On the Importance of Corporate Social Responsibility



Corporate Social Responsibility – An Outline for Companies in Pakistan

By Mahomed J. Jaffer & Syed Bulent Sohail, Orr, Dignam & Co.

Corporate Social Responsibility (CSR) is an evolving concept and is generally understood to be the way in which a company achieves a balance or integration of economic, environmental and social imperatives, whilst at the same time addressing shareholder and stakeholder expectations.[1] CSR should not be understood simply as corporate giving and neither should it be understood as compliance with laws and regulations and externally imposed buyer-codes.[2] On the contrary, CSR should be seen as the corporate sector’s contribution to sustainable development that is consonant not only with the best corporate practices but is also an embodiment of Islam’s mandatory focus on equity and social responsibility[3].

The need for CSR to take root in our corporate culture is all the more acute given the prevailing economic and social conditions of Pakistan. The Constitution of Pakistan prescribes certain essential principles of policy. Without the observance of these avowed goals the country cannot progress towards elimination of poverty. The principles of policy for promotion and social justice and the economic well-being of the people include (subject to availability of resources) basic human necessities such as:

• Promotion of the education and economic interests of backward classes and areas;

• Removal of illiteracy and providing free and compulsory secondary education;

• Securing just and humane conditions of work and ensuring that children and women are not employed in vocations unsuited to their age or sex.[4]

• Secure the well-being of people, irrespective of religion, gender or ethnicity;

• Provide for all citizens facilities for work and adequate livelihood with reasonable rest and leisure;

• Provide basic necessities of life, such as food, clothing, housing, education and medical relief;[5]

These are indeed progressive ideals and some of these have also been enshrined in the United Nations Declaration of Human Rights. However, the Government cannot be expected to successfully meet all the challenges in Pakistan and it is now imperative for civil society to supplement and complement the Government in a concerted effort to uplift the increasingly alienated segments of the population. It is no surprise therefore that Pakistan is ranked 12th worst in the index of 20 “failed states” based on criteria such as uneven development, economy and public services. These states have been characterized as being on the brink of failure to perform basic state functions and susceptible to the outbreak of violence in the near future.[6] Therefore, contribution from the corporate sector, as being an integral part of civil society, is urgently required and CSR initiatives should be facilitated and welcomed at all levels, including by the Government in the shape of increased incentives, co-funding and tax relief.

In this regard, it is heartening to see recent initiatives being taken by the private sector, most notably by CIPE and the Responsible Business Initiative (RBI) in formulating a Concept Paper on “Social Enterprise – Beyond Philanthropy”. One of the important recommendations of the Concept Paper was for the establishment of a National CSR Forum comprising of membership being drawn from representative bodies of business, labour, government, civil society, media and expert groups. The objectives of the Forum would be to provide a suitable platform for CSR initiatives to find resolution and policy impact and through such institutional arrangements to create linkages and partnerships to foster CSR practices, leaders and role models.[7]

A few individual companies have also taken the lead in CSR initiatives and in a survey conducted by PCP, it was revealed that many blue chip public limited companies have taken the lead in charitable donations.[8] In this regard, the former Prime Minister, Mr. Shuakat Aziz had proposed that all companies should annually donate in accordance with best international standards a minimum of 1% of their profit before tax for social development. Indeed such companies should be recognized publicly at appropriate forums and the PCP has taken the lead by initiating the ‘Pakistan Corporate Philanthropy Awards’ in 2004. Participants are recognized and awarded on objective criteria based on the volume of giving and the donations as a percentage of the profit before tax. It would be an incentive if such measures were further institutionalized to promote and enhance a CSR culture in Pakistan. CSR objectives are also embodied in Islam’s socio-religious fabric and consonant with the “social conscience of Islam”[9]. Teachings of Islam emphasize the importance on charity and care for the underprivileged and calls for an equitable redistribution of wealth (Zakat) as one of the five pillars of faith.

Such efforts are already underway regionally in which some leading Pakistani companies have participated. The Asian Institute of Management (AIM) has established the “Asian Forum on Corporate Social Responsibility”, which annually meets to recognize and honor Asian companies. CSR Awards are based on the following five categories: (i) best work place practices (ii) concern for health (iii) environmental excellence (iv) poverty alleviation and (v) support and improvement of education. In 2006 and 2007, Unilever Pakistan was awarded for support and improvement of education and best work place practices, respectively and, in 2006, Engro Chemicals Limited was the winner for the concern for heath category. These are very encouraging developments and more Pakistani companies should participate in the AIM awards to achieve recognition on regional and international levels.

It is therefore hoped that a majority of Pakistani companies will be encouraged by the recent initiatives taken by institutions and some leading corporate leaders to introduce a viable and flourishing CSR culture in Pakistan. As a first step, efforts should be made to encourage companies to publish their CSR policies and practices and such statements or reports should be made a voluntary part of the Code of Corporate Governance for listed companies. This will help establish CSR standards and promote competitive culture amongst companies in the field of corporate social responsibility.

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[1] Pakistan Centre for Philanthropy (PCP), “Corporate Philanthropy in Pakistan: A Survey of Public Listed Companies, 2006” p.1.

[2] Center for International Private Enterprise (CIPE) and Responsible Business Initiative (RBI), “Business Policy Roundtable: Social Enterprise – Beyond Philanthropy – A Concept Paper” August 7th 2008, p.1. (the buyer codes being referred to are the SA8000 certificates for compliance on labour and management standards).

[3] Ibid. CIPE “Concept Paper”.

[4] Article 37 of the Constitution of the Islamic Republic of Pakistan 1973.

[5] Article 38 of the Constitution of the Islamic Republic of Pakistan 1973.

[6] The Fund for Peace’s “Failed States Index 2007” Foreign Policy (taken from CIPE’s ECONOMIC REFORM Issue Paper No. 0806 August 29, 2008 “Building Democracies and Markets in the Post-Conflict Context”.

[7] Supra note 2 at p.4.

[8] Supra note 1 at p.19. (Oil and Gas Development Company Limited (OGDCL) topped the list in 2006 with donations over Rs.643 million, out of which Rs.500 million was contributed to earthquake rehabilitation.)

[9] H.H. The Aga Khan “Is Civil Society Bankable?” Annual Meeting of the European Bank for Reconstruction and Development, Tashkent, May 5, 2003.

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