Ambreen Rbi - CSR Perspective From Pakistan

CORPORATE SOCIAL RESPONSIBILITY
IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION
By
Ambreen Waheed
www.rbipk.org
A MEMBER OF THE ASIA-PACIFIC CSR CENTRE GROUP

AND THE SOUTH ASIA ALLIANCE FOR RESPONSIBLE BUSINESS
EVALUATION OF THE STATE OF CORPORATE SOCIAL RESPONSIBILITY IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION
CONTENTS
1.0 PREFACE ......................................................................................................................................................... 3
2.0 INTRODUCTION ............................................................................................................................................... 4
2.1. Why Map CSR in Pakistan? .............................................................................................................................. 6
3.0 WHAT IS CORPORATE SOCIAL RESPONSIBILITY?.................................................................................... 7
3.1. How CSR Has Evolved through History ............................................................................................................ 8
3.3 How it is Currently Defined and Understood ................................................................................................... 11
4.0 HOW IMPORTANT IS CSR IN TODAY’S WORLD? ...................................................................................... 13
4.1. Global Principles, Local Application ................................................................................................................ 13
4.2. Insurance against Bad News........................................................................................................................... 15
4.3. Risks of Non-Compliance ................................................................................................................................ 16
4.4. Factors Driving CSR Growth ........................................................................................................................... 17
4.5. World Trends in CSR Demand & Supply......................................................................................................... 18
4.6. CSR and WTO Requirements ......................................................................................................................... 18
4.7. Business Case................................................................................................................................................. 18
4.7.1. Access to Markets ..................................................................................................................................................................19
4.7.2. Improved Financial Performance............................................................................................................................................19
4.7.3. Slide in Operating Costs.........................................................................................................................................................19
4.7.4. Brand Image and Reputation..................................................................................................................................................19
4.7.5. Growing Sales and Customer loyalty......................................................................................................................................20
4.7.6. Productivity and Quality Enhancement...................................................................................................................................20
4.7.7. Employee Retention ...............................................................................................................................................................20
4.7.8. Less Scrutiny by Regulatory Bodies .......................................................................................................................................20
5.0 HOW DOES CSR FIGURE IN THE PAKISTAN CONTEXT?......................................................................... 20
5.1. CSR Practices in Pakistan............................................................................................................................... 21
5.2. Initiatives by Support Organizations in Pakistan ............................................................................................. 22
5.3. In Search of Competitive Advantage ................................................................. Error! Bookmark not defined.
5.4. CSR in the Light of Islam................................................................................................................................. 24
6.0 IS THERE A CSR ROLE FOR GOVERNMENT? ........................................................................................... 24
6.1. Examples from the World ................................................................................................................................ 24
6.2. Meanwhile, In Pakistan… ................................................................................................................................ 25
7.0 WHY THIS STUDY AND HOW ....................................................................................................................... 26
7.1. Methodology .................................................................................................................................................... 26
7.2. Benchmarks..................................................................................................................................................... 28
8.0 RESEARCH FINDINGS .................................................................................................................................. 28
8.1. Data Analysis................................................................................................................................................... 29
8.2. Response Analysis .......................................................................................................................................... 29
9.0 GENERAL PERCEPTION............................................................................................................................... 32
10.0 STATE OF CSR ............................................................................................................................................. 37
10.1. CORPORATE GOVERNMENT.................................................................................................................. 37
10.2. BUSINESS ETHICS PRINCIPLES ............................................................................................................ 39
10.3. ENVIRONMENTAL COMPLIANCE ........................................................................................................... 40
10.4. SOCIAL COMPLIANCE ............................................................................................................................. 42
10.5. DISCLOSURE AND REPORTING............................................................................................................. 46
10.6. PRODUCT INTEGRITY ............................................................................................................................. 47
10.7. CORPORATE GIVING OR COMMUNITY INVESTMENT ......................................................................... 48
10.8. STAKEHOLDER INVOLVEMENT.............................................................................................................. 50
10.9. SUPPLY CHAIN SECURITY...................................................................................................................... 51
10.10. FINANCIAL PERFORMANCE ................................................................................................................... 52
10.11. LEVELS OF COMPLIANCE OF CSR PRINCIPLES.................................................................................. 54
11.0 BRIDGING THE GAP...................................................................................................................................... 55
12.0 CONCLUTION................................................................................................................................................. 57
13.0 RECOMMENDATION FOR CSR STRATEGY................................................................................................ 58
14.0 REFERENCES ................................................................................................................................................ 74
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© Responsible Business Initiative
Ambreen Waheed
All of us
– the private sector, civil society, labour unions, NGOs, universities, foundations, and individuals –
must come together in an alliance for progress.
Together,
we can and must move from value to values, from shareholders to stakeholders,
and from balance sheets to balanced development.
Together,
we can and must face the dangers ahead and bring solutions within reach.
– Kofi Annan
UN Secretary-General
1.0 PREFACE
Corporate Social Responsibility (CSR) is now moving towards Responsible Competitiveness, a
precept that implies that there is a role for business in influencing policy for business
success. The global CSR movement has passed through varied phases in time and in concept
with regard to the implementation of CSR. Initially grounded in corporate philanthropy, it
moved on to solidarity movements or environmental activism with citizen sector movements
taking on business. At the same time governments and
courts have laid down more stringent parameters of
corporate behaviour, compelling business towards legal CSR is “the integration by
enterprises on a voluntary basis of
compliance, damage control for civil society and
the social and ecological concerns in
consumer reactions, and then on to efficiency gains and
their business transactions and their
differentiation for competitive advantage.
relations with the involved parties”
.CSR is a dimension that should be
Over the last ten years there has been a shift from part of the strategic orientation at the
antagonistic activism to positive engagement between basis of enterprise and should
companies and their stakeholders. In Europe business therefore interact with all spheres of
organizations and their stakeholders are taking company management: with the
collaborative actions for debating and creating CSR financial aspects, with production,
with marketing, with Human
policies and strategies to achieve a competitive
Resource and more generally with
advantage at a national stage and to move towards the
corporate strategies and policies.
next wave of responsible competitiveness which is
innovation, sustainability and future focus.
In the Asia Pacific most of the countries are riding the so-called second wave of CSR, which is
efficiency-centred and market focused. They have reached conceptual clarity and are looking
at the impediments to CSR implementation. In Pakistan, however, we have just started our
journey and are struggling with the first wave i.e. of philanthropy and legal compliance which is
society and government focused.
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In Pakistan’s immediate neighbourhood, we see that during the last decade or so India and Sri
Lanka have gained competitive advantage due to their pro-activeness and future market-
centred policies. Pakistan’s early promise in the wake of the widely recognized Sialkot
Partnership against Child Labour has lost momentum. Now, another opportunity is coming this
way in the emerging manufacturing hubs created by the various upcoming enterprise zones
and so-called “textile cities”, which can market themselves by adopting a demonstrable CSR
strategy. Pakistan can either let this opportunity pass it by or swing into action in case a crisis
like the Sialkot child labour crisis hit, or Pakistan could act to embed a national CSR strategy
into decision-making and business practice through effective policy, incentives and a system of
credentialing that can assure overseas buyers of the country’ distinct position as a socially
responsible supplier country.
Has the Pakistani enterprise arrived at a stage where it can learn from experience around it and
take a jump forward to catch the third wave of differentiation and competitiveness built on
responsible business practice? Is the Pakistani enterprise mature enough to assess its own
processes against global CSR benchmarks and then turn shortcomings into differentiators to
capture future markets, which are surely steered by responsible and ethical business
practices? Sadly, barring a few notable exceptions, the answer to these questions is in the
negative, as indicated by the findings of this research.
Taking Pakistan into the current wave of CSR means building responsible competitiveness, and
to do so require a collaborative effort that supports a culture of compliance and an environment
that enables responsible thinking and practices. This is only possible by underscoring CSR as
a priority of national policy, followed by the development and implementation of a national CSR
strategy supported by all important stakeholders. From this first step CSR practices need to
evolve through an institution for CSR dialogue that responds to ever changing market
demands. An example of such an institutional arrangement would be the formalization of a
CSR policy and learning group comprising individuals representing relevant stakeholders.
Beginning as a semi-formal working coalition, possibly under the aegis of SECP itself or an
academic or CSR research institution, this group can evolve into an independent organization if
the situation demands.
2.0 INTRODUCTION
Does CSR have a value to corporate and national competitiveness as well as to society at
large? Is there at all, a role for business in working with policy makers to create an enabling
environment for responsible and ethical business to flourish? Does business have a
responsibility for raising awareness, building capacities, and affecting change in ways that
impact national competitiveness in a globalizing world? Does Pakistani business have anything
to contribute meaningfully to the global CSR debate and how it influences it?
CSR is no longer a new phenomenon for business, but these are some of the questions that
confront policy makers as they determine the need for and the direction of a national CSR
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policy. Governments are reviewing regulatory frameworks to integrate CSR into routine
corporate disclosure regimes. Who would have said ten years ago that a random debate in the
citizen sector would nudge the world into a new paradigm of corporate behaviour?
As we know it today, CSR has its roots in consumer consciousness and solidarity movements
in developed consumer societies that saw elements of social and environmental exploitation in
the behaviour of major global enterprises, whether they were mining or natural resource
exploration companies or retailers sourcing consumer goods and produce from cheap labour
markets in the developing world. From initial finger pointing and confrontationist strategies
spearheaded by NGOs and civil rights activists to the blossoming of a host of sustainability
partnerships between these same NGOs and their erstwhile corporate foes, CSR has definitely
come a long way.
Yet, even as the sustainability motive drives cooperation, lingering concerns about corporate
intentions and NGO agendas continue to muddy the discussion, especially in the case of brand
supply chains in the developing world to avoid labour practice norms or the environmental
impact of obsolete plants relocating to countries with less stringent safety or environmental
regulations. Thus the CSR discussion now impacts supply chains of multinationals (MNCs)
even in their remotest reaches. As a result, with an eye on their stakeholders to safeguard
repute and often attracted by the competitive advantage it brings, MNC’s are in the forefront of
demanding “responsible behaviour” from their suppliers or sub-contractors. This side of CSR
has of late been strengthened by initiatives from influential organizations like the World Trade
Organization (WTO).
Thus, multiple variables like stakeholder awareness, government initiatives, globalization and
localization patterns, and the highly volatile business scenario, all have had a role to play in
determining the centrality of CSR in today’s business environment. But, contrary to
expectation, CSR is not a defined code or a toolkit to be employed in the manner of an
operating manual. Rather, CSR is often a vision based on particular sets of values that
business leaders often aspire to, and as such is more of an ever-changing philosophy, quite
open to interpretation and re-thinking of business strategy based on decisions related to ethical
values, legal compliance, respect for stakeholders, and supporting communities or nurturing
environment.
Increasingly, CSR is being interpreted as the expectation society has of business. CSR is the
leadership vision that is more than occasional gestures, marketing oriented initiatives,
enhancing public relations or business affiliations etc. In contrast, it’s a comprehensive set of
policies and programs enriched with the urge for developing a better society.
This report presents the prevailing state of corporate social responsibility in Pakistan. The
report has been compiled on the basis of information shared directly by companies as well as
by extensive literature review from variety of public sources such as newspapers, books, on-
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line services, reports from various NGOs, academic studies and international conferences and
dialogues between governments, industry, academics and civil society. Starting with the brief
back ground about how the CSR roots were planted, the report explains the growth and
expansion apart from the need to conduct this type of research in Pakistan. The driving factors
have been discussed along with the influence in the countries like Pakistan. The research
methodology explains the development of the questionnaire catering the set parameters and
the data collection strategy. A detailed analysis has been established over the data collected
from variegated business sectors in Pakistan including the multinationals as well as the small
and medium enterprise. At the end we have proposed the strategy to fill up the gaps in the CSR
implementation and the steps essential for Pakistani businesses to compete their international
competitors by increasing their repute and maintaining their quality.
2.1. Why Map CSR in Pakistan?

CSR is now a mainstream business management issue the world over. A growing body of
research is enriching the business case for a socially and environmentally responsive corporate
sector. This was not always so. The nineties are believed to be a watershed in pushing CSR
towards the top of the agenda following a groundswell of consumer concern about standards of
corporate behaviour along product supply chains criss-crossing the globe. From product
integrity issues confronting brands like Nike and Martha Stewart, to process integrity issues
highlighted during the Shell and Barings episodes, the ethical dimensions of an enterprise’s
conduct became a focus of debate not only within citizen sector organizations where it had
originated, but among top decision-makers in Government.
Lobbyists and legislators, especially in Scandinavia and Western Europe were quick to echo
civil society’s demand for corporate accountability and disclosure. Enron drew in the USA into
the CSR debate as well, followed by tougher regulations on corporate disclosure. Other than
for a handful of corporations, this nexus of consumer demand and legislation has meant a
paradigm shift. The new millennium has seen companies in over-drive, rallying to present their
humane values in sharp relief to their traditional competitive qualities. The “stakeholder” had
finally arrived to share the boardroom agenda with the “stock-holder”.
This burgeoning demand for socially responsible business behaviour has been matched step-
for-step by a number of credible supply side efforts that help the consumer or investor
objectively differentiate between “good” corporate citizens and everyone else. With beginnings
in diverse contexts, raging from inter-faith groups to labour unions to watchdog organizations, a
set of globally acknowledged yardsticks are now available for establishing credentials of any
enterprise that wishes to be judged for its impact on society. These, including the ISO 14000
standard for environmental management systems, the SA 8000 social accountability standard,
and more recently, the Global Reporting Initiative guidelines for sustainability reporting, all
emerged in response to the need for a global set of implement-able CSR standards. The UN
Global Compact and the Johannesburg World Summit on Sustainable Development both
validate this trend for CSR. Closer to home Securities and Exchange Commission of Pakistan
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(SECP) has made a first contribution with its Code of Corporate Governance, and the 2002
Trade Policy articulated for the first time the government’s intent to mainstream international
industry benchmarks through appropriate institutional support.
Pakistan itself has had to learn quickly in adapting to the CSR paradigm. The country’s carpet
industry suffered almost a billion dollars of damage through the 1990s as a result of the Iqbal
Masih case, while the sporting goods industry stepped away from the brink only after the
Sialkot Partnership led by industry associations brought together the government, ILO and
citizen sector organizations to combat child labour. Since then the nation’s textile and edible
products export industries have continued to face demands by international buyers for CSR
credentials
Within this environment, it is unavoidable for Pakistan to actively consider evidence-based

strategy development as a first step towards creating a well-directed and meaningful CSR
culture in Pakistan. We have numerous examples of corporate philanthropy, which are
regularly presented as CSR. To explore how deeply corporate values are embedded in
organizations and to examine the role values are playing in Pakistan’s context, this study
emphasizes:
AREAS OF FOCUS FOR THE STUDY
1. The Need for CSR in Pakistan

- how companies define
2. CSR approaches being practised in Pakistan
Corporate Responsibility and 3. Factors driving CSR, like reputation, loyalty etc.
Corporate values 4. Barriers to implementation of CSR
- the relationship of values to 5. WTO requirements
6. Assessment of potential threats & opportunities
business performance
7. Policy or regulatory measures to support CSR
- to identify best practices for 8. Outputs/targets industry can set to report on CSR
managing corporate values. 9. Identify best practices
10. Strategy for effective implementation of CSR
3.0 WHAT IS CORPORATE SOCIAL RESPONSIBILITY?
Allan Hammond of the World Resources Institute says, “I don’t know of any developing country
government that can deliver services in a million places at once everyday. If we want to solve
some of these social problems, one of the best ways we could do it is to hire the right global
companies.”
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3.1. How CSR Has Evolved through History

Corporations use natural and human resources from their environment to run their business
and generate profits, and they are responsible for the depletion of these resources and the
negative impact caused by running of their business to environment and the community
around their business. The CSR concept evolution started with the concerns related to the
damage created by business on environment and society at large by way of activities linked to
their business operation. Business are expected to clean up the mess they have generated to
the environment, Until 1980’s CSR was considered same as corporate philanthropy. The
current CSR concepts started formulating in early 80’s. In 1980’s and 1990’s examples like
Shell spoiling the environment and violating the human rights in Nigeria, started a new wave of
criticism which triggered a complete different thinking on CSR and hence many CSR
definitions emerged during this period.
On the other hand, companies like Nike and GAP Inc were hit by the bad repute of their
suppliers violating labour laws and exploiting poverty and promoting discrimination. When the
activist groups and governments felt that current laws governing environment, health, and
safety and consumer protection are weak to handle multinationals, the United Nations took the
initial step by providing a code of conduct for such trans-national companies. This step failed
due to the lack of support from governments and opposition from different organizations. As a
result a voluntary initiative, World Business Council for Sustainable Development (WBCSD)
was formed in 1991. This initiative was attacked because critics said that CSR actions should
be mandatory instead of voluntary. Critiques argued that voluntary CSR cannot hold corporate
operations accountable.
As a further development social auditing was introduced by third party verifiers to evaluate the
compliances and the social state of businesses. Social reports emerged as a result. In the late
80’s Ben & Jerry's ice-cream led in voluntary social auditing, opening up their records and
processes for evaluation and inspection. But because in these early days the process lacked
the rigour or standards against which performance could be measured, it did not create a major
following. Social and environmental standards began to be developed to cope with this
situation. Certification programmes have been emerging since all through the 1990’s. Several
certification-centred groups like Social Accountability International, Forest Stewardship Council,
Fairtrade Labelling Organizations International, and a host of others have continued to work on
different social aspects of CSR. Lately they have joined hands in the form of the International
Social and Environmental Accreditation and Labelling (ISEAL) group with a view to oversee
standard identification and standard implementation.
Hence, CSR has continued to evolve rapidly over the last thirty years. Even though it is still
favoured by corporate leaders, the old model of corporate philanthropy is looked upon more as
a self-actualization gesture than as socially responsible attitude. For example Andrew
Carnegie, the steel magnate who built libraries, universities and museums as a philanthropist
polluted towns with smoke and debris and dealt harshly with workers as an industrialist even
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employing armed guards to shoot at strikers. In today’s environment libraries or universities

might not accept funding from a business known to pollute or be socially irresponsible. In 1999
students from a number of major US universities formed the Workers Rights Consortium
(WRC) to protest against Nike and its sponsorship programmes because of human rights
allegations.
Customer expectations and demand for “clean and green” companies have led to a number of
benchmarks and guidelines, such as the Sullivan Principles, the UN Global Compact and the
Organization for Economic Cooperation and Development (OECD) guidelines on multinational
enterprises. During the last decade, the adoption of the codes of conducts by the organizations
is an encouraging act. Several examples exist in the leather, footwear and apparel industries
establishing codes of conduct and monitoring programs not only due to the prestige and
competition but also with the aim to contribute towards society. Quite a few pharmaceutical
companies have reduced the prices of the drugs direly needed in the underdeveloped
countries.
The evolution from CSR theory to CSR practice can be broken down into several phases.
1. Pressure building up against the businesses CSR Approaches

2. Wave of awareness by the society and the • Business Ethics
• Cleaner Production
stake holders • Environment
3. Realization of the responsibility by the businesses • Fair-trade
• Human Rights
4. Development of Policies and identification of • Labor Practice
best practices • Workplace Safety
• Occupational Health
5. Implementation of the policies • Quality Management
• Supply Chain Integrity
6. Development of several programs to implement
• Triple Bottom line
CSR Performance and Compliance Evaluation
3.2
3.3 A Chronology of CSR
CSR Drivers Year Crisis Focus
Business action & Civil Society Action &
Pressure & Enabling Organizations Reaction Reaction
1960-1979 1960
1 2
Amnesty International l, WWF and OECD
3 • Denial • Pressure Building
founded • Information hiding • Voice Raising
• Pressure 1962 “Silent Spring” by Rachel Carson exposed • Environmental • H/C Rights Awareness
building DDT
4 disaster • Criticism for Gov. &
against the 1962 Cuban Missile Crises • Damage control Business
Government 1969 Friends of Earth founded • Demand for policies for
s and 1970 First Earth Day Celebrated in USA compliance
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Business 1971 Green Peace founded • environmental and natural

1973 Seveso Disaster, Italy, chemical reactor • resource limits
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ruptured and infected the ecosystem. • NGOs and environment
1973 Watergate Scandal USA • ministries formed
1975 End of Vietnam War • Demand for Compliance
nd
1978 2 Oil Crises • Environmental NGO
1979 Iran revolution / Soviet invasion of Afghanistan
1984 Bhopal Disaster, India • Business • Capacity Building

1980 – 1997 1986 Chernobyl Disaster, Ukrain responsibility • Societal Awareness
1987 Montreal Protocol, intl. agreement designed to • Process • Legislation development
• Human protect the stratospheric ozone layer Implementation Strategies development
/labor right 1988 Green Consumer Guide Launched • Strategies • Auditing
violations 1989 Exxon Valdez Oil Spill, Alaska development • Accounting
1989 Fall of Berlin Wall, East Germany • Policy • Human Rights formulated
• Corruption 1989 Tiananmen Square Massacre, China development • Collaborations/forums
1990 Nelson Mandela Freed • Efficiency • Consumer actions
• Environment 1990 20 Anniversary of Earth Day • Risk management
Negative 1990 SustainAbility formed
impacts 1991 First Gulf War
1992 First Earth Summit, Brazil
1994 Triple Bottom Line
1995 Shell’s Brent Spar issue
1995 Shell’s Nigerian Scandal
1996 Nike Sweatshops, Consumers boycott Nike
1996 Mad Cow Disease
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1997 Kyoto Protocol
1998 – 2005 1999 Battle of Seattle • Accountability • Demand for SR also

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2000 World Social Forum held - the WEF’s failure • Transparency from other Stakeholders
• Globalization 2001 9/11, terror attack changes the world history, • Governance especially from
highlighting security and civil human rights • Global Government
• Demand for 2002 World Summit on sustainable development, • Diversity
Collaborations
Responsibility USA • Security • Global Social
in behavior &
actions to SH.
2002 Enron Scandal • Stakeholder Responsibility
2002 American Invasion on Afghanistan involvement • Responsible
rd
• Security 2003 3 Gulf War, UN credibility shattered • Collaborations with Competitiveness
2003 Parmalat Scandal, Italy academia • Governance
• WTO 2004 Iraq Turmoil, Abu Ghareeb human rights • Capacity building
scandal • Enabling
• Economic
imbalance 2004 Madrid Train bombing, Spain
2004 Shell reserves controversy
• Governance 2004 Tsunami Catastrophe , Indian Ocean
• Accountability 2005 London bombing, UK
Adapted Table 3.2
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3.3 How it is Currently Defined and Understood

Over the period of the past thirty years, the term CSR has continued to adapt to the changing
situation in businesses world over. The concept continues to go through its evolutionary march
and so does its definition. No one definition describes CSR, but each of the following reflects a
value-driven expectation that a business generates within its customers. A sampling is given
below:
“CSR is the organizations social license to operate, and is important to legitimize business
activity, particularly in the global activity where businesses are accused of practicing soulless
capitalism.”8 Corporations need to have powerful vision and highest values to go further than
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compliance with current regulations and best practice.
“Corporate Social Responsibility is achieving commercial success in ways that honor ethical
values and respect people, communities, and the natural environment”10.
“CSR means addressing the legal, ethical, commercial and other expectations society has for
business, and making decisions that fairly balance the claims of all key stakeholders”
“CSR when well practiced is about sound business practices and good management that
deliver value to businesses and their shareholders, as well as to society at large. This vision of
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business hardly suggests that profits should take a back seat to other considerations”
“Globalization creates risk as well as opportunity and business leaders have considerable
responsibility to help make it a constructive rather than a destructive force. Responsible
behaviour toward employees, shareholders and communities is not a luxury for good economic
times but a core concern at all times”12.
“The key for corporations is that CSR activity is seen not as PR, not as philanthropy, but as
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mainstream to the business – justified not just by altruism but on sound business ground”.
Stephen Timm’s definition above very clearly sets CSR apart from philanthropy which is
giving back to the community in some sense whether it is through funding, volunteering or any
kind donation or personal involvement and CSR involves more internally - focussed activities in
terms of HR policy, Ethical Business Practices, environmental regulatory compliance.
Corporate philanthropy is an act of giving and this business practice includes the giving of cash
gifts, the establishment of non-profit foundations, product donations, and employee
volunteerism or In addition to charitable giving, more corporations are becoming actively
involved in arts, education, culture, health and human services, and civic and community
outreach.
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A socially responsible company may include philanthropy as a part of its overall efforts to be
stakeholder-focused. However, corporate social responsibility implies a much broader
obligation than philanthropy alone. Socially responsible companies will consider the community
impact of all aspects of their operations, rather than reserving community issues until after
profits are made. Shifting one-time philanthropic donations into a focused program of
community partnering can be a good first step for companies that want to develop a
comprehensive approach to social responsibility.
However, it has to be made clear that CSR extends beyond the random act of generosity to
include such commonplace values as paying taxes, open disclosure, labour standards and
customer sensitivity. It is time Pakistan has a mechanism for collecting and analyzing credible
real-time data on accepted CSR variables within its multi-layered corporate sector. Only then
can we see CSR becoming a strategic asset for increasing industry competitiveness and a
socially responsive corporate culture.
Increasingly, companies around the world have adopted formal statements of corporate values,
and senior executives now started to identify social concerns as top issues on their companies’
agendas. The meaning of this new emphasis on social responsibility is less obvious than the
trend itself.
John Zinkin of Nottingham University explains, “defining responsible behavior and getting CSR
right is difficult because it is a journey, not a destination. As countries evolve, getting richer and
better educated, so society’s expectations of company behavior become more demanding. So
what was good enough yesterday may no longer be good enough today, and certainly will not
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be good enough tomorrow.”
CSR still is an evolving concept and has taken its shape based on different events in different
geographical contexts over a period of time. We can say it has gone through different stages of
evolution over the last 30 to 40 years, which can be referred to as “generations”. After the
massive destruction of World War II, the process of rebuilding and restructuring was begun.
International organizations were formed. Businesses were developed through incentives.
During the 1960’s and 1970’s several non-governmental organizations came into being, often
lobbying with governments to develop policies and laws related to human rights and fair
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treatment for vulnerable segments of society In the 80’s and in the mid 90’s the world
economy saw several ups and downs.
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3rd
Generation
Integrated
Strategic engagement
for sustainable
competitiveness
2nd Generation
Systematic engagement for
risk management and
increased under-standing
of stakeholders
1st Generation
Pressure driven engagement for pain alleviation with
localized benefits
Fig (3.3)
©AccountAbility
Several international pacts were signed and organizations emerged to address a variety of
social and environmental problems collectively. Corporate governance and responsible
investment emerged as key areas of regulatory concern as a consequence of highly publicised
cases16. Concurrently, and perhaps as a consequence, several advocacy or enabling
organizations and initiatives have come into being in the face of the growing need for corporate
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disclosure and social accountability . The Fig (3.3) elaborates the focus on the activities
during these three generations. We are now on the verge of the 4th Generation and importance
of CSR is still growing.
CSR Dynamism
4.0 HOW IMPORTANT IS CSR IN TODAY’S
In a perpetually changing world, there is
WORLD?
A constant re-evaluation of what CSR means,
individually and collectively,
4.1. Global Principles, Local Application
Within business, for government,
For societies in which business operates
Globally organizations, especially UN organizations, And for the environment.”
are promoting CSR as the path to competitive Chris Perceval
Director CSR International
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advantage and sustainable development. There is emphasis on designing projects to facilitate

less developed countries in understanding and implementing CSR.
UNCTAD is assisting developing countries18 in designing and implementing active policies

for building productive capacity
The Sullivan principles act as a benchmark of CSR
and international competitiveness
• Express our support for universal human rights and, particularly, based on an integrated treatment
those of employees, the communities. of investment, corporate
• Promote equal opportunity for employees with respect to issues
responsibility, technology transfer
such as color, race, gender, age, ethnicity or religious beliefs...
• Compensate employees to enable them to meet at least their and innovation, enterprise
basic needs and provide the opportunity to improve their skill development and business
and capability facilitation (including
• Provide a safe and healthy workplace; protect human health
transportation and information
and the environment.
• Promote fair competition including respect for intellectual and
and communication technology),
other property rights. competitiveness, diversification
• Work with governments and communities in which we do and export capacity, to sustain a
business to improve the quality of life. high level of growth and promote
• Promote the application of these Principles by those with whom
sustainable development’.
we do business.
According to a survey conducted by PriceWaterhouseCooper to reach CEO’s around the word

to gather their view on CSR "Many Global CEOs seem to view their companies' social
reputations as a work in progress. While 47 percent are resolutely proud of their companies for
having a positive social reputation, another 41 percent offer a qualified view-'to some extent'
The survey reported highest confidence in CSR reputation amongst North American CEOs,
with 64 percent feeling strongly that the public perceives their company as a positive social
performer and 30 percent feeling somewhat guarded confidence.
Asia-Pacific CEOs have the lowest confidence in public perception of their companies as
positive social performers, with only 28 percent feeling strongly confident and 54 percent
feeling more cautiously confident. CEOs definitions of CSR differ across regions. As a group,
CEOs prioritize workplace safety and responsiveness to all stakeholders, regardless of legal
requirements, as the key defining components of social reputation, with over 80 percent
support. However, North American CEOs' prioritize supporting community projects over
workplace safety in their definition of CSR, while Central/South American and European CEOs
prioritize workplace safety highest. About 60% CEO believe that CSR is vital to profitability
and stress that CSR must remain a priority, even amidst the current economic downturn.
According to Nitin Desai, the UN Under-Secretary-General the evolution of corporate social and
environmental consciousness over the past decade, with corporate supporters of these
initiatives is growing from a small minority to a larger, more legitimate minority. Marketplace
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Ambreen Waheed
competition, as well as burgeoning environmental and social consciousness in society at large,

may create the critical mass necessary to push this minority into a majority.
Ben Cohen, founder of Ben and Jerry’s homemade ice cream and a well-known social
entrepreneur believes that businesses tend to exploit communities and their workers and he
thinks that this is not the way the game should be played. He envisions that “business has a
responsibility to give back to the community because the business is allowed to be there in the
first place, the business ought to support the community, and business get community support
when they support the community.”
4.2. Insurance against Bad News

While corporations need to adopt common values that work across cultures and nationalities,
they also need to be sensitive to local communities, cultures, norms and work practices. CSR
is a corporate survival issue. In the e-information age any negative news can be a Tsunami for
even the most stable of organizations, Good news are short lived but negative news has a long
lasting negative impact on stakeholders. It can wreck market confidence, effect customer
loyalty and enrage general public. The media highlights corporations for their failures rather
than their successes – and unethical behaviour even if it is unproven means a blot on
reputation that takes a long time to clean, even with the most strident of remedial steps. The
ensuing cost to competitiveness is not difficult to surmise.
Whether you Being proactive and embracing CSR at the earliest possible is a
“believe” in it or not,
good risk managing strategy for a company. In today’s world social
responsibility, corporate values and community initiatives have a
CSR is a corporate
major role in increasing profits through larger sale of product by
survival issue
responsible companies. It’s the best management tool for voiding
and mitigating business and marketing risks.
Over recent years it has become more and more evident that customers reject products
developed, made or marketed through ways that generate unethical profits, even if it generates
profits for shareholders, who too are progressively becoming wary of such sensitivity.
Increasingly, there are growing legal implications linked to unethical business practices.
Corporations are finding it a challenge that is difficult to respond to. The global stakeholder
mindset reflects that mere compliance to regulation is not enough to label a corporation as
socially responsible. Even
companies that appear 100% CSR Opportunity
compliant today can still land up Globalization creates risk as well as opportunity, and
in trouble tomorrow because business leaders have considerable responsibility to help
history tells us they will be make it a constructive, rather than destructive, force,"
judged by tomorrow's standards DiPiazza.
even when their past is

examined. There is a need for companies to be more “futuristic” and proactive in their thinking
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Ambreen Waheed
so they can lead the market by anticipating new legislation. It is now possible for companies to
make a difference not only with their products but also with their values.
4.3. Risks of Non-Compliance

Businesses had to pay a huge cost for failing to understand and integrate socially responsible
values and practices in business dealings with stakeholders. There are several examples that
alarmed the business sectors over the last two decades and enforced them for a strategy
change. A company’s repute and success is dependant on the relationship with all these
stakeholders. Relationship building is a key to success of any business and it’s only possible
when the business practices are the ones acceptable to everyone. Several corporate scandals
have been highlighted by the pressure agencies like NGO’s, media, internet etc.
In the 70’s and 80’s Shell was heavily criticized for continuing to carry out the business in South
Africa and breaking anti-apartheid sanctions. Shell’s intimate involvement in Nigeria while a key
opposition leader was assassinated and its role in environmental damage in Ogoni-land too
brought severe criticism against the multinational. The watershed event was by many
accounts, the Brent Spar crisis in 1995. Greenpeace. Opposed Shell’s decision to dismantle
and dispose of one of its oil platforms in the North Sea. Initially unmoved Shell ended up paying
a price in image and reputation, costing them more than double to what it would have cost to
decontaminate the structure and reuse or dispose of the waste on land. In the face of consumer
boycotts even a mighty company like Shell came to feel the might of the mass market, and
bowed to public opinion in the new media war.
Nike, the world leader in sporting goods, was struck by controversy over their labour practices
in Asia. This too led to massive consumer boycotts, negative publicity, stakeholder and
pressure group criticism, and created an emergency situation for the top management in which
the company was compelled to change their policies and devise a new strategy to clean up
their supply chain and make their suppliers compliant with the standard practices. The Nike
issue acted as a catalyst to bring about a change in management policies and pointed out that
consumer expectations are not restricted by geography.
The Enron scandal was another landmark in the history of CSR and built up a strong case for
its implementation. Enron came up from nowhere to become America’s largest company in just
15 years employing 21,000 staff in more than 40 countries. The company was spotlighted by its
corruption, bribery and false projection. Enron’s declaration of false profits, political lobbying,
shredding of documents and auditors inability to reveal companies unorthodox business
practices are just a few of the major charges. The Company had to face criminal investigation
and law suits and bad repute; transparent reporting then emerged as a solution to avoid such
corruptions in future which emphasizes the ethical dimension of CSR. Enron’s latest report on
environmental and social situations outlines this as a measure taken and how the company is
gearing up to address human rights, environmental problems, and health & safety issues etc.
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4.4. Factors Driving CSR Growth

The changing scenario of business across the world due to globalization has instigated
governments to regulate business and develop policies compliant to this emerging situation.
These policies target traditional corporate performance variables such as environmental
performance, working conditions and marketing ethics etc. According to its promoters
globalisation is promoting democracy as well as economic growth. Companies can work with
local communities for sustainable development programs by conveying clear values and
principles, and accepting responsibility for workplaces and workplace conduct, companies can
not only build trust and mutual understanding with stakeholders, they can also support the role
of governments. As for its detractors, globalization can be contained by encouraging CSR as a
foil for runaway commercialism and exploitative business practices. This is a rare convergence
in support of CSR from completely opposing perspectives.
Customers can be both from businesses or consumers. Studies have shown that their interests
and purchasing decisions are linked with
Global CSR Trends
social criteria, especially judging the
environment and human rights. Awareness CSR is now a mainstream business principle
of various stakeholders including Triple Bottom Line is an accepted tool

shareholders and the general public has
Voluntary disclosure is gaining ground
increased over the period. This awareness
CSR departments are now commonplace
has increased the expectations they had of
businesses thus creating a pressure on the CSR is now seen as an investment not a cost
businesses to adapt to the social and SRI Indexes are outperforming others
economic well being. Increasing Business schools teach CSR at PhD level
interdependence of shareholder values and
© Responsible Business Initiative-2003
the corporate values have brought up a
strong case for top management about CSR.
There is increasing awareness among business leaders in the developed economies that
practicing corporate responsibility affects their corporate reputation and brand image.
Demand for disclosure has increased over time from the customers, investors, regulators,
community groups, environmental activists, trading partners which have resulted in a variety of
social audits that explains the social performance of an organization. NGO’s have also played a
major role in turning the spotlight on the corporate practices creating pressure for the non-
compliant organization and boosting the activities of the organization practicing or planning the
CSR strategy. Also there has been a rapid growth in the ‘CSR industry’ of consultants and
accounting firms who are driving the social reporting trend, while representing that the driving
force actually comes from the organization’s stakeholders. Companies that base their business
decisions on profit margins alone and ignore their impact on stakeholders can pay a heavy
price in both the court of public opinion and the stock markets.
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The Nike experience was a catalyst for bringing supply chain issues into the spotlight, that
consumer expectations from their favourite brands business are not geographically restricted to
their home country but based on universal principles reinforced by the fast expanding
information society that links all manner of stakeholders. Nike’s misfortune was that it became
the symbol of what every other global brand seemed to be doing – disregarding their
responsibility to exploited workers or an endangered environment. But Nike has also ended up
having to lead the pack in changing their previous business practices at headquarters as well
as along their supply chains in developing countries.
HOW IS CSR CHANGING WITH GLOBALIZATION?

4.5. World Trends in CSR Demand & Supply
The European Commission has established a “European Multi-stakeholder Forum” to exchange
best practices and explore the European approach to CSR. Corporate progresses towards
greater responsibility has always been the result of both push and pull forces. Business
leaders pulled their organisations to higher standards and, their counterparts in society pushed
19
for change. Pascal Lamy, EU’s Commissioner for Trade strongly advocates that in order to
extend the limited societal benefits of CSR practices it needs to be integrated into broader
strategies and public policies.
4.6. CSR and WTO Requirements

CSR is one of the responses to the imbalances resulting from
To make CSR into a
business case, companies the acceleration of the globalization process. Imbalance
have to under-promise and between the advanced governance system in industrialised
over-perform.
©Responsible Business countries, who dispose of a highly sophisticated set of
Initiative-1999
economic and social regulations, and the lack of such
governance in developing countries as well as at international
level.20
International growth of business and the efforts of WTO to remove global barriers has also
pressurised the smaller economies to become competitive. Big business entities are not only
concerned about their CSR strategies, companies are also keen to ensure that their suppliers,
distributors and even consumers are informed about the company’s ethical and social
performance.
Investment groups have also started pressing the companies on their social issues. They
require disclosure on wide range of CSR issues including environment responsibility, workplace
policies, community involvement, human rights practices, ethical decision making and
corporate governance.
4.7. Business Case

Our research also focuses on different definitions and benchmarks being used globally in major
regions and at how business is being impacted in terms of their profitability and productivity by
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implemented CSR practices. The business case for CSR is now a reality proven through a
number of researches. Case studies of organizations all over the globe have clearly identified a
21
linkage between socially responsible practices and greater financial gains . In Pakistan, on
the whole, the business case for CSR is yet to be understood in terms of competitiveness and
business advantage. If we assume that business schools teach what they determine as useful
to their pupils, then this finding is reinforced in the lack of importance being given by them to
CSR. Moreover, we find that companies often feel that resources expended on mandatory
social or environmental compliance is CSR. And that their donations to charity are CSR
costs.
The challenge is to create companies that have the vision and capacities to create socially and
environmentally responsible business models that can outperform competitors who do not
accept this challenge. Some of the proven benefits to business are discussed below:
4.7.1. Access to Markets

According to socialinvest.org SRI funds have increased from 40 billion US dollars in 1984 to 2
trillion US dollars in 2003. Socially Responsible Investments have risen by 7% over the past
year even as the total volume of investments has declined 4%. Companies addressing ethical,
social and environmental responsibilities have growing access to capital.
4.7.2. Improved Financial Performance

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

Environmental stewardship and workplace safety initiatives help improve work place practices,
and processes, reduce wastes, and resource consumption. Thus they improve productivity and
reduce costs. Enhancement of social standards and benefits result in employee retention which
saves hiring and training cost and increase profit by improved productivity through stable work
force.
4.7.4. Brand Image and Reputation

Companies or brands with good image and clearly defined strategy on corporate social
responsibility attract a large number of customers. A socially responsible organisation can
benefit from its good reputation amongst its customers and is also recognised as a respectful
entity in their business community. Increasing their ability to attract investment and trading
partners. Saves revenue on advertising to restore brand image and increase financial viability
through increase share prices.
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4.7.5. Growing Sales and Customer loyalty

The common concerns of the customers include price, quality, appearance, taste, availability
safety and convenience. CSR has created potential incentives for entrepreneurs who can now
cater a growing market segment of ethically motivated consumers who are inclined to value
based criteria. A good example from Pakistan is Saga Sports, whose investments in
community infrastructure and socially responsible manufacturing made it the world’s largest
soccer-ball manufacturing company despite a business environment fraught with child labour
allegations
4.7.6. Productivity and Quality Enhancement

Companies that invest in the working conditions and environmental friendly atmosphere and
also involve the employees in decision making tend to have an increase in productivity.
Employee loyalty and dedication results in effective man hour utilization and hence increase in
quality.
4.7.7. Employee Retention

Companies perceived to have strong CSR commitments often find it easier to recruit
employees, particularly during tight labour markets. Retention levels may be higher, too,
resulting in a reduction in turnover and associated recruitment and training costs.
4.7.8. Less Scrutiny by Regulatory Bodies

Another important advantage observed in case of organizations practicing corporate social
responsibility is that they are less scrutinized by the regulatory authorities and are given prompt
treatments and extra benefits.
5.0 HOW DOES CSR FIGURE IN THE PAKISTAN CONTEXT?

In the West CSR has become a touchstone of Corporate trust and a predictor of business
longevity. In Pakistan, CSR is still a buzzword for most of the organizations and individuals.
Businesses are in a process of attaining the internationally accepted norms of corporate social
responsibility often either misunderstanding the true philosophy of CSR or ignoring it. The
multinationals in Pakistan are ahead of this wave, due to their international linkages and are
actually adopting the standards followed in their
Need for change
head-offices in the developed countries. The birth of
Systemic change is needed. Discontinuities
several NGO’s working for CSR related issues have will lead the core of the global economic
expedited the awareness process. The pressure system — i.e. the financial community — to
raised by their voice has actually instigated the value the material importance of sustainability
government and the businesses to develop management.
strategies complying with the international Ernst Ligteringen, GRI
standards. Still there is a need to involve civil Global Reporting Initiative, Netherlands
society and the academia to make a powerful CSR

strategy for Pakistan that can be implemented in addition to a strong national body that can
enforce the regulations.
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Multinationals and quite a few large nationals have policies committing to environmental, social
and ethical compliances and they have also invested in community projects which includes
welfare, primary education, adult literacy and health sector projects, media awareness and
vaccination campaigns, establishment of hospitals and diagnostic centres. Some focus is also
on cultural programmes such as, charity shows, sports events which are mainly initiated to
22
enhance brand image and product publicity. All these corporate activities are cyclical and
reflect a non-strategic and non-business approach to very good societal investments. These
activities are a useful component of CSR, referred to as Social Investment. It is mostly a step
that makes a difference, but companies can create an even larger impact towards sustainable
development if they consider strategically sound CSR investments.
5.1. CSR Practices in Pakistan

State of CSR in Pakistan is still in its infancy. Only few companies have an existing CSR
strategy and mostly they are the multinationals who follow their own CSR policies and S
standards. Unfortunately, the local industry is either unaware of the benefits brought by CSR or
they feel that even if they do not adopt such policies, they are not in any state of danger. The
apathy of the local business sector was highlighted in the 1996 by the breakdown of the local
carpet industry and the threat of damage to Sialkot’s sports industry. Labour exploitation, child
labour, inadequate employee benefits and unsuitable working environment were few areas
pinpointed by the international eye. Though taking the reactive measures, the joint effort of the
industrialists saved the greater damage foreseen, but not much has been done to take more
proactive measures.
In 2003 a multi stakeholder forum

Why we need CSR Strategy in Pakistan...
“Pakistan Compliance initiative” was
- Money is better spent for preventive interventions
launched with support from
- It costs less over time to fix the process
international buyers, the textile sector,
- It costs more over time to fix “end-of-pipe”
and the Ministry of Commerce. A draft - One-off philanthropy is good but not sustainable
national standard was developed for - Business goals are better achieved if linked to CSR aims
use as compliance standard approved - CSR leaders enjoy entrepreneurial advantage too
by Government to replace many ©Responsible Business Initiative -2000
International social and environment
compliance standards and buyers code of conduct. The result of this effort was inclusion of
social compliance in the trade policy and initiation of a project proposal by Ministry of Science
and Technology to European Union for encouraging SA800 implementation by subsidizing
consulting and implementation cost.
In Pakistan CSR is frequently equated with corporate philanthropy, the terms being often
mistakenly used synonymously. Some consider CSR to be a simple compliance with law.
This creates a difficulty because top management is still uncertain about the true meanings of
CSR. This indicates the need for a mass awareness campaign supported by the government,
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targeting businessmen, entrepreneurs and customers so that they are able to appreciate CSR
and also the general perils of non-compliance in today’s environment. Frequent and open
discussion defining and understanding CSR, detailing its nature and promoting and developing
methodologies on how local businesses adopt and manage their CSR obligations would be a
useful first step.
5.2. Initiatives by Support Organizations in Pakistan
Since the inception of the concept of CSR and the awareness, several organizations have
evolved over the period of time that have played a major role in creating the awareness,
pointing out the issues and fighting the injustice. In Pakistan this activity has not been
encouraging so far. Since the idea is hardly a decade old, few organizations have been formed
to work on different issues incorporated in CSR. The table-5.2 elaborates the initiatives taken
by different organizations and the key areas they are working on.
There is a slow growth of the ‘CSR industry’ of consultant firms who are charging highly to
corporations who want to ride the CSR bandwagon. They pose a risk of misguiding
corporations to get involved in “green washing” by doing token efforts or replicating policies
and projects done by other Global Corporations or their competitors without realizing the real
impact of their initiatives. These corporations sometimes claim that the driving force actually
comes from their stakeholders.
- Academia
Academia has a very important role in shaping the future Business Leaders in Pakistan. As an
extension of this study, RBI asked faculties, departments and institutions recognized by the
Higher Education Commission whether they taught CSR as a course or whether it was a
subject for faculty or student research. The study found no CSR department or unit in any
institution within the sample and no faculty member carrying out primary research on CSR
issues. Also, with the exception of the Institute of Administrative Science at the Punjab
University where a special elective is offered, this study found no CSR courses being taught.
There are examples of conferences where CSR is made a topic for panel session, but it is often
observed that the focus of these presentations labelled as CSR tends to examples of corporate
philanthropy and the examples cited as CSR best practice often describe charitable acts by
companies. In a situation where there is a lack of both theoretical and practical CSR
knowledge and experience, this attitude invariably goes unchallenged.
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- Media
The Media plays a large role in consumer awareness and in creating demand for responsible
behaviour from business on globally accepted parameters. In Pakistan the Tele Media as well
as newspapers are often silent on these issues. We see a few programmes or interviews on
some television channels, but the focus is often limited to elements like labour rights or
environmental compliance. A few supplements on related topics like environmental reporting
and CSR best practices mainly write about the odd corporate community project or
environmental reports. Main CSR parameters are still missing from media.
Organization Initiative Focus

ACCA – Association of Chartered Reporting Award Environment
Certified Accountants
GTZ – German Technical Cooperation Partnership for awareness European social standards
ILO – International Labour Organization Monitoring for child labour ILO code, child labour, labour
compliance rights, Decent Work conditions
LEAD-Pk – Leadership for Environment Component in overall training Environment
& Development – Pakistan programme Corporate Philanthropy
Corporate investment
NCP Cleaner Technologies Environment
NPO Productivity Environment, Trade
PCI – Pakistan Compliance Initiative Criteria development Social Compliance

Pakistan Centre for Philanthropy NGO Certification Philanthropy
Community work Corporate giving
Organization Initiative Focus
RBI – Responsible Business Initiative Research, awareness CSR-10 pillars, Tripe Bottom Line,
Capacity building, Global Responsible Leadership
Standard/tools development, Initiative, Social auditing, GRI
Strategy building UN Global Compact, SA8000,
Stakeholder Dialogue UNCTAD/ISAR, AA1000,
Training/Teaching Accounting Standards
International Linkages Responsible Entrepreneurship
Impl. & Impact assessment Sustainable consumerism
Global CSR policy Responsible competitiveness
Tools development
SECP – Securities and Exchange Codes development Corporate Governance
Commission of Pakistan Research, Regulation CSR
UNDP – United Nations Development Research projects Corporate Governance
Program Environment, Global Compact
UNCTAD – United Nations Conference Reporting Standards Corporate transparency
on Trade & Development
UNIDO – United Nations Industrial Triple Bottom Line project Efficiency, sustainable business
Development Organization Cleaner production centres principles
GCF – Global Compact Foundation Compact signing GC principles
Pakistan
Table (5.2)
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5.3. CSR in the Light of Islam

Islam favors fair and ethical business as the best source of income. It aims to promote mutual
benefit in business interactions. Islam reinforces transparent and corruption free written
contracts, acceptable working conditions, fair exchanges for both natural resources and human
effort. It advocates “Tazkiyah”23, through active participation in this life and by behaving
ethically in the midst of the tests of this dunia (world). Muslims prove their worth to Allah by
upholding Huquq-ul-Ibad (Individual Rights) and care for society, and sharing wealth with poor
and underprivileged. Actions and decisions are judged to be ethical depending on the intention
of the individual. God is omniscient, and knows our intention completely and perfectly. Good
intentions followed by good actions are considered as acts of worship. Halal (good) intentions
24
cannot make haram (bad) actions halal) . Islam allows an individual the freedom to believe
and act however he/she desires, but not at the expense of accountability and justice.
The Shariah (Islamic law) defines codes of social behaviour, and business ethics according to
which today’s business investors can invest in socially responsible companies. One example
of applying the Shariah in socially responsible investment is the Dow Jones Islamic Fund –
IMANX – which invests in Shariah -compliant companies to encourage muslims seek a blend
between financially rewarding and faith-compatible investment opportunities. Thus it makes a
strong business case for companies in Pakistan to adopt Islamic business principles as part of
a national compliance code and support a disclosure and verification system to validate
performance against it.
6.0 IS THERE A CSR ROLE FOR GOVERNMENT?

6.1. Examples from the World
Governments can play a unique and powerful role when it comes to corporate responsibility. It’s
widely accepted that countries and governments that respect human rights have more open
and transparent laws and financial systems, less corruption, a better-educated workforce, more
stability and more security. In order to establish the global rules and regulations imposed by the
international organisations, and making their businesses compliant to the international law and
practices;
- Governments should pursue their traditional function of promoting trade and business
through a proper policy. Supporting economic growth establishes a support for
democracy. The strongest foundations for the stability, predictability, and security
necessary for a sustainable business environment are democratic governments that
protect human rights and labour rights.
- Government must work with companies to promote strong corporate values which
promote legal and ethical behaviour as well as respect human rights and labour rights.
- Governments should support and facilitate public-private efforts to promote corporate

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

International are two good examples of such efforts.
- Governments should support existing international standards and adopt them in their
policies to delegate them to their local businesses making them readily competitive for
the international market.
- Governments should help civil society, business, academics, NGO’s and unions to join
hands together and craft credible solutions for their day to day problems and help them
implement that throughout the business chain.
- Governments can promote the CSR agenda through legislation, media and create
awards to encourage the organizations to adopt the changes.
The importance of CSR for United Kingdom is depicted by the

“Role of Business in Society
fact that they have a Minister for CSR. Stephen Timms, Minister is the 21st century's
for Corporate Social Responsibility, welcomed a social most important and
responsibility investment index saying, “Corporate Social contentious
public policy issue”.
Responsibility has a vital role to play in our society. It's living
Simon Zadek
proof that economic and social goals do not have to be in CEO, AccountAbility
conflict. And it can address some of the toughest challenges our
society faces”.
6.2. Meanwhile, In Pakistan…
The conduct of for-profit businesses in Pakistan is regulated through comprehensive principal
legislation in the form of the Companies Ordinance, 1994, overseen by a statutory body like the
SECP, and business interests are represented by duly recognized representative bodies such
as trade associations or chambers of commerce. This structured and supervised mechanism
imparts strength to the concept of process integrity by instituting transparency and
accountability. .
- SECP is reviewing corporate governance legislation and regulations that will bring into
focus elements of corporate disclosure, shareholder liability and transparent
accountability.
- NAB has unveiled a national anti-corruption strategy that lays down parameters for
corporate compliance.
- The State Bank has outlined new regulatory frameworks on financial responsibility and
probity.
- Internationally recognized guidelines such as SA8000 is getting support from
Government
- In 2003 “Pakistan Compliance initiative” was launched with a draft national standard as
a compliance standard approved by Government.
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Ambreen Waheed
- Compliance was declared a priority in the national trade policy, however, little progress
was seen at the practical level.
- PNAC initiated awareness seminars on SA8000, social compliance standards in 2003
at all major chambers of commerce in the Punjab.
- A proposal was made by Ministry of Science and Technology to the EU for subsidizing
SA800 certification among Pakistani suppliers and companies
Corporations, people and innovative CSR initiatives need Governments support, in terms of
policies and acceptance of the initiative, more than financial investment.
GAPs
- There is no evidence of the various tenders, requests for proposal (RFP’s) or terms of
reference (TOR’s) for government contracts advertised or initiated by its departments or
agencies specifying any CSR-related parameters25 as criteria for selection. This could help
in promoting the management aspect of CSR.
- There is no confirmed information on any clearly articulated tax incentives or recognition
from Government for good business practices and innovative initiatives like research &
development for sustainable technologies.
- The research could identify no work in progress on the development of CSR-related
policies based on emerging global requirements to facilitate Pakistani companies in
improving and expanding export and trade in international market.
7.0 WHY THIS STUDY AND HOW
7.1. Methodology
Based on available data, a universe of companies was identified, stratified and randomised into
a representative cohort of about 100 companies. A detailed survey instrument was designed in
keeping with the data requirements articulated in the TORs, with due reference to current
international CSR trends and issues and benchmarks. This instrument was based on the RBI
26
“Pillars of CSR” model within the context of the “4-Ps of CSR embeddedness” in a
Knowledge, Attitude and Practice (KAP) format. It was administered to identify stakeholder
respondents.
A ten-level multi phased CSR performance grid was used to inform the survey instrument and a
triangulation methodology was adopted for administering the survey involving a three-step
process. First, respondents were identified within the subject organization through a signed
letter of intent and baseline information acquired. Second, an information pack was sent out
with the survey instrument directly to individuals identified as respondents. Third, a trained
data collector personally validated the response in discussion with the respondent. The
methodology was kept adaptable and flexible
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This research is specific to the current state of corporate social responsibility that is being
practiced in Pakistan. Questionnaires were dispatched to over 100 organizations from 10
sectors, a mix of multinationals and national companies, including small and medium
enterprise. The sectors include
1. Textile
2. Tobacco
3. Pharmaceuticals
4. Fuel & Energy
5. Chemical & Fertilizer
6. Cement & Building
7. Financial Institutions
8. Leather & Footwear
9. Telecom & IT
10. Sugar & Food
11. Consumer product & services (misc.)
A detailed literature review was conducted to inform the context and the approaches currently
being followed and the type of organisational best practices relevant to Pakistan. This led into
a comprehensive super-set of questions, which was shared with SECP for review. This set of
questions for assessing respondents’ CSR awareness, practices and performance was then
split into three separate questionnaires, to be used in three steps.
The first questionnaire served as an introduction between the questioner and the focal person
from the organization. Getting the initial details about the company, its strengths, locations and
practices, the second questionnaire acted as a detailed evaluation on the state of corporate
social responsibility. It judged the organizations on the basis of several essential parameters of
corporate social responsibility. These parameters
include:
Questionnaire 1 sought general
1. Corporate Governance information about the respondent
2. Business and Ethical Principles organization’s business, human
3. Environmental Compliance resources and systems.
4. Social Compliance
5. Disclosure – Environmental and Social Questionnaire 2 asked for detailed CSR
6. Product Integrity information based on the KAP approach
according to the RBI’s 10 parameters
7. Corporate Giving & Community Investment
and global benchmarks.
8. Stake Holder Dialogue
9. Financial Performance
Questionnaire 3 asked for the CEO’s
10. Supply Chain Security direct views on CSR and the success or
failure of their various initiatives, if any.
For each parameter a set of KAP questions was
devised. The questionnaire was purposely kept
very detailed to instigate respondents’ thinking. The two-fold purpose was firstly to get detailed
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understanding of the respondent’s CSR aspirations, issues, impediments and expectations and
to have evidence-based qualitative data for a designing future strategy. Secondly, it was to
facilitate participating organizations in understanding CSR and assist in a gap analysis of their
respective CSR practices as a result of the question-answer process. The questionnaire
served to also standardize the information exchange in line with a framework based on a global
benchmark. Sample questionnaires are attached as appendices ( APPENDIX A). Responses
to all three questionnaires were cross linked and integrated for an In-depth qualitative analysis.
Recommendations were prepared for taking action toward a National CSR Strategy. The
research findings and recommendations were presented for validation to the leaders of the
participating companies and other major stakeholders through an Apex Consultation process.
The consultative process created larger awareness and generated interest for actions. (see
minutes attached- APENDIX B)
7.2. Benchmarks
The RBI Pillars and the Perception model is derived from the consultant’s local and overseas
experience, of developing business and social standards, fair trade criteria, CSR and reporting
indicators independently and as a team member with International organizations such as
UNCTAD, SAI, GRI, Accountability, FLO, etc. Additional benchmarks being used in different
regions were also reviewed to include all the various perspectives relating to the fast-evolving
thinking on CSR. A number of CSR experts from RBI’s international collaborating partners
were also consulted to get a balanced approach while designing the three questionnaires.
The Table (7.2) introduces some of the well recognized organizations from different regions
who have pioneered and developed or are in the process of developing CSR tools and
Benchmarks. These include guidelines, criteria, indicators, benchmarks, frameworks for
facilitating and implementing CSR
.
REGION BENCHMARKS by Measurement Frame work Formatted: Font color: Black

EU UNCTAD,GRI, FLO, ILO, Transparency AA1000- process framework
UK Accountability, BIC ,FTSE4Good Brands - CoC
FTSE- FTSE4 good index
US BSR, GC, SAI, OECD Keidanren- Quality standards
Global Compact- COP
Asia Pacific BIC, CSM, CCSR, IBL,PBSP27,RBI GRI Reporting guideline
South Africa AICSR ILO- Resolutions on HR
ICCR- Code for ethics
South America Ethos SA8000- Social standard
RBI- CSR management
Transparency- BP for Bribery
Table (7.2)
8.0 RESEARCH FINDINGS
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8.1. Data Analysis

Ongoing debate on how countries are gaining competitive advantage using CSR as a
management tool reflects the importance this approach has for companies continuously
seeking the next formula for success. There is evidence that national strategies are being
developed to facilitate corporations overcome impediments that prevent them fulfilling their
corporate social responsibilities.
If CSR is to be regarded as an integral part of business decision–making, it merits a place in a

company’s core mission, vision and value statements, succinctly related to its business goals.
This research found “quality” and “customer satisfaction” as aspiration values occurring
frequently in corporate statements, owed no doubt to the consumer demand for such attitudes
from business and the realization that they affect the bottom-line. Likewise, perhaps as an
indication of the changing paradigm, mission or vision statements of companies aspiring for a
“socially responsible” image frequently refer to going “beyond mere profit” or “creating social
value for stakeholders”.
Results of this study, discussed below in detail show that Pakistani corporations, barring a
handful of enterprises, remain outside of the CSR mainstream. CSR thinking is still confined to
a select few who often believe philanthropy to be responsibility. CSR leaders responding to
queries in connection with this research stress that Pakistani businesses must learn fast to ride
the CSR bandwagon. Otherwise others in the region would benefit from the gains in
competitive advantage.
From the findings of this research what appears to be a priority is a clear and realistic
appreciation of the business case for CSR and the systemic advantages it bestows on the day
to day running of a company. SECP’s recent efforts indicate that it may be best placed to
provide the leadership for achieving consensus on a National CSR Strategy developed through
a consultative process and the active involvement of the corporate and citizens sectors, and the
patronage of government ministries directly working for trade promotion.
8.2. Response Analysis

Over 100 companies were invited to participate in this survey. They represented the following
sectors:
1. Textile
2. Tobacco
3. Pharmaceuticals
4. Fuel & Energy
5. Chemical & Fertilizer
6. Cement & Building
7. Financial Institutions
8. Leather & Footwear
9. Telecom & IT
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10. Sugar & Food

11. Consumer product & services (misc.)
Legal requirement or Customer Image drives CSR
Consumer & Services
Sugar &Food
Telecom
Leather & Footwear
Financial Institutions
Cement & Building
Chemical & Fertilizer
Fuel & Energy
Pharmaceuticals
Tobacco
Textile
0 1 2 3 4 5 6 7 8 9 10
Response %
Fig (8.2)
Of the companies invited to participate, about 35% responded to the survey questionnaire.
Multinational, fuel and energy, and financial institutions showed 70% response which is so far
the best percentage. None of the pharmaceutical companies responded to our call. Based on
our frequent interaction with companies, we found the following factors responsible for lack of
participation:
1. Lack of Interest: The general perception elicited from respondents about research is that it
is an academic exercise which has no direct benefit to their business. These perceptions
seem to be based on respondents’ experience of previous research surveys that have a
tendency for ending up in reports and research papers with limited practical outcome.
Respondents overwhelmingly said that they consider surveys as a mere waste of time28.
2. Lack of Awareness: For a majority of respondent organizations CSR is a new and alien
concept and it appears there is significant resistance towards adopting CSR best practices
particularly among family owned businesses. Respondents confirm that there is a
perceived apprehension of “getting exposed” with regard to their relatively low compliance
with even existing mandatory requirements, and aspiring to major CSR benchmarks
increases this feeling of vulnerability.
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3. Lack of Learning: Most of the companies who agreed to participate in the survey
expressed difficulty in responding to the questionnaire because either the questions on
CSR were not understood within the context of business or specific data were not available
in a reportable form. RBI team members personally visited corporations and were always
available on the telephone phone to backstop the process of completing the
questionnaires. Respondents who took this as a learning opportunity later conveyed how
the process helped them build awareness on CSR precepts.
4. Lack of Trust: There seems to be no culture yet of corporate disclosure, and while a
number of the respondents were ready to verbally communicate their information with the
research team, they expressed a reluctance to share anything in writing. Respondents
referred to incidences of misuse of corporate information by competitors and others,
indicating a general lack of trust even for research that may ultimately prove beneficial to
their companies.
5. Lack of Documentation: Lack of documented information and absence of proper systems

to generate decision data about company’s policies and practices invariably hinders
companies in participating actively in CSR initiatives. Among the respondents there
appeared to be no considered effort by management to invest specifically in CSR-led
information systems that make data available for decision-making and strategy.
6. Lack of Leadership: Like all other innovations, the success of CSR activities too depends
to a large measure on strong, visionary leadership. In the case of this research, even
though invitation letters from the Chairman SECP were addressed to CEOs, only a small
number were able to commit personal time to oversee the collection or validation of their
respective company data. At times the task was handed down to executives who seemed
to have limited time, knowledge or interest in the study.
7. Lack of Coordination: In a number of respondent companies, despite top managements

interest, the feedback process was very time-consuming, and in the odd case the study
questionnaire got lost between departments. It was clear that in the absence of clear
demarcation of responsibility for CSR assignments within the corporate structure, there was
insufficient coordination between departments as well as layers of top and middle
management.
8. Lack of Commitment: In a number of cases the research team faced a general gap in
commitment from people to whom the task of completing the questionnaire was assigned.
In a small number of respondent companies assigned personnel went for leave or left their
jobs without handing over the task. A general paucity of the right CSR knowledge and skills
at the management or supervisory tier to which the task was assigned also may have
contributed to the overall quality of the questionnaire in a small number of responses. RBI
had to recheck and validate a number of such data instruments.
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9. Lack of Stability: The research team were unable to get timely feedback from a number of
highly committed corporate leaders and company managements because of the transitional
process underway within their companies due to re-structuring, privatization or mergers and
acquisitions.
9.0 GENERAL PERFORMANCE
1. Perception
1. Before a discussion of the different key factors for CSR awareness and implementation
it is important to get a general sense of perception of CSR among corporations in different
Industrial sectors in Pakistan. Each participating company was to define CSR based on their
own perception, knowledge and understanding of CSR. The responses are compared to the
globally accepted parameters based on interaction with Global CSR initiatives on a scale of 1 to
5. Each of the parameters was given weights and ranking based on its relevance to the CSR
concept.
International exposure creates better understanding of precepts
4.
3.
3.
2.
Average understanding of
definition of CSR on a scale
2.
1 to
C
OI F T C O S
FI T
C L O O H N E
N T1. E
E O S E R
A E & B L S
M T U MI VI
N X G A E U
1. E W G C C
CI TI A C C M
0.
FI
N
0. A
N Sectors 1participating in the
CI
Financia Textil Cemen Oil and
Footwea Suga Tobacc Chemical
Teleco Consumer Service
Fig (9.1)
From the responses, it is evident that companies from consumer products and oil & gas sectors
have a greater awareness about current CSR concepts. This is perhaps because of
international exposure and consumer pressure in the case of the former and relatively stringent
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legislation and regulatory requirements for the latter. Responses of certain companies also
show that they do have programs to contribute to the communities, but they are more of
philanthropic endeavours than activities to contribute to actual CSR spirit.
ZThe service and the financial sector show moderate awareness towards principles of CSR.
Their detailed responses reveal that they are either now starting to focus on policies and
procedures for implementing CSR or they are developing strategies and frameworks for such
initiatives. However, these companies reveal an unmistakable focus on marketing and
business-development as a derivative of CSR interventions. In any case companies in this
category appear to have accepted that CSR is here to stay and they now show evidence of
being in the process of developing, documenting and implementing CSR policies and code of
business ethics.
The cement, footwear manufacturing, sugar, chemicals and telecommunication sectors still
appear to be lagging behind in assimilating CSR precepts and their importance to their
business. Their relatively fuzzy perception of CSR means they typically do not have well formed
initiatives to develop CSR strategies in their organizations. Data provided by respondent
companies in these sectors show that companies are unable to relate their business practices
and community interface with CSR, nor is there widespread evidence of any substantial
constructive activity to develop a CSR infrastructure in these organizations. Responses reveal
that certain companies feel their philanthropic endeavours are CSR initiatives.
Pakistani companies have an unfocussed perception of business ethical principles. Few have
certain bribery control policies which they think encompass the complete business ethical
principles red book. Textile, footwear, and cement industry typically lack tailored policies to curb
corruption, which can be a possible setback for quality in business. The fuel & energy sector
acknowledged corporate governance, business ethical principles and product integrity as the
parameters of primary importance in CSR.
On average companies are shy of admitting their pursuit towards business and financial
benefits for the fear of being perceived as not being “socially responsible”. Similarly
environmental and social commitment towards internal factors like employees, management,
workplace environment is not reflected in many companies’ definition of CSR. And quite
understandably, company responses show a general lack of awareness about the emerging
global prospective of CSR.
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2. CSR Policy
Of the companies providing data, most are engaged in CSR as a minimal compliance
requirement or in response to specific client demand. Often it is possible to draw the
conclusion that CSR activity in a company is involuntary and as such driven not by corporate
values but by necessity. However, companies do declare philanthropic projects, some of which
are in place for decades, as evidence of their commitment to CSR. Interpreted within the
current paradigm, these otherwise admirable acts do not make a company fall in to the CSR
compliant category.
In addition, there are companies who have just begun adverting to CSR, and can be termed as
being in the “Awareness” stage. These may often be companies who have traditionally
supported community projects but have only recently been introduced to CSR as an umbrella
term that implies community giving. Often these companies find themselves in the process
learning what CSR actually means, and why it is important for their management practice and
corporate image.
3. CSR Practices
Less than 50% of respondents fall into the “Compliance” category, a stage where a company
exhibits a general awareness of CSR principles, objectives and benefits. These companies
typically take interest in training their management about CSR and are found focusing on
developing CSR policies. They are seen reviewing their philanthropic activities and evaluating
their community impact within their renewed CSR orientation. Companies at this stage show
that they are becoming more conscious of environmental and social impact issues arising as a
result of their industrial activity. Most are contemplating or actually implementing measures to
improve their CSR impact. The textile, financial, leather & footwear, cement & building, and
telecommunication sectors, all appear at this stage of CSR development.
In terms of adopting company-wide CSR policies or strategically implementing CSR, this study
finds only multinationals or large nationals with international affiliations actively engaged at the
practical level. This is primarily because of global policy uniformity among international
businesses, designed to bring overall conformity with head offices overseas. These companies
exhibit a focus on internal stakeholders. Some are in the process of customizing their head
office policies to Pakistan’s local environment. Amongst national companies, those belonging
to the chemicals, oil & gas and those operating in the service sector are in the early stage of
CSR development. These companies reveal a desire for developing their CSR strategies and
are in the process of doing so. They show well-formulated business ethics policies, regard for
stakeholders, and generally good reporting structures. They often have projects which
contribute to the community and environment, e.g. waste minimization, recycling and pollution
prevention. They also show evidence of encouraging compliance to CSR standards among
their subcontractors and suppliers.
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Multinational companies in the fuel & energy, and consumer sectors appear to be implementing
CSR policies to a relatively greater extent as compared to their peers. They provide indications
of addressing environment-related issues, implementing employee-related best practices and
community support programs.
4. CSR Performance
This study can state with reasonable confidence that only a handful of respondent companies
seem to be concerned about the long term impact of their CSR policies, such as corporate
governance, anti-corruption measures, disclosure, and process- and product integrity. This
research could not find widespread evidence of reliable and verifiable measurement processes
to gauge these impacts, or stakeholder feedback mechanisms that can help improve on or
change the nature of these activities.
The 4 P’s
The adoption of CSR starts with clear understanding and right perception of Global CSR
debate, knowing what actually Corporate Social responsibility really means and why it is
important to adopt CSR practices. Once a company has a clear concept the first step is to the
show commitment and have CSR reflected in their mission and vision so it progress to the
stage of developing CSR policies to guide management in implementing them and to create
awareness among employees to adopt these policies. Having clear and related policies is not
enough for a successful CSR program. The third and most important stage is the “practice“ of
implementing well established systems to follow the policies for integrity, governance,
marketing practices, social and environmental compliances, disclosure and other CSR
parameters. The success of a CSR program and initiatives needs to be measured to improve
the ongoing CSR practices and projects, thus the performance needs to be obvious and
transparent. Very few companies at present are seen to be at the fourth stage where they are
able to reap business benefits of their efforts.
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Most Companies are still in the initial Policy Development stage
Perception Performance
Knowledge and Measuring Impact
understanding company competitive
of CSR edge
Policy
Developing a Practice
CSR policy CSR policies
implemented to
improve
i ti l
Financial Textile Cement Fuel & Energy
Footwear Sugar Tobacco Chemicals
Telecom Consumer Services Technology
Fig (9.2)
The Fig (9.2) illustrates the stages in which different organizations participating in this study
are seen in. The Figure maps the sectors-wise general state of CSR on perception, policy,
practice and performance. Participating sectors have been colour-coded and placed in
overlapping bubbles which represent different states of CSR the “4-Ps29 of CSR embedded-
ness. Companies in textile, telecom and financial sectors are in the overlapping areas between
Perception and Policy which indicates that they are in a transition between the two stages.
They have developed a perception about CSR and are currently contemplating to develop a
CSR Policy. Companies in technology and services sector fall in the overlapping region
between Policy and Practice. It is indicative of the fact that these companies have developed
policies to bring CSR in their organizational infrastructure and are currently struggling to deploy
them. Consumer goods manufacturing multinationals are in the middle section of the figure
which indicates better perception, policies and some practices in place and trying to gauge their
performance. Tobacco is weak in perception but has a place in the performance circle as it has
tried to evaluate interventions through social reporting and attempts to measure the impact of
their interventions through stakeholder Involvement and assessment.
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10.0 STATE OF CSR
RBI’s “CSR Pillars” were used to benchmark the state of CSR in Pakistan. Each parameter
was further assessed against globally acknowledged standards, evaluation tools, evolving CSR
definitions and indicators, as well as learning through interaction with International business
and CSR organizations. Questions gauged company knowledge; attitude and perceptions
(KAP) related to each “parameter”, validated through existing codes, rules, policy, standard
operating procedures (SOPs) and implementation.
RBI’s CSR Pillars

CG Corporate Governance
BE Business Ethical Principles
EC Environmental Compliance
SC Social Compliance
DR Disclosure & Reporting
EP Product Integrity
CC Giving & Community Investment
SH Stakeholder involvement
FP Financial Performance
SS Supply Chain Security
10.1. Corporate Government

Corporate Governance is the most important pillar of CSR. It acts as the umbrella for all CSR
activities and ensures that the corporation is directed, administered or controlled fairly by its
shareholders, management and the board of directors. Corporate Governance is concerned
with holding the balance between economic and social goals and between individual and
communal goals. The corporate governance framework is there to encourage the efficient use
of resources and equally to require accountability for the stewardship of those resources. SECP
already has in place a Code of Corporate Governance that all listed companies must comply
with and report in the mandatory annual report.
Corporate governance is commonly referred to as a system by which organizations are directed

and controlled. It is the process by which company objectives are established, achieved and
monitored. Corporate governance is concerned with the relationships and responsibilities
between the board, management, shareholders and other relevant stakeholders within a legal
and regulatory framework. In today’s fast paced corporate and industrial growth, there is a
global appreciation of the corporate governance principles of responsibility, accountability,
transparency and fairness.
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SECP’s Code implemented fairly uniformly by listed companies

5
4 Median
on 1-5 scale
2 State of Corporate
Governance on a
scale of 1-5
1
Financial
0
Textile
Oil and gas
Cement
Footwear
Sugar
Tobacco
Consumer Products
Chemicals
Telecom
Services
Outlier
Participating Sectors
Fig (10.1)
This research shows that companies have a fair understanding of the need to conform to the
corporate governance parameter in order to become responsible. More than 50% of the
respondents gave corporate governance the highest priority as a CSR measure. Consumer
products and chemical manufacturing companies showed a stronger conceptual understanding
of corporate governance along with the necessary infrastructure, documentation, policies and
procedures in place. They showed confidence that strong corporate governance policy helps in
beating corruption and as a result improves business as well as image.
The financial sector assigned topmost priority to corporate governance and business ethics
principles. Corporate governance and business ethics principles go hand in hand in any
professional setting. Business ethical principles provide a framework of behaviour to the
professional. Integrity in all professional and business relations, fair dealing and truthfulness
should be shown by a professional with commitment uncorrupted by self-interest. One should
strive for objectivity in all business judgments, display necessary competence to fulfil assigned
tasks and should carry out delegated professional work with due skill, care and diligence with
proper regard for the technical and professional standards expected.
This research shows that companies do have a clear understanding of the need to conform to
this particular CSR parameter. More than 50% of the respondents gave corporate governance
the highest priority as a CSR measure.
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Conclusively, Corporate Governance looks at the institutional and policy framework for
corporations - from their very beginnings, in entrepreneurship, through their governance
structures, company law, privatization, to market exit and insolvency. The integrity of
corporations, financial institutions and markets is particularly central to the health of our
economies and their stability. Our interaction with companies in different sectors allowed us to
evaluate that many companies do not have a corporate governance strategy; rather they need
direction to fit them into CSR definition.
10.2. Business Ethics Principles

Government and corporate corruption cost billions of dollars throughout the world that could
have been used to improve the lives of countless people. Corruption is against the spirit of
competition. Business efficiency improves when conducted in an environment of fair
competition supporting stake holder’s confidence.
Companies generally understand that employees tend to engage in behaviour that is rewarded
and avoid behaviour that is penalized. The system of recruiting, hiring, promoting,
compensating and publicly honouring employees all can be designed to promote CSR. Most
respondents to the questionnaire include ethical behaviour as part of their general code of
conduct. However, this study did not find an instance where a company acknowledges an
employee’s individual contribution towards maintaining an ethical environment. Thus research
appraised companies on two key parameters:
• Existing policy that penalizes workers in case of unethical behaviour
• Existing policy that rewards workers on abstinence from unethical behaviour
In the following graph, companies were rated on a scale of 1 to 5. Almost a third of the
respondents were hesitant to share information on their initiatives or practices in ethical
behaviour. Shown as “0” on the scale, this reflects lack of importance given to implementation
of ethical values or codes mentioned in their mission, vision or codes of conduct.
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Ethics not linked to CSR implementation in company

5
Practices in company policy & Practices
Importance given to ethical business
Company attitudes clustered by response

Respondents not fnamed? Formatted: Font: Not Bold
Fig (10.2)
27% of the companies, rated 2 show that they neither have an effective business ethics policy
in place to motivate employees to abstain from unethical behaviour nor any incentive to induce
practice of ethical behaviour. 20% of the respondents have penalties for unethical behaviour,
such as bribery or other misdemeanours. These commit to a verbal declaration that exhorts
avoidance of unethical behaviour in the organization. Only 7% companies declare a clearly
articulated code of behaviour for employees that aim to promote an ethical work environment.
Not surprisingly, all respondents in this category are multinational companies with well-
formulated organizational structure and policies in place.
The research findings confirm that national companies still do not have a clear enough
perception of ethical principles relevant to their respective processes. A few do commit to
bribery control policies which they think encompass the complete business ethical principles.
Textile, footwear, and cement industry typically lack tailored policies to curb corruption, which
can be a possible setback for quality in business.
10.3. Environmental Compliance

Environmental compliance means that the organization makes health, safety, and environment
considerations a priority in its business decision-making and processes. This implies that
there are mechanisms in place to promptly report any hazards or incidents that put the
environment or life at risk to authorities or other stakeholders, along with any recommended
protective measures. It also means that a company shares learning on the impact of its
process to outside parties and assures by the management of its waste materials that it is
doing its best to safeguard the environment and protect life.
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An organization's aim is to Identify assesses, rank and control all health and safety risks for
their employees and contractor staff. Generally human error is the primary cause of work-
related accidents and incidents, high priority should be assigned to raising health and safety
awareness by providing appropriate training to the workers and employees and raising their
consciousness, and caring about environment. There is a need for changing behaviour through
briefings, instructions, training and appropriate tools.
It is the responsibility of the management to make sure they have proper policies and that their
work force is familiar with health and safety policies, and they are briefed on all potential
hazards and risks in the workplace. Employee involvement and training is necessary to actively
manage and minimise health and safety risks.
Health and Safety performance should be measured in terms of accident frequency and
severity. Three aspects are of incremental importance in safety reporting: industrial safety,
personal safety and time lost.
Compliance vision is predominantly situational not strategic
Fig (10.3)
The Fig (10.3) maps the measures taken by corporations in different sectors to improve their
Environmental Compliance. The light shade reflects some awareness raising trainings and
initiatives, the darker shade shows that a company has policies relating to environmental and
health & safety compliance, the darkest shade reflects that a company has future plans for
improving their health & safety, environmental training, improvement on policies and
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implementation. Finally the opaque shade shows that the company feels the importance of
environment risks and have employed personal specially to look after environmental issues and
initiatives. This research reflects that fuel and energy sector and multinational companies
have:
• Environment, health and safety and accident management policies in place.

• Future improvement for current projects
• Personnel to support train and manage employees for environmental compliance.
• Protective gears available for workers working with hazardous chemicals.
These corporations owe these measures to international consortiums and petroleum products
regulatory authorities’ laws pressing upon them. Multinational chemical manufacturing
companies also display a competent level of environmental compliance and health and safety
management of their employees, although their existing departments are handling these
issues.
As a best practice work-related accidents should be recorded in a central database and

periodically analyzed. A uniform system should be employed for reporting accident figures and
the figures published for future reference and preventive tactics. Health and Safety
performance should be measured in terms of accident frequency and severity.
Majority of the respondents in our survey do not provide or support any organized
environmental awareness training, health and safety training procedures and proper record
keeping mechanism for documenting frequency and causes of accident for future analysis and
risk management.
The research identifies very low focus on waste management, recycling, energy efficiency or an
emphasis on finding innovative ways for employing green energy and sustainable technologies.
Only 25% of the respondents were seen to have taken an initiative towards improving
environmental conditions. 30% said they give consideration to energy-efficient and
environmentally friendly products while choosing office appliances or raw material. Only 12%
said they are recycling a proportion of their waste material.
10.4. Social Compliance

Like shareholders, employees of a company too have demands on a company to be treated in
a socially responsible way. In developed countries, employees are seeking contracts that not
only define wages and working conditions, but also their employer’s social responsibility. It is
becoming evident that a corporation’s reputation for social responsibility can attract and retain
better quality employees. One study shows that more than ninety percent of MBAs in the
relevant sample were willing to forgo financial benefits to work for firms with better reputations
for corporate social responsibility.30 Employees derive satisfaction from being associated with
responsible firms.31
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This study finds that none of the respondent companies include a reference to CSR in their
employee contracts. Social compliance being recognized as the backbone to corporate
citizenship, involves policies, procedures and practices that relate to the impact of the
organization on the society in general and the workplace in particular. Workplace security,
wage and work hour’s related issues, human resource development, abolition of child labour,
labour welfare and social protection and the right for the employees to organize as unions and
bargain collectively are important aspects that come under the bracket of social compliance.
This indicates a significant knowledge gap that requires immediate attention.
Like shareholders, employees should insist on socially responsible behaviour from employers
both by contract and by choice of work. Employee’s contracts should have clauses on
responsible behaviour, along with the mandatory ones on wages and working conditions,
including provisions for social and human capital development through shared learning,
knowledge enhancement, human capacity building and opportunities for future growth. A
corporation’s reputation for social responsibility can attract and retain employees.
All companies sampled agreed that the employee is the backbone of their organization, and
that competent, satisfied and healthy employees are invaluable assets. 100% Companies
accept that they can attract best human capital by providing employee rights, employee
benefits, growth potential, and a safe and healthy workplace. But less evidence is found for
practice relating to systematic approach and enabling environment for flexibility and employee
knowledge enhancement. The questionnaire for this research included a number of parameters
to determine the state of social compliance in the respondent companies.
Pakistan’s industry has lagged behind the transformation of the economy and must now ‘catch
up’ if they are to play a meaningful role in national and enterprise development. New
approaches to cooperation between workers and employers at enterprise level are of particular
importance with the purpose of encouraging genuine bilateral dialogue.
Social compliance encompasses the introduction of norms and implementation of policies to

ensure basic rights like equal treatment and non-discrimination, the absence of forced labour,
and the absence of child labour. Safe working conditions including minimum wages and above
minimum wage issues, allowances and benefits, hours of work, over time work, rest breaks and
leave arrangements, including annual leave, sick leave and special leave issues, and job
security provisions. Working environment includes protection against the effect of hazards in
the work place involving issues of work safety as well as protection from work related diseases
and illness. Social security includes protection against the effects of economic and social
hardship resulting from a reduction in earnings due to work accidents, work illness,
unemployment, or retirement.
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Our survey questionnaire consisted of different parameters which help in determining the state
of social compliance in different companies in Pakistan. Among the major employee benefits
provided by our participating organizations are: annual leave and medical insurance and annual
bonus and sports and recreation. Primary benefit given to women in all sectors of Pakistan
industry is the maternity leave. The goals of maternity leave policies are to support family work
and child rearing and to create an incentive for women not to leave the labour force when
children are very young. These policies are made to facilitate women's work outside the home
and help reconcile work and family life by protecting and promoting the well-being of children
while their parents are in the labour force.
On average, respondent companies are willing to let a mother have 2 months paid leave. The
question about paternity leave grant was avoided by companies in general. It can be concluded
that it is not the norm in Pakistani companies to give paternal leave. Maternity rights affect the
time a mother spends out of the labour force after a birth and the probability that a mother
returns to her pre-birth employer rather than starting a new job. The provision of paid leave can
help to protect children’s health and development by enabling financially constrained mothers
to remain at home for longer period following childbirth.
There is one company in the financial sector that gives female employees 130 days paid leave
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for Iddat , which is commendable. This can serve as an indicator of best practices being
followed employed by companies in Pakistan with a vision to facilitate workforce and to improve
their overall performance and commitment.
Benefits like subsidized food and transport facilities are uncommon. Except for one company,
stock options are not offered to employees. Employees unions are typically discouraged by
companies who do not cater to the international market. Multinationals allow workers to form
works councils and unions, as stipulated under law, which allow for negotiating worker
demands with the management.
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Benefits follow minimal legal requirements or leader’s
Financial Textile Cement Oil & Gas Footwear Sugar Tobacco Chemicals Telecom Consumer Services
Annual leave 9 9 9 9 9 9 9 9 9 9 9
Insurance 9 9 9 9 9 9 9 9 9 9 9
Free Meals x 9 9 9 9 9 x 9 9 9 9
Free transport x 9 9 x 9 x x 9 9 9 9
Recreation etc. 9 9 9 9 9 9 9 9 9 9 9
Bonus/profits 9 9 9 9 9 9 9 9 9 9 9
Stock options 9 x X x x 9 x 9 x 9 x
Maternity leave 9 9 x 9 9 x 9 9 9 9 9
Paternity leave x x x x x x x x x x x
Fig (10.4)
wrefCompanies do not focus on areas like subsidized food and transport facilities. Multinational
companies allow employees to have work councils and unions which protect their rights and
negotiate worker demands with the management. They can elect their representative
independently and have the right to voice their concerns, to improve working conditions.
Employees unions are not allowed by local companies or even by exporting companies whose
international buyers insist unions or works councils as a major CSR compliance issue.
According to the responses received about 50% of the companies do not approve of
employees joining unions, and associate unions with strikes and coercive practices. However,
companies seem to favour works councils and often opt for “workers’ committees” to represent
workers for issues and complaints to management for solution. Half of the respondent
companies do not even support such in-house representative structures.
There is always the potential for conflict to arise in a workplace. Conflict creates an
environment of tension and if not properly managed can harm morale and productivity. A work
related grievance might flow from any aspect of a staff member's work experience that they
believe to be unfair, unjust or unreasonable. 80% of the companies in Pakistan lack articulate
grievance procedures. Companies rely on verbal employee-management interactions to deal
with conflicts and problems. There are no complaint document management systems and no
history is kept to review on an annual basis.
Management and staff should understand that having a grievance procedure provides a
process for resolving conflicts and can help facilitate the effective use of resources, maintain
good working relationships, and support a positive overall experience. Multinational companies
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operating in the region have strong, well-maintained grievance procedures. Most companies
did not share detailed information to enable us to assess the kind of support documents and
procedures in place to ensure effective response of worker issues. An effective procedure
operates as an early warning system and alerts management to potential problems before they
escalate. A grievance procedure should be part of a larger effort to enhance communication.
Make clear and timely communication a priority.
10.5. Disclosure and Reporting

Reports are used as means of management (creating and documenting systems). The main
benefits that come out as a result of maintaining a reporting system is the ease of comparability
of the organization’s social and environment al performance. Like Business Principles, reports
also reduce conformance cost by providing quick views on operational procedures and their
outcomes and also to monitor ongoing processes.
The research showed that reporting is not given a high priority in adaptation of CSR by any
sector. For most of the organizations, it was given a priority value greater than 6 on a scale of 1
to 16 where 1 was the highest priority and 16 the lowest. In general, none of the sectors is
releasing reports on a voluntary basis. The sectors like Financial and Textile are doing this as
per requirements by government or their customers. None of the organizations have mentioned
any benefits obtained from reporting, even as 6% of the respondents have already published
CSR reports, of which one is based on the GRI reporting format. 20% of the respondents have
in the past disclosed environmental and social initiatives either in their annual report or in
newsletters or company supplements.
Cross-checking company procedures allowed us to realize that reporting is not being given
substantial importance in any sector in Pakistan. Reporting being done is often focused on
lighter issues and contains factual information concerning the organization. Often there is little
correlation between CSR and other business variables highlighted in company annual reports.
In recent years, however, interest among corporations for reporting environmental initiatives
has grown due to ACCA-WWF Environmental Reporting Award, but the quality of information
presented is still quite elementary compared to global standards.
The scope of CSR information in the financial report should cover information which is material
to the economic performance of the company. In order to properly capture CSR-related
financial risks there is a need for a cross disciplinary approach including both the financial and
the CSR manager of the company. Moreover there is a need for definitions which define e.g.
environmental costs and investments and a need to develop appropriate verification standards
for CSR information.
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Apprehension of benefit-seeking outsiders is another factor that seems to compel companies to

avoid complete disclosure financial information in their reports. Textile, Financial institutions,
cement, leather and technology sector companies in Pakistan are run as family businesses
rather than publicly owned companies. At present private enterprises are not mandated by law
to publicly declare such information.
10.6. Product Integrity
Product integrity is actually a part of product quality. In a business sense, having Product
Integrity means a company ensures that the product reaching the consumer is the same as it
was promised in the advertisements and other commitment statements like quality standards
etc. It is an outcome of the supply chain monitoring as well as in-house quality systems. It
encompasses a wide variety of issues like environmental and social impacts of the production
process. An organization needs to pay attention to the following issues regarding product
integrity.
- Environment is not being damaged in any way during the production process (effluents,
emissions, pollution)
- Harmful materials are not being used in the process (chemicals, machinery that is risking
production crews’ life or health)
- workers are not being pressurized in any way during the production process (forced labour,
whistleblowers)
- There should be no harmful effects of the product. (chemicals that cause allergic or corrosive
reactions on human body, products that deteriorate human health and quality of life)
- Technology being employed should be sustainable and efficient. It should be at par with
modern safety and production standards. Product finishing should be to ensure that it is not
harmful for end user.
- Product being produced should be biodegradable. If it is not biodegradable then what
mechanisms are available to dispose of it after use.
- Channels of research should be well-developed with personnel implying a role of improving
standards of product not only in terms of quality but also increased health and safety
standards.
The research monitored Product Integrity through several ways, including the priority assigned
to it as a part of the CSR strategy by each company and the emphasis on Product Integrity
upon purchase of raw material. The emphasis of the company on ethical advertising was also
added to the criteria for evaluation of Product Integrity. We found that there is a serious lack of
appreciation regarding this factor. Respondents were not aware of any specific initiative on
part of government to enforce policies regarding product integrity. Participants in the survey did
not show much interest in this section of the questionnaire which is an indication that
companies lack awareness in this area. A contributing factor ascertained by the research to
this state of affairs may be the relatively weak consumer lobby in the country, even as there is
an abiding interest in quality management systems and certification in all sectors.
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The Fig (10.6) shows the priorities ((1-10) assigned to Product Integrity by organizations in
different sectors. The sectors not shown in this chart lacks proof of efforts made for the
integrity of their products
Awareness linked to market image and customer sensitivity
Textile Fuel & Energy Tobacco Telecom Services Cement Financial
. Fig (10-6)
Across all products, avoiding confusion with labels and labelling statements should remain a
priority for all companies. Use of environmental labels on products, clear mentioning of product
ingredients and possible side effects should be mentioned clearly on each product label.
Tobacco sector showed commitment that their policy is to provide their customers with all the
necessary information to help them choose the product that is right for them. In this regard
ministry of health has also made an effort to prohibit sale of tobacco to minors and to clearly
state the harmful effects of tobacco on the label. Financial sector has also shown responsibility
towards fair trade, proper labelling of financial products and ethical marketing procedures. A
Few companies in the oil & gas sector are trying to improve their product’s negative
environmental impact.
10.7. Corporate Giving or Community Investment

Companies clearly give a lot of importance to community philanthropy and show a trend of
significant spending towards services and amenities to communities around their geographical
boundaries. However, these are mostly one-off activities, with companies allocating resources
based on their own perceptions, marketing needs or following peers or competitors.
Respondents reveal that the typical motivation stems from a desire for competitive advantage
and positive public relations impact. Corporate giving seems to be equated with good
corporate citizenship by a significant number of companies, including multinationals.
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A number of companies reflect a readiness to actively contribute towards the welfare of poor
communities around them by providing education, health services, and technology access. Yet
most often, these efforts are independent of a considered strategy that reflects the felt needs of
the communities concerned. This appears as a gap in strategic planning the industrial sector in
relation to CSR precepts. The potential for leveraging the enormous potential of corporate
sector to alleviate poverty in specific terms is not generally recognized, and appears as a key
area for government policy direction.
We are part of society and have a responsi1bility to the world in which we operate.
This is not a matter of charity but of investment, because our continued success
33
depends on, among other things, the progress of the communities in which we work.
The Fig (10.7) below shows the various community initiatives disclosed by the respondent
companies.
Giving follows High Visibility & services that attract attention
6% 0%
Education
Technology
28%
21% Water & Sanitation
Environment aw areness
Sports
Capacity building
Health
6%
9% Micro credit
Enterprise Development
6%
Citizen Rights
12%
12%
Fig (10.7)
Education, health and water & sanitation are the most frequently addressed areas in
community initiatives. Organization-run schools, primary education schemes, educational
trusts, scholarships, free dispensaries, health camps, hospital set-ups, tube wells and tankers
to provide drinking water and sanitation projects are a few examples of this community
investment activity. However, this study did not encounter any initiative being taken by the
corporate sector to improve citizen rights or generally redress environmental deterioration.
Also the most important areas for sustainable development like technology research and
human capacity building have the lowest priority.
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10.8. Stakeholder Involvement

CSR implementation is not possible in its essence without
stakeholder involvement. All over the world, corporations
are generally beginning to realize the importance of the
stakeholder perspective and are becoming clear about their
primary and secondary stakeholders. Increasingly,
mechanisms are being put in place for meaningful corporate
interaction with stakeholders. In Pakistan, however,
companies still seem to be relatively aloof from their
stakeholders and need to understand the importance of
stakeholder dialogue as the basis of CSR initiatives.
Fig (10.8.1)
This research reveals a low understanding of the importance of Stakeholder Involvement to a

company’s social responsibility. Likewise, the study found no large-scale evidence of any
systems and procedures installed by companies to elicit stakeholder feedback for CSR related
activities. In general, there seems little organized interaction between the five key stakeholders,
namely the board, employees, customers, buyers, and the community at large.
This study found evidence of stakeholder interaction in the chemical and tobacco sectors with
specific reference to the environment. The reason for this appears to be the perceived dangers
associated with the product in question with regard to the environment, and relatively high
media sensitivity. Apart from this one finding, companies generally reveal insufficient
understanding of the role of the stakeholder in their social interface. The Fig (10.8.1) indicates
a colour-coded comparison, which shows that Stakeholder Involvement is prioritized by
chemical manufacturing, telecommunications, consumer products and the service sectors.
They demonstrate the existence of varying degrees of reporting mechanisms and
communication channels with relevant stakeholders. Quite clearly the service and
telecommunication industry puts customer communication quite high as a priority and show that
they have policies and practices to satisfy them.
Another interesting finding is the importance of stakeholders by corporations in general. The

Fig(10.8.2) shows stakeholders order of priority given to them by the corporations.
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Cus
Boar
Go Emp
Com Mgt
Stock
Env.
Buyert C
Ac Emp
Com Supplie
Media
Fig (10.8.2)
10.9. Supply Chain Security

As stakeholders take a growing interest in corporate social responsibility, many companies are
finding that they not only are responsible for their own CSR performance, but also for the CSR
performance of the companies upstream and downstream, that is, a company’s suppliers as
well as its customers and even its customers’ customers.
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Supplier practices considered less relevant to companies’ own practices
5. Outlier
4.
3.
2.
Median on 1-5 scale
1.
0.
Financial
Textil
Cement and
Fuel and
Footwea
Suga
Tobacc
Chemical
S
Telecommunicatio
Consumer
Service
Participating sectors
Fig (10.9)
In this research we have focused policies and practices which organizations expect from their
subcontractors and their suppliers only. Suppliers that manufacture, components and products
used by any industry must comply with all national and other applicable laws and regulations,
and they require their suppliers do the same (including labour agencies). They should uphold
the highest standards of ethics, sound human rights practices and treat workers fairly with
dignity and respect. They should strive to provide a safe and healthy working environment for
their workers. They should conduct business operations in a way that protects and sustains the
environment and maintain management systems that measure, improve and communicate their
company's labour, health & safety, environmental performance. Companies in Pakistan working
on permanent contract with international buyers especially in the consumer product sector take
particular care of supply chain security standards. Supply chain standards in Pakistani service
sector companies who have based their operational procedures on similar companies working
abroad have trickled down automatically.
10.10. Financial Performance

It has been a much-believed fact now that CSR compliant companies perform better worldwide.
CSR helps companies develop new competencies because it engages employees,
organization-wide, calls for a forward-thinking managerial style, and leaves responsible firms
better prepared for external changes, turbulence, and crises. It builds reputations and
enhances relations with bankers and investors. It helps firms attract better employees and
increase employee goodwill. It helps firms run better.
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A study commissioned by the UK Environment Agency concluded companies with sound

environmental policies and practices are highly likely to see improved financial performance♣.
The analysis looked at 60 research studies over the last six years, finding that 51 of them (85
percent) showed a positive correlation between environmental management and financial
performance.
VALUE ADDED
Taken by Taken by
Enterprise Customer
Revenue Cost
Customer Loyalty / Retention

Plant / Process Efficiency
Customer Acquisition Social Efficiency
'Eco-efficiency'
Customer 'Margin' Machine Efficiency Employee

(downtime) Productivity
Customer 'Share of Wallet
Employee
Process Efficiency Loyalty &
(cycle time) Availability
UNIDO’s TBL approach is unique in that it adds to the traditional TBL elements of evaluation and reporting a
34
third element of continuous improvement . Fig(10.10)
The report on UNIDO demonstration project on Triple Bottom Line in four countries including
Pakistan35, very clearly demonstrated the link between social viability and environment
stewardship on the financial bottom line of the companies.36 Good social performance leads to
good financial performance which contributes to making sound reputation for the organization.
Organization can reap long term profits and have sustainable growth in turn.
The survey questionnaire asked respondents to provide information on buying decision to

ascertain cost savings through durable, energy efficient products, recycling, reusing and selling
waste. The organizations who are able to record these data demonstrate the link between
social and environmental stewardship to their financial bottom line. Only 5% of sampled
companies expressed this level of consciousness. They also revealed that their efforts towards
CSR compliance did not take away from their financial viability. The rest of the companies did
not respond to the question.
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10.11. Levels of Compliance of CSR Principles

Summarizing the findings of our study we have developed the following matrix P-P
representation of the state of CSR compliance in each participating sector. Each tile shows
state of compliance for each sector divided into separate columns for different states of CSR
embedded ness, Perception, Policy, Practice and Performance. Based on the evidence from
the study we have highlighted the existence of each state against the 10 pillars of CSR as
devised by RBI.
Fig (10.11.1)
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All the sectors mapped on 10 parameters of CSR identifies the gaps for each sectors on CSR
parameters.
Highly variable CSR practices indicate no fixed goal-posts or mechanisms
CG
5 Financial
SS 4 BE Textile
3 Cement
2 Oil and gas

Footwear
SH 1 EC
Sugar
0
Tobacco
Chemicals
Telecom
CC SC
Consumer
& Services
EP DR
CG Corporate Governance EP Product Integrity
BE Business Ethical Principles CC Corporate giving’s /Community investment
EC Environment Compliance SH Stake holder Involvement
SC Social Compliance FP Financial Performance
DR Disclosure Environmental & Social Report SS Supply Chain Security
Fig(10.11.2)
11.0 Bridging The Gap
This study aimed at a realistic assessment of where Pakistani business stands with regards to
its awareness and attitudes on CSR in relation to the world at large. The assumption is that
learning from this study will help policy makers find ways to tackle the Global challenge our
business is going to face because of a change in market perception.
Consumer value perception has moved beyond a simple

“price-quality” focus to one where buyers seek “value- Business needs to develop
integrity” that reflects a company’s sensitivity to clear strategies to implement
the method of giving or
environmental and social stewardship. It seems Pakistani volunteering that best suits
businesses need to gear up to respond to this challenge. their goals and desired image.
Analysis of data collected against available global CSR
good practice benchmarks shows:
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1. Incomplete Conceptual Understanding

This study confirms that most companies still see CSR as a “philanthropic obligation”, or as
“imposed compliance” with buyer-led social standards. Moreover company efforts are typically
“feel good” activities that often betray a low consideration for their long-term impact on
sustainable development. This reflects a shaky perception regarding the scope and scale of
CSR as a business strategy and management tool among the average Pakistani business.
2. Less Focus on Competitive Advantage

It appears from the results of the study that most CSR initiatives being implemented by
respondents presently are focused on short term economic benefits. There seems a lack of
understanding of how business can contribute to create sustainable development models that
promote economic growth, creating more business opportunities for corporations.
Respondents mention no investment and resource allocation for research and development on
cost effective models and efficient technologies that help bring production costs down and also
decrease environmental impact in future. However, two companies mentioned bringing their
costs down by using recycled material and environmentally safe raw materials. They also
declare they are tracking their savings through these initiatives.
3. Inadequate Stakeholder Communication

Companies appear to seldom engage directly with stakeholders other than those that are in
some way connected to their marketing activity. This study found no examples of any
organized communication mechanisms between companies and their stakeholders for 95% of
the respondents. Examples shared were somewhat scattered and random, which indicates
that while positive role models do exist, there is a need for a more systematic approach to
documenting best practices.
4. No Nationally Recognized CSR Benchmark

Respondents in the study were rightly not able to point to any nationally recognized definition or
benchmark according to which they could design compliance or implementation programmes.
37
A number of international CSR benchmarks were cited, such as GRI, SA8000 or the Sullivan
Principles, etc, which revealed the ambiguity such tools pose to the average business.
Implementing these, therefore, remain for businesses a factor of customer demand. Hence,
this study confirmed that customer-specific social compliance codes were a priority for
businesses primarily as a selling proposition, and not necessarily as an intrinsic organizational
value.
5. Uneven Official Incentives
Respondents revealed a relatively limited awareness of laws, codes or government policies
related to CSR. There appear to be no clearly understood incentives for socially responsible
behaviour, high labour standards or environmental performance, as there are for corporate
philanthropy or charitable donations. As such respondents are not able to link incentives or
enabling factors from Government to profits. SECP’s recent requirements for disclosure on the
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Code of Corporate Governance too are not presently matched by tangible performance-related
incentives to motivate businesses.
6. Unclear Strategic Approach

Even among companies that show a relatively higher appreciation of business ethics issues,
this study finds a low incidence of consistent strategic CSR programme direction. In most
respondent companies that exhibit a demonstrable degree of environmental or social
compliance, data reflects community or philanthropic responses that appear to be the result of
situational decisions by or a projection of personal causes of the leadership.
7. Absence of National Platform

Respondents were not aware of any forum or platform, whether created by the Government,
representative trade bodies or any other institution that is currently able to provide a uniform or
credible level of awareness, information or guidance on CSR to interested individuals or
companies. Compared to some countries where such neutral platforms bring major
stakeholders together with CSR experts to discuss issues, identify solutions and frame policies,
the Pakistani business environment functions in somewhat of a vacuum.
8. Disclosure
This report confirms the general impression that Pakistan has still to develop a culture of
Disclosure. Over 60% of companies approached for this study declined to provide complete
information on their respective social and environment performance. A key reason for this is
the low trust companies have of any outsider asking questions. A second reason is the low
priority given to documentation and reporting in the typical business enterprise unless it has to
do with mandatory requirements. A third reason is the relatively low professional capacity and
allocated resources for such reporting. This can be overcome firstly by encouraging an
environment of trust between companies and regulatory agencies. Secondly, the development
of user-friendly formats to document and disclose social and environmental performance,
backed up by an effective orientation programme, ideally via internet or call centre solutions,
can quickly turn around the present state of information vacuum. Government can be
supported in this activity by its citizen sector counterparts.
12.0 CONCLUTION
It is clear from the above findings that Pakistani businesses need to be supported in bridging
the gap between their present state and the rapidly evolving CSR environment that is creating
new benchmarks of corporate performance and customer acceptance. Pakistan needs to
leapfrog from its present level of CSR into the current paradigm. The upside of this is that we
have global standards to guide such a leap and professional linkages to help along the process
over a relatively short timeline. Experts reflect on CSR as the main hedge against the negative
tendencies of globalization. With a well-considered strategic CSR action plan Pakistan can
emerge from being a potential victim of globalization to a potential beneficiary.
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In placing Pakistani business in a competitive place with regard to CSR, every stakeholder has
a role to play and would need to be cultivated as an ally. On behalf of the Government, this
requires the creation of an enabling statutory and regulatory environment, clear policy
guidelines, fair and transparent rating and reporting mechanisms and tangible incentives and
penalties for companies who wish to demonstrate their commitment to sustainable
environmental or social investments.
Business on the other hand needs to abandon the subsidy-seeking culture of the past and
embrace competitive ways that build capacities, efficiencies and customer friendly practices as
a basis for market advantage. This requires adopting a culture of compliance, integrity and
technological research as dictated by current
CSR precepts. And finally both government and
There is a dire need for a dialogue between
the government, business and the citizen
business need to include civil society as
sector to develop a win-win for every one. represented by academia, consumer groups,
Outcomes from this dialogue must inform enablers, the media, and experts in their
policy, which then must Such policies should
be strictly observed by regulators, certifiers, activities to build a multilayered social
academia and the media. Companies have consciousness that quickly rewards ethical
to feel encouraged to adopt CSR, know that it
helps achieve profitability, human behaviour by business in the marketplace and
development and progress, and that just as readily condemns irresponsibility.
regulators, government authorities, investors,
shareholders and labour representatives all
value accountability and transparency. This study recommends the following immediate
Businesses need to know that in a
competitive international market, CSR adds
actions to build into a strategic response to CSR
value and builds image. CSR is not an option, that can leapfrog Pakistani businesses into the
it is a condition of survival for our businesses, mainstream of business achievement in today’s
and ultimately, our society.
world:
13.0 RECOMMENDATION FOR CSR STRATEGY
There exists a dire need to improve the quality and quantity of corporate social responsibility. A
wide-ranging and multi-tiered awareness campaign needs to be organized in order to make the
various stakeholders and businesses understand the necessity and advantages of CSR and
remove any misconceptions related to it. Flowing from this improved awareness, cross-
stakeholder dialogue between governments, business, civil society and academia is a
necessity. A relevant and enabling CSR policy needs to be developed by Government with the
involvement of all stakeholders.
An effective regulatory authority is key to this strategic thrust, having the requisite capacity to
38
implement guidelines and monitor progress . Also crucial are facilitator organizations that can
help groom small and medium enterprise in building socially responsible process, and advise
the larger businesses in leveraging the advantages of CSR and sharing lessons and best
practices. And to come full circle another important area that needs investment in terms of
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money, time and education is consumer awareness, providing credible information beyond
social investments and corporate citizenship initiatives.
All this is achievable, but requires a strategic approach and a step-by-step process so Pakistani
businesses can emerge stronger in the current CSR paradigm. Below is a summary of what
this research has highlighted as areas for immediate attention within the context of a CSR
strategy. Each of these areas has the potential to becoming a distinct hub of programme
activity or project:
1. Build Strong Conceptual Knowledge

The first step towards a national CSR initiative must be a considered effort to build awareness
and knowledge on what comprises minima for CSR performance in Pakistan. A task force
could be formed with representatives of Government from SECP, Business and select CSR
experts to suggest a Pakistan-specific “definition of CSR” with accompanying policy guidelines
for Government to implement and Process indicators for business to assess their initiatives and
concept and frameworks to be included in business schools curricula. These could then be
introduced gradually, with the requisite opportunities for national debate, into legislative and
regulatory mechanisms. To guide CSR perceptions in the right direction media claims and
“green-wash” activities need to be watched through appropriate Government institutions like
SECP and representative bodies such as chambers, associations and stock exchanges.
2. Link CSR to Competitive Advantage

Businesses in Pakistan, especially the small and medium enterprises that form supply chains of
major businesses need to make the connection between CSR and profits so they can become
more efficient and pass on savings and value all along to the customer. CSR focus needs to
shift to improving internal efficiencies using CSR as management tool. This can be achieved
through linking SMEs with their larger corporate counterparts in knowledge transfer and
capacity-building partnerships that develop responsible cost effective solutions to create a
ripple effect. Institutions like SMEDA and Technology Institutes and engineering firms could be
linked into such programmes, along with trade associations and chambers of commerce.
Companies could contribute with their thinking and financial capabilities supported by
government incentives and facilitating policies.
3. Enhance Effective Stakeholder Involvement

CSR needs to be introduced as a topic in business discussions starting right from business
and commerce education to the highest level of trade negotiations. This area requires perhaps
the widest stakeholder involvement, with academia, lobbying groups, the media, Trade Unions
etc, all taking up the agenda in their inquiries, debate and dissemination activities. Social
Investments needs to be based on community and societal needs assessed through
stakeholder’s involvement at community and national level. All community projects and social
investments needs to be assessed for both negative and positive impacts, Incentive like tax
breaks and awards for sustainable programs with larger economic and social impacts. Also
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Learning from successful and unsuccessful investments can provide feedback into more
relevant policies and procedures.
4. Harmonize and Standardize CSR Performance

The most urgently required is a CSR tool based on considerations of our national limitations
and strengths for gaining competitive advantage with a focus on Global CSR debate and to get
it recognized globally. It would be appropriate to immediately embark upon the task of
instituting this national CSR standard or at least a voluntary best practice guideline against
which companies can benchmark them and be accepted in the global market. Companies
going beyond compliance would more readily gain competitive advantage. Over time and
through a calibrated process of national dialogue and technical appraisal these guidelines could
be inducted as a national standard on which companies can be graded for performance and
for bestowing incentives. Simpler CSR reporting guidelines need to be devised and
encouraged through CSR Report Awards by Government agencies like SECP in collaboration
with civil society organizations having technical expertise in CSR reporting standards.
5. Define and Promote Clear Incentives

At present the Government allows for tax exemptions and preferential treatment of businesses
that contribute to philanthropic causes. Other incentives include awards and public recognition
of individuals and companies bestowed by the government, representative bodies, trade
associations and public benefit organizations. All this promotes business interest in certain
activities and allows for interested individuals to aspire to higher standards. CSR must be
marked for such incentives too. Social reporting can be encouraged through instituting minimal
disclosure requirements as part of the licensing and compliance process for companies.
Benefits and recognition akin to those proposed for exemplary taxpayers by CBR could be
extended to transparent and accountable companies. Social investments can be recognized as
tax-relief contributions and finally official recognition of CSR as a corporate responsibility must
be matched by public rewards instituted officially or through trade associations and civil society
organizations.
6. Promote a Shared Strategic Vision

With all the above initiatives building the context for action, the country needs a clear and
compelling strategic vision for CSR, articulated convincingly by champions who practice what
they preach. SECP in its regulatory role has a key responsibility in steering other stakeholders
towards such a vision. Pakistan has many a notable example of socially responsible
entrepreneurs, CSR experts and conscientious citizens who can help promote the national
CSR strategy. Again, a task force of such citizens hosted by SECP would be well placed to
take this forward through the active collaboration of academia, CSR experts and the media.
7. Promote “Business” Thinking for CSR Projects

CSR interventions that seek to respond to community needs such as health or sanitation or
education are often not seen by their corporate sponsors as social investments and as such not
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Ambreen Waheed
open to the kind of scrutiny reserved for financial investments. This is a reason why such
projects often do not last long. Businesses need to be convinced that social investments are
not too different from financial ones and thus have to be measured like them. A real
contribution to CSR that business can make is to go beyond providing resources and instead
impart “business” thinking to their social interventions. This will encourage social enterprise
models that bring sustainable economic competitiveness to projects and lead to community
building through profits and entrepreneur skills. An approach towards this goal would be to pair
large, compliant organizations in mentoring relationships with smaller local companies that are
part of the large companies’ supplier network, leading to a gradual ratcheting up of socially
responsible thinking that is not averse to profits but to unethical practices. Good mentoring
programmers can be recognized and replicated. Examples can be documented and covered
through the media. An advice help-line and newsletters can provide basic CSR information and
a CSR induction kit for businesses can be developed and disseminated on a cost-recovery
basis.
8. Seed a Vibrant National Forum

CSR has fast emerged as key management concern for businesses, and thence for
government, due to a widespread citizen movement and
action by activist judicial systems. Recent years have “True, from the consumer society
perspective, but telling
witnessed a spate of convictions of world renowned philanthropy from responsible
business leaders for unethical practices, which indicates the business is still a conceptual leap
for our businesses that prevents
shape of things to come. However, the world has also seen them contributing to sustainable
that confrontation between erstwhile antagonists among the development. “
corporate and citizen sectors is now changing to joint action CSR in South Asia, India 2001 ©RBI
and strategic partnerships for sustainable development.

Governments and corporations now regularly partner civil rights and development groups
guided by CSR experts to develop and implement sustainable interventions in an ever widening
range of environmental and social themes. In Pakistan too there is room for a national CSR
forum where knowledge can be shared informally and good practice honed to take the country
into the next plane of CSR performance. SECP can lead this forum, with secretariat housed in
an institution such as the Institute of Corporate Governance, or any another academic
institution, or a suitable citizen sector organization. The forum could become a membership
body and take over the tasks described above, such as publishing newsletters and
disseminating good practice values culled from a regular series of national dialogues.
9. Groom Future CSR Leaders

There is no dearth of innovation leaders among Pakistan’s corporate and citizen sectors. These
innovative corporate leaders can be the best resource and act as a catalyst for creating a larger
pool of future leaders. These leaders need to take a leap forward to educate themselves on
CSR issues and then showcase ethical behaviour within their own organization, collaborate
with other responsible leaders and provide a learning forum for young leaders. Over time and
through a considered stewarding approach, possibly through the forum suggested above, it
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would be possible to create a culture of competition based on innovation and socially

responsible behaviour in all aspects of business. These young leaders can be encouraged
through rewards and recognition by representative bodies, such as chambers of commerce,
SECP, business schools or CSR enabling organizations.
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THE WAY FORWARD
How to leapfrog into the global CSR mainstream for competitive advantage
Government
CSR Expert
Multinational Large National

Corporation Corporation
Funding Agencies
Business Technology
Sustainabl School Institute
Small and Medium e
Enterprise Technology
Society and Environment
Fig (13)
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APPENDIX B
APEX DISCUSSION FOR CSR STRATEGY
th
Date: 26 September 2005
Time: 2:30 pm – 6:00 pm
Venue: Shalimar Room, Hotel Pearl Continental Lahore
1. AGENDA
14:30 Participant Registration RBI/SECP associates & staff
15:05 SECP’s CSR Initiatives Ms. Jaweria Ather, Director SECP
15:15 Research Brief & Findings Ms. Ambreen Waheed, Executive Director RBI
16:00 Reflections & Way forward Dr. Faiz H. Shah, Advisor RBI
17:15 Closing Remarks Dr. Tariq Hassan, Chairman SECP
2. Registration:
Participants were registered at the registration desk by RBI volunteers and were provided with a folder containing
details of the seminar, a summary of research findings, a feedback form, information material by SECP and a
souvenir
3. Delegates:
30 participants representing a wide array of stakeholders, including Government, business & industry, and the
citizen sector were represented at a senior level. Dr Tariq Hassan, Chairman SECP presided over the session.
4. Opening and Welcome:

Ms Jaweria Ather, Director SECP, welcomed participants to the seminar and explained the context and
significance of the research being presented and its relevance to the emerging importance of Corporate Social
Responsibility (CSR) in conduct of business. She shared with the audience SECP’s objectives for commissioning a
national baseline study of the state of CSR in Pakistan. Ms. Ather said this research, conducted by RBI on behalf
of SECP, is the first of its kind in the country and was going to help fill the gap that exits regarding credible
information on which to base national policies. SECP feels an evaluation of the current state of CSR in Pakistan
would facilitate and improve transparency and accountability, and help businesses compete better within the WTO
regime. She said that as a result of rapid globalization in the past decade the expectations of customers are now
greater than ever before, and that in order to thrive, companies today must also be mindful of how their businesses
impact their social, economic and environmental context – the so-called triple bottom line – instead of just their
financial outlook. She explained that enhanced corporate reputation, brand image and satisfaction at being “good”
corporate citizens are just a few basic benefits to be gained through the principles of CSR.
5. Introductory Session:
Ms. Ambreen Waheed, Executive Director RBI made a presentation outlining the background, context,
methodology and findings of the baseline study, followed by a gap analysis of CSR in Pakistan. She said that
since the successful implementation of the Code of Corporate Governance, SECP was now engaged in conveying
to all the organizations it was charged with regulating the emerging importance of a viable strategy for CSR in
Pakistan. She expressed her concern on Pakistan’s slow progress rate as compared to other countries and urged
that CSR could be used as a tool to gain competitive advantage in a rapidly changing global trade environment.
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• She informed participants that from a cohort selected by location and size from within 10 industrial sectors
over 100 companies were invited to participate in the study.
The response rate was about 35%, which can be considered a fair response rate for a study of this kind even
though the expectation was for a higher response. All invitees for research were followed up by RBI, who clarified
elements of the questionnaires in response to their respective queries and backstopped their information needs.
Ms. Waheed highlighted the “CSR Pillars” framework against which the research has been carried out:
Ms. Waheed shared with participants the research techniques used for the study and a brief overview of the three
questionnaires developed for data collection. She then discussed the levels of analysis based on “Thought-to-
Action” transition model comprising the “4-Ps” of “embeddedness”, namely Perception, Policy, Practice,
Performance. She revealed that there is a lack of understanding of CSR precepts and it is still equated to
Philanthropic gestures and corporate giving in general. In terms of policies the fuel & sector and the tobacco
industry were amongst the high scorers in proper choice and compliance of environment, social, quality and
occupational standards where as Services and goods sector.
She said that there is overall lack of CSR implementation against most of the CSR pillars and little effort or
evidence of assessment of impact and linkages of CSR activities to financial performance. She expressed concern
that in the new Global market environment these industrial sectors would face the most pressure to adopt CSR
concepts or risk losing business to other countries. In her discussion Ms. Waheed pointed out the glaring lack of
proper channels of stakeholder communication, absence of benchmarks, the urge to hide information with a culture
of non disclosure, and lack of a strategic approach as major causes of concern in implementing the precepts of
CSR. To overcome these she proposed a “Collaborative Model” that aims to bring together the government, multi-
national corporations and funding agencies to support citizen sector and media synergies to develop constructive
dialogue and appropriate technologies to help build sustainable business. Towards the end of her discussion, she
reiterated that to leapfrog into the global mainstream and gain competitive advantage it is essential to for Pakistan
to develop and then work in unison within a CSR strategy that focuses on awareness and dissemination of CSR
prospects, encourages CSR practices through factual information, creates opportunities for sustained stakeholder
dialogue, maintains focus on sustainable development priorities and paves way for benefiting from global market
opportunities. She presented the gaps identified during the research and presented her recommendations for CSR
Strategy as a way forward and basis of the Panel discussion in the next session
6. Cross Stakeholder Panel Discussion:
Taking up the facilitation of the session, Dr. Faiz Shah, Advisor RBI, began the session by showing participants the
United Kingdom’s official CSR website, and informed them about steps that are being taken in a number of
countries to mainstream CSR as a day-to-day management issue. He said that the importance of CSR as a
national business issue in the UK could be gauged from the fact that the country had a minister for CSR. He set the
context of the discussion by comparing current global trends in CSR with the situation in Pakistan, referring to the
findings presented by Ms. Waheed. He highlighted SECP’s emphasis on corporate governance as a positive
contribution to CSR. He pointed to the need for a national consensus on CSR and the importance of a practical
national CSR strategy developed with inputs from all major stakeholders. For this purpose Dr. Shah reiterated the 8
issues identified by the research and initiated discussion on them one by one as follows:
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1. Build strong conceptual knowledge

2. Link CSR to competitive advantage
3. Enhance effective stakeholder involvement
4. Harmonize and standardize CSR performance
5. Define and promote clear incentives
6. Promote a shared strategic vision
7. Promote “business” thinking for CSR projects
8. Seed a vibrant national forum
A Representative from NGO said that CSR as a concept was relatively unknown to the NGO sector and as such
there was a need to educate the civil society organizations about its precepts. She asked how these precepts
could be made relevant and applicable to the not-for-profit sector, especially those organizations that are registered
under section 42 of the Company’s Act.
Dr. Tariq Hassan responded to the question saying that section 42 not-for-profit companies have a mandate and
objectives specific to such aims as social welfare and corporate philanthropy. He explained that such organizations
were already performing some of the functions intrinsic to the CSR model described by Ms. Waheed. He said that
most of such organizations did realize the importance of CSR but still needed to build on this knowledge to develop
their specific CSR plans. Dr. Hassan informed the participants that SECP and the Institute of Chartered
Accountants of Pakistan (ICAP) are currently in the process of developing a standard for social auditing, especially
for not-for-profit companies to make sure that they spend their funds responsibly and for the purposes received. He
said that there was a dire need for creating awareness for those to whom the concept is completely new so that
everyone is involved, thus validating the notion for building strong conceptual knowledge.
Representative from oil sector asked how long it would take SECP to develop such guidelines and how long it
would take companies to develop the capacity and systems to comply.
Dr. Hassan explained that companies would need sufficient time to prepare for social compliance, which would be
provided. He underscored the need for practical steps to be taken in this regard and assured participants that the
SECP would soon take the initiative of going beyond verbal CSR to prepare such guidelines.
Representative of a professional association shared his observations on the current state of legislation in the
country and stressed that a strong action plan was needed to properly disseminate the CSR concept. He
expressed concern over the lack of responsiveness of officials responsible for matters such as workers welfare,
social health and security and compared it with the 1960’s and 1970’s when new social security legislation was
created to effectively dealt with these matters. Speaking from his knowledge of tax laws, he said that on average
35% of company incomes actually goes into workers’ benefits and for ensuring worker health and safety etc.
However, when these companies file their returns these very expenses are disallowed by tax authorities. This
amounts to a strong disincentive for companies to spend on labour and workplace benefits.
Dr. Tariq Hassan agreed that government incentives were less than perfect, but noted that CSR is not a completely
new concept and had existed for many years in a number of forms. He narrated his recent visit to a leather factory,
where the owners have installed a water treatment plant, indicating that even if they are doing it at the behest of
clients, such industrialists are cognizant of the concept of CSR.
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A Civil Society representative pointed out the inadequacy of laws relating to CSR, and said that they require
immediate attention on the part of government. Referring to the findings of a recent study that finds Rupees 19
th
billion being generated through charity, he expressed his concern that in spite of being ranked 6 among the
countries demonstrating high levels of private philanthropy, Pakistan still did not rank as a socially responsible
state. He agreed with the observation made earlier about the necessity of communicating to businesses and
individuals alike that philanthropy is but one cornerstone of CSR, which embraces a much wider thought. He
advised the use of taskforces, newspapers, TV channels and conferences to further the CSR concept.
Workers-Employers Council representative, pointed out the weak base of the CSR concept especially when
related to Small and Medium Enterprises (SMEs). He further noted the lax efforts of the government to rise up to
the occasion and face the challenge head on.
Small and Medium Enterprises Development Authority (SMEDA) representative articulated that if CSR was to
register a sufficiently deep impact it was necessary to develop a collaborative front involving the ministries, civil
society as well as the academia to make a joint effort for the spread of the CSR concept.
A representative of chemical industry, presented her idea of targeting the stock exchanges as mediators for CSR
among listed companies in Pakistan.
A participant representing oil and gas sector stressed on the need for creating a platform to help companies
achieve social standards compliance, along with a mechanism to allow for an independent monitoring authority.
Another participant from Oil and Gas sector said there was a need to study the prevailing CSR benchmarks in
countries such as the UK and France, and incorporating these into a nationally relevant system. He said that SECP
should act as the umbrella organization to maintain liaison with CSR organizations in other countries, as well as the
media and high profile organizations, which should be invited to support CSR efforts to strengthen the awareness
base nationally.
Representative from pharmaceutical industry reiterated the necessity for the government to create benchmarks
and incentives to act as catalysts for a socially responsible business culture. She elaborated by giving the
examples of organizations which some years ago were subsidized by the government for achieving compliance
and certification to quality management standard ISO 9000, and as a result of which a large number of companies
attained a higher quality rating. She said those companies or sectors should be targeted first, which are likely to be
better motivated through such incentives. They will be more prepared to accept the concept of CSR because it
serves their business interests. Others will follow suit.
A participant from a multinational, said multinationals that normally have to follow policies of their global parent
companies, including CSR guidelines can be encouraged to share their practices and well developed procedures
with the local organizations for creating motivations.
A civil society member said that according to a survey conducted by PCP in Pakistan on corporate citizenship:
- 67% companies consider it to be extremely important,
- 16% companies believe it to be important,
- Only 6% think otherwise
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Other findings from this study reveal that out of the Rs. 19 billion generated through charity, Rs. 600 million was
contributed by the corporate sector. He said that in order to better channel all these resources the government
must introduce social reporting guidelines and provide incentives such as awards for corporate philanthropy. He
cautioned, however that since these donations are voluntary, government intervention should be minimal yet
effective.
Representative of workers/employee council was of the opinion that the government, as of yet, has failed to take
the initiative in this scenario, but must now make amends by giving the scheme its due attention otherwise things
were likely to deteriorate. On a more positive note he insisted that whether the government plays its part or not, all
the various stakeholders present in the room should make a unified effort to propel the cause of CSR forward.
A Civil Society organization member, mentioned an incentive scheme being run by WWF-Pakistan in collaboration
with the Association of Certified Chartered Accountants (ACCA), called the “Pakistan Environmental Reporting
Award”, which recognizes environmental reports from among entries in three categories, namely, “best
multinational”, “best local listed company” and “best unlisted company”. Reports from companies are evaluated for
their clear communication of a company’s environmental responsibility performance by a panel of judges that
includes Ms. Jaweria Ather and Ms. Ambreen Waheed. The award aims to encourage the development of an
environmentally responsible culture in Pakistan.
7. Reflections on the Way Forward:

Dr. Faiz Shah drew the attention of the participants to the agenda for the apex consultation and invited precise
comments from the delegates on the 8 issues identified in the research as requiring attention in terms of a
nationally relevant CSR strategy. Comments by the participants appear below, against their relevant action
heading:
1. Build Strong Conceptual Knowledge

Participants unanimously supported a national CSR awareness campaign, which should be developed with the
help of a cross-sectoral national task force formed by SECP with the possible involvement of academia and the
media. Participants suggested the starting up of a periodic newsletter and the use of private TV channels to
disseminate awareness about CSR. SECP agreed to take the initiative in this and to bring together representatives
of CBR and other stakeholders to discuss these options.
Member representing workers/employee offered their services to in this regard. Dr. Hassan commented that the
recently established Institute of Corporate Governance could be asked to provide a home for this task-force since
they have adequate resources and because volunteer organizations are represented on the institute as well.
He pointed out that although a CSR culture is not too widespread yet, it does appear that companies are
interested in knowing how they can accept greater social responsibility. He urged participants, SECP and RBI to
assist meaningfully in building conceptual knowledge.
2. Enhance Effective Stakeholder Involvement

There was unanimity again among participants for a national initiative to involve business and its various
stakeholders, utilizing the good offices of representative bodies such as trade associations, chambers of
commerce, labour unions, NGOs, media groups and educational institutions, so as to build mutual appreciation of
each others perspectives and work towards synergies in the context of competitive advantage.
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Participants put forward a number of practical suggestions, including:

- Regional CSR roundtables, with representation from government, business, and civil society
- Industry CSR forums, bringing buyers, suppliers and traders together with consumers
- Expert Working Group developing CSR content for mainstream media programmes
- NGO coalition propagating CSR through their respective channels
- Orientation & Training programme on “Pillars of CSR” for all above groups
A participant informed the participants about the national CSR roundtable pilot project being implemented by GTZ–
German Development Cooperation, which brings together all stakeholders. Dr. Faiz Shah suggested that since this
pilot would end in December 2006, SECP could consider taking over the institutional support of the roundtable. He
also shared with participants that a draft set of national CSR guidelines had been developed under an initiative
supported by EPB and leading export companies in 2004, which could be used as an agenda for further discussion
under the aegis of the Corporate Governance Institute.
Dr. Tariq Hassan agreed that stakeholder participation was necessary, and that as with all recommendations
emerging from this consultation SECP would consider this option.
3. Harmonize and Standardize CSR Performance

In response to this recommendation, one participant said that CSR needs are different for different businesses,
and in his opinion it would not be possible to develop a nationally relevant set of CSR guidelines. Dr. Shah
reminded participants of a number of existing standards such as those for quality, environment or social reporting,
which are cross-applicable, but also quoted the example of the Global Reporting Initiative (GRI) which in addition to
core parameters, has also released industry-specific supplements.
A general consensus emerged among participants that a national CSR code, sensitive to the particular
requirements of Pakistani industry would be a positive outcome of SECP’s interest in CSR. However, participants
were also conscious of the cross-stakeholder participation, expertise, time, resources and institutional commitment
needed to develop standards or codes that aspire to national and international legitimacy and acceptance.
Ms. Ambreen Waheed, Executive Director RBI mentioned her continuing involvement with GRI and informed
participants that GRI is now in the process of developing a reporting standard for emerging markets, and as a
member of the organization’s governance structure invited participants to become involved in the development and
testing of such evolving tools for measuring and reporting CSR performance.
4. Define & Promote Clear CSR Incentives
While participants were unanimous in agreeing that government should introduce concrete incentives in the form of
tax benefits, subsidies, recognition, awards and benchmarks, duly supported by the business sector, it was clear
that there was a lack of information regarding what the government was already offering as compared to what
would be required to promote CSR among companies.
There was general agreement that the situation required a detailed study of present laws and regulations that
govern the conduct of business, resulting revenues, taxes and oversight. Such a study would be required to
ascertain what incentives are presently available in Pakistan, identify what other countries are providing in similar
conditions, assess what stakeholders see as positive motivators for CSR, and analyse what would be a realistic
mix of CSR incentives that promote corporate interest, government confidence and civil society acceptance.
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5. Promote Shared Nation-wide CSR Vision
When asked to identify a national perspective on CSR, participants agreed that there was none. However,
everyone agreed that it would be beneficial to have a national vision along which to develop a comprehensive CSR
strategy, which could then guide various programmes as are required for various stakeholders and industry
sectors.
Dr. Tariq Hassan said that businesses need to have a common vision centred on “enlightened self-interest”, a
situation where companies would serve community-specific needs and safeguard the environment knowing that
such actions generate greater well-being among existing as well as potential customers, and as a direct
consequence generate greater business opportunities. Ms. Waheed mentioned that companies are taking up
social service delivery or strategic partnerships with government or NGOs to address specific social or
environmental issues as “corporate social investments” (CSI).
Some multinationals are keen to interact with counterparts who it can explore effective partnerships in CSI.
Participants expressed enthusiasm for this concept as a way to build shared vision at the national level and for
working with local communities, educational institutions, NGOs) and other capacity-building stakeholders.
6. Promote “Business” thinking for CSR interventions
Leading off from the preceding views on enlightened self-interest, participants agreed that as yet there was
insufficient realization of the fact that social investments are part of business thinking. There was agreement that
transferring value perception and relationship-building are central to sustaining a business, and social services and
projects contribute to cementing them. This is something that is evident even among successful non-profits and
NGOs. Yet, it appears that NGOs and businesses see social investments quite differently. Participants agreed that
this perception gap needs to be bridged, possibly through multi-stakeholder orientation and also by developing
need-based community service programmes.
7. Seed a Vibrant National CSR Forum
The Chairman SECP impressed upon the delegates that sustainable, strategic partnerships must be sought
between business and government or civil society. He agreed with the potential that a strong national CSR
dialogue would have on building awareness. He said that SECP would do all it can to support all meaningful
attempts towards developing a socially responsible business sector in Pakistan. And he was sure that with an
empowered environment, participants and their companies would not shy away from their responsibility as
corporate citizens, and instead lend a hand in building a culture of CSR.
Ms. Waheed committed RBI’s technical capabilities to any initiatives by SECP, companies and NGOs, which can
further CSR and corporate citizenship in the country and in her capacity as an active member of international CSR
networks such as the UN Global Compact, UNCTAD and GRI, offered to continue backstopping them. She
accepted the suggestion from a number of participants and said RBI would commit its technical resources and staff
to run CSR orientation sessions for companies and key stakeholders in concert with SECP. Taking this further,
representatives from SMEDA and WEBCOP offered to organize such seminars among their respective networks.
Dr. Faiz Shah reviewed the comments hared by participants on the 8 outcomes of the study and asked for any
further thoughts from them before closing the plenary.
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In response it was suggested that a full-scale need assessment on CSR should be conducted at company level to
see how much CSR was an intrinsic part of company plans. He said that if done professionally, it would help
companies realize that CSR is here to stay as a priority.
The Chairman SECP stressed the need to develop stakeholder synergies so as to fully exploit the advantages that
can possibly be derived from pursuing a well-thought out CSR strategy. He reiterated SECP’s wholehearted
support towards this goal and invited others to join the initiative. A number of delegates voiced full alignment with
SECP’s views and committed support for any initiatives that SECP would develop in future.
8. CONCLUSION:
Closing the plenary, Dr. Tariq Hassan reiterated SECP’s commitment to see CSR establish itself firmly as a priority
area in Pakistan’s policy environment and emphasized again the importance of stakeholder ownership and
commitment for any CSR strategy initiative to succeed. He said it was a pleasure for him to be able to attend this
apex consultation because he learnt from it and thanked all participants who had come from all over the country to
attend. He appreciated the enthusiasm exhibited by the participants, the high quality of their feedback and the
commitment they had shown in bringing about a CSR compliant culture in Pakistan.
Dr. Hassan thanked Ms. Ambreen Waheed and appreciated the hard work of the RBI team for conducting the
country’s first CSR study and for successfully organizing the consultation. He thanked Dr. Shah for facilitating the
session. He said he was looking forward to the final draft of the report, following which he hoped to consider a
media campaign with the help of various stakeholders to achieve the outcomes outlined in the day. He urged
every corporate citizen to recognize their responsibility and make efforts to work towards realizing social values in
enlightened self-interest.
He said CSR was a movement which must go beyond workplace health and safety, and take into account the
consumer protection aspect so as to win the very hearts of the community. He expressed satisfaction at the
outcomes of the consultation, which he felt was a quantum leap towards fostering a socially responsible
environment.
Ms. Ambreen Waheed thanked the participants for their interest in the study and for their valuable inputs while
validating the recommendation on the CSR Strategy outline presented
Dr. Hassan referred to CSR as, “a process of generalizing what we have, prioritizing what we want, and carrying it
forward with actions in a meaningful manner”, and once again urged everyone to shoulder responsibility.
“We are fully committed to CSR.

We will not shy away from our obligations.
But for this we need widespread
partnerships.”
Dr. Tariq Hassan
Chairman SECP
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APEX CSR DISCUSSION WORKSHEET

Lahore – 26th September 2005
# TARGET ACTIVITY LEAD ROLE TIME ASSUMPTION
1. Build Strong Conceptual - Task force - SECP 12-18 CRI
Knowledge - National Campaign - Pak Inst. Of Corp. Governance months Message development
- Private TV channels - RBI
- Annual CSR Event
- Newsletter
2. Link CSR to Competitive - formal CSR guidelines - SECP
Advantage - Corp. Index Card - EFP
- - RBI
3. Enhance Effective - CSR Roundtable - SECP
Stakeholder Involvement - Outreach - GTZ/RBI
- NGO Coalition
- Industry Forums
- Media campaign
4. Harmonize and Standardize - Industry-specific norms - RBI Consider GRI as norm
CSR Performance - Develop frameworks
5. Define and - Tax break - CBR

Promote Clear Incentives - Govt. co-funding
- Recognize performers
6. Promote a Shared Strategic - enlightened self-interest - PICG
CSR - NGO Coalition
Vision -Corporate reps
7. Promote “Business” - design need-based programs - Business
Thinking for CSR Projects - CSR Centre
8. Seed a Vibrant National - take reps from existing -SECP
CSR Forum committees forum - CSR Expert
9. Link Taxes to CSR -
performance – tax reform
10. Review laws and draw -
together supportive
elements
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14.0 REFERENCES
1 AI’s vision is of a world in which every person enjoys all of the human rights enshrined in the Universal Declaration of Human Rights and other international human rights standards.
2 WWF World Wide Fund for Nature was officially formed and registered as a charity on 11 September 1961. WWF planned to work, wherever possible, with existing non-governmental organizations, and
base its grants on the best scientific knowledge available a policy which has been adhered to ever since.
3 OECD Organisation for Economic Co-operation and Development-Organization groups 30 member countries sharing a commitment to democratic government and the market economy. The work covers
economic and social issues to trade, education, development and science and innovation. http://www.oecd.org
4 Carson Rachel, “Silent Spring” -exposed the hazards of the pesticide DDT raised question on humanity’s faith in technological progress and helped set the stage for the environmental
5 The company tried to hide that instead of sharing and overcoming the disaster
6 International treaty on global warming risk management
7 The WEF’s failure to deal with the social and environmental issues in the agenda.
8 Dr Vivian Balakrishnan, Minister of State for Trade and Industry and National Development, Singapore
9 Business for Social Responsibility, USA

10 Defined by “Business for Social Responsibility”
11 Business for Social Responsibility
12 Samuel DiPiazza. CEO Price Water house Cooper
13 Stephen Timms MP, UK Minister for CSR
14 John Zinkin, Associate Professor, Nottingham University
15 Amnesty International and OECD was formed by thirty countries to monitor economic development and foster good governance, V The World Wide Fund for Nature (WWF) came into being to protect
natural resources. Greenpeace was founded to fight against the pollution and the hazards caused due to human ignorance.
16 Promonent recent example have involved leading businesses like Enron, WorldCom, Parmalat, Shell and Nike.
17 Prominent among these are a wide array of international interventions including Global Reporting Initiative, SARB SouthAsia Alliance for Responsible Business, the Asia Pacific CSR Centres Group and
the Globally Responsible Leadership initiative, and a slew of national ones like the Pakistan Institute of Corporate Governance.
18 São Paulo Consensus of UNCTAD XI
19 Mark Goyder, Director, Tomorrow’s Company
20 Pascal Lamy, Commissioner for Trade, European Commission
21 A by FTSE 350 index undertaken by the Institute of Business Ethics found above average financial performance for
companies with CSR policies.
22 “CSR Supplement”: Financial Post , 20th September

23 According to Islam.com, Islam emphasizes a conscious effort to avoid “hypocrisy, caprice, heedlessness, and everything else that keeps a Muslim serving God for His sake alone. This purification of the
soul is called tazkiyah”.
24 Raymond A. Klesc Business Ethics in Islam”, Part III, Muslim Executive and Expatriate Newsletter Volume 1 Issue 3
“ ,
25 For example, a set of business ethics principles, disclosure requirements, product integrity specifications or identified social & environmental compliance standards
26 4-Ps- Perception, Policy, Practice, Performance
27 Bench marking Corporate Citizenship Practices 2003 Report, Philipines Business for Social Progress
28 This could also be a key reason for the relatively low response-rate for this particular study
29 4-Ps- Perception, Policy, Practice, Performance
30 David B. Montgomery and Catherine A. Ramus, "Corporate Social Responsibility Reputation Effects on MBA Job
Choice" Stanford GSB Working Paper, May, 2004.
31 See Aguilera, et al, supra

32 Iddat (also pronounced IDDAH) is the period of waiting mandated upon widows after the death of their husbands during which they may not remarry. Iddat is established from the Quran and Hadith.
mubaarak.netfirms.com/iddat.htm
74
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Ambreen Waheed
33 Lord Browne of Madingley, Group Chief Executive of BP, 2001
♣ Holy Grail Found, Absolute, definitive proof that responsible companies perform better financially; Marjorie Kelly,
34 Shah Faiz, Waheed Ambreen “ Triple Bottom-line Demonstration Project in South Asian Countries–Pakistan”,
Project Report: World Summit on Sustainable Development, Johannesburg, South Africa, 2002
35 Waheed Ambreen “GRI Potential at the Grass roots: Applying the Triple Bottom-line to Export SMEs in Pakistan”
Paper presented at the GRI Regional Symposium, Kuala Lumpur, Malaysia, 2002
37 http://www.iso14000.com, http://www.sa-intl.org
38 Strong regulatory authorities are exemplified by such institutions as the State Bank, SECP, Monopolies Control Authority, PEMRA, NEPRA etc.
75
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Ambreen Waheed

Ambreen Rbi - CSR Perspective From Pakistan

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CORPORATE SOCIAL RESPONSIBILITY

IN PAKISTAN AND A STRATEGY FOR IMPLEMENTATION

A MEMBER OF THE ASIA-PACIFIC CSR CENTRE GROUP

2.1. Why Map CSR in Pakistan?

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

AREAS OF FOCUS FOR THE STUDY

1. The Need for CSR in Pakistan

3.0 WHAT IS CORPORATE SOCIAL RESPONSIBILITY?

3.1. How CSR Has Evolved through History

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

1. Pressure building up against the businesses CSR Approaches

Business 1971 Green Peace founded • environmental and natural

1984 Bhopal Disaster, India • Business • Capacity Building

1998 – 2005 1999 Battle of Seattle • Accountability • Demand for SR also

Adapted Table 3.2

3.3 How it is Currently Defined and Understood

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

UNCTAD is assisting developing countries18 in designing and implementing active policies

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

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

4.2. Insurance against Bad News

judged by tomorrow's standards DiPiazza.

even when their past is

4.3. Risks of Non-Compliance

4.4. Factors Driving CSR Growth

of various stakeholders including Triple Bottom Line is an accepted tool

HOW IS CSR CHANGING WITH GLOBALIZATION?

4.6. CSR and WTO Requirements

4.7. Business Case

4.7.1. Access to Markets

4.7.2. Improved Financial Performance

4.7.3. Slide in Operating Costs

4.7.4. Brand Image and Reputation

4.7.5. Growing Sales and Customer loyalty

4.7.6. Productivity and Quality Enhancement

4.7.7. Employee Retention

4.7.8. Less Scrutiny by Regulatory Bodies

5.0 HOW DOES CSR FIGURE IN THE PAKISTAN CONTEXT?

society and the academia to make a powerful CSR

5.1. CSR Practices in Pakistan

In 2003 a multi stakeholder forum

5.2. Initiatives by Support Organizations in Pakistan

Organization Initiative Focus

PCI – Pakistan Compliance Initiative Criteria development Social Compliance

5.3. CSR in the Light of Islam

6.0 IS THERE A CSR ROLE FOR GOVERNMENT?

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

mutually recognized problems. The Voluntary Principles and Social Accountability

The importance of CSR for United Kingdom is depicted by the

7.0 WHY THIS STUDY AND HOW

REGION BENCHMARKS by Measurement Frame work Formatted: Font color: Black

8.0 RESEARCH FINDINGS

8.1. Data Analysis

If CSR is to be regarded as an integral part of business decision–making, it merits a place in a

8.2. Response Analysis

10. Sugar & Food

Legal requirement or Customer Image drives CSR

Consumer & Services

Leather & Footwear

Cement & Building

Chemical & Fertilizer

Fuel & Energy

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