Why CSR

Why CSR

THE BANGLADESH CONTEXT


CSR concepts and practices in Bangladesh have a long history of philanthropic activities from time immemorial. These philanthropic activities included donations to different charitable organizations, poor people and religious institutions. Till now, most of the businesses in Bangladesh are family owned and first generation businesses.They are involved in community development work in the form of charity without having any definite policy regarding the expenses or any concrete motive regarding financial gains in many instances. Moreover, most of the SMEs fall under the informal sector having low management structure and resources to address the social and environmental issues. These limitations drive the top management of local companies to think only about the profit maximization rather than doing business considering the triple bottom line: profit, planet and people (CSR definition of Lotus Holdings).


The discussions on CSR practices in Bangladesh in its modern global terms, are relatively new, but not so for the concept itself. Because, being a part of the global market, it is difficult to ignore CSR standard specifically in the export sector. Ingeneral, it is true that in Bangladesh, the status of labor rights practices, environmental management and transparency in corporate governance are not satisfactory, largely due to poor enforcement of existing laws and inadequate pressure from civil society and interest groups like Consumer Forums.  Globally, as CSR practices are gradually being integrated into international business practices and hence is becoming one of the determining factors for market accesses, it is becoming equally instrumental for local acceptability. A focus on CSR in Bangladesh would be useful, not only for improving corporate governance, labor rights, work place safety,fair treatment of workers, community development and environment management, but also for industrialization and ensuring global market access. 


Since, CSR entails working with stakeholders it is important to work from within and diagnose the stakeholders; concerns so that CSR is truly embedded in the companies.  By now, many CSR dimensions are practiced in Bangladesh. The SMEs largely depend upon export. The US and EU buyers set guidelines to Readymade Garment (RMG) industry to ensure the standards. The 1992 Harkin’s Bill and subsequent consumer and industry boycott of RMG products by USA and the consequent remedial moves by local RMG sector is one example. Moreover, some buyers from EU visited the sites of recently collapsed garments factories. A temporary ban was also imposed on shrimp export to the EU on health and hygienic standard and appropriate remedial action followed in that instance too. But, some of the exporters found difficulty in convincing the US/EU buyers to have positive attitude towards Bangladesh due to inadequate CSR practices.


Businessmen need to recognize the implications of CSR for business activities. Companies are facing the challenges of adapting effectively to the changing environment in the context of globalization and in particular in the export sector. Although Consumer Rights Movement, enforcement of government  regulations and a structured view regarding the economic importance of CRS are not yet so widespread in the corporate world in Bangladesh, companies have graduallybeen attaching more importance to CSR in the local market as well. They are increasingly aware that CSR can be of direct economic value.  Companies can contribute to social and environmental objectives, through integrating CSR as a strategic investment into their core business strategy, management instruments and operations.  This is an investment, not a cost, much like quality management. So, business organizations can thereby have an inclusive financial, commercial and social approach, leading to a long term strategy minimizing risks linked to uncertainty.


CSR in Bangladesh can also contribute a lot to community development. The corporate house can develop the community by creating employment, providing primary education, contribution to infrastructure development like road and high-ways and addressing environmental concerns. This is more relevant for a country like Bangladesh where the government interventions in these fields augmented by corporate alliance can go a long way in developing the economy, society and environment.


Lack of enforcement of Industrial Laws and Regulations, weak unions, absence of consumer rights groups and high level of corruption within the regulatory bodies make CSR violation rampant in Bangladesh. Two most significant foreign exchange sources is the RMG sector and the overseas manpower export. Unbelievably low compensation, working hours, health/hygiene/sanitation conditions, fire safety and various types of abuse are so common and to the extent of inhumanity that will shock any conscientious individual to the core. Recently, the RMG sector employees have embarked on a industry wide movement to establish their rights.


Overseas workers are mostly exploited by recruiting agencies whereas these rural and mostly illiterate people have to sell all their belongings becoming paupers and borrow money at very high interest. Owing to cheating by the recruiters and unlawful behavior by the overseas employers, many of them are compelled to come back as beggars, some after long confinement in overseas jails. Hardly any remedy is available from the law enforcing agencies.  Many industrial units run with half-century old machinery producing fatal air, soil and water pollutions.More modern factories also don’t care to install Effluent Treatment Plants.Starting from FMCGs, vegetables, fruits and all other consumable goods,adulteration, abnormal ripening at times with poisonous elements, keeping fish fresh with applying deadly formalin and all other malpractice is rampant and carefree. Good governance and efficient law enforcing agencies can only solve these plights.


Although a developing country, because of global competitiveness and demand, the CSR practices and standards are being gradually implemented in Bangladesh. But there is a long way to go. There are challenges to implement CSR properly in Bangladesh. Ultimately CSR practices should be better practiced in Bangladesh for better and enhanced performance. In the publication “Good Governance and Market-Based Reforms: A Study of Bangladesh, Fara Azmat and Ken Coghill relates Good Governance with CSR by discussing the good governance indicators of regulatory quality, rule of law and control of corruption in the context of Bangladesh and analyses how lack of good governance indicators affects the success and sustainability of reforms and contributes to the lack of business ethics andCSR in Bangladesh.


CSR has been defined in general terms as ‘the obligation of the firm to use its resources in ways to benefit society,through committed participation as a member of society, taking into account the society at large and improving the welfare of society at large independent of direct gains of the company’ (Weile et al., 2001: 288). In this respect, CSR, as related to the problems of the agricultural input sector of Bangladesh, is used to explain the need of the businesses to be socially responsible and focus on economic, social, legal, ethical and environmental issues. Farmers are being cheated into buying underweight, low quality inputs sometimes at higher prices, which do not benefit yields. The contaminated inputs also cause damage to soil fertility, which eventually results in decreased yields. While the economic aspect is represented by the resultant effect of a price hike on the farmers, the social impact is due to the decrease in farmers’ income. The legal and ethical components are represented by the private sector not complying with the laws and rules and not meeting the obligations placed on them by the state and the society.Finally, the environmental consideration is also important because of the effect of contaminated and unbalanced inputs on the soil and on soil fertility.


As discussed above, lack of effective good governance in Bangladesh has resulted significantly in lack of business ethics and poor CSR culture. According to Wilson (cited in McIntosh and Thomas, 2002: 7), the key idea behind CSR and corporate citizenship is that responsible behavior makes good business sense. In Bangladesh the private sector seems to focus on earning profits in the short term, ignoring the issue of responsible behavior and the desirability of earning the trust of consumers which are important for the long-run success of their operations.The incidence of selling adulterated underweight low quality products at high prices and above all, hoarding to reap dishonest profit, all confirm this. In the absence of socially responsible behavior in the private sector,there is need to enhance capacity-building on the part of the state to intervene and implement sanctions effectively to enforce compliance. CSR does not develop and is not sustained independently of the context in which business operates. Importantly, the context includes the legal infrastructure created by the state and the enforcement effort imposed by the state. In the absence of an effective state intervention in the public interest, private entrepreneurs are less constrained to behave in the public interest and in conformity with CSR. Thus lack of capacity or lack of will, or both, by the state weakens the incentives for private sector entrepreneurs to practice CSR.


In addition, private sector entrepreneurs lack expertise and are not efficient and competent enough to take advantage of the open economy. The government has recognized the need for educating the private sector and is undertaking some programmes. However, this is not done on a large scale and nor is the potential exploited sufficiently for NGOs to be involved to educate the private sector on business ethics and issues of CSR.


There is limited research on CSR in Bangladesh. As of 2002, TERI-Europe contracted Centre for Policy Dialogue (CPD)to conduct an initial survey of the state of Corporate Responsibility (CR)in Bangladesh. The survey covered experiences and perceptions of workers,company executives and public representatives. Some of the conclusions of the survey were that the companies appear stronger on policy rather than on practice, around 2/3rd of the companies have policies on sustainable development, the aspects requiring attention are corporate governance, AIDS, human rights and International labour standards. Some of the conclusions of the report were that external forces are the main drivers for CR in Bangladesh, need for educating business leaders in CR assustainable and profitable business models, CR for the environment is of low concern and there is scope for partnership between the corporate sector and civil society.


As mentioned earlier, there are many evidences of corporate philanthropy in Bangladesh, which is different in character from fully developed CSR practice by a company, however small,medium or large in size – local or multination.  


Some commentators have pointed out that only multi-national companies and a few of the leading national companies in Bangladesh have the resources to implement CSR. Some others argue that CSR is primarily a political and strategic agenda pushed by policy makers, NGOs and big business. Furthermore, it is argued that only export-oriented companies whose customers are in Europe or North America need CSR to comply with the ‘Overseas’ CSR requirements of their buyers. This is not a worthwhile debate to pursue rather it is more relevant to pursue; the status of practice of CSR in Bangladesh in a cross section of companies so that effort may be directed towards promoting CSR for better business in Bangladesh to meet global and local needs. This CSR survey has been undertaken to gain insight into the same.