusses the value they contribute to business, identifies selected key factors to success, presents an approach for managing successful GSC projects and reviews what remains to be done through busi-

ness management, government policy making and financial management partnerships. Greening the Supply Chain initiatives are part of a process for implementing a sustainable development plan for corporate business strategy aimed at achieving improved environmental, health and safety performance; increasing efficiencies in the use of energy, water or other natural resources or raw materials; reducing the environmental and societal impact of business operations upon local communities and the global biosphere; and expanding economic and quality of life enhancing opportunities that result from the company's business activities. One of the lesser understood factors in the governance of global companies, especially with respect to management of their supply chains, is the limited number of their own employees that are located on-the-ground in developing market nations. Greening the Supply Chain (GSC) initiatives have emerged as one means to compensate for this limitation; they also aim to assist companies to achieve greater economic efficiencies and alignment of sustainability objectives across their operations while working with hundreds and, at times, thousands of independent supplier firms with differing objectives and capabilities. Cleantech Investments and Economic Stimulation The short-term blowback from the global financial panic has been pretty logical: A flight to value and safety and reallocation of assets to deal with longer-term risks of the new economy. So what does this mean for cleantech investing? While it is true that the short-term panic means an interim dry-up of financing, the same can be said for nearly all venture capital,

private equity, and even public equity. But the fear that cleantech projects may take a back seat to economic recovery efforts ignores the fact that cleantech is still being embraced by many forwardthinking U.S. companies and investors - and may just be the driving force behind economic stimulation. Bill Gates is one of the $100 million in investors for algaebased fuel technology company Sapphire Energy. T. Boone Pickens has over one million signatures on his Pickens Plan petition, and is investing $10 billion to build the country's largest wind farm. Even Warren Buffet is seeing long-term value in General Electric by investing $3 billion in the world's leading manufacturer of wind turbines, energy-efficient hybrid locomotive engines and other eco-friendly products. The bottom line is that these investors are not philanthropists; they recognize these as money-making opportunities in the long term. Clean energy is also an excellent hedge against long-term downside risk. Despite extreme turbulence in the short-term, carbon emission limits, public sentiment and climate change itself represent significant financial risk to every company's bottom line. The risk of increased regulation, combined with volatile energy prices for oil and other fossil fuels, all favour clean energy in the future - and in some cases, already do. According to Mark Fulton, global chief of climate change investment research at Deutsche Asset Management: "The current crisis is making the necessity of tackling climate change an opportunity to stimulate growth through investment opportunities. Encouraging investment in renewable energy is a key focus. Energy efficiency technologies are obviously highly desirable in economies facing recession. Infrastructure stimulus

can be tied directly to climatesensitive sectors such as power grids, water, buildings and public transport which present a vast field for the creation of new technologies and jobs."

How to Create Green Jobs and a Low-Carbon Economy A report "Green Recovery" by economists at the University of Massachusetts Political Economy Research Institute was released in October, by the Center for American Progress (CAP). The report shows that a $100 billion green economic investment could create 2 million US jobs in two years - not to mention the wonders it would do for breaking our dangerous fossil fuel addiction and cleaning up the climate. A groovy new map on the CAP website illustrates how allocations to 34 states from this "green recovery programme" would translate to net job creation and the dent this would make on each state's unemployment rate. The CAP programme proposes to boost public investment (and leverage private capital through loan guarantees) in six energy efficiency and renewable energy strategies: retrofitting buildings to improve energy efficiency; expanding mass transit and freight rail; constructing "smart" electrical grid transmission systems; wind power; solar power; and next-generation biofuels. Shared by Worldchanging, a nonprofit media organization

Compiled by Rutaba Ahmed

tbl nov-dec 08 11

the crisis and causes

the failure of good governance:

how it led to the financial crisis

report by jia en teo for tbl

The concept of good governance has typically been used in development economics as a way to describe the system of aid-recipient countries - developing economies. The recent economic crisis has brought this concept into light in developed economies where governance, both public and private, has been assumed to be sound. Euphemistically put, the unfolding of recent events has proven that this is not always true. 12 www.tbl.com.pk

special report Governments create the conditions for the functioning of markets, operation of private firms, strength of civil society, and welfare of communities and individuals. (Or at least that's what they're supposed to do.) Systems of governance affect the performance of the state in executing its core functions and through this, the performance of countries in meeting their major economic and social goals. In the private sector, the same concept applies - firms' leadership enables the functioning of various departments and is responsible for the welfare of the firm's employees. A firm's leadership also largely determines the firm's performance and its ability to meet its goals. In recent months, developed economies around the world experienced an unprecedented shock - credit markets froze up, equity markets tumbled to record lows and major banks failed and whole countries were on the brink of default. While the crisis cannot be blamed on one single entity because it came about as a result of greed and complacency of consumers, investors and businesses alike, it is widely argued that the lack of good governance at the public and private levels led to this meltdown. PUMA's Six Pillars of Governance Good governance, in the private and public sphere, is the ability to exercise power, and to make good decisions over time, across a spectrum of economic, social, environmental and other areas. There are many ways to define good governance, however, there seems to be a general consensus that key factors, as outlined by the OECD programme on Public Management and Governance (PUMA) include: 1) Technical and managerial competence 2) Organizational capacity 3) Reliability 4) Accountability 5) Transparency and open information systems 6) Participation

Technical and Managerial Competence Under Question in The Wake of Crisis Technical and managerial competence of leadership is an obvious factor of good governance. In this financial crisis, it is hard not to question the competence of the regulatory bodies responsible for overseeing the financial institutions, and the competence of the financial institutions themselves. It became obvious that neither public sector leadership nor private sector leadership really understood the complex financial instruments that were structured, packaged and sold during the boom years. Rewind to April 2004. Only after the crisis had begun unfolding did the New York Times publish an account of the brief meeting between Security

and Exchange Commission (SEC) officials and the heads of the large investment banks. The investment banks wanted the SEC to exempt their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would free up billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities, credit derivatives, and other exotic instruments. This meeting was sparsely attended and went unreported in the media. It lasted a total of 55 minutes, states The NY Times. In loosening the capital rules, which are supposed to provide a buffer in turbulent times, the SEC also decided to rely on these investment banks' own risk models, essentially allowing them to monitor and regulate themselves. The 2004 decision was a chance for the SEC to supervise the banks' increasingly risky investments in mortgage-related securities, but the agency never followed through on this and it remained a low priority, until now. Inadequate Organizational Capacity: Failure of the Fed? Another factor of good governance is organizational capacity. Good governance has to be built on the quality of organizations so that development is based on this rather than simply relying only on the political or personal will of a strong leader, which may not be sustainable over the longer term. Both government and private sectors firms proved to be inadequate in this regard, and a case in point is the failure of the Federal Reserve under Alan Greenspan. The Federal Reserve under Greenspan was operated by the will of one rather than by a system of checks and balances. Stephen Roach, Chief Economist at Morgan Stanley said in an interview with the Financial Times that the Federal Reserve, led by the "libertarian ideology" of Alan Greenspan was "very reckless in condoning the excesses of complex financial information and setting the price of risk far too low." Roach's views are echoed by many other economists who say that Greenspan encouraged the bubble in housing prices by keeping interest rates too low for too long and that he failed to rein in the explosive growth of risky and often fraudulent mortgage lending. The Fed chairman had been one of the nation's leading voices for deregulation, and there are past statements in which Mr. Greenspan had argued that government regulators were no better than markets at imposing discipline. The Fed slashed interest rates from 2001 to mid-2004, which led to warnings of a potential bust, but Greenspan brushed these worries aside, according to the NY Times. Greenspan, along

tbl nov-dec 08 13

with most other banking regulators in Washington, also resisted calls for tighter regulation of subprime mortgages and other high-risk exotic mortgages that allowed people to borrow far more than they could afford. The Freddie Mac and Fannie Mae Case: The Case for Reliability Highlighted Reliability is another factor of good governance. Reliability requires governance that is free from distortionary incentives - through corruption, nepotism, patronage or capture by narrow private interest groups.

markets. But perhaps this call for accountability is a case of too little, too late. Financial Crises: Due to A Breakdown of Transparency Transparency is another important aspect of good governance. Governments have access to a vast amount of important information. Dissemination of this information through transparency and open information systems can provide specific information that firms and individuals need to have to be able to make good decisions.

This financial crisis was a case study of the breakThe story of Freddie Mac and Fannie Mae is a classic down of transparency at many levels. Take for case of policy capture that highlights the importance example, AIG and its 'small' derivatives unit, headed of reliability in governance and the effects when it is by Joe Cassano. This unit was conveniently absent. The Wall Street Journal and CBS have report- classified and located in London so to ensure particularly lax oversight over the dubious accouned that Freddie Mac and Fannie Mae spent millions ting and disclosure practices evidently abetted by its of dollars lobbying some influential members of chief. The insurance behemoth came to its downfall congress, in exchange for, among others, lax capital because its leadership had made some very risky reserve requirements. As a result of their lobbying bets, hid them from regulaprowess, these obsolete tory oversight, and moved institutions became virtually Accountability is a convoluted the risky business abroad. untouchable behemoths. concept with respect to this financial Congressman Ron Paul has Capital markets depend on said that "the special privicrisis because of the global nature information openness and leges granted to Fannie and of the financial system. Consumers transparency but the nature Freddie have distorted the are at fault for over-borrowing, of these complex derivative housing market by allowing banks are at fault for over-lending, products made it difficult them to attract capital they investment banks are to blame for for most people to undercould not attract under pure stand, much less regulate. market conditions." over-securitizing, and regulatory The collapse of the giant institutions are at fault for allowing investment banks and the Accountability: too little, this excessive behaviour. too late? financial system are due to Accountability is a crucial the lack of transparency way to ensure that the surrounding these products power that is given to those in public office is used and the loss of confidence in the counterparties appropriately and in accordance with public interinvolved. As a result, investors panicked, causing est. Accountability requires clarity about who is the markets to tumble. accountable to whom, for what, and that civil servants, organizations and politicians are held Lack of The Right Kind of Participation Triggered The Crisis accountable for their decisions and performance. Another factor of good governance is participation. Participation involves consultation in the developAccountability is a convoluted concept with respect to this financial crisis because of the global nature of ment of policies and decision-making, elections and other democratic processes. Participation gives the financial system. Consumers are at fault for governments access to important information about over-borrowing, banks are at fault for over-lending, the needs and priorities of individuals, communities investment banks are to blame for over-securitizing, and private businesses. Governments that involve and regulatory institutions are at fault for allowing the public will be in a better position to make good this excessive behaviour. decisions, and decisions will enjoy more support once taken. At some level, the leadership at the public and private institutions that has been involved in this Before the crisis happened, in boom times, particicrisis are being held accountable - top executives at pation was everywhere. However, it was not the these banks are being questioned and will be right kind of participation - this was participation in missing out on some of their bonuses; Greenspan is being called into question for his lax oversight of the a party of excess, complacency and greed, and the

14 www.tbl.com.pk

special report participants were not just greedy investors, but large banks and even regulators. As Professor at Columbia University, Joseph Stiglitz put it, "it was all done in the name of innovation, and any regulatory initiative was fought away with claims that it would suppress that innovation. They were innovating, all right, but not in ways that made the economy stronger. Some of America's best and brightest were devoting their talents to getting around standards and regulations designed to ensure the efficiency of the economy and the safety of the banking system." The lack of the right kind of participation - participation in developing sound policy and regulation, has contributed to the unraveling of financial systems worldwide. Due to poor governance, America's financial system failed in its two crucial responsibilities: managing risk and allocating capital. The industry as a whole had not been doing what it should have been doing and it must now face change in its regulatory structures. Regrettably, many of the worst elements of the US financial system were exported to the rest of the world, according to Joseph Stiglitz. The global financial crisis, triggered by the mortgage and financial derivatives debacle in the US, was not just a failure of dogmatic ideology, or of know-how, or of technical regulations. As illustrated at the outset, powerful 'vested' interests, at the intersection between politics and business, and corruption, played a role in shaping the flawed oversight, the absence of transparency, the regulations, and their lax implementation. The Effect on Pakistan In Pakistan, people watched from afar as the capital markets crashed in the US and Europe. According to sources within the banking industry, the global financial crisis has not affected Pakistan yet because the country is not a large financial player in the global economy. However, the SBP's First Quarterly Report issued last month states, "the domestic economy is now more open and prone to external shocks than ever before". Former president of the Overseas Chamber of Commerce and Industry, Zubyr Soomro believes that the primary impact for Pakistan would be tightened terms for access to international debt markets. Some analysts view this crisis in the West as a chance for Pakistan to establish a stronger economic foothold in the region. They believe that investment will pour into the country as returns in developed markets fall. According to the Head of retail banking of the National Bank of Pakistan, Amir Siddiqui, "We need to prepare ourselves on a war footing by getting floating barrages from the Middle East to

overcome the energy shortages and to receive a fat chunk from the investment that would be diverted to surging economies of Asia." But Pakistan has a crisis of its own to take care of for now. While Mr Musharraf's prime minister, Shaukat Aziz, frequently likened Pakistan to a "tiger economy", the former government left an economy on the brink of ruin without any durable base. No Bail The Pakistan Rupee has lost more than 21 percent of its value so far this year and inflation now runs at 25 percent - by conservative estimates. The rise in world prices has driven up Pakistan's food and oil bill by a third since 2007, according to Wilkinson in the Telegraph. President Zardari told the Wall Street Journal that Pakistan needed a bailout worth $100 billion from the international community. President Zardari is expected to ask the international community for a rescue package at a meeting in Abu Dhabi next month. This gathering will determine whether the West is willing to bailout Pakistan. However, with developed nations vying for bailouts of their own, it is unclear if they even have the capacity to provide this rescue package. Whatever the outcome, it is clear that good governance is key to steering Pakistan, and the rest of the world, out of a global recession. It will take cooperation at an international level and for many governments to not only make the decisions that are right for their domestic situations, but also work together with their counterparts abroad to find a solution to mend this problem and reduce its trickle down effect on real economies. References http://www.nytimes.com/2008/10/03/business/03sec.html?_r=1&oref =slogin Edmund L. Andrews. The NY Times. http://www.nytimes.com/2008/10/24/business/economy/24panel.html (Joseph Stiglitz, The fruit of hypocrisy; Dishonesty in the finance sector dragged us here, and Washington looks ill-equipped to guide us out, The Guardian, September 16) http://governanceblog.worldbank.org/capture-and-financial-crisis-elephant-forcing-rethink-corruption http://www.dawn.com/2008/02/04/ebr17.htm Isambard Wilkinson. Pakistan Facing Bankruptcy. November 17, 2008

About the Writer Jia En Teo is an online entrepreneur and writer who currently resides in New York City. Aside from her online ventures, she has great interest in issues related to social entrepreneurship, corporate social responsibility and the environment. She graduated from the University of Michigan with a Bachelors in Political Science and Economics.

tbl nov-dec 08 15

rules vs. relations

pak-governance: parallel tracks by ahsan ali mangi for tbl

The term "good governance" has increasingly been used to describe the regulatory interventionist regime necessary to support free markets in order to reduce, minimize and dampen suboptimal market outcomes due to constraints present in the real world. The concept was also adopted by development literature whereby it was argued that better institutions (that is, better governance) is one of the vital factors which differentiates a country's relative progress in social and economic development. What is Governance? Governance has been defined differently depending on the context, however for clarity, lets first understand what governance is not. Governance is not synonymous with government. Therefore, there is always a danger that a governance issue maybe dubbed a 'government' issue, with the corollary that the onus for fixing it necessarily rests with the government. Governance has been defined by the UN ESCAP (United Nations Economic and Social Commission for Asia and the Pacific) as "the process of decision-making and the process by which decisions are implemented or not implemented". An analysis of governance processes reveals that it involves a number of formal and informal actors including government, private sector, civil society, religious leaders, NGOs, media and others depending on specific governance issues. Better governance is the result of meaningful and productive interactions between the actors involved in decision-making and 16 www.tbl.com.pk

its implementation. Thus, the more mature, responsible and educated the actors, the better the results. Good governance is equally important in the international, national, sub-national and corporate governance scenarios, as all of them affect the general wellbeing and welfare of people. Democratic Governance Serving Citizens In terms of the state and citizens, governance is about provision of public goods to persons living within certain parameters; it is the quality of these public goods that distinguishes strong states from the weaker ones. A well-governed nation provides the rule of law, political and civil freedom, healthcare, education, arteries of communication, a banking and money system, a fiscal and institutional context within which citizens can prosper; support for civil society; and a method of regulating the sharing of the environmental commons. Together, the management, supply and delivery of some or most of these goods constitutes governance, states Rotberg, Director of the Programme on Intrastate Conflict at Harvard University's John F. Kennedy School of Government

Key Factors of Good Governance The distinguishing characteristics of good governance which have been commonly accepted and pioneered by UNDP (United Nations Development Programme) are; accountability, transparency, consensus orientation, participation, rule of law, efficiency and effectiveness, equity and inclusivity. The World Bank rates over 200 countries annually on its WGI (Worldwide Governance Indicators) to measure the level of governance in these countries. WGI includes six dimensions of governance; voice and accountability (VA), regulatory quality (RQ), political stability and absence of violence/terrorism (PV), government effectiveness (GE), rule of law (RL), control of corruption (CC). Governance in Pakistan Successive Pakistani Governments have underscored 'good governance' as an essential step towards a prosperous Pakistan. Trade bodies and the private sector and businesses have also aspired towards and demanded good governance which will instigate efficiency, reduce cost of

special report doing business and ensure the implementation of contracts. A look at Pakistan's performance on WGI between 1996-2007 reveals that not much progress has been achieved on any of the six determinants of good governance. In fact, Pakistan's ranking in the world has declined on all of these indices during the last two years. There is a genuine concern at all levels of elected representatives, public functionaries, civil society and among private businesses, about suboptimal governance in Pakistan, which results in inefficiencies in the economic sector, implementation of basic rights and security, and poor provision and quality of public goods and services. Pakistan has gone through structural adjustment programmes funded and endorsed by IFI's (International Financial Institutions) with the aim of improving governance, institutions and the economy. During the last two decades, Pakistan has significantly reduced subsidies on food and fuels, liberalized its financial markets and is now implementing second generation financial reforms. It has successfully privatized the public-run banking sector, fertilizer plants, its national telephone company, public transportation and the Electricity Supply Company of its biggest city. In spite of these efforts, governance in Pakistan has seen marginal improvement, if any. For example, telephone services have not shown any improvement since the management of the national monopoly has been handed over to a private entity. Amounts spent on the capacity building of judicial officers, public officials and public representatives in three tiers of government over this time period seem to have not affected them in a substantial way.

Rule-based versus Relationbased Governance This scenario is better explained in the framework of a rule-based system of governance versus a relation-based system. Rule-based governance is based on explicit and clear contracts with clear monitoring mandates. Maturity Indicator: RuleGovernance Rule-based governance consists of a mature informational infrastructure such as auditing, accounting, rating agencies, legal codes, cases, and efficient regulatory regimes. Until universal informational sharing is possible; laws on paper are mere ink. All these accumulate with time as accountability processes take root in a continuous and representative democratic system. Establishment of rule-based governance in a country is a long evolutionary process, since rules can only be implemented if all decisive players have mutually consistent beliefs and they become common knowledge. Dysfunctionality Indicator: Relation-Governance In the absence of rule-based governance, countries function under a 'relation-based governance' system, whereby most transactions are based on personal and implicit agreements. Governments are usually not able to enforce contracts and regulate impartially. Players are more interested in getting a larger share in the pie rather than increasing the size of the pie. All decisions are made taking a short-term view and taking into account immediate gains. The incentive matrix in this case resembles a prisoner's dilemma whereby collaboration will result in value maximization while deviation is unilaterally beneficial and results in inefficiencies. Ex-ante behaviour of players is based on their expectations for their ex-post bar-

gaining power which in turn is dependent on ex-post institutional arrangements and also the behaviour of the government (for example, whether it is predatory, benevolent, partisan or otherwise). The Effects of Relation-Based Governance in Pakistan Relation-based governance is common in countries where there is lack of circular monitoring. There is no clear separation between judiciary, legislature and executive levels - or one arm is overwhelmingly powerful. In such scenarios, business is carried out and contracts are made purely on local and personal knowledge and through personal 'rapport', resulting in large individual gains at the cost of a maximization of gains. The transaction cost is negligible in these cases, unlike in the rulebased governance system, which involves large total fixed transaction costs. The average transaction cost however is high in the form of suboptimal use of resources and inefficient outputs. Quite recently relation-based governance in Pakistan has manifested in the hoarding of food essentials, speculation on commodities and currencies and a price bubble in stock markets in the backdrop of hapless state regulation: Thus, yielding high inflation, devaluation of the rupee, depleting foreign exchange reserves, a slowdown in economy and rising unemployment. The result? Few winners - and the rest, all losers.

About the Writer Ahsan Ali Mangi is Director Planning (Education) at Earthquake Reconstruction and Rehabilitation Authority (ERRA) and former Director Food, Sindh. His research interests include causes of inequality between and within nations and its impact on human well-being and the political economy of Food. He holds a Bachelors in Electrical Engineering and a Masters in International Development from the UK.

tbl nov-dec 08 17

futuralysis: the financial crisis and csr

corporate responsibility in the age of irresponsibility: a symbiotic relationship between csr and the financial crisis?

“

This has been an age of global prosperity. It has also been an era of global turbulence, and where there has been irresponsibility we must now clearly say the age of irresponsibility must be ended.

”

PM Gordon Brown, UN General Assembly (September 26, 2008)

by flavia thomé for tbl

Trying to understand the future impact of the financial turmoil of the last few months on the many institutions and actors on the global stage, is a daunting yet fascinating process. The analysis forces us to take a step back and view whatever it is that we may be aiming to understand with rather critical eyes - in my case it was through the lens of Corporate Responsibility. As an advocate of CSR, I often spend my time fighting the cause and countering its many critics. However, as I attempted to make sense of the effects on CSR of the recent financial crisis and potentially extended recession, I was able to see more clearly how close the CSR industry may be to its demise if it does not radically re-shape itself. Financial Crisis: The Causes & CSR's Role The causes of this turmoil are multifaceted. Although many issues remain unclear, there are a couple of conclusions to take from the crisis. The first is that this was a crisis of responsibility, or lack thereof. The second is that it will 18 www.tbl.com.pk

only be repaired by the re-establishment of trust between companies (especially those in the financial sector) and their stakeholders. Logically, this presents a perfect entry-point for CSR to be finally recognized by the business community as a force of necessary good and long-term sustainability. The emphasis placed by CSR on the role of corporations in the larger social and environmental contract is key in preserving an ideal equilibrium of confidence and responsibility. However, in its current shape CSR has opened itself to yet more criticism with strong anti-CSR arguments being voiced by businesses, academia and the media. Understandably, in a crisis defined as one of corporate irresponsibility (and arguably also of individual) it is only logical that the inability of CSR to ensure deep-rooted accountability and business governance is being highlighted and condemned. Is this crisis not the antithesis of the core principles of CSR?

What The Crisis Means for the CSR Industry As we focus ahead, I can see three possible paths for the CSR industry: Path 1: CSR Fad Fades The business community will dismiss it entirely as a fad that served a role in creating a market for ethical and environmental

special report products but does not have a wider purpose in society. As a potential recession looms, business expenses will be reduced only to essential and CSR will be considered a 'nice-to-have' but unnecessary outflow. Cost-cutting will result in a number of corporate activities and sponsorships being axed. Philanthropic activities will be confined to foundations rather than to corporations, which is a shame because those in need of charity are particularly vulnerable during times of crisis and weak economic prospects. Nonetheless, this kind of CSR was arguably unsustainable anyway as it had little to do with integrating responsibility and governance into the core business model. Path 2: Active CSR Survives - not Thrives The second outlook for CSR is that companies will come to realize just this and understand that CSR must play an active rather than superfluous role which may be relinquished during hard times. Organizations may choose to engage in actions where their products or activities are linked to a wider social or environmental good. For example, a computer manufacturer joining hands with local schools by supplying classrooms with computers. On the other hand, responsible actions should be recognized as not just necessary but a business imperative. It is good business to understand the role that your organization plays in the broader society and to leverage your resources in order to manage and satisfy your stakeholders. Keeping CSR at the periphery of the business model will go some of the way towards improving stakeholder relations and reestablishing much needed trust. However, this form of CSR will do little to bring about long-term business and market sustainability, consequently also little to avoid future crises like the one

we face today. Path 3: Non-peripheral, Widescale Sustainable Practices The third model builds upon the last two and benefits from my eternally optimistic view of the world. In light of the shocks the world is experiencing and the critical need to re-establish trust with stakeholders, companies will not have a choice but to make CSR a main concern.

Peripheral CSR, even if strategic, will not be sufficient to minimize risk and promote the long-term health of the system. In this model, I look beyond the CSR which encourages employees to plant trees in low-income housing areas or companies to donate computers to schools. Evidently, these are valuable actions in their own right; both in terms of the benefits to society and the positive corporate culture it fosters. But peripheral CSR, even if strategic, will not be sufficient to minimize risk and promote the longterm health of the system. As we look ahead to perhaps the largest crisis of business confidence, it is time to shift the focus away from short-term gains to longer-term economic, environmental and social successes. Even in the catastrophically affected financial sector, organizations such as the Dutch Tridos Bank and the UK's Co-operative Bank have proved robust due to their focus on transparency and responsible investing. Tridos Bank's CEO, Peter Bloom, explained that "by lending to businesses and projects that are sustainable financially, as well as socially and environmentally, we balance a positive impact on society with a healthy financial return." Hence, "by sticking firm-

ly to our own approach, the crisis currently impacting the banking industry is bypassing Triodos Bank. This crisis is caused by losing touch with the real economy." Embedded CSR targets good governance, accountable leadership and ethical practices so as to ensure that they create opportunities and contribute to increased performance. This is the opening for CSR to demonstrate its strength and power to bring about the changes needed in the business and financial sectors promoting the adoption of sustainable practices on a wide scale. Sustainability, after all, is what will determine whether a business will outlive the actual and inevitable crises of the future. Symbiotic Relationship Forged As I look at these three paths ahead, I realize that this crisis forces corporations and CSR into the perfect symbiotic relationship. Businesses cannot afford to allow for the demise of CSR, as it provides the only way out. Embedding responsible action and ethical conduct into the core business will go a long way to re-establish trust and re-connect stakeholders. At the same time, CSR must re-shape itself and instill confidence in its fundamental importance to corporate and market sustainability. Only by working together with the same goals and priorities, will business and CSR guarantee their own survival - and, maybe even their victory. The economy, environment and society will be much obliged.

About the Writer Flavia Thomé has worked as a consultant for Accenture and is currently working as a Programme Administrator at the International Institute for Sustainable Development (IISD), based in Geneva. Born in Brazil, she has a BSc in Economics and International Development and an MA in Global Ethics from the University of London.

tbl nov-dec 08 19

csr in turbulent times

csr now needed more than ever before by michael hopkins, julian roche and ivor hopkins for tbl

Turbulent times: Financial storms in the US and UK will have implications for all of us. Main Street and Wall Street cannot be separated. If the captains of those financial companies, now in crisis or bankrupted, had acted more responsibly with a proper Corporate Social Responsibility (CSR) strategy, then their vessels would not have sunk nor would they be on the brink of foundering. Responsible business will be the new mantra. Indeed, we go further, and suggest that the demise of investment banks in their present form would be the best news possible for CSR!

What went wrong? Lehman Brothers stated in its 2007 letter to its shareholders that: "Strong corporate citizenship is a key element of our culture. We actively leverage our intellectual capital, network of global relationships, and financial strength to help address today's critical social issues." Regarding sustainability they stated: "As a global corporate citizen, Lehman Brothers is committed to addressing the challenges of climate change and other environmental issues which affect our employees, clients, and shareholders alike. It is critical that we

20 www.tbl.com.pk

continue to develop initiatives to focus on these challenges facing our environment now and in the future." They had corporate responsibility too and noted in 2007 that: "We are also looking inward. In 2007, Charlotte Grezo, an expert in socially responsible business practices, joined the Firm as global head of Sustainability and president of the Council on Climate Change. In addition to overseeing the Council's activities, she will further the development of the Firm's own environmental policy and strategy." Charlotte, as many readers will know, was the former head of

CSR at award-winning Vodafone - but Lehman's announcement showed that their focus was more on environmental concerns than strategic CSR which examines all key stakeholders. In fact we at MHC International Ltd had suggested to Lehman Brothers early in 2007 to carry out a strategic CSR review and to examine all stakeholders. Our proposal was not accepted. A careful stakeholder analysis could well have discovered Lehman's problems in the sub-prime market and alerted top management. Yet, as Mallen Baker noted, "Bear Stearns produced no CSR report of any sort. Lehman Brothers did not produce a CSR report, but they produced a philanthropy

special report report. Even if they had gone further, it seems unlikely that the complex nature of how they created wealth would have been a feature." Recap on what investment banks do They earn their money through a mixture of means: trading and broking stocks and shares including short selling and derivatives - providing advice on mergers and acquisitions, and IPOs, investing in private equity deals of one sort or another, and structuring deals such a securitization and public-private partnerships. They have been responsible, in large measure, for the current financial crisis. What have they been doing to achieve this? Their private equity investments have stripped companies of jobs, merged them with their competitors, and stacked them up with risky debt provided by eager bankers. The debt has been securitized in tranched revenue deals that ended up with pension funds holding toxic securities they do not understand, and then creating exotic securities with payment profiles that defy even the most complex modeling. When they have not been 'rationalizing' companies, they have been pushing companies to accept external equity, or creating market solutions for problems that defy markets.

Carbon trading is an excellent example. CSR would suggest voluntary curbs by individual firms, backed up with strong regulatory control by responsible Governments. What is the investment bank solution? Carbon trading, of course: let the rich buy the right to pollute, and let the poor be obliged to pay transaction fees to investment banks to let it happen!

How could CSR help? CSR is about companies sliding into the role previously occupied by Governments in taking responsibility for making the world a better place for all their stakeholders. Ban Ki Moon, SecretaryGeneral of the United Nations, recently used his opening remarks at the General Assembly to question the reliance on free markets: "We need a new understanding on business ethics and governance, with more compassion and less uncritical faith in the 'magic' of markets." How right he was. The investment banks have been the wizards of market magic. If investment banks are to be truly socially responsible, they need to change what they do fundamentally. What could investment banks do instead? Clearly, they need to be properly regulated. But more venture capital investment, infrastructure investment with guaranteed maximum rates of return,

The investment banks have been the wizards of market magic. If investment banks are to be truly socially responsible, they need to change what they do fundamentally. and more socially responsible investment - and less, much less, private equity, would be a start. The plain fact is that investment in socially responsible business is highly unlikely to exhibit the sorts of returns that the shareholders of investment banks seek, so a compact amongst the investment banks and the analysts will be needed. The new financial architecture, in which CSR could play a major role, will render such attitudes socially unacceptable to stakeholders and even subject to judicial review. A code of practice amongst investment banks limiting the extent of their involvement in traditional private equity deals that slash jobs would be helpful here - for instance, the UN Principles for Responsible Investment. Such a code could also limit the amount of debt injected into any one deal to prevent undue risk creeping back into the system as it did after the failure of the junk-bond market never again, said the regulators at the end of the eighties - yet look what's happened now. A commitment not to use certain types of security altogether, such junk bonds, could follow on. More than that, such a code could also be worked out in conjunction with the rating agencies so that there is far more disclosure of risks than hitherto. The rating agency models failed on sub-prime. But if voluntary disclosure by the investment

tbl nov-dec 08 21

banks were combined with similar constraints on retail bank lending, backed up by stronger regulation, the raw material for the structuring which has led the global economy, at least in the West, into such difficulties would be in shorter supply. Something also needs to be done about securitisation, structured finance and tranching in general. For instance, a general guarantee by investment banks over all their structured products - effectively forcing them to act as their own insurers? They would charge for these services, of course, but it would prevent them from making money out of securities over which they have no future interest once issued, which has created a situation of moral hazard time and again. CSR companies should have no truck with moral hazard so this alone as a yardstick of future investment bank behaviour would be useful. Investment bankers have long been able to avoid the responsibility of actual entrepreneurship, so tying their rewards more closely to their deals would be a step in the right direction. Sadly, however, all this is very unlikely. With all the attention being focused on the demise of larger investment banks, what is being forgotten is the quiet rise of numerous boutique organizations specializing in M&A advice or one particular sector. Such smaller companies don't even need to cloak themselves in the veneer of respectability that the larger ones did, and will be able to continue the relentless pursuit of shareholder value for their often tiny shareholder base without the glare of public attention. If Ban Ki Moon's vision is to be realized, then governments need to use corporate tax to deflect investment away from financial deals and towards socially

22

www.tbl.com.pk

responsible investments in such areas as alternative energy, food technology and low-cost housing. Of that, not a word from Congress, not a word from Wall Street. At times like these, investment banks are not likely to turn to CSR consultancies such as MHCInternational for advice. It's a shame: if they had done when times were good, times would be a lot less bad now.

What to do next? There are a number of steps as we noted in an article written by MHCi as far back as 2002! First, CSR can help. A major stakeholder of a firm is its employees. CSR does not imply that downsizing should be prevented, that would be absurd. What it does imply is that companies must make an effort to organise layoffs in a socially responsible manner. This could include early warning, counselling, re-training, temporary financial assistance etc. The tendency of US companies to give immediate notice is both distressing and can be counterproductive once re-hiring starts again. There is no doubt that there is an unequal power between companies and employees. A company can recover, it has its own institutions such as banks willing to keep it going through hard times. A redundant employee has none of these advantages and is in a very weak position once he or she leaves the confines of an institution. Second, CSR urges transparency of operations through socially responsible reporting of activities such as informing shareholders and staff about off-balance sheet holding of debts. Enron, for instance, may well have been in much better shape today if it had behaved in a socially responsible manner. Even though Enron was a lavish donor, Simon Caulkin of

The Observer (Feb 3rd, 2002) regarded this philanthropic form of CSR as a 'figleaf' and 'of a piece with Enron's overall strategy'. In fact, CSR is an overall strategy for systematic management of all of a company's stakeholders and is not confined to philanthropy. Third, CSR has not been given as much prominence on Wall Street as it should simply because of the legal framework under which most corporations operate. Robert Hinkley argues , for the USA, that the law, in its current form, actually inhibits executives and corporations from being socially responsible because the law baldly states that the purpose of the corporation is to make money for its shareholders. Any deviation from that could leave the corporation open to a lawsuit. So Hinkley suggests simply adding a phrase on CSR to corporate law so as to enhance CSR. Law, he advocates, would then read something like: “Directors and officers have a duty to make money for shareholders, but not at the expense of the environment, human rights, the public safety, the communities in which

special report

Directors and officers have a duty to make money for shareholders, but not at the expense of the environment, human rights, the public safety, the communities in which the corporation operates or the dignity of its employees.

the corporation operates or the dignity of its employees.” Fourth, CSR has a positive impact on the intangible assets of a company. A company's clear ideas on its identity and long-term goal, can help it to identify two sets of variables: one a 'value creating path' and the other a set of key success factors (KSF) and indicators that are appropriate as performance measurements. Such a process is very similar to developing CSR in a company which, in turn, will have a powerful effect on developing intellectual capital, a significant part of a company's intangible assets. Fifth, CSR has a long-term affect on improving a company's bot-

tom line. There is a positive link between social and financial performance especially when looking at the increased relevance of intangible assets such as reputation and knowledge networks. These turn into a source of market value and competitive advantage. Sixth, social responsibility is not confined to corporations. Institutions that have a major impact on the way we live are also expected to behave in a socially responsible manner. How, therefore, can we explain the continuing focus of the International Monetary Fund (IMF) on targeting inflation and not on creating incomes and employment? Nor has the IMF been very active in these turbulent times. As Joseph Stiglitz, the 2001 Nobel Prize winner for economics noted, "...rather than providing needed liquidity to developing countries to enable them to pursue full employment policies, typically the IMF provides liquidity to countries only on the condition that they pursue contractionary policies." Contraction in the developing countries or in countries in economic crisis, such was the case at the time for Argentina, leads to smaller markets for a corporation's goods and services. In times of crises, business history can be a source of inspiration. Consider Sony founded, 'among the ruins of a defeated and devastated 1945 Japan' in 'an abandoned telephone operator's room in the hollow remnants of a bombed and burned-out old

department store…", by the entrepreneurial Masaru Ibuka. He certainly concentrated on his day to day business essentials, yet, he also took the time to formulate his core ideals for the company that led the company for the next forty years and which are today still part of the Sony Pioneer Spirit. His ideals were very much CSR as they embodied a focus on the individual within the company together with a mission that impacted positively and was intended to continue to impact positively - on the wider society in which the company operated. Crisis? Recession? CSR is a long range strategic tool that if used and accessed prudently, would give a hard pressed captain the guidelines and support that will help avoid, or weather, the sudden storms of crisis.

References http://www.lehman.com/annual/2007/letter/i ndex4.htm, accessed 24 Sept 2008 http://www.lehman.com/annual/2007/sustainability/ Business Respect - CSR Dispatches No#137 - 29 Sep 2008 MHCi article, 2002. 'How Corporate Law Inhibits Social Responsibility', Robert Hinkley, Business Ethics, Jan. 2002 Joseph Stiglitz, "Employment, Social Justice, and Societal Well-being", Keynote speech to ILO Global Employment Forum, 1-3 Nov 2001 see www.ilo.org Collins & Porras, Built to Last (Random House, 2000), 'More than Profits..', p. 48

About the Writer Michael Hopkins is Managing Director of MHC International Ltd (MHCi) and is an economist specializing in socio-economic issues. He has broad range of experience and almost two decades of action in CSR.

tbl nov-dec 08 23

strategic csr

casuality

victims and winners: csr and the financial crisis report by wayne visser for tbl

Is the crisis the result of irresponsible banking, financial markets, corporations, executives or capitalism itself? And how will the impact vary, depending on whether CSR is philanthropic, strategic, embedded or revolutionary? This article examines the scale of the financial crisis, the links to CSR and the likely impact on CSR.

24

www.tbl.com.pk

special report The Scale of The Crisis There is nothing small or trivial about the global financial crisis. According to the Bank of England's recent Financial Stability Report, governments worldwide have already pledged more than $7 trillion in loans, guarantees, capital injections, and other assistance in their coordinated effort to prop up the global financial system. (Ironic since the financial industry is the oft-glamorous, jet-setting pinnacle of many corporate circles). The ILO estimates the crisis will cost 20 million jobs by next year. This is not the first financial crisis the world has seen over the past century. The worst, of course, resulted in the Great Depression in the 1930s. But there have been numerous others, all of which carried painful economic and human costs. For example, the crises in Argentina (1981-1990), South Korea (1997-1999) and Thailand (1997-2000) all cost more than 30 percent of these countries' GDPs. But even by historical standards, the 2008 crisis is, big. In what's been dubbed "Wall Street's Red October", the S&P 500 plunged 16.9 percent, or 198 points, for the month. That's the worst-ever monthly point decline for the S&P 500. The Dow similarly dropped 14.1 percent, or 1,526 points. And the ILO estimates that the crisis will bring the total unemployed figure to more than 210 million for the first time in history. The key difference is that, unlike the Asian and Latin American crises in the 1980s, this crisis is truly global. Some countries, like Iceland and Pakistan, are threatened by bankruptcy. Others, like Japan, have been hit by huge volatility in the markets. And even the cash-rich, high-flyers like China are seeing their growth suffering as a result. But what does any of this have to do with corporate social responsibility (CSR)?

The Links to CSR Irresponsible Banking I'd like to suggest a multi-level approach to this. At the first and most obvious level, we can say the financial crisis is a direct result of irresponsible banking. According to the Mortgage Bankers Association, the number of sub-prime loans offered to risky borrowers increased more than 15 times since 1998. Essentially, the banks got greedy and compromised good banking practices of credit risk assessment. Irresponsible Financial Markets At another level, the crisis is the predictable consequence of irresponsible financial markets. Since the deregulation of the 1980s, the derivatives market has grown to around $600 trillion dollars, almost 10 times the value of our global GDP. This speculative trading (which some call the "casino economy") is meant to hedge risk, but it also increases the volatility and systemic risk of financial markets. We would do well to recall economist John Maynard Keynes' warning: "Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a byproduct of the activities of a casino, the job is likely to be ill-done." Irresponsible Corporations Others argue that the crisis is the inevitable consequence of irresponsible corporations. This is linked to the short-termism of shareholder value driven public companies. At the extreme, authors like Joel Bakan suggest that corporations have "a legally defined mandate to relentlessly pursue - without exception - its own self-interest regardless of the often harmful consequences it might cause to others." This behaviour in humans, he notes, would be characterized as pathological.

Irresponsible Executives The financial crisis has been further inflamed, some claim, by irresponsible executives, as evidenced by outrageous pay packages. In 2007, the CEO of a Standard & Poor's 500 company received, on average, $14.2 million in total compensation, according to The Corporate Library. United for a Fair Economy reports that, in 2006, CEOs received more than 364 times the pay of the average U.S. worker (up from 42 times in 1980). More specifically, it seems the leaders of Wall Street's top banks are still in line to receive pay deals in 2008 worth more than $70bn, a substantial proportion of which is expected to be paid in discretionary bonuses. "Many critics of investment banks," reports The Guardian, "have questioned why firms continue to siphon off billions of dollars of bank earnings into bonus pools rather than using the funds to shore up the capital position of the crisis-stricken institutions." Irresponsible Capitalism Some would even go so far as to say that the current financial crisis represents a systemic failure of shareholder-driven, free market capitalism. Among such critics is European Central Bank President Jean-Claude Trichet, who argues that the current financial crisis is partly a result of the demise of the original Bretton Woods' agreement, after deregulation since the 1970s. Trichet's conclusion is unequivocal: "It's absolutely clear that financial markets need discipline: macroeconomic discipline, monetary discipline, market discipline." British Prime Minister Gordon Brown and French President Nicolas Sarkozy agree, stating that the turmoil has shown the world's post-Second World War financial architecture is not fit for tbl nov-dec 08 25

the task of controlling today's global financial system. The Impacts on CSR Irrespective of its causes, it is likely that the financial crisis will have a substantial impact on CSR. The question is, how will this impact play out? Who will win and who will lose? According to a poll run on the CSR International blog during October, 44 percent of CSR professionals believe that CSR will increase as a result of the crisis. A further 26 percent believe it will change, while 22 percent think it will weaken. This is a slightly surprising result and perhaps masks a more complex answer. In my opinion, the impact on CSR will vary depending on the type of CSR being practiced. Philanthropic CSR: Worst Hit I have little doubt that those who have adopted an immature version of CSR, in which CSR is primarily about philanthropy (sponsorship, donations, charity and employee volunteering), will suffer substantial cut backs during the coming recession. Irrespective of the fact that those most in need of charity will be worst hit by the crisis, companies around the world will be forced into cost-cutting and philanthropy budgets will be among the first to be trimmed. Strategic CSR: Less Affected It is likely that Michael Porter and Mark Kramer's concept of strategic CSR will pay dividends for its followers in the aftermath of the financial crisis. They argue that "the more closely tied a social issue is to a company's business, the greater the opportunity to leverage the firm's resources-and benefit society." Hence, companies that have aligned their philanthropic and broader CSR efforts with their core business are more likely to protect these initiatives, even during the recession. For example, the commitment Coca-Cola has made to become a water neutral company is so

26

www.tbl.com.pk

closely tied to its core business (which is, after all, mostly about selling huge volumes of sugar water), that they cannot afford to abandon this as a superfluous CSR programme. They know that if they are not perceived to be responsibly managing the scarce water resources of the communities in which they operate, their business will ultimately fail (as they have already found to their detriment in India). Embedded CSR: Largely Unaffected CSR can only be resilient if it is part of the DNA of an organisation. In other words, CSR will only survive the vagaries of fickle markets, fluctuating profits, financial crises and leadership whims if it is totally embedded in the corporate culture, strategy and governance systems. The impending recession will be the ultimate DNA-test for companies. A year from now, we will have a much better idea of who has driven CSR deep into the heart of their business and who has simply been wearing it as a mask. One example may be the UK's Cooperative Bank. Although it will not emerge from the financial crisis completely unscathed, its deeply ingrained ethical approach to banking - introduced in 1992 is unlikely to change and may even have contributed to its robustness over the past 12 months. As Jonathan Porritt, Chairman of the UK's Sustainable Development Commission says, "at the very least, the relative resilience of this business model should prompt both Treasury and the sector's regulators to think again about alternative ownership and governance structures in the financial services sector."

for business growth and financial profits. This is because CSR 2.0 is all about the creation of scalable solutions to the world's most urgent and intractable problems, such as water stress and climate change. Unlike the defensive, incremental, risk-based CSR of the past (CSR 1.0), CSR 2.0 rides the wave of emerging responsible and sustainable markets. For example, the demand for renewable energy and low-carbon technologies now far exceeds the supply. And given the escalating costs of climate change, the high oil price and ambitious political targets (of up to an 80 percent reduction in greenhouse gas emissions by 2050), companies that have strategically positioned themselves as clean technology solutions providers will continue to benefit from this $284 billion market, which is expected to grow to over $1.3 trillion by 2017. Conclusion Hence, the answer to the question, "What is the relationship between the financial crisis and CSR?", is that it depends. It depends on your beliefs about how deeply the irresponsibility behind the economic meltdown runs - is it banks simply overextending themselves, or a far more systemic failure in the corporate, financial and capitalist models? Similarly, the answer to "How will CSR be affected by the financial crisis?" depends on how deeply CSR runs within the organisation - is it superficial philanthropic CSR, something more strategic or embedded, or even the more revolutionary CSR 2.0 version? Either way, the recession ahead will not only be an acid test for companies' CSR commitment, but for CSR itself. It may very well be that the time has come for CSR to adapt or die. About the Writer

CSR 2.0 will continue to strengthen For those companies that are alive to the opportunities of the CSR 2.0 revolution, even the recession will present large opportunities

Wayne Visser is Founder and CEO of CSR International. In addition, he is Internal Examiner at the University of Cambridge Programme for Industry, where he previously held positions as Research Director and External Examiner.

governance via internet

the internet:

true government of the people by ramla akhtar for tbl

One day in June 2006 I had a sudden realization: I am beyond borders and regulations on the Internet. Certainly, the regulations and norms of the "real world" no longer applied to the virtual interactions of hundreds of millions of people. From chatting to creating social networking communities like Orkut and Facebook; from writing emails to sussing out the real from the fraudulent on MySpace, and taking citizen action through blogs, using our networked computers as our media centers - we are semi-consciously creating a new space with its own rules and codes of conducts. It struck me that the Internet had indeed become my de facto government. It was then that I proposed this at the NEXT> blog: June 2, 2006: If "government" means the "act of exercising authority," then I must report that I believe my official government may not be my official government. In its broadest sense, 'govern' means the power to administrate, whether over an area of land, a set group of people, or an association." If this is really what government is - a body of influence, whose rules and laws I form, obey and own - my government is The Internet. The Internet is the government of the commons, which has leveled social, and class and racial and other barriers.

28 www.tbl.com.pk

I think for the first time in history, humans across the globe have created a government that is truly a government of the people, by the people, for the people. A reader at the blog questioned: "You're sure? Internet is only the medium…it is neither the message nor the messenger. What thrives here is the open and accessible communication between farflung human beings." My response: Exactly. What is government but a facilitator of the activities of human [societies]… a servant that administrates the complex function? That is why we say, "like people, like government." By itself, the government is nothing. Governments do not represent the people - rather they shape the minds of the people. The Internet does not exist to rule. It does not exist to create absurd laws. It is a collaborative space. It is inclusive, responsive, selforganizing, and evolving. It is a powerful source towards which the modern human is turning to share and to listen. In fact, in my opinion, never before in the history of humankind has the democratic, human-centric definition of government been seen in practice. The Internet is not just any people's government; it is the first truly human government. The Power of Conversations Here is the reason why the details of this exchange are shared. If we

step back and look at the content of conversation and how it develops, we notice that: 1. One person, using their territory (the blog) declared allegiance to a new kind of government. This declaration draws authority from another virtual territory - Wikipedia which has a self-governing system. That territory is able to overcome differences of race, class, geography, language, sexual orientation, faith, etc. to create a thriving system; 2. This declaration is willful; 3. Another person challenges; 4. And the first responds demarcating their "law"; 5. If the challenger agrees, this law is established between at least two people. There are also silent readers to count. Within this conversation, an evolution of governance has taken place that is hard to emulate in the physical world in speed and authority. The power of such conversations in creating change is not to be underestimated, especially where the virtual community is strong and led ably. Conversations change people. People change spaces. The Formation of a Government One of the most powerful constitutions in the world is that of the United States of America. It was the result of the conversations between the founding fathers of that nation. The outcomes of their thoughts were published in The Federalist Papers - 85 essays outlining how the new government would operate and why that type of government was the best

special report choice for the USA. Back in the days of print, the Federalist Papers meant to persuade New York voters to ratify the proposed constitution. Internet: How It's Changing the Territory The process of writing a constitution is germinated in conversations and willingness. Internet is changing the way conversations take place. Humans are in a free space communicating with each other. The once slow and costly services have been replaced with fast, agile, free, and universal services. Let's step back in history and examine how countries came to be marked. In the most primitive times, it was oceans, rivers, mountains, forests, walls, wild animals, and other natural phenomenon that marked distances and differences. Soon enough, humans began marking fields, building walls, setting up colonies, and creating tribes. Over time, ideological boundaries led to the birth of countries. What separates the two sides of a no man's land but the differences in political constitutions and social contracts? Passports, visas, restrictions, treaties are the products of very recent times with respect to the human history. This development has run parallel to an evolution in human knowledge. November 2008: Generation-O has Chosen a Government There are many people who still believe that Internet has no reach, it is a waste of time, and above all - it's an elite medium. Media are relevant. Let's make it simple: which of the following seems the most inclusive? 1. Print: Few write, many read. 2. Radio/TV: Literate and groomed produce, many are audience. 3. Internet: Many produce, many engage. As a Pakistani, which of these

media can I use to send a message to an official in Barack Obama's transition team? To the world via CNN (iReport)?

resistance movements in Pakistan, Burma, Thailand - are often the signs of territories changing. Obama's victory is the first but

This chart shows how the systems of governance have been changing in congruence with the enablers humans have put to use. Human Knowledge: Evolutionary stages

System of Governance

Source of Governance Power

Enabler People

Prehistoric Era

Right of Might. Might. Agility.

Survival Instincts

Elements

Agricultural Era

Feudal Contracts: Slave & master relationship.

Physical Strength. Land.

Manpower

Industrial Era

Economic Treaties.

Natural resource ownership. Scientific supremacy.

Machines

Information Era

Breakdowns of traditional government. Systematic anarchy.

Information manipulation

Traditional Media

Intent & Attention Era

Reformation of new, idea-based tribes. Driven by personal leadership.

Integrity: Character, responsibility, vision, action.

Internet: the supreme communication network

More than 2 years after I first postulated the idea, a relatively unknown, young, multi-ethnic black man has been elected the President of the United States. Barack Obama's campaign machine made unprecedented use of the Internet by forming community organizations, linked through their leaders who networked online. Not everybody has to be online, only their community leaders. The argument about the Internet being elitist and non-effective has little merit. At any rate, Internet is growing to become more inclusive, not less. Obama's victory is an affirmation to all believers in the power of Internet to create a true people's government. Making Sense of the Global Governance Breakdown Governance, in its widest sense, is not just a political-national institution. From households to corporations, even down to the Self, the rules of governance apply. What we are witnessing in this world as "breakdowns" - from financial meltdowns of USA, Europe and Asia to people's

not the last time in human history when the networked structure of the Internet became a map for real-life organization - and change of government. It is a benevolent change - one that is brought about by acceptance, inclusion, and the will of the peaceful citizens working together to create a more positive world. (That is the intent.) A Matter of Choice Internet is not just a tool for passing time. It is at once the product of and the herald of a new era in human consciousness, and therefore systems of governance that are inclusive, self-reflective, transparent and swift. The choice is up to humanity to accept the power of this enabler, and use it now to create benevolent governance from corporations to communities to nations. Or, as it happens at times of all evolutionary shifts, be left behind and perish. About the Writer Ramla runs a consultancy, "NEXT>", which is geared to design fresh solutions for contemporary opportunities and challenges. She can be reached at [email protected]

tbl nov-dec 08 29

opinion

corporate social responsibility in a recession:

10 reasons to keep doing it...

by toby webb for tbl

W

hile many corporate executives are worried, rightly, about their budgets for next year, there are many good reasons for continuing efficient responsible business initiatives in 2009. Here's a few of them. While I wouldn't claim to be an expert on pretty much anything, I have been out and about talking to some big companies about what may be going on next year in the world of responsible business.

that well-thought-out programmes can be worth the investment, given that, lets be honest, CSR is cheap compared to advertising spend, or paying staff more money.

Clearly, all in the world of business ethics are concerned about what they will be allowed to spend in the next year or so. But smart companies will know

Here are some reasons I have gleaned from talking to companies in the last month as to why the right CSR spend is still worthwhile:

30 www.tbl.com.pk

While Matthew Bishop at the Economist calls CSR often "a cynical exercise in public relations", companies do it because it can deliver, despite the challenges in measuring impacts or progress.

special report

1.

It can be cheap. CSR that does not radically alter business models does not cost that much. And, as we all know, can save money. As anyone from Boots to WalMart will tell you, going greener often saves money. CFOs will like that. Make the case to them, convince them that what you are proposing helps the bottom line. They may have forgotten and started thinking its all-socialist plot again. Some stats on their desk might help.

2.

Reputation and transparency are still key. In fact, they are now even more important. If you let people go, you need those you keep to understand why you did it. And how you did it in the best way possible. You still need talent, and talented people want to know you are well regarded.

3.

Communities are feeling vulnerable. They are looking for local leadership on important issues. Your company may be able to help. Think about what you can do that's different, and that caters to their current concerns, not to your volunteering plan from last year.

4.

Customers are worried. They are wondering who they can trust. Some readers may have seen the new Lloyd's TSB ads, which talk about how they are seen as solid (implying others are not). Help reassure customers with communications about anything from product safety to reliability and good service awards. These things matter. And yes, this is part of CSR.

5.

Regulators are up in arms. Many are happy to use the business world as a scapegoat for their own poor regulatory incentives. Showing you are still focusing on a bit more than just sales and cost-cutting can help you reassure them that you care, and may help them stop overreacting.

6.

Green advertising has gone mainstream. People care about green if it delivers efficiency, particularly for them. So communicating well is still key, and a green/efficient message may still resonate well.

7.

Newspapers are even hungrier for copy that sells. And companies provide excellent cannon fodder for editors. Ethics related cutbacks, poor customer service and extended payment terms will all start making the news. Keeping an eye on overeager internal plans and how they might go against your values statements can help keep things consistent. No board wants to see panic, so re-iterating values in tough times may help keep things in check.

9.

Think about the shortterm future. Recessions don't last long, usually. Imagine the benefits of NOT cutting back once all this is over. You'll be able to crow in your CSR report, that unlike others, you kept X and Y initiative going when times were tough.

10.

Trim the fat. Become more evidence-based in your approach without upsetting partners who may go to the media in better times. This time they may be more understanding. Being more rigorous will only help when things pick up again.

Note This article has been tailored for tbl and is a copyright of Ethical Corporation 2008.

Half-price subscriptions for new subscribers to Ethical Corporation magazine are available for just €199 for 700 pages a year of articles such as this one. Go to: http://www.ethicalcorp.com/ to sign up for half price or a free trial to the monthly print edition.

8.

There is opportunity to gain trust. This is particularly true if others are cutting back. Showing you can treat your customers, suppliers and business partners fairly, even when times are right, may help you build that bank account of goodwill, useful when you really need it.

About the Writer Toby Webb is Founder and Managing Director of Ethical Corporation, ClimateChangeCorp.com and Ethical Corporation Institute, UK.

tbl nov-dec 08 31

adult literacy

pursuing a lost generation or common sense csr? report by zohare ali shariff for tbl

I

f you are reading this publication, you are a literate person with probably a minimum of 16 years of formal education, till at least an undergraduate degree level. Your life is greatly facilitated because of your advanced ability to read and write. Now imagine what life would have been like if you did not have this ability, even if you were born with a silver spoon in your mouth in a well-to-do family. You would probably have been heavily dependent on others, for all but the simplest chores, almost like a handicapped person. That is exactly how adults who have now become literate felt, before the light of literacy shone on them - disabled. One factory worker who graduated from the Adult Literacy Programme (ALP) run by National Foods Limited (NFL) even went as far as saying that he feels as if all his life he had been blind and now, after the programme, he had got sight for the first time. Another expressed his newly acquired literacy capability as freedom from bondage. A third, a female, described her ability to read post-programme as an awakening; joyous but in one respect also painful. Because now she realizes how much she had been taken advantage of in everyday life matters by others who exploited her inability to read or write. Adult literacy is not about advanced education at an adult age. This is perhaps not even possible, given the fact that acquiring advanced education would require a lot of time, and the majority of illiterate adults are from the lower income segments, who cannot afford to stop work to pursue higher educa34 www.tbl.com.pk

tion. Of course the ALP enables them to continue with part-time education to perhaps a secondary school level, which itself would substantially improve their livelihood further. Some eight years ago, in 2000, Abdul Majeed, the Chairman of National Foods Limited met with Rayed Afzal, the founder of Literate Pakistan Foundation, an organization imparting education to illiterate adults. It was a decisive meeting, for at the end of it Abdul Majeed had decided to initiate a programme to provide basic education to the largely illiterate and semi-skilled labour working in the company's factories. To say that Majeed was motivated by altruistic considerations would not be incorrect. A self-made man himself, he strongly felt it was his moral responsibility to educate the people who worked for him and gave their best to the business he and his friend Waqar Hasan had set up. By this time National Foods had grown from humble beginnings in 1970 as a single ingredient spices company, into a multi-category food company, producing over 110 products (over 250 today) and employing almost 1500 employees, including 1000 contract workers. Thus was launched the Adult Literacy Programme that has grown over the years both in its scope and its coverage. A number of corporate sector organizations are supporting education in Pakistan at various levels, from adoption of government schools, to sponsor-

Chairman’s Thoughts

“There is a lower rate of their forgetting because they can read instructions posted,” he elaborated. “We are creating awareness, and we are creating literate people in Pakistan".

by khadeeja balkhi

The team asked Majeed if he felt that such programmes can be leveraged to make a widespread positive impact on the lives of illiterate people in the country. His response:

M

r. Abdul Majeed shared his vision with Ronald Inayat and Khadeeja Balkhi of the tbl team. "Since inception, we at NFL were aware of our responsibility to the society we exist in," Mr. Majeed shared. "Adult illiteracy is the main cause of our (the country's) problems: the females especially are not literate - which means future generations will be at a disadvantage also." When asked about the positive changes he witnessed in participants, he said, "Whenever they complete the programme, they show and they tell how much they have gained. Most of them say that when they were illiterate, they were just like the blind. Now their eyes have opened - and they will bring their children up according to the modern environment." "I think the basic gain is that the children take the message to their mothers and sisters who are not educated and ask them to enroll in our programmes in TCF schools," the Chairman said. There are obvious benefits of education, which go far beyond just the learning that an individual gains. "If your labour is educated, your efficiency will go up, your productivity will go up," he emphasized. “Cleanliness, handling, responsibility levels have improved - if you give them instructions in writing, or put labeling on the machines, they can read it,” Majeed added.

ship of schools operated by NGOs like The Citizens Foundation (TCF) and CARE, to offering scholarships for higher education at various institutions and including top-rated ones like the Institute of Business Administration (IBA) in Karachi and the Lahore University of Management Sciences (LUMS) in Lahore. All such initiatives are to be lauded because these are helping to bridge the yawning gap in our education system, caused by grossly insufficient government attention to this vitally important sector. But the possible drawback with philanthropic support is often that it is not sustainable after a few years, as priorities for the philanthropic corporate may and do change for various reasons and their budget for such social action may well be diverted in time to more 'newsworthy' causes.

"Definitely!" The reasons? "Our costs are very low," he shared. "The communities run the programmes". "Corporate people should come forward, the government alone can't tackle this issue," Majeed stressed. "For example, we can make any one person literate for Rs. 400." Afterwards, the trainees are requested to establish literacy centers in their own homes, and charge nominal amounts - this way these become community-owned programmes. There is a need to create awareness and motivate people to step forward and support this cause."What is 400 Rupees?" Mr. Majeed questioned both rhetorically and emphatically. "You don't have to go to the United Nations to get it!” “We don’t need to look for big grants or anything like that. You, me, we can sit together and do it," he said with deep conviction. "All we need is awareness." About the Writer Khadeeja Balkhi is a Sustainability Consultant who finds great joy in her work, whether it's strategizing, hands-on implementation, field-based stakeholder engagement or documentation and monitoring.

Thus a better model for the long term is a CSR model whereby the support to education or for that matter any other worthy cause, has a strong linkage into the business of the corporate sponsor. This ensures the continuity of the support as an ongoing programme, as it in turn gives back to the company's business also on an ongoing basis. The Adult Literacy Programme scores high on this count. Let us examine how. A factory employing a largely illiterate labour force still expects that its labour will follow rules and regulations and standard operating procedures put in place to ensure consistent quality of product, meeting a set of minimum requirements. These procedures are communicated to the labour force through

tbl nov-dec 08 35

training, verbal and printed instructions and signage placed at strategic locations to create high recall. The procedures may be required by local or national laws, by international standards like ISO, or by foreign buyers (like EU) regulations in the case of exports. At a minimum a company may formulate and institute its own standard operating procedures that seek not only to maintain high product quality, but also serve to control wastage, ensure higher output or productivity and reduce or control other undesirable human resource related issues, like downtime due to any accidents at the workplace. It should be quite obvious that even a semi-literate worker will be able to understand and comply with the regulations and procedures in place far better than an illiterate worker. Even a simple task for example, of inserting a product the right way up into a package can be a challenge to the illiterate worker, especially if both ends look the same and the distinction has to be made on the basis of lettering or text. Example: a bar of soap which must be inserted into its wrapper with the engraved brand name on the bar being the same way 'up' as the brand name on the wrapper into which it is going. As the illiterate worker cannot even distinguish even between a single letter being 'up' or 'down', he or she is more liable to make mistakes. Perhaps a simplistic example, but nevertheless a valid one to illustrate the point. Think also in terms of worker safety. Yes, a factory management may train all labour on safety procedures. But still, safety signage is placed all over the premises as a constant reminder which studies have shown is essential to create frequent recall. Some signage may be simple graphics which presumably even an illiterate person will understand. But of necessity others need to be simple text based or at least text included with graphics. And this is not all. At National Foods are examples of workers who have gone through the ALP and have actually been able to rise within the organization to levels they could not have been dreamt of before. Bashir Masih, an employee of NFL since 1988 and based in the SITE factory, is proud that he has risen from a cleaner in the factory to being a Janitorial Supervisor under the administration department, after successfully going through the Adult Literacy Programme and subsequently meeting the promotion criteria. An ALP is also good CSR at a holistic societal level. A literate worker is more inclined to educate his or her children, thus starting off education of the next generation at an age when it should ideally start off. A more literate society pays back into the company's business in several ways. For example, in terms of a

36 www.tbl.com.pk

more capable future workforce becoming available and instances are common across industries where sons have followed fathers into the same company and often at a higher level than where their fathers had started off. A more literate society can also mean higher earnings and hence higher spending power. The ALP of National Foods is being operated effectively with two strategic partners. The programme consists of four books (three Urdu and one basic arithmetic book) developed by the Literate Pakistan Foundation - one of the partners. This course is called Jugnoo Sabak and can be taught in a short span of three months at two hours per day for six days a week. On successful completion, a previously illiterate person can read and write Urdu and do simple arithmetic. This is possible via a special phonetic system of teaching. The other partner, The Citizen's Foundation (TCF) was brought onboard by NFL in 2005 to provide much needed premises to expand the programme beyond NFL's own labour force. Thus, TCF schools (and teachers) came into the equation for holding the ALP classes in poor communities. The tripartite partnership is working with enviable results. TCF provides the premises which are mostly free during the evenings when the regular schoolchildren have finished for the day and the teachers, who are trained by LPF. NFL picks up the tab for the books and for stipends to the teachers and other miscellaneous expenses. Thus starting off in National Foods factories, the ALP has been running for the past three years: the fourth phase has now started in Karachi. Normally two programmes per year are feasible. Most centers are for women and in the three phases so far, over a thousand women have graduated. Now the broad plan for this year is to activate a total of 100 TCF Literary Centers (TLCs) and run 4 sessions per year in each of these, with a target to educate 12,000 adult learners on an annual basis. Once thought by some cynics as pursuing a lost generation, the Adult Literacy Programme has proved itself to be common sense CSR with far-reaching and long-term sustainable benefits.

About the Writer Zohare Ali Shariff is CEO of Asiatic Public Relations Network Ltd. & Editor-in-Chief of tbl. A graduate of the London School of Economics, he is a published author and winner of National Book Foundation Awards. He is based in Karachi.

feedback

feedback please! As our readers, your thoughts are what should keep moulding our magazine. In upcoming issues, the tbl platform will starting conducting surveys. For starters though, we'd like to test our understanding of the baselines of CSR in Pakistan. Please respond to the quick questions below and email it to us at [email protected] You can also fax or mail us this survey page at the APR address.

1.

Is there anyone in your organization directly involved with CSR who should also be receiving tbl? Please give name and full contact info below.

2.

How many articles in tbl have you read to-date? (It's ok, you can be honest…)

3. 4.

Do you think tbl is playing a role in creating awareness about corporate social responsibility in Pakistan effectively? Please rate on a scale of 1 - 10, with 1 being the lowest and 10 the highest score. What do you think are the major knowledge gaps in CSR understanding in Pakistan?

5.

To what extent do you agree or disagree that social responsibility is vital to the long-term profitability of a company?

6.

Does your organization report on corporate social responsibility? How?

7.

Does your organization monitor CSR using specific benchmarks and quantifiable targets?

8. 9. 10.

tbl plans to carry out a range of activities during 2009 focused around CSR. Who is the one person in your organization who is principally responsibl for CSR whom we should interact with? Which companies are you aware of that practice CSR? Would you be interested in participating in cross-company CSR programmes?

38 www.tbl.com.pk

entrepreneurship

entrepreneur,

anyone? One can study facts and acquire the expertise to even predict events. But it is only when one has control over certain factors, that one can aspire to determine one's destiny as a change agent and choose which direction to take. When you are in the driver's seat, then only are you able to choose this direction. This seat exists in the realm of entrepreneurship alone. report by muhammad siddique sheikh for tbl

History of Entrepreneurship Economist Joseph Schumpeter (1950) defined an entrepreneur as a "person who is willing and able to convert a new idea or invention into a successful innovation. Entrepreneurship forces 'creative destruction' across markets and industries, simultaneously creating new products and business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth." In the year 1900, only about 10 percent of the U.S. workforce was employed by the government and the industrial/commercial corporate sector. The others -about 90

percent - were entrepreneurs running their own businesses. After 100 years - in the year 2000 - the scenario was just the reverse with only 10 percent of the workforce being self-employed and 90 percent in state and/or corporate employment as salaried professionals. A Driving Force in Growing Economies Is the field of entrepreneurship growing or becoming obsolete? There are a growing number of economies thriving on small and medium enterprises (SMEs) - a characteristic of flourishing economies.

One of the main qualities expected in a professional is to be, enterprising. The ability to be creative, original, proactive and bold, that is, enterprising, shall always rank high as an essential competence for success in one's personal and professional life. Corporations are investing huge amounts and effort into developing human capital and fostering a work environment that enables and promotes individual excellence as well as team spirit. The Knowledge-based Economy Human capital coupled with innovative, cutting-edge technolotbl nov-dec 08 39

Recently, some segments of specialization in the education sector in Pakistan have been overemphasized, such as information technology and business administration.

enough. The organized sector in Pakistan is neither diverse nor large enough to accommodate current and potential job seekers. Furthermore, Pakistan is confronted with the challenges posed by the growing number of people living below the line of poverty 57 million Pakistanis - according to the Asian Development Bank (ADB). This necessitates the need for us to think differently, for a solution to the economic challenges that our country is facing.

Abundance qualifies for superiority only within the perspective of a genuine need. If all that we have cannot be put to any lucrative use, then having too much is not superior to having just enough. Thus, resources invested in producing the unused surpluses are a sheer waste.

Many respectable segments of global wisdom assign great weightage to entrepreneurship as a potential vehicle for alleviating poverty. Acumen Fund's philosophy is: "a belief in the power of innovation, in the power of a good idea … in entrepreneurial solutions to global poverty."

An individual's educational career choice is usually based either on guidance from parents or on peers' counseling. These are triggered by the glory of professional success attained by recent graduates and the available job opportunities with local and multinational organisations. This trend has led to a mushroom growth of institutions, some of high -and many of questionable- credibility. Consequently, the education sector - both public as well as private - is mainly producing employees.

Acumen Fund is currently working to promote entrepreneurship in three major areas- water, health and housing. This is being done in five countries and eventually aspires to help the four billion people earning less than US$ 4 a day to play a decisive role in the alleviation of poverty.

gies are fast undermining the value of material input and enhancing the weightage of value-addition components in final products or services. This is a characteristic of a knowledgebased economy.

This slow and costly process is unable to arrest the widening and deepening poverty, much less alleviate it. The Institute of Business Administration (IBA), Karachi, for example, has only produced about 5000 graduates to date. Also, the large number of incumbents coming from the Urdu-medium system of schooling can simply not survive in the English-medium education system. Economic Challenges Facing Pakistan In the current economic scenario prevalent in Pakistan, this is not

40 www.tbl.com.pk

Entrepreneurial Initiatives The UNDP Report 2004 "Unleashing Entrepreneurship Making Business Work for the Poor" has gone the extra mile: to the extent of drawing an elaborate action plan for stakeholders in the developing world - including governments, philanthropy and the civil society organizations. The purpose is to provide an enabling environment and opportunities for skill development to private sector entrepreneurs to bring them out of their plight. Contributors of this report Commission on the Private Sector and Development - include personalities such as Paul Martin, the ex Prime Minister of Canada and A. Dello, ex- president of Mexico. A large array of high profile global organizations like UNCTAD,

UNDP, WORLD BANK, SIDA (Swedish International Development Co operation Agency), a host of companies and researchers such as, McKinsey and Co (Unleashing the Full Potentials of Entrepreneurs to Alleviate Poverty in Less Developed Countries, 2003) C. K. Prahad (The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profit) and Hammond Allen (Serving the World's Poor Profitably, 2002) have focused on suggesting specific thematic, structural, policy and legal changes, effectively to promote pro-poor entrepreneurship. Physical conditions and human potentials vary from country to country, along with specific advocacy about formula changes. What the developing world today urgently needs is change agents: entrepreneurs of all types. What was Conrad Hilton back in the first quarter of the twentieth century, when he carried a picture of the Waldorf Astoria Hotel in New York with him for years and dreamt of owning it one day? A day dreamer? An entrepreneur? What is Mehmood Bhatti? An artist? A world class designer? An entrepreneur? What was he in 1977 when he left for Paris? A graduate of Government College, Lahore? An adventurer? An entrepreneur? What is Bill Gates? A researcher? A scientist? An entrepreneur? We need to prepare an army of enlightened, courageous and committed entrepreneurs, equipped to revisit the enormous challenges scattered around them and to undertake projects. Not just to enrich their current jobs or seek new ones and get lost in the same old glut. That very glut which has miserably failed to empathize with the underprivleged of society.

Competence, personal experience and readiness breeds confidence. It seems that the education sector needs to work closely with organizations like SMEDA, Chambers of Commerce & Industry and professional trade associations or Taameer (Shell), to develop educational plans that focus on inculcating entrepreneurial competence in addition to strategic management skills.

Characteristics of an Entrepreneur 1. Vision to conceive projects of useful and lasting value through synergy of tradition with technology and globalization. 2. Inquisitiveness and the pursuit of knowledge. 3. Integrity to consistently deliver good value for money and to establish and promote their own brands. 4. Courage to be creative, original and bold. 5. Consideration of all factors, especially the human factor for effective team-building. 6. Commitment and determination to be a change agent, to make a difference 7. Resilience to absorb the shocks and persevere in the face of challenges and losses.

True, well-groomed competent professional managers get promptly employed, thus successfully meeting their personal economic objectives. But an entrepreneur can achieve a lot better and a lot more by adding value to the existing businesses, exploiting untapped resources and generating additional wealth through new businesses, products and services.

Taking these traits into account, educationists and practitioners, in consultation with successful entrepreneurs, must attempt to state curricular objectives and design a relevant syllabi focusing on developing entrepreneurial qualities and attitudes. The educational system needs to give weightage to, and highlight the immense opportunities present in traditional products and art and handicraft of Pakistan.

Educational System Must Focus on Developing Entrepreneurial Competence The systems of almost all the educational institutions are designed to produce first-class professional managers, and they are successfully churning them out. But do these managers essentially lack entrepreneurial confidence?

To a large extent, the children of businessmen tend to opt for business and those coming from families with a professional service background, choose to go professional. Whereas the family environment does have an influence on an individual's career choice, the educational system plays a vital role by enhancing weightage on the inculcation of entrepreneurial competence and confidence. Given Pakistan's current economic challenges, institutions must teach: the conceptualization of projects of relevance; the preparation of feasibility studies from concept to launch.

GIs: Entrepreneurial Opportunities in Rural Pakistan This calls for the embodiment of an authentic National Register of Geographical Indications (GIs) (peculiar products and services of different districts - such as the carved wood work of Chiniot, tiles of Hala, ajrak / ralli of Larkana and blue pottery of Multan, etc) traditional knowledge (literature, treatments and recipes, etc.) and folklore (legendary stories of wisdom, chivalry, truth, beauty and romance). Educationists and social scientists need to take up this assignment with the help of bodies such as the FPCCI (Federation of Pakistan Chambers of Commerce and Industry).

The findings must be contextualized and collated into the 4T model of Tradition, Talent, Technology and Trend, in order to merge tradition with current trends and demands of the marketplace. The certified GIs, TK and FL shall be registered under Intellectual Property Rights and promoted in national and international markets as authentic originals, for which a premium price niche of collectors and connoisseurs exist worldwide. Folklore can fetch respectable royalties from art galleries, publishers and media producers, especially documentaries, feature films and TV serials. This exercise will provide districts a unique and genuinely welldeserved opportunity to build upon and add value to their exclusive designs and skills handed down through generations. Taking the unique opportunities that exist in our country, the intervention by the breed of neo -professionals in Pakistan - the educated entrepreneurs - should hence focus on resource mobilization, standardization of materials, design, quality assurance practices, national and international marketing, among others. Improved quality, cost-effectiveness and intensified marketing will certainly expand the horizons of businesses - in terms of size and scale - as well as add to increasing profitability. Which will in turn help alleviate poverty through increased income generation and economic growth.

About the Writer Muhammad Siddique Sheikh is Chairman of the Standing Committee on Education and Standing Committee on CSR at the Federation of Pakistan Chambers of Commerce & Industry. He is a Member of the National Think Tank on Education and the Federal Ministry of Education, Islamabad.

tbl nov-dec 08 41

report: corporate governance

corporate

governance and corporate

social responsibility ownership, management and accountability report by peter l. walker for tbl

“

Nothing is more central to an organisation's effectiveness than its ability to transmit accurate relevant understandable information among its members. All the advantages of an organisation…are of no practical value if it's members are unaware of what other members require of them and why Saul Gellerman

PIELLE Consulting Group conducted a research study in the United Kingdom among a self-defined group from the FTSE 350 and international and multi-national firms based in the UK taking or demonstrating 'a leadership role or position in Corporate Governance and Corporate Social Responsibility.' The objective was to research, and if possible identify, common approaches to the ownership, management and forms of accountability for both Corporate Governance and Corporate (Social) Responsibility among this 'benchmark - lead group' of companies. At the same time we set out to see whether it was possible to identify: i) The extent to which 'international' operational issues and accountability play a role in the process. ii) What, if any differences existed between the views/responses of the three distinct groups of executives that participated viz: Chairman/CEO; Company Secretary/Corporate Counsel; Public Relations/Corporate Communications Director/Advisor. 42 www.tbl.com.pk

”

The results of this study were revisited in 2006 after the original work in 2004 and presented to a meeting of the World Council for Corporate Governance at the 7th International Conference on Corporate Governance.

The Overlap of Governance, CSR and Management According to the website wisdom of one of the leading institutions for directors, 'a non-executive director's role is to provide a creative contribution by providing objective criticism'. Perfectly logical, but it comes close to suggesting that, between the executive and non-executive directors, there is an intellectual and cultural battleground for the soul and direction of the corporation. It is not helpful analysis when governance and CSR are part of a mutual responsibility and, arguably the nonexecutives have a key role to play in embedding CSR into the boardroom.

Prof Bob Tricker, the doyenne of corporate governance and author of several books including Essential Director, put accountability as the axis between management and 'governance and CSR' the point at which the roles of the executive and non-executive directors are both clarified and combined.

ability of most businesses through their non-financial or social reports is all too frequently self-serving and smacks of the "what did we do well that we can highlight this year" approach. It may provide a basis for a narrowcast judgement of a specific range of activities or convey an impression of underlying commitment. Nowhere can we find a clear, concise year-on-year report on operational CSR issues that companies themselves see as important - let alone for employee welfare and development (human rights), environmental standards and observance which the critics view as important. Accountability is the rhetoric of reporting. Judgements are made on the reality of comparing historic performance against clearly identified standards. Stick to the self-regulatory principle but require the international stock exchange and financial regulators to make consistent annual CSR reporting a listing requirement so that the world can make a proper judgement of what we actually do not just what we say. From Corporate Governance to CSR - Corporate (Social) Responsibility For the purpose of research, PIELLE adopted an inclusive definition for CSR as follows: "CSR (Corporate Social Responsibility) is about how companies manage the business processes to produce an overall positive impact on society."

Reality not Rhetoric PIELLE's research study on the 'Patterns of Ownership, Management and Accountability for Corporate Governance and CSR' among leading corporations based in the UK sheds light on some of the issues that are feeding confusion and debate. Their research shows that 69 percent of leading UK based corporations see CSR as 'Corporate Governance in Action' and 85 percent of them have clear and demanding systems in place for measuring ethical and social performance throughout the business. Company Disclosure under the 7th EU Accounting Directive (2004) enshrines the principles for nonfinancial reporting. It is for directors to judge whether this information is material to an assessment of the company's past performance or future prospects. It will provide a good indication to the extent to which corporate responsibility has become 'embedded in the boardroom'. Accountability and Judgement Until 2008, current evidence shows that the account-

1. 'Corporate social responsibility and social reporting have been defined as corporate governance in action' - do you agree or disagree with this statement?

69 percent of organisations surveyed responded yes to this question.

Behind the Headlines - Taking Corporate (Social) Responsibility Seriously… 2. Corporate Governance is now part of every company's operating business strategy and every

tbl nov-dec 08 43

respondent business conducted a governance audit of some kind across all its business units. As can be seen in this graph, almost two thirds of respondents use an internal audit system to meet their needs inviting the question whether the 39 percent using an external audit process are anticipating legislation.

3. Where does responsibility for corporate governance reside within your organisation? The Board 35% Chief Executive 24% The Chairman 21% Specialist Committee of the Board 17% Company Secretary/Corporate Council 3% Specialist committees of the board are responsible for corporate governance in only 17 percent of businesses. In a third of companies the board as a whole takes responsibility while for 45 percent of businesses either the chairman (21 percent) or the chief executive (24 percent) takes the responsibility.

4. Where does accountability for CSR activities rest within your organisation? Specialist committee of the board Corporate communications/ Public affairs The board Chief Executive The chairman Operating management

23% 24% 19% 14% 10% 10%

Accountability to the board for CSR is vested in specialist committees of the board for 23 percent of businesses and with Corporate Communications or Public Affairs in 24 per cent of businesses.

5. Over 90 percent of those businesses surveyed review their corporate governance standards and

44 www.tbl.com.pk

best practice criteria annually. For 43 percent it is an annual rolling activity; for 50 percent it is part of the business plan review. Only 10 percent conduct any review on an ad hoc or 'as needed' basis.

6. How does your organisation evaluate the effectiveness of CSR programmes? Through an external social audit 35% By appraisal 18% The audit procedures are evaluated 14% against a competency framework Against pre-determined 11% outcomes/measures By continuously tracking a project 11% There is no formal evaluation 7% Other 4% Of those organisations that answered other, methodologies identified included: o Using an AA1000 process o An external independent audit

Business has invested heavily in sophisticated and systematic measurement and evaluation systems and structures and established clear internal reporting systems for ethical and non-financial reporting to the board. 7. What systems do you have in place for measuring ethical and social performance? The organisations that answered other, specified it as: o Annual CSR report o Disclosure of corporate donation and activities o Social reporting, both centrally and at end market level o Dedicated board committee, targets and reporting o Moving towards triple bottom line reporting o Balanced business scorecard

Influence Benchmarking Stakeholder dialogue is kept to a minimum with all groups except shareholders Stakeholder dialogue is always to a minimum

14% 0%

0%

Those that answered other, listed: a. Enhancement of long-term shareholder value b. Ability to learn and respond to needs of stakeholders c. Advancing the corporate reputation d. Identify changes to policy and practice in order to meet stakeholder expectations

8. What internal systems are in place for ethical/social/non-financial reporting to the board? Annual strategic review Part of a routine monthly or quarterly reporting process Other Stand alone None

42% 24% 24% 5% 5%

The organisations that answered other, specified it as: o Regional corporate social committees and board CSR committees o Dedicated board committee, targets and reporting o Annual via a social reporting process

Over half the main benefits of stakeholder dialogue feed straight into public relations strategy and planning and nearly a quarter of all businesses make the corporate communication or public affairs function to be accountable to the board for - Corporate (Social) Responsibility - CSR. There is more comfort to be drawn from the 28 percent of businesses that use the process to 'evaluate and report on social performance over time' and the 14 percent who use the exchanges with stakeholders and stakeholder groups to influence internal governance and CSR benchmarking.

Note This report has been tailored specifically for tbl and is a copyright of PIELLE Consulting Group 2006 .

For the majority of businesses formal systems exist to drive improvements that result from the 'social audit' through the organisation. The only surprise is that there is such a significant minority of businesses with no structures or systems in place to respond to audit identified issues. There is no question of information being for internal consumption only and stakeholder dialogue is a pro-active process for every company surveyed. The survey also asked whether the organizations' stakeholder dialogue is proactive and 100 percent of organisations answered YES to this question.

9. What do you see as the main benefits of stakeholder dialogue for your organisation? Identify key activities for public affairs, areas of reputation management Other Evaluate and report on social performance over time

30% 28% 28%

tbl nov-dec 08 45

global energy outlook

new energy realities

weo calls for

global energy revolution despite

economic crisis

by OECD/International Energy Agency for tbl

“We cannot let the financial and economic crisis delay the policy action that is urgently needed to ensure secure energy supplies and to curtail rising emissions of greenhouse gases. We must usher in a global energy revolution by improving energy efficiency and increasing the deployment of low-carbon energy,” said Nobuo Tanaka, Executive Director of the International Energy Agency (IEA) at the launch of the World Energy Outlook (WEO) 2008 - the latest edition of the annual IEA flagship publication, held in London. The WEO-2008 provides invaluable analysis to help policy makers around the world assess and address the challenges posed by worsening oil supply prospects, higher energy prices and rising emissions of greenhouse gases. In the WEO-2008 Reference Scenario, which assumes no new government policies, world primary energy demand grows by 1.6 percent per year on average between 2006 and 2030 - an increase of 45 percent. This is slower than projected last year, mainly due to the impact of the economic slowdown, prospects for higher energy prices and some new policy initiatives. Demand for oil rises from 85 million barrels 46 www.tbl.com.pk

per day now to 106 mb/d in 2030 - 10 mb/d less than projected last year. Demand for coal rises more than any other fuel in absolute terms, accounting for over a third of the increase in energy use. Modern renewables grow most rapidly, overtaking gas to become the second-largest source of electricity soon after 2010. China and India account for over half of incremental energy demand to 2030 while the Middle East emerges as a major new demand centre. The share of the world's energy consumed in cities grows from two-thirds to almost three-quarters in 2030. Almost all of the increase in fossil-energy production occurs in non-OECD countries. These trends call for energy-supply investment of $26.3 trillion to 2030, or over $1 trillion/year. Yet the credit squeeze could delay spending, potentially setting up a supply-crunch that could choke economic recovery. "Current trends in energy supply and consumption are patently unsustainable - environmentally, economically and socially - they can and must be altered", said Nobuo Tanaka. "Rising imports of oil and gas into OECD regions and developing Asia, together with the growing concentration of produc-

tion in a small number of countries, would increase our susceptibility to supply disruptions and sharp price hikes. At the same time, greenhouse-gas emissions would be driven up inexorably, putting the world on track for an eventual global temperature increase of up to 6°C." In addition to providing a comprehensive update of long-term energy projections to 2030, WEO-2008 takes a detailed look at the prospects for oil and gas production. Oil will remain the world's main source of energy for many years to come, even under the most optimistic of assumptions about the development of alternative technology. But the sources of oil, the cost of producing it and the prices that consumers will have to pay for it are extremely uncertain. "One thing is certain", stated Mr. Tanaka, "while market imbalances will feed volatility, the era of cheap oil is over". "A sea change is underway in the upstream oil and gas industry with international oil companies facing dwindling opportunities to increase their reserves and production. In contrast, national companies are projected to account for about 80 percent of the increase of both oil and gas production to 2030", said Mr. Tanaka. But it is far from certain that these companies will be willing to make this investment themselves or to attract sufficient capital to keep up the necessary pace of investment. Upstream investment has been rising rapidly in the last few years, but much of the increase is due to surging costs. Expanding production in the lowest-cost countries most of them in OPEC - will be central to meeting the world's oil needs at reasonable cost. The prospect of accelerating declines in production at individual oilfields is adding to these uncertainties. The findings of an unprecedented field-by-field analysis of the historical production trends of 800 oilfields indicate that decline rates are likely to rise significantly in the long term, from an average of 6.7 percent today to 8.6 percent in 2030. "Despite all the attention that is given to demand growth, decline rates are actually a far more important determinant of investment needs. Even if oil demand was to remain flat to 2030, 45 mb/d of gross capacity roughly four times the current capacity of Saudi Arabia - would need to be built by 2030 just to offset the effect of oilfield decline", Mr. Tanaka stated. WEO-2008 also analyses policy options for tackling climate change after 2012, when a new global agreement - to be negotiated at the UN Conference of the Parties in Copenhagen next year - is due to take effect. This analysis assumes a hybrid policy approach, comprising a plausible combination of cap-and-trade systems, sectoral agreements and national measures. On current trends, energy-related

CO2 emissions are set to increase by 45 percent between 2006 and 2030, reaching 41 Gt. Three-quarters of the increase arises in China, India and the Middle East, and 97 percent in non-OECD countries as a whole. Stabilising greenhouse gas concentration at 550 ppm of CO2-equivalent, which would limit the temperature increase to about 3°C, would require emissions to rise to no more than 33 Gt in 2030 and to fall in the longer term. The share of low-carbon energy hydropower, nuclear, biomass, other renewables and fossil-fuel power plants equipped with carbon capture and storage (CCS) - in the world primary energy mix would need to expand from 19 percent in 2006 to 26 percent in 2030. This would call for $4.1 trillion more investment in energy-related infrastructure and equipment than in the Reference Scenario equal to 0.2 percent of annual world GDP. Most of the increase is on the demand side, with $17 per person per year spent worldwide on more efficient cars, appliances and buildings. On the other hand, improved energy efficiency would deliver fuel-cost savings of over $7 trillion. The scale of the challenge in limiting greenhouse gas concentration to 450 ppm of CO2-eq, which would involve a temperature rise of about 2°C, is much greater. World energy-related CO2 emissions would need to drop sharply from 2020 onwards, reaching less than 26 Gt in 2030. "We would need concerted action from all major emitters. Our analysis shows that OECD countries alone cannot put the world onto a 450-ppm trajectory, even if they were to reduce their emissions to zero", Mr. Tanaka warned. Achieving such an outcome would require even faster growth in the use of low-carbon energy - to account for 36 percent of global primary energy mix by 2030. In this case, global energy investment needs are $9.3 trillion (0.6 percent of annual world GDP) higher; fuel savings total $5.8 trillion. WEO-2008 demonstrates that measures to curb CO2 emissions will also improve energy security by reducing global fossil-fuel energy use. But the world's major oil producers should not be alarmed. "Even in the 450 Policy Scenario, OPEC production will need to be 12 mb/d higher in 2030 than today." Mr. Tanaka noted. "It is clear that the energy sector will have to play the central role in tackling climate change. The analysis set out in this Outlook will provide a solid basis for all countries seeking to negotiate a new global climate deal in Copenhagen."

Note This article has been shared with tbl with permission from IEA and is a copyright of OECD/IEA, November 12, 2008, London.

tbl nov-dec 08 47

csr talk

“the desire to not stagnate” Asif Qadir CEO, Engro Polymer & Chemicals Ltd. by khadeeja balkhi for tbl

F

or those of you who've interacted with me recently, you know that among my current CSR passions is almost anything to do with value chain empowerment. And that's precisely what the juicy parts of my conversation with Asif Qadir, President and CEO of Engro Polymer, were about. Now, at Engro Polymer, it's all about value chain development, hard-core even. Upstream, downstream, you name it. All the way to the farmer who uses the drip irrigation that uses the PVC resin his company makes. (Talk about a high for nerds like me.) tbl's interaction with Qadir started out in relatively romanticizable drip-irrigated farms in Gadap, so this interview may reflect the breezy informality of the cheeku orchards and kerala vines. The interview - in his office of course, no longer at Allah Buksh's farms - really got started with him asking us the right questions. After unabashedly asking what the triple bottomline approach really meant, he promptly re-ordered tbl's 'people, planet, profit' tagline. "This is how the bottom line works," said Asif Qadir, firmly announcing profit as the first bottom-line. Of course, we at the barely-breaking even tbl offices vividly understand this. But the 'how' behind profits must be just as crystal clear. "We're not just doing what the law requires, but we're trying to do a little more," Qadir said when asked about toasty areas such as governance and transparency. "As of July this year, we're a listed company," Qadir

48 www.tbl.com.pk

began. "Prior to this, as far as the [three major] shareholders were concerned, there was absolute transparency. However even at that point in time, we were following the SECP guidelines, in fact slightly more than SECP requirements." "We were looking at a new business line," Qadir continued. "We didn't pursue this line, because this has the potential of exposing our people to a business line in which there will be underhand dealings". "This was about two years ago: a simple example of a reaffirmation of our commitment to ethics". Biodegradability >?< Minimalistic Consumption So we've set the stage, you know we're more excited about sharing the company's value chain (VC) initiatives. At least, that's how tbl fondly refers to Engro Polymer's market development work. Now, if like us, Engro Polymer's value chain is a little mystified for you too, here's the scoop: they make the resin that is then used by a myriad of industries to make PVC products. That includes

everything from the ominous little 'sample' containers the medical lab hands you to window frames. But first, we wouldn't be doing our job if we didn't tell you that we did ask Qadir about the weighty environmental impacts of his products. We skipped through the lush green effluent pond and ongoing operational efficiencies bit to this part. "The fundamental environmental impact comes from the nature of the product - it comes from chlorine", he candidly states. Of course, we knew that, PVC after all stands for polyvinyl chloride. "The net energy consumed, is still the lowest of all plastics," balanced out Qadir. "The quantum of energy consumed is the least too. And get this revolutionary idea: to Qadir, its nonbiodegradability traits are among his products ecofriendly traits. "I don't take that as a criticism, I take it as a positive effect". I'll admit, we weren't ready for that one. "I find it to be more effective that a person will not be consuming a new product every two to three years," he said. (Yes, we have a lot more to say about this, but that'll be on tbl's online forum) "The basic advantage is that it has an unlimited life". "It's what you're going to use things for," he elaborated. He estimates that 60-70 percent of the resin his company produces goes into long life cycle products, such as pipes. "What you need to know is, what's the chain?" Grow Our Customers’ Businesses Really, now we're going to talk about the VCs that don't necessarily have anything to do with chlorine, promise!

Yet now, the customers are fairly open about their business needs or the areas they need help and support in. Of course, being a monopoly helps Engro Polymer be so benevolent. Customers of Customers In addition to Qadir's passion for agriculture, that has been conducive to encouraging the company to invest creative energy in developing a simple, userfriendly drip irrigation system - and thus boosting Pakistan's agricultural sector. Allah Buksh's farms, the hosting 'laboratory' for this model showcased the almost fool-proof simplicity to us. One that will prove a harbinger of inter-connectedness of the triple bottom line, and all actors in a value chain. Intriguing Numbers Engro Polymer has also directly helped develop the capacity of one of its major customer groups the PVC pipe industry. Their processing capacity has more than doubled over the last five years. Ten years ago, the industry could manufacture pipes with a maximum diameter of 4 inches. "And this year they're producing 20 inch diameter pipes - and obviously enhancing the usages of it," beams Qadir. Another VC example: "We took an industry that had been killed in Pakistan: the cable compounding industry," Qadir shared. Of the 10,000 tons of cable compound that was previously being imported in Pakistan, now approximately 8,000 tons are being produced in Pakistan. Business Karma The best part: this not only comes full-circle, the TBL circle keeps growing.

"Our customers are a wide range of people, from relatively larger to some who are very small," shared Qadir. "We've had reaffirmations over time that we are an organization which focuses on a desire to grow our customers, to grow their businesses".

If the cable compounding industry is producing 8,000 tons, half of their raw input is Engro Polymer's product. So this patient support to the industry has paid off with a 4,000 ton-strong market for the company. No wonder Qadir thinks "there is a phenomenal link between social investments and business".

"So, on the value chain side," thought Qadir, "it's a very significant initiative we have, providing technical and managerial support to enhance our customers' business".

"It's not the number that you're looking at today," Qadir emphasized, exhibiting just the kind of foresight that excites tbl, "it's the potential you're looking at in the future".

"We work with all of our customers to … reduce their power consumption, improve quality, reduce wastages, and how to develop market access," said Qadir. Of the roughly 400 businesses he counts as customers, there's not a single one that Engro Polymer teams haven't visited.

With successes such as these, the company's sales have more than doubled in eight years, inherent market growth and other factors included. In 2000, Engro Polymer sold 37,000 tons of PVC resin. With their market development (or VC development as tbl might call it) taking shape in 2002, they will have sold 100,000 tons this year, 2008.

The teams weren't always missed and invited - as they are now. They were initially refused entrance.

This, is Qadir's bottom-line.

tbl nov-dec 08 49

in hindsight

bull’s-eye? revisiting ‘07’s forecast for ‘08 by michael hopkins for tbl

his special CSR update for the year 2008 has been developed by MHC International Ltd (MHCi). Director MHCi Michael Hopkins and his team take an annual look at where CSR has been, how did their own predictions make out and where do they think CSR is going this year.

T

A. Introduction My in-tray tells me that CSR has gone off the boil. The environmental aspects of company and institutional offerings have jumped to the fore. Corporate Sustainability are the watchwords, it would appear. It is not surprising that the word 'sustainability' would be preferred by CEOs: who would not like to see their company exist forever? I covered the issue of CSR and corporate sustainability (CSu) seven years ago and my view today remains the same.

Terminology - CSR, CR, Citizenship or Sustainability? Corporate social responsibility

33%

Corporate responsibility

25%

Sustainability

17%

Corporate citizenship It doesn't matter, it's all the same thing Source: Ethical Corporation Poll as of September 25, 2007.

50 www.tbl.com.pk

6% 18%

The poll by Ethical Corporation never one to favour the phrase CSR - shows that its readers still prefer to use CSR. I have always believed that throwing out the word 'social' and leaving 'corporate responsibility' weakens the notion of business in society. I have discussed this elsewhere, where I re-state the definition I have used for some years and mean social to include economic (business case issues) and environmental (including sustainability). I also emphasize that CSR means treating key stakeholders both within the company and outside in a fair and ethical manner. I am, however, realistic enough to

accept that the word 'social' throws many company executives. Eventually, I believe that just about all companies (and institutions) will accept the main tenets of CSR and behave well with stakeholders, simply as a survival strategy. A company cannot be sustained without treating its stakeholders well -that is, ethically and socially responsibly. What is wrong, for example, in treating stakeholders well - consumers for instance? I have also often said that a CSR exit strategy is obvious since CSR itself is obvious. B. CSR - 2007 to 2008 1. On the question of CSR, we said 'CSR is still the preferred term among commentators, the Government and NGOs although companies hesitate and prefer the term CR'. In 2008, we would substitute corporate responsibility (CR) with corporate sustainability (CSu). 2. CSR is becoming greener, and this trend has continued throughout 2007. 2008 will also see companies struggling with the effects of the credit crisis of last year and the worries of recession. Bank credit will be difficult to obtain and that will dampen investment and down-the-line profits. Issues of CSR will still be important but will not be as important a driver for company policy as has been seen in the past two years. 3. This year, CSR as PR may still be on the agenda as economic problems dominate. 4. This year, an issue which has increasingly become important in CSR is global warming. Another issue of growing importance is how to deal with human rights in global operations. C. CSR Review by EIRIS In their review of CSR in the past two years, EIRIS' (a think tank on socially responsible investment)

has come to the following conclusions: Over the past 25 years CSR has evolved from a mainly philanthropic activity to a more mainstream approach that integrates responsible business principles into core business activities. European companies have well developed responsible business practices across a broad range of issues. This is due to a sophisticated responsible investment market, NGO pressure and a strong regulatory environment. Japanese companies demonstrate strong performance on environmental issues, although need to make progress on other areas to match European levels. Beyond a core of companies which have adopted responsible business practices, North American companies significantly lag behind their European counterparts across all the areas researched. Large companies are more likely to adopt responsible business practices than smaller companies. Will these trends continue into 2008? D. CSR in 2008 This year will be dominated by three key concerns: The rise of oil prices and the rapid substitution of food crops for bio-fuel production. This, in turn, will lead to sharp rises in food and consumer price inflation. The sub-prime credit crisis will feed more and more into the real economy as banks become tighter in their ability to lend even as interest rates fall. This will lead to a fall in investment and lower output and employment. The gradual trend toward authoritarianism coupled with rising instability caused by poverty as often written about in The Observer by

Henry Porter, will lead to ever increasing restrictions on freedom and human rights. These three global trends, depressing as they are, cannot be ignored by proponents of CSR since companies and institutions will be forced to grapple with these global issues and act accordingly. It will mean that respect for human rights and concerns about supply chain exploitation will be put on the back burner. The rise of, and concerns about, China will not be affected as it tries through massive PR to show a new face, at least temporarily, as Beijing hosts the summer Olympics. Companies will also have to face some restructuring as unemployment starts to rise to cope with falling economies which may, or may not, experience a global recession. Will companies restructure in a socially responsible manner? There is not much evidence that companies will follow such a route as argued, for instance, by luminaries such as George Starcher. Certainly, companies in the West will respect national labour laws on redundancies but even these are under attack sometimes justifiably as in Sarkozy's new France. The move from CSR departments, and their clones, to mainstreaming CSR issues throughout companies and institutions will falter as the above concerns dominate company policy this year. So a difficult year ahead for the CSR community is in prospect, especially those whose main focus is not the environment. Therefore, by year's end, we shall see the term 'sustainability' used so much that, like CSR, it may also be the subject of questioning and eventual sidestep. About the Writer Michael Hopkins is Professor of Corporate and Social Research at Middlesex University Business School, and Managing Director of the CSR advisory company and think-tank MHC International Ltd.

tbl nov-dec 08 51

csr toolkit

my choice

a model for a sustainable future by kurt archer for tbl

My Choice! is a project that aims to raise awareness among the youth about Sustainability. We offer a holistic understanding of sustainability taught through a simple model known as Society, Economy and Environment. The Environment is impacted by our human footprint; this footprint is the result of diverse community interactions (economy, leisure, family) in any given society. Social activism, or civil society, is shaped by embedding values in the people that are part of the society and who will take up responsibility for that society. It is therefore vital for youth to grab this inclusive picture of sustainability to ensure a positive future generation of prosperity and increased quality of life. This toolkit aims to provide an overview for the programme and how it can be run in not only colleges and institutes, but also in companies of any size. All that is required is a committed team to organize some logistics, and a series of individuals with a passion for sustainability. 52 www.tbl.com.pk

The picture shows a circle of people connected by a web. This activity looks at interdependence of global issues.

Stage 1: Around 20 motivated individuals are selected and trained as mentors This number can vary depending on how many schools or students you want to reach out to. The point to remember here is to recruit individuals, who are fun, can relate well with kids, and have an interest in learning about Sustainability. The big bonus here is that through being a mentor, the individual actually learns more about him/herself and their personal actions in sustainability by going through this process. It is important to establish rules of conduct, and training on material before hand so that the next stage can run smoothly. Stage 2: They share an understanding of sustainability through a workshop in the school. The best part of this programme is interacting with the kids; they end up being our greatest teachers. This stage is when the newly trained mentors will go into the

classrooms and deliver a 1-1.5 hour presentation on sustainability. Topics can be focused or broad; the idea here is to make sure the kids leave with a strong understanding that sustainability means making smart choices now so that we don't suffer the negative consequences in the future. Topics you should cover: Defining sustainability. Understanding the Venn diagram of People, Business and Nature (Society, Economy, Environment). Grasp the idea that all actions and events in the world are interrelated and interdependent - there are no such things as isolated actions and response. Stage 3: The most interested students get a deeper understanding through a simulation game. Are we having fun yet? If not, then we surely will now! Stage 3 represents a simulation game

with a duration of 3 - 4 hours. Here the mentors will plan and facilitate a series of activity-based learning games that will help develop soft skills while teaching them core ideas of sustainability. Topics you should cover in the simulation include: Understanding the big picture of sustainability (that is, global warming, pollution, security, overpopulation nature, business and society). Introduce the concept of 'Tragedy of the Commons'. Guide them through a product life cycle of their favourite things, move from linear product life cycle to closed loop product life cycle. What is a network or system, how can we simplify it if it no longer makes sense and is overly ineffective? Understanding interdependence from the perspective of various decision makers (Government, NGOs, Companies, and Individuals). What is their vision for a sustainable future in 20 years time? Stage 4: Through mentorship students will execute a project in their school. This is the most magical stage, as anything can happen when you put good intentions into the hands of creative children. By mentoring a group of kids, you get to see a project and change happen over the span of 3 weeks to 1 month. The kids will surprise you with their creativity and ability to grasp the concept of sustainability. The goal of the project is simple: Make one change in your school that can help it become closer to being zero-waste. Project areas that kids can work on include: Waste and Disposal Water Conservation Soil and Plants Energy Efficiency

The My Choice! Model

School Supplies and Books Paper Usage Transportation Food Make sure you start the projects with an audit of the school, so the kids can identify unsustainable practices, then come up with ideas, and measure the ideas based on the Venn diagram model. Does it make Business, People and Nature sense? If not, how can we improve it? Stage 5: The projects are showcased and rewarded, raising awareness in the community about sustainability. The last stage of this programme is the most glamorous, as you want to invite the public, partners, other schools and dignitaries to the event. This event can be imagined in many ways, but it should aim to capture the excitement of the kids in presenting their projects ideas, and rewarding them thoroughly for all their hard work. The benefit of inviting so much public is that they too get to play a hand in learning about sustainability. Prizes should further the kids development in understanding about sustainability, such as nature retreats or educational books.

Stage 6: Taking our learning virtually! Yes that is right, we have a special sixth stage not represented in the diagram, but ever more important. It is taking the learning of this programme and giving the students and mentors an online platform to connect with other youth across the globe, who are passionate about sustainability. By accessing the My Choice social network, participants gain access to networks of young people, fresh media and resources to help them learn more about sustainability, and best of all: contribute to the discussion. You're done! You've made a great contribution to society, you've learnt a lot along the way, and you've networked with others building the same vision and promoted your brand every step of the way. What could be more satisfying? After all, it's your choice for a sustainable future! About the Writer Kurt Archer originates in Canada and lived in Karachi, Pakistan for two years where he established international internship programmes for both AIESEC and the Aga Khan University. He is now on an eco-travel tour of Asia where he aims to share his experience in working with and learning about the top sustainability solutions in Asia.

tbl nov-dec 08 53

corporate diversity practices

cracks in the ceiling

examining the

report by calvert for tbl

Overview While the current landscape of diversity in the corporate workplace evidences cracks in the glass ceiling, women and minorities continue to face barriers in their quest for advancement. Nowhere is this more evident than in the board room, where men continue to occupy the vast majority of board seats of Fortune 100 companies - approximately 83 percent, compared to 17 percent for women. In 2006, Calvert initiated a survey of the corporate diversity practices of the 636 companies in the Calvert Social Index reveals that the majority of companies have much yet to accomplish in developing a comprehensive diversity strategy; in fact, not a single company earned a perfect score in this report's analysis. Rather than focusing exclusively on diversity leaders, Calvert's diversity ratings identify leaders, average performers, and laggards, while providing companies a road map that can guide them as they seek to identify and address gaps in their own internal practices.

54 www.tbl.com.pk

Key Findings In evaluating the companies' diversity practices, ten indicators were considered, including: Equal Employment Opportunity (EEO) Policy, Internal Diversity Initiatives, External Diversity Initiatives, Scope of Diversity Initiatives, Family-friendly Benefits, EEO-1 Disclosure, Highest Paid Executives, Board Diversity, Director Selection Criteria, and Overall Corporate Commitment. The analysis reveals the following key findings:

the importance of board diversity and have at least one woman and/or minority on their board, a disappointing 62 percent demonstrate no evidence of women and/or minorities in their top five highest paid positions positions that are most often the pipeline from which future directors are chosen. Despite significant room for improvement, innovation and creativity abound. Diversity leaders in particular

policy and director selection criteria-represent areas where Calvert has been focusing its diversity advocacy over the past five to ten years. Performance varies by sector. On average, companies in the technology sector performed the best, closely followed by companies in the consumer, cyclical sector. Companies in the energy sector, on average, significantly underperformed the rest of our rated companies.

Increased disclosure is needed. Poor disclosure on a number of indicators hindered our ability to fully assess and portray women and minority representation at various levels of the workplace, as well as our ability to assess the quality of certain diversity initiatives. -

-

EEO-1 disclosure is the worst performing indicator, with 93 percent of companies lacking any public EEO-1 disclosure. This is truly disappointing, as disclosure of detailed demographic data is critical to demonstrating how successfully women and minorities are advancing throughout a company's ranks, and identifying potential weaknesses in diversity initiatives that may be preventing them from moving up the pipeline. Overall disclosure of internal and external diversity initiatives remains weak, with 48 percent of companies scoring zero on these indicators.

A disconnect remains between diversity on the board and in the executive suite. While 83 percent of rated companies understand

are demonstrating innovation in leveraging employee diversity to reach out to new demographic and geographic markets and are evidencing unique approaches to recruitment and outreach, among other diversity practices. Corporate commitment is the X factor. Top scores in corporate commitment translate to higher scores in the nine other indicators, demonstrating a strong commitment to inclusive EEO policies, a variety of diversity initiatives and family-friendly benefits, and executive and board level representation. Advocacy makes a difference. Two of the best performing indicators - EEO

Market cap matters - at least in most instances. Not surprisingly the higher the market capitalization of the company, the better its performance, at least on nine of the ten indicators, the exception being the five highest paid executives.

The survey reveals that the majority of companies are not currently providing the wealth of information investors need. With the increasing importance of diversity in the workplace and marketplace, investors expect far greater disclosure from companies in order to understand their capacity to fully manage both the risks and opportunities inherent in operating in our increasingly global economy and society.

tbl nov-dec 08 55

Methodology The Calvert Social Index is a broad-based, rigorously constructed benchmark for measuring the performance of large, U.S.-based sustainable and responsible companies. The Index measures the performance of those companies that meet the social investment criteria selected from the universe of approximately the 1,000 largest companies in the U.S., represented by stocks listed on the NySE and NASDAQ and AMEX (not including closed-end mutual funds, ADRs, REITS and noncommon shares). For this analysis, a snapshot of the Index as of September 21, 2007 was used. How We Obtain the Information We base our analysis and research on a number of public sources, including company websites, SEC filings, corporate social responsibility and sustainability reports, and direct feedback from companies. We also use thirdparty sources such as Diversity Inc., Working Mother, and Human Rights Campaign Foundation's Corporate Equality Index. Examining the 10 Key Indicators Rated companies scored across the entire spectrum of our Diversity Ratings scale. Most companies performed at the bottom half, and only 3 percent of the companies demonstrated excellent diversity performance. While only nine companies showed no public commitment to diversity, all companies have room to improve. Rather than weakening our indicators to compensate for the lackluster performance of the majority of rated companies, we hope to raise the bar of diversity perform-

56 www.tbl.com.pk

ance by honestly reflecting the landscape of current corporate performance and providing a road map that can guide companies as they seek to identify and address gaps in diversity policies, programs, and performance. 1)

Equal Employment Opportunity (EEO) Policy 66 percent of rated companies support EEO policies inclusive of sexual orientation.

2)

Internal Diversity Initiatives 37 percent of rated companies offer training/development and/or mentoring/Employee Resource Group (ERG) programmes.

3)

External Diversity Initiatives 43 percent of rated companies offer recruitment/outreach and/or supplier diversity programmes.

4)

Scope of Diversity Initiatives 70 percent of rated companies disclose no evidence of diversity programmes targeting one or more groups

5)

Family-friendly Benefits 59 percent of rated companies offer at least one family-friendly benefit.

6)

EEO-1 Disclosure 93 percent of rated companies have no EEO-1 Disclosure.

7)

Highest Paid Executives 62 percent of rated companies had no women or minorities in their five highest paid offices.

8)

Board Diversity 83 percent of rated companies had at least one woman and/or minority on their Board of Directors.

9)

Director Selection Criteria 53 percent of rated companies had some mention of diversity in director selection criteria.

10)

Overall Corporate Commitment 28 percent of rated companies demonstrate an overall corporate commitment to diversity.

Conclusion Significant opportunities remain for all companies in the Calvert Social Index to improve their diversity practices, particularly regarding increased disclosure of existing diversity policies, programmes, and performance. Greater disclosure is essential to further progress on diversity. Once companies have reviewed and reported on current diversity practices, they can use this reporting to identify areas of opportunity and risk and in turn set manageable, measurable goals to address these areas. Employees should be recruited, hired, promoted, and retained based on competency, not chromosomes or the colour of their skin. Their should be a level playing field, where merit and hard work - not bias and stereotype are what count in workplace opportunities. Companies that fully embrace this challenge and commit to providing a fair and equitable working environment will recognize gains in both the workplace and marketplace. Note This survey has been tailored specifically for tbl and is a copyright of Calvert. To read complete survey, please visit http://www.calvert.com/pdf/CorporateDivers ity2008.pdf

crossword

CROSSWORD Across 1. What it’s all about! At least in the world of tbl 2. If I was as strong as your ability to account, your organization would exist at a higher plane altogether 4. This tbl issue’s current thematic focus! 6. Not the indecent kind. Just so public knows what you’ve been up to in areas that do happen to concern them 8. Do we really need all that talking? 11. An official raid on your company’s existence 13. The skewed concept that ever-expanding consumption of material goods is advantageous to - anything at all under the sun? 15. A system of values we all like to think we live by 16. Not the kind from a fresh green apple, but the one the world’s in right now 17. Without these, how would we know we had quantifiable success? Down 1. Think of them as one among a group of many stakeholders, but those that happen to hold the strings to some of your purses 3. The spirit of which is what keeps all economies fuelled 5. More with less (this was part of tbl’s third issue’s title) 7. This sometimes translates into unbridled profiteering, if there isn’t a robust governance mechanism in place 9. If you take me literally, your attire might be rather objectionable but without me, governance doesn’t mean anything to the public 10. If you’re on the cutting edge, you’re bound to have some up your sleeve 12. By the bureaucracy, for the common people 14. One who muses in tbl

tbl Issue 5 Crossword Hints Across 1. A situation favourable for attainment of a goal 5. ...Of change 7. Too many of these, but it is all for their sake 11. To enable or permit 13. What we must do to keep everyone on board 16. Make more of this, to do more 17. The effort to increase the well-being of humankind 18. Without this function, your CSR may go wild

Down

Think you got it? Tell us at [email protected] and see what surprises we have in store for you!

2. Bottomlines corporate citizens usually have 3. A person or group that has an investment, share etc 4. Exercising authority 6. Social and cultural forces that shape the life of a person 7. The difference between ethical and non ethical returns 8. Power derived from the force or energy of moving water 9. Combination or interaction of social and economic factors 10. To keep up or keep going, as an action or process 12. To treat or process so as to make suitable for reuse 14. Save it, to save yourself 15. The only CSR magazine in Pakistan

tbl nov-dec 08 57

model for urban development

sustainable cities: a model for the future by kurt archer for tbl

I

n October 2008, the Foreign Policy Magazine of Washington D.C. published a list of the most global cities in terms of business activity, human capital, access to information, cultural identity and political engagement. In this list, the city of Karachi was ranked number 57 out of a total of 60 cities reviewed. In an embarrassing communications error, officials mistook the rankings of the 'mayor of the moment' as referring to Syed Mustafa Kamal of Karachi as the number 2 mayor in the world. For many this was joyous news, until the mistake was uncovered. This mishap has brought a lot of attention to Karachi's current development plans, and although progress is underway, many citizens are not happy with the way things are, or are moving towards. Lahore, Pakistan's second largest city is not far behind on public discontent with how things are run. The good news is that neither of these two cities are alone in facing these issues. All over the world, developing countries' cities struggle to meet the gross demands of urbanization and rapid expansion. Little has prepared them to manage such growth, and the results are higher than normal crime rates; high levels of pollution leading to an increased risk of respiratory disease, cancer and skin problems; long lines of traffic jams, noise pollution and an infrastructure that clearly separates the economic classes. Could it be that all of these are caused by poor design management during the last forty or more years when Karachi and Lahore have faced their biggest population growth? To draw an example of this: if a plane was poorly designed, would it fly? It might fly, but chances are much higher that it will crash - if not now, then in 58 www.tbl.com.pk

the near future. So if design plays such an important role in how we make certain things run in a certain way, the same can be true for cities. So What Does a Sustainable City Look Like? In 2007, e2 design shot a PBS documentary on Enrique Peñalosa, the former mayor of Bogota, Colombia from 1999-2001, as a best case practice for urban transformation. The film, titled 'Bogota: Building a Sustainable City' is narrated by Brad Pitt (it just got steamier) and goes through the process of explaining the achievements and challenges that Bogota faced in becoming more sustainable. Bogota, like many developing countries was faced with the problem of rapid population growth, mostly due to urbanization. This led to ineffective infrastructure for many parts of the city, which was connected to rising crime rates. Overall, Bogota's quality of life was pretty low. Key Elements for Building a Sustainable City: Vision and Leadership In the words of Peñalosa, "I've never known a city where their people hated it so much." What was lacking in the city was vision and leadership. Peñalosa was the man who had both - the vision and leadership - for his city. His philosophy was simple, sustainable design equates to social justice so he looked upon the cities infrastructure and thought to himself: "Like fish need to swim, people need to walk; not to survive, but to be happy" Hounded by design plans to build overpasses and widen highways, Peñalosa couldn't justify spending such exuberant amounts of money to benefit only the top 15 percent of the city, so he decided to focus his efforts on the majority of the citizens where he suspected the result would trickle up to a better

quality of life for everyone, even at the top of the economic pyramid. As Peñalosa commenced his journey to create a sustainable design, he faced some challenges, which he successfully overcame. Design Challenge #1 Peñalosa's first design challenge was to transform the thinking that cities are for cars, to cities are for people. He did this by spending money in lower income areas to build parks and sidewalks. He shut down a major road artery in the city for 8 hours on a Sunday afternoon so pedestrians could walk, cycle or come together for various reasons. This now attracts over a million people who come out to enjoy the day and socialize. This move alone has been credited with lowering the crime rate by over 70 percent over ten years, simply by making areas of the city more accessible and more social. Design Challenge # 2 The next task Peñalosa tackled was to create a public transport system for the city to replace the current one. The problem with the current transport system was that it was not very safe for the average commuter due to non-existent policies and standards, so typically only the lower economic classes would use it, out of necessity. The transport industry was also run by a mafia, which would do anything, including shut the entire city down in a strike if they so chose. Peñalosa then decided to bring the mafia into the deal and give them control and input into the system as long as they adhered to standards and policies set by the government. This now means that the government has full access to control emission standards of the buses, and to ensure safety measures are enacted to protect citizens, thus returning the trust of the system to the higher-class commuters - those with choices. Real Game: New Name One strategy that Peñalosa says worked well was to call the new transport system something other than a 'bus' because of its old associations with safety; the new transport system is called the Transmilenio (Trans Millennium) after the fact that it was introduced as we shifted from the 20th to 21st century. Design Challenge # 3 The third task, which ended up being more of a challenge than an achievement was to transform the

roads themselves to include bigger sidewalks, and to remove cars in general from most sidewalks, making these areas more walkable. The backlash came from the business owners who feared that the cut to vehicle traffic would affect their business. For some it was true that vehicle access resulted in loss of clientele. The challenge, says Peñalosa, was in improper negotiations with the businesses in the area to get their buy-in to the vision. Many neighbourhoods were transformed and businesses adjusted to the change in clientele by appealing to more of the walking pedestrians that rose in the area instead. But it became a very unpopular a move. As a result, the opposition party used it to win back a majority seats in the next election. However the results are bearing fruit now. Eight years later, and more than ever, Colombians look back to Peñalosa as a hero for what he did for the city. A Successful Model: Bogota's Urban Transformation Peñalosa now travels to various countries in the world to share his success story of urban transformation and has advised cities such as Cape Town, Denver, Berkeley, Seattle, Melbourne, and Sao Paulo. He has been featured by The New York Times, Herald Tribune, PBS Television, BBC and many others for his stewardship of urban development. On September 19, 2008 The LUMS School of Law and Policy invited Mr. Peñalosa to give a talk to the students and public about his experience, and how it can be applied to the Pakistani reality. The talk must have been influential to the audience because on December 2, 2008, the Provincial government of Punjab announced that it is going to launch a new transport company called the LTC (jazzy acronym baptism, eh…?), which will include all other transport unions in the city in a move to bring up the cities overall effectiveness in transportation. The bad news, however is that Mustafa Kamal from Karachi had other priorities and declined to meet with Mr. Peñalosa during this visit.

About the Writer Kurt Archer originates in Canada and lived in Karachi, Pakistan for two years where he established international internship programmes for both AIESEC and the Aga Khan University. He is now on an eco-travel tour of Asia where he aims to share his experience in working with and learning about the top sustainability solutions in Asia.

tbl nov-dec 08 59

musings

yours humbly by praetor for tbl

G

ood governance at the nation-state level is measured in a variety of ways, with research based rankings by independent agencies being a popular methodology. And so you have the Corruption Index, Ease of Doing Business Ranking and so forth. Good governance is seen as being integral to economic growth, the eradication of poverty and hunger and sustainable development. Corporate good governance on the other hand has as yet no universally practiced measurement tool, although there are efforts under way to have nations agree to quickly adopt the IAS - International Accounting Standards - as their accounting standard. This move will make it easy to compare the performance of corporations, in an industry, across countries. At the core of corporate good governance are of course two inter-related issues - transparency and accountability. Elsewhere in this issue of TBL are undoubtedly sufficient explanations of what corporate good governance is, why it is needed and what companies do to enact it. Praetor will therefore not examine these facets, but as usual, will comment on the more metaphysical manifestations. Corporate good governance is expected to result in a company's growth and longevity. However growth alone cannot be the yardstick or the 'proof' if you will, of corporate good governance. Otherwise we would not have had the Enrons, Worldcoms, Lehmann Brothers' of this world collapsing in spite of great growth over the years. Post-mortems of these and similar other corporate failures have brought out a whole set of reasons why these mega entities went under; corruption and malpractices being at the fore. But there is more. Something less tangible and auditable than say corruption. And that is what you can call ethos or culture. An integral goal of corporate good governance has to be to build a company wide ethos of the finer qualities of human behaviour 60 www.tbl.com.pk

and interaction, like sensitivity, understanding and even basic courtesy. Companies which lack these attributes will sooner or later have serious issues with their stakeholder groups. If, for example, there was an arrogance measurement tool, you would find that many highly successful companies in financial terms are also high on arrogance, which permeates into the day to day behaviour of their employees. Is then arrogance a pre-requisite of financial success? Or is it the inevitable outcome of such success? A worthy question to ponder over! What is sure is that arrogance one day could very well spell the death knell for these successful companies and we have plenty of examples on hand to support this belief. Examining arrogance at an international level, there seems to be an east-west geographical divide, with Pakistan on the dividing line. Are we not arrogant as a nation? But go east from Pakistan and the arrogance of the general public sharply reduces. First stop India and you have the humble greeting of submissive folded hands that indicate a lack of arrogance. Go further east, into Malaysia or Thailand and the level of humility rises even further. No one seems to be arrogant and everyone shows great courtesy to others in daily life. On the other hand, go west from Pakistan and arrogance rises in the Middle East. Keep going west and at a nation-government level at least, the arrogance perhaps peaks in the United States, with this superpower convinced it can walk into and take over any country on this planet. Coming back to corporate good governance, one would really like to see major companies introduce policies and practices that cultivate positive values in their employees, besides taking measures to enhance productivity and performance. If corporate arrogance is controlled and the bigger you are the humbler you become, then surely your longevity is assured, for the simple reason that you will be liked and trusted more.