4 NGORC Journal, June 2007

Corporate Social Responsibility (CSR) is a recentdevelopment in Pakistan. Although individuals andbusinesses have been indulging in philanthropy and

voluntary giving since long, the concept of CSR and itsallied practices are relatively new to the socio-economicdevelopment scene. Already, there are certain pronouncedtrends and types we can find emerging with respect toCorporate Social Responsibility in Pakistan.

Three trends in CSR are most visible:

11.. CCoommppeettiittiioonn ttoo CCooooppeerraattiioonnInstead of stand-alone departments undertaking end-to-end project, partnership with NGOs and developmentagencies is on the rise. This is also an acknowledgement ofthe contributions made by the development sector in recentyears. The corporations recognize that delivering socialservices is a specialized field with its own dynamics. Whilethey retain the right of monitoring and oversight, they areletting partner NGOs deliver the services. In effect, thebusinesses then become "funding agencies."

22.. CCoommmmaanndd ttoo DDeemmaanndd OOrriieennttaattiioonn Instead of corporations determining what is best for thecommunity or society and then supplying that service, there

is marked awareness to be responsive to the need of thepeople whom CSR is supposed to serve. This trend is alsoevident from the way project selection is done. Far from thetarget population, the Board of Directors decides the socialservice to be provided. In certain cases the company con-sults the local politician or power lord to determine the"beneficiaries' needs". We can roughly compare thisapproach to Soviet-style command economy, where theKremlin would decide what Tajikistan needed 5000-miles-away.The ideas of participatory planning, stakeholders'analysis, community involvement, volunteerism were aliento the corporate CSR strategy and implementation. It mustbe acknowledged that with the passage of time the corpo-rate thinking is coming of age: CSR is now more demand-driven. Not only there is recognition of proper demandanalysis but also there is greater community involvement,lesser reliance on "politicians' advice," and greater confi-dence in NGOs and local CBOs to carry out much of theplanning and implementation on behalf of the corporatesponsors.

33.. OOuuttssoouurrcceedd vveerrssuuss IInn--ssoouurrcceedd FFuunndd MMaannaaggeemmeennttEconomic liberalization, since the mid 80's, has led to verygood growth in fortunes of businesses and the industry. Atthe same time, confidence in government's ability to deliversocial services most needed by the public has been waning.Corruption in the higher echelons of political governmentsduring the last two decades was one major factor thatprompted businesses to rethink their own contribution tothe society. The phenomenon of setting up an in-housefoundation or a welfare trust is not new. Business housesand empires have been using this provision of law for gen-uinely paying back to the society sometimes, but mostly forunscrupulous tax evasion and mere eyewash, not only inPakistan but all over the world. Recent trend of setting upown foundations and trusts seems to be quite differentfrom the practices of the past. There is genuineness aboutthe purpose and as a result serious efforts are being made toaddress most pressing social issues that have come aboutdue to failure of governmental ability to deliver publicgood. A famous fast food chain Cupola Foundation, has setup its own foundation to take care of its employees aftersome of its workers were burned to death in religious fren-zy. Pakistan's largest newsgroup, Jang Group ofPublications, has the Mir Khalilur Rehman (MKR)Foundation that played a most commendable role in earth-quake relief. PICIC Bank has set up PICIC Foundation foremployee welfare and promotion of higher education.

In addition to genuine philanthropic reasons, in-sourcefund management is also driven by sound business logic.Governments' taxation regime allows tax relief to business-

Corporate Social Responsibility:

Trends and Types in PakistanBy Shadab Fariduddin

5NGORC Journal, June 2007

es if they spend on social development. The tax burden oflarge business empires runs into millions of rupees. Taxrelief when calculated on such huge tax liability is foundenough to justify creation of a family foundation or trust,which in turn might partner with larger NGO networkworking for the socio-economic development.

These trends are influencing CSR practices in Pakistan. Ifwe analyze the motivations and the CSR practices inPakistan, distinct patterns can be observed, based on whichwe can identify four separate types of CSR strategies:

11.. PPoolliittiiccaallllyy MMoottiivvaatteedd CCSSRR SSttrraatteeggyyUnder this type, a company's CSR strategy is aligned withcurrent political slogan which seldom, if ever, captures areal grass-root need. Social spending by most public sectororganizations falls in this category. CSR funds are neitherallocated based on any analysis of people's needs nor arethey aligned with any espoused social value as part of long-term corporate strategy. Instead, the CSR allocations can belikened to a "slush fund", discretionary money available totop management and the CEO, who can spend it as theyplease. The shrewd CEO senses which way the politicalwind is blowing or going to blow and then moulds the CSRmoney accordingly to the ongoing political thrust. The

result is more support for the CEO or the company fromthe power corridors of politicians, generals and bureaucrats.In the decade of 90's, few notable nationalized banks spon-sored, with great fanfare and media coverage, IT trainingcenters in interior of Sindh. The then-Prime Minister inau-gurated these centers in Nawabshah and Larkana andpraised the sponsors' sense of social obligation. Today, asone would expect, the centers are no more there! One ofthe sponsoring institutions has gone bankrupt and the otheris partially privatized.

This is not to say that politically motivated CSR is specificto our national companies alone. It happens even inadvanced countries like UK, Sweden, Denmark to name afew. The reigning monarchs, who are now more of a figure-head in their countries, have set up welfare foundations fortheir subjects. The businesses generously donate funds tosuch non-profits in order to build relationship with thepowerful, draw public goodwill and extract political mileage.

22.. GGlloobbaallllyy AAlliiggnneedd CCSSRR SSttrraatteeggyyMany multinational corporations, MNCs, operate inPakistan. They are in pharmaceutical, consumer goods,

manufacturing and services sector of our economy.Invariably all MNCs operate under the policies of theirhead offices in Europe and US. It must be mentioned herethat many MNCs are now larger than most developingcountries if we compare their earnings with the latter'snational income. Like a government, an MNC has certaincentral policies decided by the head office; Corporate SocialResponsibility is one of them. Parent company is alignedwith a value or social development theme, which all officesfollow worldwide. A central CSR makes good economicsense for the MNCs. It lowers the cost of implementationand it maximizes benefits. By promoting a defined socialcause or services implementation becomes easy in terms ofchoosing partners, lower administrative costs, and designinga common promotion strategy. Maximum benefits accrue tothe MNC as it is recognized supporting a cause across allcultures, which results in global branding.

Historically, local MNCs have been following the strategy ofparent organization. A pharmaceutical company, Johnson &Johnson, under its global CSR commitment, is very well-known for its generous and genuine support for the cure ofbreast cancer among women. No doubt, the company hasdone a marvelous job by highlighting and fighting the prob-lem of breast cancer through its "Pink Ribbon" campaigns

in the US and Europe, where this scourge of women'shealth is more common and hence its CSR more relevant.The local office of the company cannot deviate from thecentral commitment. So, only very recently has its CSRstrategy become relevant in Pakistan as compared to its sig-nificance, dating back to the 50's, for the US and Europeanwomenfolk. Another example is of Hewlett Packard, which,through the Packard Foundation, is globally supportingreproductive health under its CSR strategy.

Following the central CSR strategy, therefore, carries therisk of miss-or-match with genuine local needs. The result-ing CSR commitment is likely to be inflexible and, there-fore, less responsive to the host society.

Some MNCs are realizing the need of, and benefit in, beingresponsive to local needs. As a result, they are opting for abroad policy for social development at the head office leveland giving more autonomy to their local country offices todecide to spend CSR funds under the broad central policy.For example, a software giant has chosen education andhealth as its global social development responsibilities. Itallows local offices to support such programmes that are

Historically, local MNCs have

been following the strategy of

parent organization

6 NGORC Journal, June 2007

most needed by the society. This variation could be called"glocal CSR", a broad thematic central support that resultsin need-specific response at the local level in a hot country.

33.. EExxtteerrnnaallllyy IImmppoosseedd CCSSRRThis CSR-type takes two forms: legally-imposed and trade-imposed CSR.

Regulatory environment of business in Pakistan consists ofmany newly formed bodies such as the Securities andExchange Commission of Pakistan, Oil and Gas RegulatoryAuthority, Pakistan Telecommunication Authority etc. Inaddition to these many existing watchdogs such as LabourCourts, National Industrial Relations Commission andEnvironment Protection Agency etc also operate. Theseregulators serve as custodian of public good and are man-dated to ensure that public safety and rights of people arenot trampled upon by businesses and industries. The regu-lators have the force of law behind them and corporationshave to comply with the provisions of law. The complianceis an unavoidable cost of doing business in our economy.Some businesses just do bare minimum to meet the legalrequirements and some try to beat the law. Still there is anethical minority, which goes beyond the bare-minimum of

law and willingly do more than just complying with regula-tions.

Federal government requires big businesses to divert a por-tion of their earning towards social development of the areain which they are located. Oil and gas exploration licensesare particularly tied with mandatory conditions whichrequire energy companies to spend a fixed percentage oftheir investments on socio-economic uplift of the conces-sion areas granted to them for explorations. Invariably thecompanies have a dedicated department to comply with reg-ulatory CSR requirements. Such departments vary frombeing very effective source to simple window-dressingmechanisms for community development. The departmen-tal effectiveness solely depends upon the value-system andcommitment of the top management towards sociallyresponsible behavior.

The Pakistan government and business sector also havecomprehensive policies on the elimination of child labour.The Constitution of Islamic Republic of Pakistan states:"No child below the age of fourteen shall be engaged in anyfactory or mine or in any other hazardous employment." In

addition, it states that "All forms of forced labour and traf-fic in human beings is prohibited." However, the enforce-ment of these provisions is a different story as is the stateof willing compliance to these laws by businesses.

A number of laws contain provisions prohibiting childlabour and regulating the working conditions of child andadolescent workers. The most important laws are:

The Factories Act 1934 The West Pakistan Shops and Establishments

Ordinance 1969 The Employment of Children Act 1991 The Bonded Labour System Abolition Act 1992 The Punjab Compulsory Education Act 1994

Pakistan has ratified ILO Convention 182 and has acceptedthe obligation to increase the age limit to 18 years to controlthe worst forms of child labour. The labour policy of 2002reflects this obligation. In turn, the business sector has alsoadopted the policy and the written statement "anyone belowthe age of 18 years is not employed in this factory/busi-ness" can be seen close to the entrance gate of most busi-ness entities.

Another variant of Imposed CSR is when corporate behav-iour is amended because of pure business compulsionsimposed by the buyers or customers. For example, Pakistaniexporters seek SA8000 certification to gain and retain mar-ket access to European countries. Social Audit 8000 certifi-cation, if implemented in earnest, ensures that the businessis being conducted in a socially responsible manner; itsoperations are transparent and free from labour malprac-tices. Increasingly, importers from the USA and Europehave been becoming stringent in imposing good responsi-ble behavoiur on companies in Pakistan. How cosmetic orreal the behaviour change is, again, really depends on theintentions of the top management. Trade-imposed CSR hasproven good for Pakistan at least in one case. AndreGorgemans has documented a case study of multi-stake-holder initiative to eliminate child labour in sports goodsindustry around Sialkot.

World Federation of the Sporting Goods Industry(WFSGI) is an independent association formed in 1978 bysports industry suppliers, national manufacturers' associa-tions, and well-known brands such as Nike, Adidas, Reebok,New Balance, Puma, and others. Under one of its commit-tees, the Committee on Ethics and Fair Trade (CEFT), themembers cooperate in promoting free and fair trade andethics, and work to improve the well-being of mankindthrough sports. Around 1995, FIFA, UNICEF, ILO, localNGOs and Chambers of Commerce and Industry joinedhands to address some of the more complex issues comingto light around ethical business practices and to establish avenue for the industry to understand, analyze, and act upona wide range of issues of corporate social responsibility.Writing in eJournal USA: Economic Perspectives, AndreGorgemans comments on the results and impact of theprogramme "The Pakistan programme has a wonderfulrecord of tangible accomplishment. Some 90 manufacturers

7NGORC Journal, June 2007

from Sialkot, Pakistan, are now enrolled in the programme,and more than 95 percent of export production is regularlymonitored and certified child-free. More than 6,000 work-ing children have been phased out of production and putback on the education track. The programme's UniversalPrimary Education component focuses on all children agedfive to seven to prevent the entry of new children into thelabour market.

Leaders of the India Sports Manufacturer and ExportersAssociation and the Sports Goods Foundation of Indiahave adopted the Pakistan model to fit their unique circum-stances." He finally concludes most aptly, "Internationalbodies like WFSGI can facilitate collaboration, but we haveno illusions that industry's national leaders are the back-bone of any successful programme (of responsible corpo-rate behaviour)".

44.. PPhhiillaanntthhrrooppiicc aanndd RReessppoonnssiivvee CCSSRRSome times CSR does not seem to follow a well-definedobjective; rather it is based upon a broad "Do Good" prin-ciple. A sum of money is reserved for "doing good" andfunding takes place on as-requested basis. Corporate dona-tions to the Shaukat Khanum Cancer Hospital, the KidneyCentre, Aga Khan University, Sindh Institute of Urologyand Transplant and various other outfits especially healthand education institutions fall in this category. Highly suc-cessful business families have spent millions of rupees onphilanthropy. Recently in Karachi, the Tabba Institute ofCardio Care has been set up at a cost of Rs 200 million bythe Tabba Family. Dewan Mushtaq Centre of Nephrologyand Transplant has been fully funded by the Dewan groupto the tune of Rs 350 million. Similarly generous corporatedonations to The Citizens Foundation are illustrative ofphilanthropic CSR.

The general principle of "doing good" attains a particularfocus to become responsive CSR. The CSR funds are aimedat addressing a particular and defined social service need ofthe community or people. The need is genuinely felt for bythe business and becomes a value for the company. LytonRahmatullah Benevolent Trust (LRBT) focuses exclusivelyon free cutting-edge eye care for the poor. A car manufac-turer in Bin Qasim found people in the area suffering fromeye diseases caused by poor drinking water, so its CSR isfocused community health and hygiene. It provides fordrinking water, waste management and free eye care to peo-ple in the surrounding villages. The largest private powergeneration company in Pakistan, Hubco, operating in near-by industrial city of Balochistan is responding to the com-munity need of clean drinking water and basic education forthe people of the area. Karachi Chamber of Commerce andIndustry joined hands with the City District Government'shealth department to spray and fumigate various localitiesagainst the Dengue fever. A local chemical company pro-vided disinfectants for the treatment at very low costs.

Jas Ahmed of Middlesex University Business School pub-lished, in May 2006, findings of a comprehensive survey onCSR practices in Pakistan. Jas's research captures the trendsand types of CSR discussed here. With due acknowledge-ment, his findings are reproduced as summarizing this arti-

cle (parentheses added):

Western-style corporate social responsibility is clearly anascent concept in Pakistan

The motivation for CSR, the types of CSR empha-sised, and the relative importance of different CSRactivities are influenced by cultural values, religiousbelief, and (personal interests)

There are external pressures driving the adoption ofCSR values and practices in the country

There is evidence of financially substantial CSR activ-ity in Pakistan both in the corporate sector and by highnet worth businessmen

A considerable proportion of activity is directedtowards socio-political causes such as health, educa-tion and social welfare (indicating government's failurein providing social services)

Social responsibility appears to be limited to conceptsof corporate and personal philanthropy (limited togiving money for good causes such as health and edu-cation)

Some industries are setting standards of ethical andsocially responsible behaviour

Inconsistencies prevail and there are considerable gapsbetween best practice and common practice - includ-ing examples of socially irresponsible behaviour

Corporate Social Responsibility has the potential of becom-ing a major source for socio-economic uplift of the peoplein our country. The development sector has grown to anextent where NGOs are seen as providing specialized serv-ices and are respected for their contribution. Traditionalmistrust between corporate, government and non-profitsectors is receding and is being replaced with cooperationand mutual understanding. Need for home-grown, cultural-ly valid and widely replicable CSR models, however, remainsunmet. Only public awareness and consumer pressure canmake the industry behave in more socially responsible man-ner. CSR concept, principles and practices will come of agethen: all CSR-types other than the truly responsive CSRstrategy would cease to exist because they become sociallyunacceptable.

Shadab Fariduddin works for Frontline Consultants, which provides

management training and consulting services to development and

corporate sectors.