Why CSR is important for businesses in Bangladesh
Wednesday, 6 January 2010
Edward Probir Mondol
Concepts of corporate social responsibility (CSR) and its practices in Bangladesh have a long history of philanthropic activities from time immemorial. Such philanthropic activities included donations to different charitable organisations, poor people and religious institutions. Until now, most businesses in Bangladesh are family owned and first generation ones. 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 small and medium enterprises (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. In general, it is true that in Bangladesh, the status of labour 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, CSR practices are gradually being integrated into international business practices and hence are becoming one of the determining factors for market access. They are also equally instrumental for better local acceptability on the part of businesses. A focus on CSR in Bangladesh would be useful, not only for improving corporate governance, labour rights, work place safety, fair treatment of workers, community development and environment management, but also for industrialisation 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 practised in Bangladesh. The SMEs largely depend upon export. The US and European Union (EU) buyers set guidelines to readymade garment (RMG) industry to ensure the standards. The 1992 Harkins Bill and subsequent consumer and industry boycott of RMG products by the USA and the consequent remedial moves by local RMG sector are examples here. Moreover, some buyers from the EU visited the sites of recently collapsed garments factories. A temporary ban was also imposed on shrimp export to the EU on grounds of health and hygienic standards; 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 recognise 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 CSR are not yet so widespread in the corporate world in Bangladesh, companies have gradually been 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 organisations 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 roads and highways and addressing environmental concerns. This is more relevant to 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 sources of country's foreign exchange earnings are 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 common and prevail to the extent of inhumanity, that will shock any conscientious individual to the core. Recently, the RMG sector employees have been carrying out their 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 rate of interest. Owing to cheating by the recruiters and unlawful behaviour 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. A good number of them including more modern factories, also do not care to install effluent treatment plants. Adulteration, abnormal ripening of fruits and related consumable items at times with poisonous elements, keeping fish fresh with applying deadly formalin and all other malpractices are rampant. Only good governance and efficient law enforcing agencies can only solve such deadly problems.
Because of global competitiveness and demand, the CSR practices and standards have to be gradually implemented in Bangladesh. But it has a long way to go. There is no denying of better enforcement requirement of CSR practices in Bangladesh.
Fara Azmat and Ken Coghill in one of their publications -- Good Governance and Market -- Based Reforms: A Study of Bangladesh-- have tried to relate 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. The writers have analysed how lack of good governance indicators affects the success and sustainability of reforms and contributes to the lack of business ethics and CSR in Bangladesh.
CSR in general terms is defined as the obligation of the firm to use its resources in ways to benefit society, through committed participation as a member of the community, taking into account the society at large and improving the welfare of society at large independent of direct gains of the company.
In this respect, CSR, as can be 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 through buying underweight goods and supplies of 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, 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.
The key idea behind CSR and corporate citizenship is that responsible behaviour makes good business sense. In Bangladesh the private sector seems to focus on earning profits in the short term, ignoring the issue of responsible behaviour 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, underweigh and low quality products at high prices and, above all, hoarding to reap dishonest profit, do confirm this. In the absence of socially responsible behaviour 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 practise CSR. In addition, private sector entrepreneurs lack expertise and are not efficient and competent enough to take advantage of an open economy. The government has recognised the need for educating the private sector and is undertaking some programmes. However, this is not done on a large scale. This heightens need for educating business leaders in CR as sustainable and profitable business models. This will help direct efforts towards promoting CSR for better business in Bangladesh to meet global and local needs. The non-governmental organisations (NGOs) need to be involved to educate the private sector on business ethics and issues of CSR. (The writer is Executive Director of CSR Bangladesh. He can be reached at epmondol@csrbangladesh.org)
Concepts of corporate social responsibility (CSR) and its practices in Bangladesh have a long history of philanthropic activities from time immemorial. Such philanthropic activities included donations to different charitable organisations, poor people and religious institutions. Until now, most businesses in Bangladesh are family owned and first generation ones. 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 small and medium enterprises (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. In general, it is true that in Bangladesh, the status of labour 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, CSR practices are gradually being integrated into international business practices and hence are becoming one of the determining factors for market access. They are also equally instrumental for better local acceptability on the part of businesses. A focus on CSR in Bangladesh would be useful, not only for improving corporate governance, labour rights, work place safety, fair treatment of workers, community development and environment management, but also for industrialisation 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 practised in Bangladesh. The SMEs largely depend upon export. The US and European Union (EU) buyers set guidelines to readymade garment (RMG) industry to ensure the standards. The 1992 Harkins Bill and subsequent consumer and industry boycott of RMG products by the USA and the consequent remedial moves by local RMG sector are examples here. Moreover, some buyers from the EU visited the sites of recently collapsed garments factories. A temporary ban was also imposed on shrimp export to the EU on grounds of health and hygienic standards; 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 recognise 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 CSR are not yet so widespread in the corporate world in Bangladesh, companies have gradually been 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 organisations 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 roads and highways and addressing environmental concerns. This is more relevant to 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 sources of country's foreign exchange earnings are 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 common and prevail to the extent of inhumanity, that will shock any conscientious individual to the core. Recently, the RMG sector employees have been carrying out their 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 rate of interest. Owing to cheating by the recruiters and unlawful behaviour 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. A good number of them including more modern factories, also do not care to install effluent treatment plants. Adulteration, abnormal ripening of fruits and related consumable items at times with poisonous elements, keeping fish fresh with applying deadly formalin and all other malpractices are rampant. Only good governance and efficient law enforcing agencies can only solve such deadly problems.
Because of global competitiveness and demand, the CSR practices and standards have to be gradually implemented in Bangladesh. But it has a long way to go. There is no denying of better enforcement requirement of CSR practices in Bangladesh.
Fara Azmat and Ken Coghill in one of their publications -- Good Governance and Market -- Based Reforms: A Study of Bangladesh-- have tried to relate 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. The writers have analysed how lack of good governance indicators affects the success and sustainability of reforms and contributes to the lack of business ethics and CSR in Bangladesh.
CSR in general terms is defined as the obligation of the firm to use its resources in ways to benefit society, through committed participation as a member of the community, taking into account the society at large and improving the welfare of society at large independent of direct gains of the company.
In this respect, CSR, as can be 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 through buying underweight goods and supplies of 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, 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.
The key idea behind CSR and corporate citizenship is that responsible behaviour makes good business sense. In Bangladesh the private sector seems to focus on earning profits in the short term, ignoring the issue of responsible behaviour 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, underweigh and low quality products at high prices and, above all, hoarding to reap dishonest profit, do confirm this. In the absence of socially responsible behaviour 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 practise CSR. In addition, private sector entrepreneurs lack expertise and are not efficient and competent enough to take advantage of an open economy. The government has recognised the need for educating the private sector and is undertaking some programmes. However, this is not done on a large scale. This heightens need for educating business leaders in CR as sustainable and profitable business models. This will help direct efforts towards promoting CSR for better business in Bangladesh to meet global and local needs. The non-governmental organisations (NGOs) need to be involved to educate the private sector on business ethics and issues of CSR. (The writer is Executive Director of CSR Bangladesh. He can be reached at epmondol@csrbangladesh.org)