Ensuring Corporate Social Responsibility in Bangladesh

Topic: Ensuring Corporate Social Responsibility in Bangladesh

1 .Introduction:

The first question that needs to be answered is ‘what do we mean by corporate social responsibility or CSR?’

Corporate social responsibility can be defined as “the behavior that society commonly expects of businesses in matters of public concern.”[1] . One view of CSR suggests that the efforts of the firms should be intended exclusively for profit making for investors. And the other view of CSR is that the manager of the firm should decide what portion of the firm’s profit should be utilized for specific public issues such as improvement of the education system, medical research, etc. There are two competing theories of CSR[2], they are:

A)    The agents of capital view: states that corporations have to take the responsibility to maximize profits while abiding by the rules of the society.

And

B)     The social contract view: states that the society we live in has improved a lot and now should start to concentrate more on improving quality of life and begin addressing environmental concerns.

The concept of corporate social responsibility is a relatively new and modern one. CSR is a new concept apart from the occasional social beneficial services carries out by some business firms. Businesses are run by governments, labor unions and consumer groups. These powerful governing bodies consider CSR as a long-term investment in PR. In the context of Bangladesh, CSR is more applicable for the export-oriented industry. Due to globalization, CSR has become a necessary practice for businesses in Bangladesh. CSR looks out for the benefits of all stakeholders, not just for the stockholders. In order to adapt to the process of globalization the country is sensing the necessity for practicing CSR. But the total status of application of CSR in Bangladesh is very small. Some factors that challenge the progression of CSR  practices include lack of  Good Governance, lack of strong labor unions or consumer rights groups, and failure of the business community to identify CSR as a pre-condition for survival  in export and PR investment local market . After learning the importance of CSR for the local business community from incidences of boycotting  from the importer ,there is a gradual  increase in the  application of CSR in Bangladesh.

For the purpose of addressing the social problems or the problems of the stakeholders, the business community fashioned a new approach in their business strategies and named it CSR. And via CSR companies plan to strike a balance between economic and social goals, where the resources are consumed in a rational manner and social needs are addressed maturely.  CSR  can be seen as an all-inclusive set of policies, practices, and programs that are incorporated into business operations, supply chains, and decision making processes all the way through the business enterprise  and include responsibilities for present and past actions in addition to sufficient attention to future impacts. The focus of CSR can vary from business to business, and can also vary by size, sector and also by geographic region.

2. BODY

A. HISTORICAL PERSPECTIVE OF CSR

CSR is a notion in which firms incorporate communal and ecological issues in their business operations and in their interactions with their stakeholders voluntarily. It is claimed that corporations  should act both responsibly and ethically. But this goal is complex and very hard to achieve. It seems that corporations now face a battle between their motive of profit making and the ideologies of CSR. If a table of the conflicting goals of profit making and adoption of CSR ideologies is drawn, it would look like this[3]:

The term “ Socially responsible “ means satisfying legal obligations and also taking a step beyond and investing some portion of the profit into human capital, the environment and in trustworthy relationship building with stakeholders it is applicable to all sorts of companies from MSMEs to Multinational Enterprises (MNEs). Quite a few bunch of companies with good social standing and environmental records suggest that CSR activities can be the cause behind better performance and can also produce more revenue and growth. Companies that are socially responsible usually generate satisfactory financial returns. Some internal areas of business that are influenced by CSR are: human resources management, health and safety during work, adjustment to changes and management of environmental impact and natural resources. The external areas include local communities, business, partners, suppliers and consumers, human rights and global environmental issues. CSR may include arranging a simple social service event for the community. In the context of Bangladesh, many MNCs and local companies practice CSR.  MNCs are influenced by their own ESRB to practice CSR but most of the businesses based in Bangladesh show reluctance to practice CSR unless they are forced by the foreign buyers, provided the business is an export-oriented one.

B . IMPLICATIONS OF CSR TO BUSINESS ACTIVITIES

In theory, business persons are pressured to behave ethically or adopt CSR ideologies by the market mechanism and the legal system. But when we go outside and take a look into the real word, we see that both the economic and the legal system are flawed. Therefore individuals need to define what is right and wrong conduct in business[4]. Especially in the export sector, companies are facing the challenges of efficiently adapting to changes brought about by globalization in the environment. Here, personal analytical skills and implementation of CSR ideologies would definitely help to come up with sound business decisions .Companies have slowly started to give more importance to CSR even in the local markets, even though Consumer Rights Movement, the implementation of government rules and regulations and a systematic vision regarding the economic importance of CSR are not so popular in the corporate world in Bangladesh. Firms are becoming aware of the direct economic value of CSR.  By incorporating CSR as a strategic investment into their fundamental business strategy, management instruments and operation, companies will be able to contribute to social and environmental issues affecting the development of mankind. CSR is not a cost, it is an investment. Therefore, by incorporating CSR, businesses will be able to contribute to the society  and at the same time minimize risk due to uncertainty.

C. THE ROLE OF CSR IN THE DEVELOPMENT OF THE COMMUNITY

In the context of Bangladesh, CSR can contribute immensely for the development of the community. The businesses can help develop the community by creating jobs, thereby reducing the rate of unemployment. CSR can also help provide primary education and contribute to infrastructure development such as roads and high-ways and also help highlight the environmental issues causing concern. CSR can be of immense help for developing the economy, society and the environment for a country like Bangladesh .

D. THE APPLICATIONS AND REALITIES OF CSR IN BANGLADESH

From  the beginning of its inception, CSR ideologies and practices created a long history of social service activities in Bangladesh. These social service activities included donations to various charitable organizations, poor people and religious institutions. Until now, most of the Bangladesh based businesses are either family businesses or are first generation businesses. Many among these business firms are involved in community service work as a form of charity without any particular business policy regarding the money spent for these community services or without any selfish motive of financial profit behind this mask of goodness. Majority of the SMEs (falls under informal sector), with their low management structure, do not have sufficient resources to address social or environmental issues. These limitations influence the top management of local companies to contemplate only about the profit maximization rather than thinking about doing business which would generate profit and also help the planet and people. The discussions on practices of CSR ideologies are comparatively new but the CFR ideology has been around for a while. As a part of the global market, it is difficult for Bangladesh to ignore CSR standard specially in the export sector.  It is a well known fact that the status of labor rights practices, environmental management and transparency in corporate governance in Bangladesh are not satisfactory, mainly due to poor implementation of existing laws and insufficient pressure from civil society and interest groups like Consumer Forums. Since the popularization of the CSR practices in the international business practices, CSR is becoming one of the factors which help determine market accesses. CSR is slowly becoming an integral measure for local acceptability. Proper practices of CSR ideologies will prove to be very useful for improving corporate governance, labor rights,  safety in work place, unbiased treatment of workers, community development and environment management, and would also prove to be useful for ensuring global market access and industrialization.  CSR involves working with stakeholders and  it is vital to work from within and analyze the stakeholders’ concerns so that the Ideologies of CSR becomes an inseparable part of the company .Now-a- days, various CSR dimensions are practiced in Bangladesh. The SMEs are mainly export dependent. The US and EU buyers provide guidelines to RMG industry in order to make sure of the standards. Moreover, some buyers from EU went to see the sites of recently shut down garments factories. Due to insufficient and inappropriate CSR practice in Bangladesh, A temporary ban on shrimp export to EU was imposed based on health and hygienic standard and appropriate remedial action was  followed immediately a. But, some of the exporters found difficulty in convincing the US/EU buyers to have positive attitude towards Bangladesh after this incident.

Lack of implementation of Industrial Laws and Regulations, weak unions, absence of consumer rights groups and high level of corruption within the regulatory bodies make CSR violation massive in Bangladesh. The RMG sector and the overseas manpower export are the two most important foreign exchange sources. The workers work in shockingly unhygienic ambience, and insufficient fire safety facilities, this is often followed by poor sanitation facilities in the work place. The workers are offered very low compensation and different forms of abuse is commonly faced by the workers. All these have forced the workers in the RMG sector to fashion an industry wide movement in order to establish their rights in the work place.

These workers go abroad searching for jobs and recruiting agencies exploit them at every chance they get. These workers, who are mostly rural, illiterate people sell all their belongings and take loans at high interest rates to go abroad. But life doesn’t become easier for them abroad. The recruiters cheat them and the overseas employers behave unlawfully with them. Due to this many of the workers feel obliges and forced to come back to their motherlands as beggars. Some workers come back after serving some years in overseas jails. The law enforcing scarcely help these people out.

Various industrial firms run with fifty year old machinery producing poisonous air, soil and water pollutants. More up-to-date factories also do not seem to care to install Effluent Treatment Plants.

Good governance and efficient law enforcing agencies ( RAB, police) can only provide effective solutions to the following problems (abnormal ripening of fruits and vegetables using harmful hormones and applying Formalin to fishes to keep them fresh for a longer time) are all unethical practices which can cause severe health damage. The aforementioned problems arise due to lack of implementation of CSR ideologies.

E . THE FUTURE AND PROSPECTS OF CSR IN BANGLADESH

CSR is being practiced and implemented in Bangladesh in order to survive in the competitive and demanding, global, corporate jungle. Since Bangladesh is a developing country, we have a long way to go and have to face some challenges to properly implement CSR in Bangladesh.  The purpose of Practicing CSR in Bangladesh is enhancement of performance. In an article published under the title “Good Governance and Market-Based Reforms: A Study of Bangladesh” the writers Fara Azmat and Ken Coghill tried to relate good governance with CSR  by  discussing  good governance indicators  such as regulatory quality, rule of law and control of corruption in Bangladesh and analyzing how the absence of good governance indicators affects the victory and maintenance  of reforms  and gives rise to the lack of business ethics and CSR in Bangladesh.

F. CSR AND GOOD GOVERNANCE IN BANGLADESH

CSR has been defined as the responsibilities of corporations beyond those essential by law. The profit making motivations of the shareholders are a highly debated issue. According to some scholar corporations are not moral agents and therefore cannot have social or moral obligations. On the other hand, some scholars believe that all the elements of moral and social responsibility is present in individual’s corporate life. Thus, corporations should be considered as moral agents[5].  In the agricultural input sector of Bangladesh, CSR is used to explain the necessity of the corporations to be morally and socially responsible and concentrate on, social, economic, ethical, legal and environmental issues. Farmers are cuckolded into purchasing underweight, low quality inputs now and then at higher prices, which do not promote yields. The polluted inputs degrade soil fertility, which ultimately results in decreased yields. Despite the fact that the economic facet is represented by the consequential effect of a price hike on the farmers, the social impact is owing to the reduction in farmers’ income. The legal and ethical aspects are represented by the private sector not acting in accordance with the laws and rules and not meeting the obligations placed on them by the state and the society. In conclusion, environmental contemplation is also vital for the reason of the effect of polluted and unstable inputs on the soil and on soil fertility.

Like discussed earlier, the lack of business ethics and CSR practice in Bangladesh is the result of lack of good governance. The central idea in the wake of CSR and corporate citizenship is that responsible conduct makes excellent business sense. In Bangladesh, the private sector seems to concentrate on generating profits in the short term, disregarding the issue of responsible conduct and the merits of earning the confidence of consumers, which are imperative for the long-run success of their business.  Selling underweight, low quality inputs now and then at higher prices to farmers and primarily earning profits dishonestly, all back up this. During the absence of socially responsible behavior in the private sector, a necessity to develop capacity-building on the part of the state to intercede and implement appropriate rules and regulations to successfully enforce obedience. CSR ideologies are developed and they are sustainable in the corporate world. The legal infrastructure created by the state and the execution effort imposed by the state significantly affect the development and implementation of CSR ideologies .In the absence of an effectual state interference in the public interest, private sector entrepreneurs are less guarded to behave in the public interest and in accord with CSR. Lack of capacity and will of the state cause abatement of the incentives of private sector entrepreneurs to practice CSR.

Moreover, entrepreneurs in the private sector do not have enough proficiency and are not capable and experienced enough to benefit from the open economy. The government is designing some programmes in order to educate and improve the skills of the people working in the private sectors. NGO’s cannot get involved to educate the private sector on business ethics and issues of corporate social responsibility since the potential is not adequately exploited.

G. THE PERCEPTION OF THE BUSINESS COMMUNITY OF BANGLADESH OF CSR

By social responsibility we mean a firms long terms as well as short term goals and concerns. If a corporation decides to shut down one of its factories, it may have favorable effects on the corporations that year’s balance sheet and profit and loss statement. But a decision like that may result in decrease in employee loyalty and productivity at other factories and also a decrease in brand loyalty in inhabitants of the town may result from such a decision. Thus, business decisions should be taken on grounds of both social responsibility as well as a profit making.[6] Speakers acknowledged dearth of proficiency and poor accountability as foremost hindrances to practicing CSR at a Roundtable meeting organized by CSR Center of Bangladesh Enterprise Institute, held on Thursday, 23 February, 2006. They convoluted that not having sufficient expertise and poor accountability of corporate houses are obstacles to execution of CSR in Bangladesh. The speakers also said that various CSR activities by Bangladeshi corporate houses are mainly planned and designed keeping the motive of publicity on mind and the short-term implications of implementing CSR ideologies. The BEI roundtable meeting on CSR named ‘Corporate Social Responsibility Practices and Challenges in Bangladesh’ was a segment of its ‘Dialogue Series on CSR in Action’.

Sanjiv S Mehta, chairman and managing director of Unilever Bangladesh Ltd, Mohammad Abu Musa, deputy managing director of Dhaka Bank Ltd, and Mohin Khan, executive assistant (Board Affairs) of BRAC, where among the notable speakers at the meeting.

According to BEI President, Farooq Sobhan , corporate entities should gain more knowledge about CSR and try to understand its importance . The private sector enterprises will continue to be fragile unless and until they start to implement CSR ideologies . In addition, The BEI president also said that when it comes to implementing good corporate governance, Bangladeshi companies are lagging far behind than companies based  in India, Pakistan and Sri Lanka. Mr. Farooq also said “Properly implemented CSR programmes help the companies meet legal and societal expectations and benefit governments, employees, citizens and businesses,”. He then added that poorly implemented CSR programmes were nothing more than public relations exercises.

An approximate of 20 elite executives attended the roundtable from both local and international corporate houses and donor agencies and representatives of Unilever Bangladesh, Dhaka Bank and BRAC briefed the roundtable about their CSR activities.

3. CONCLUSION

In spite of countless hindrances the modern ideology or concept of CSR is evolving slowly but surely. CSR is an instrumental PR investment. Sluggish progress can be attributed to lack of Good Governance, deficiency of strong labor unions, consumer forums and most of all lack of comprehension and perception by business houses, particularly non-exporting ones. The driving forces behind the evolution of CSR is pressure from the various stakeholders. But at the end of the day, companies mostly benefit from the application of the concept of Corporate social responsibility or CSR.

BIBLIOGRAPHY

1. Barnes, A.J., Dworkin, T.M., & Richards, E. (2000). Law for Business. McGraw-Hill/Irwin.

2. Cameron III, G.D., & Scaletta Jr., P.J. (1990). Foundation of Business law.Von Hoffman Press Inc.

3. Conry, E.J., Ferrera, G.R., & Fox, K.H. (1986). The legal evironment of business. Wm.C. Brown Publishers.

4. Edwards, F.L., Meiners, R.E., & Ringleb, Al H. (1994). The Legal Environment of Business. West Publishing Company.

5. Henkel, J.W.,& Tucker, E.W.  (1992). The Legal and Ethical Environment of Business. Diane Pub Co .

6. Miyan, M.A. (2007). Manuscript submitted for publication, IUBAT – International University of Business Agriculture and Technology, Dhaka, Bangladesh. Retrieved from http://webcache.googleusercontent.com/search?q=cache:90hoiRiHqVsJ:www.csr-weltweit.de/uploads/tx_jpdownloads/M_Alimullah_Miyan-Dynamics_of_CSR.doc+ensuring+corporate+social+responsibility+in+bangladesh&cd=6&hl=en&ct=

style=”text-align: justify;” size=”1″ />

[1] Henkel, J.W.,& Tucker, E.W.  (1992). The Legal and Ethical Environment of Business. Diane Pub Co .,p.23.

[2] Edwards, F.L., Meiners, R.E., & Ringleb, Al H. (1994). The Legal Environment of Business. West Publishing Company. pp.208,209.

[3] Barnes, A.J., Dworkin, T.M., & Richards, E. (2000). Law for Business. McGraw-Hill/Irwin.p.49.

[4] Conry, E.J., Ferrera, G.R., & Fox, K.H. (1986). The legal evironment of business. Wm.C. Brown Publishers. P.53

[5] Edwards, F.L., Meiners, R.E., & Ringleb, Al H. (1994). The Legal Environment of Business. West Publishing Company. p.205.

[6] Cameron III, G.D., & Scaletta Jr., P.J. (1990). Foundation of Business law.Von Hoffman Press Inc.pp.917,918.