Corporate Social Responsibility and Sustainability:

Emerging Trends in Developing Economies

Corporate Social Responsibility in Pakistan: Current Trends and Future Directions
Aymen Sajjad Gabriel Eweje
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 CORPORATE SOCIAL
RESPONSIBILITY IN PAKISTAN:
CURRENT TRENDS AND FUTURE
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DIRECTIONS

Aymen Sajjad and Gabriel Eweje

ABSTRACT

Purpose The purpose of this chapter is to provide a practical review of

topical developments in corporate social responsibility (CSR) perspec-
tive within Pakistani business environment.
Methodology/approach To investigate the concept of CSR in
Pakistan, this chapter primarily draws on secondary sources including
extant literature on CSR, government reports, publications of interna-
tional agencies, industry reports, companies’ CSR/sustainability reports,
and newspaper articles.
Findings The findings of this research reveal that the concept of CSR
is relatively underdeveloped in Pakistan. There is a general perception
among business practitioners in Pakistan that CSR relates to altruism or
philanthropic activities. However, only few large local companies and
multinational enterprises hold a well-defined CSR policy. Small and

Corporate Social Responsibility and Sustainability: Emerging Trends in Developing Economies

Critical Studies on Corporate Responsibility, Governance and Sustainability, Volume 8, 163 187
Copyright r 2014 by Emerald Group Publishing Limited
All rights of reproduction in any form reserved
ISSN: 2043-9059/doi:10.1108/S2043-905920140000008010
163
 164 AYMEN SAJJAD AND GABRIEL EWEJE

medium enterprises limit their CSR engagement to comply with codes of

conduct set by foreign buyers.
Research limitations/assumptions The discussion in this chapter is
based on the secondary data, therefore the empirical research is needed
to validate the findings of this study. Further, this chapter presents a gen-
eric reflection about how CSR is practiced and perceived in Pakistani
business environment. Thus, industry-specific research would illustrate a
much clearer picture on how different sectors in Pakistan are promoting
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CSR principles.
Practical implications The findings of this research would help busi-
nesses and policy makers to recognize the current state of CSR progress
and potential CSR challenges in Pakistan. These findings may assist the
government, private sector, and civil society to devise future CSR agenda
in Pakistan.
Originality/value The authors contend that this is one of the few stu-
dies in Pakistani context which attempts to provide a comprehensive
overview of CSR-related developments in Pakistan.
Keywords: Pakistan; corporate social responsibility; sustainable
development; developing countries; environmental stewardship;
social sustainability

This chapter examines the concept of corporate social responsibility (CSR)

in the Pakistani business environment. In recent years, the concept of CSR
has received considerable interest within the academic, business, and non-
governmental organizations (NGOs). Globally, many companies are proac-
tively seeking opportunities to invest in CSR practices to achieve business
competitiveness and societal legitimacy. However, the extent to which CSR
is practiced in different parts of the world reflects a stark variation. The
concept of CSR has been extensively explored in the context of western
business concept, nonetheless, there is a paucity of research on how CSR
is practiced and perceived in the developing world (Dobers & Halme,
2009; Jeswani, Wehrmeyer, & Mulugetta, 2008; Lund-Thomsen, 2004;
Prieto-Carrón, Lund-Thomsen, Chan, Muro, & Bhushan, 2006). In parti-
cular, relatively little research has been conducted on CSR in the Pakistani
business context (Ehsan & Kaleem, 2012). Essentially, Pakistan presents
 Corporate Social Responsibility in Pakistan 165

a unique case for CSR as currently the country is facing a range of problems
including fragile economy, political instability, social unrest, rampant cor-
ruption, energy deficit, terrorism, and inadequate regulatory framework. At
a broader level, all these issues have implications for the corporate sector,
specifically, in terms of CSR implementation. Therefore, there is an intense
need to examine how Pakistani companies are integrating CSR principles in
their business decisions given the above political, social, economic, and
environmental challenges. Aside from the unique context of Pakistan, the
research on the nature and scope of CSR-related developments in Pakistan
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as well as the current state of CSR adoption by Pakistani businesses is

rather underdeveloped. Against this background, this chapter aims to
extend the understanding of CSR notion in Pakistan business environment.
First, this chapter outlines the concept of CSR in the light of theoretical
perspectives for subsequent discussion. Secondly, social, economic, and
political conditions of Pakistan are contextualized to provide an overview
of socioeconomic, environmental, and political challenges business sector is
presently encountering in Pakistan. Following on this, the chapter draws
on a number of sources to examine the state of current CSR practices in
Pakistan. In this regard, the CSR practices of multinational corporations
(MNCs), large local business companies, and small and medium enterprise
(SME) sector are explored. Finally, the chapter concludes by offering a
way forward for building CSR as a mainstream agenda in the Pakistani
private sector and suggests the directions for future research.

THE CONCEPT OF CSR

Over the last few decades, the concept of CSR has significantly evol-
ved and attained much prominence in the business and the academic
community. In general, CSR refers to a voluntary business approach which
stresses that business practitioners have to achieve economic outcomes in a
way that contributes to the social well-being of the society and safeguard
natural environment. Thus, those firms which promote CSR principles com-
mit themselves by demonstrating a high level of ethical and moral standards
in their business behavior. Notwithstanding, the notion of CSR is not a new
phenomenon, in fact it has a well-established history. Yet, CSR has never
been considered with such an immense importance in the corporate decisions
as today (Baughn, Bodie, & McIntosh, 2007; Hess, Rogovsky, & Dunfee,
2002; Smith, 2003). Increased global recognition of CSR perspective can be
 166 AYMEN SAJJAD AND GABRIEL EWEJE

attributed to two reasons. First, increasing globalization, international

trade, and global information sharing have created new constraints for
corporations to improve transparency, accountability, and corporate citi-
zenship. Corporate stakeholders including customers, NGOs, media, and
the society at large require corporations to resolve CSR issues and fulfill
their ethical and moral obligations toward society. Smith (2003, p. 15)
states that “safeguarding the corporate reputation and brand image have
become ever more important as markets have become more competitive
and reputations and image have become more vulnerable. Simply put,
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firms may be penalized by consumers and others for actions that are
not considered socially responsible.” Second, in the past, governments by
and large undertake the major responsibility for improving the social well-
being of the population. However, the needs of the society have radically
changed and there is a growing realization about the failure of govern-
ment to solve many social problems (Smith, 2003). Thus, governments
alone lack sufficient resources to meet those increased social needs, and as
a result the private sector is called upon to take an active role in addressing
sustainability challenges, such as pollution, product safety, or hazardous
working conditions for which businesses are more directly responsible
(Smith, 2003).

Defining CSR

There is a lack of consensus regarding the definition of CSR and the activ-
ities that constitute the CSR concept (Dahlsrud, 2008). The multifaceted
nature and a much broader scope of CSR makes it complicated to be expli-
citly conceptualized and clearly defined. As Birch and Moon (2011, p. 19)
point out: “there is no single formula or template for CSR worldwide.” In
practice, the meaning and the scope of CSR depends on political, social,
economic, and cultural conditions in which a firm operates and also the
point in time when it is conceptualized (Baughn et al., 2007; Chapple &
Moon, 2005). Dahlsrud (2008) conducted a recent study on CSR definitions,
which found that five dimensions were frequently used to define the concept
of CSR: stakeholder dimension, social dimension, economic dimension,
voluntariness dimension, and environmental dimension. Dahlsrud (2008)
found that European Commission’s (EC) definition is the most cited defini-
tion of CSR. According to the EC (2001, p. 6), CSR is “a concept whereby
companies integrate social and environmental concerns in their business
operations and in their interactions with their stakeholders on a voluntary
 Corporate Social Responsibility in Pakistan 167

basis.” This definition mostly encapsulates the core dimensions of CSR con-
cept. Therefore, the CSR value driven companies aim at: “(a) maximizing
the creation of shared value for their owners/shareholders and for their
other stakeholders and society at large, (b) identifying, preventing and
mitigating their possible adverse impacts” (EC, 2011, p. 6).
However, in the developing world context, the scope of CSR goes
beyond the western CSR conceptualization to include “not only aspects of
corporate conduct that impinge on social, environmental and human right
issues, but also the role of business in relation to poverty reduction”
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(Prieto-Carrón et al., 2006, p. 977). Consequently, companies in the devel-

oping world including Pakistan, India, China, and Bangladesh infrequently
adhere to the government regulations in areas such as corruption, tax pay-
ments, occupational health and safety (OHS), environmental conservation,
labor and employment practices, human rights, and child labor. In these
circumstances, the challenge is to make corporations fulfill their existing
legal responsibilities rather than encourage them to integrate CSR initia-
tives beyond legal compliance (Jamali & Mirshak, 2007; Khan & Lund-
Thomsen, 2011). Thus, Khan and Lund-Thomsen (2011, p. 76) argue that
“in the context of developing world, however, the emphasis on corpora-
tions voluntarily going beyond their legal obligations might be somewhat
misleading.” On the other hand, Dobers and Halme (2009) emphasize on
corporate activism regarding improving capacity in identifying tax evasion,
antitrust, and unveiling of corruption cases. Another problem in the devel-
oping world lies at the public policy level where governments lack motiva-
tion, resources, and competency to regulate corporate sector. Governments
in developing countries perceive that increased regulations may negatively
impact foreign direct investment, which create extra economic and social
burden on these nations (Graham & Woods, 2006). Accordingly, the CSR
notion in the developing world context requires a relatively broader inter-
pretation, different from the way it has been described, perceived, or prac-
ticed in the developed world. In this regard, Blowfield and Frynas (2005,
p. 503) suggest an extended conceptualization of CSR in the developing
world context. They describe CSR concept as an umbrella term for a vari-
ety of theories and practices including:

(a) that companies have a responsibility for their impact on society and
the natural environment, sometimes beyond legal compliance and the
liability of individuals;
(b) that companies have a responsibility for the behavior of others with
whom they do business (e.g., within supply chains); and
 168 AYMEN SAJJAD AND GABRIEL EWEJE

(c) that business needs to manage its relationship with wider society,
whether for reasons of commercial viability or to add value to society.

Models of CSR

There are different models of CSR in the academic literature that reflect
ways CSR can be integrated in the corporate contexts. However, in this
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chapter two models Carroll’s (1991) CSR pyramid and Smith’s (2003)
normative and business case view on CSR are utilized. These models are
used as a yardstick to examine the CSR practices of companies in Pakistan.
Carroll (1991) suggests a framework for CSR by categorizing CSR activ-
ities into four types of social responsibilities: economic, legal, ethical, and
discretionary (or philanthropic) (see Fig. 1).
According to Carroll (1991), the economic responsibilities relate to
delivery of improved financial outcomes to shareholders and business com-
petitiveness in the marketplace. The economic responsibilities further
involve provision of fair wages or salaries to workers, safe products to the

PHILANTHROPIC
Responsibilities
Be A Good Corporate Citizen
Contribute to the
community;
Improve quality of life

ETHICAL
Responsibilities
Be Ethical
Obligation to do what is right, Just and fair;
Avoid harm
LEGAL
Responsibilities
Obey the Law
Law is society’s co dification of right and wrong;
Play by the rules
ECONOMIC
Responsibilities
Be Profitable
The foundation upon which all others rest

Fig. 1. The Pyramid of CSR (Carroll, 1991).

 Corporate Social Responsibility in Pakistan 169

customers at a fair price, and ensuring payments of profits to corporate

shareholders. Legal responsibilities entail the need for businesses to accom-
plish their economic commitments within the framework of law. Ethical
and discretionary responsibilities, on the other hand, cover a broad spec-
trum of organizational commitments toward protection of ethical or moral
rights of stakeholders. Ethical responsibilities include those practices,
activities, and behaviors, which do not dwell in or expressed by the legal
framework but are expected or proscribed by the members of society.
Philanthropic responsibilities relates to corporate actions and initiatives
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expected by society to attain a reputation of good corporate citizen in the

society. Thus, philanthropic responsibilities are discretionary or voluntary
by nature, however, society expects businesses to actively perform these
responsibilities. These four categories of social responsibilities can be
depicted by a pyramid structure, in which economic responsibilities estab-
lish the foundation upon which all other responsibilities are based (Carroll,
1991). Based on this view, without adequate economic performance, it
would be difficult for firms to actively participate and achieve other manda-
tory or discretionary social responsibilities. The philanthropic responsibil-
ities are placed at the peak of the CSR pyramid. However, Carroll (1991)
recognizes that businesses are expected to simultaneously undertake all
these responsibilities.
Smith (2003) classified CSR into two distinguish perspectives the
normative case for CSR and the business case for CSR. The normative
perspective focuses on corporate engagement in CSR with a desire to do
good because it is morally and ethically correct to do so. This view holds
that business should function in a way that meets its ethical and moral
obligations toward stakeholders. This viewpoint closely relates to social
values-led case, where CSR values are ingrained in the organizational
culture (Berger, Cunningham, & Drumwright, 2007). Economic motives
and external market factors are of secondary importance, compared to the
profound ethical commitments that direct CSR behavior in an organization
(Berger et al., 2007). Conversely, the business case perspective holds that the
business participation in CSR promotes firm’s long-term self-interest
(Smith, 2003). Further, the business case suggests that corporate involve-
ment in the CSR activities presents an opportunity for promoting economic
benefits to organization. Therefore, it is in the self-interest of the organiza-
tions to promote CSR in their business activities. In particular, the business
case for CSR offers business benefits such as societal legitimacy, protec-
tion against stringent penalties and regulations, low risk from activists
targeting business, and access to new markets and business competitiveness
 170 AYMEN SAJJAD AND GABRIEL EWEJE

(Carroll & Shabana, 2010; Porter & Kramer, 2002; Smith, 2003). However,
it is important to recognize that engagement in CSR involves costs such as
investment in environmentally friendly equipments, third-party certifica-
tions, OHS programs, CSR reporting, and community development
projects. Generally, the payoffs of these investments are usually realized in
the long run.
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ECONOMIC, SOCIAL, AND POLITICAL CONTEXT

IN PAKISTAN

Pakistan is a federal democratic republic located in South Asia with over

184.35 million population making it a sixth largest populated country in
the world (Economic Survey of Pakistan, 2013). The geographical location
of Pakistan provides a unique strategic advantage to the nation as regards
to developing a regional trade network with China, Middle East, Central
Asia, and South Asian countries including India. In addition, the nation
possesses a large reserves of untapped natural resources other than its vast
working-age population, which gives a potential demographic benefit but
also posing a substantial challenge to policy makers in the provision of
employment and adequate social services to the population (World Bank,
2013). However, at present Pakistan’s economy is facing the worst crisis in
its history. The consumption-led economic growth with falling investments,
ineffective economic governance, rising inflation and unemployment rates,
energy deficit, a series of natural disasters, persistent conflicts in the border
areas, and critical law and order situation have created circumstances
where it becomes very difficult for the nation to achieve macro-economic
stability and desired development outcomes (Asian Development Bank,
2013). All these factors have implications for companies’ CSR policy in
Pakistan. Many companies operating under these conditions strive for sur-
vival rather than investing in CSR initiatives, which may, to some extent
increase their cost of operations.
A number of indicators suggest that an effective economic policy and
resilient structural reforms are needed to achieve desired socioeconomic
development outcomes in Pakistan. The gross domestic product (GDP)
rates of the past 10 years show a volatile trend in the growth of Pakistan’s
economy. The economy has experienced reasonably stable average GDP
growth of 6.76 percent in the period of 2002 2007. However, the global
financial crisis in year 2007 2008, sharp rise in international oil prices,
 Corporate Social Responsibility in Pakistan 171

acute power shortages, inadequate fiscal reforms, huge expenditures on the

war against terror, security hazards, and repetitive natural disasters such as
floods in 2010 and 2011 have had overwhelming impacts on the Pakistan’s
economy (Economic Survey of Pakistan, 2012). For instance, the estimated
damage caused by the recent floods was over $8 billion (5.8 percent of
2009 2010 GDP) (ul Hasan & Zaidi, 2012). Accordingly, the average
GDP rate during 2008 2012 remained low and the economy grew by only
3.04 percent (Economic Survey of Pakistan, 2012). International Labor
Organization (ILO) (2011) estimates that about 5.3 million jobs were lost
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or affected by 2010 floods. On the other hand, according to the official esti-
mates, the economy of Pakistan suffered approximately US$68 billion
losses in the war against terror (Economic Survey of Pakistan, 2011).
Energy plays a very significant role in the socioeconomic development of
a country. However, in the case of Pakistan energy deficit, electricity defi-
ciency is one of the most fundamental reasons for impoverished economic
growth. Power outages of 12 20 hours per day have paralyzed industrial
activities and made life miserable for households. The lack of regular power
supply to the private sector has resulted in thousands of industrial units in
the textile, cotton ginning, small loom sectors to discontinue operations in
many industrial cities. Acute electricity deficit has caused tens of thousands
of workers to relinquish their jobs in the country (Human Rights
Commission of Pakistan, 2010). The electricity shortage roughly cost $13.5
billion to the Pakistan’s economy (Shah, 2013). Planning Commission of
Pakistan (2013) estimates that per annum power deficit reduced GDP by 2
percent. According to Economic Survey of Pakistan (2013), the installed
electricity generation capacity in Pakistan is 20,000 MW but the actual pro-
duction remains below the demand, causing long hours of power outage
known as “load shedding” syndrome in the country. Currently, the electri-
city production in Pakistan stands at 11,000 MW, while the demand for
electricity is 17,000 MW, thus making it a shortfall of 6,000 MW (Shah,
2013). Inadequate corporate governance and ineffective management at
state-owned power companies, high transmission and distribution losses,
lack of customized government subsidy, and poor revenue collection are
some of the significant reasons for electricity crisis in the country (Planning
Commission of Pakistan, 2013). All these factors have contributed to the
circular debt1 problem. As of December 2012, the circular debt of the gov-
ernment stands at Rs. 450 billion (US$4.5 billion). The circular debt issue
has made it difficult to operate power generation companies at their full
potential, the government allocates substantial amount of money in budget
every year or acquires loans to write off circular debt. However, without
 172 AYMEN SAJJAD AND GABRIEL EWEJE

substantive structural reforms by the government in the power sector, it is

unlikely that economic activities would achieve any significant momentum
to reach the desired economic outcomes.
Another pressing economic issue is mounting public debt and inflation
in Pakistan. As at end of March 2012, Pakistan’s public debt stood at Rs.
12,024 billion. The external debt contributes to Rs. 4,818 billion to the total
debt (Economic Survey of Pakistan, 2013). Although it is a common prac-
tice in developing countries to borrow money to facilitate socioeconomic
development process, however, only diligent channelization and effective
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use of public debt act as a catalyst to the economic development process of

a country. Conversely, unsustainable levels of public debt have harmful
consequences on development process because of heavy expenditure on
debt servicing payments to the granter. In Pakistan, myriad of domestic
problems and international recession and financial crisis negatively
impacted the country’s debt position (Economic Survey of Pakistan, 2013).
Moreover, a massive debt repayment commitment of Pakistani government
has made it difficult to allocate sufficient funds to the social-economic
development activities. On the other hand, the inflation continues to be in
double digits in the last five years with an average of 13.08 percent
(Economic Survey of Pakistan, 2012). This problem is adding further
misery to the majority of people in Pakistan who are struggling for jobs
and basic living owing to acute energy deficit and terrorism.
Human development is an integral part of a country’s sustainable devel-
opment (SD)2 process. Pakistan’s human development indicators suggest
mixed trends. The total unemployment rate is gradually increasing in the
country and currently it is 6 percent with an estimated 3.4 million people
unemployed in the national labor force (Economic Survey of Pakistan,
2012). The poverty in the country has declined from 34.5 percent to
17.2 percent during 2001 2008, however, the trend in poverty reduction
may be difficult to sustain due to existing problems (World Bank, 2013).
The government expenditure on health and education in Pakistan remains
very low in the region. Unfortunately, the government has failed to invest
in its people, especially, its women. The government spends only 2 percent
of the GDP on health and education (Economic Survey of Pakistan, 2012;
World Bank, 2013). According to the World Bank (2013), “at the current
rate of progress, it will be difficult for Pakistan to meet the Millennium
Development Goals (MDG) targets on health and education by 2015.” In
addition, Pakistan has a highest fertility and population growth rates in the
South Asian region. The population is growing at the rate of 2.03 percent
while the total fertility rate was 3.4 percent in year 2011. The fertility rate
 Corporate Social Responsibility in Pakistan 173

has improved considerably compared to 4 percent in 2006, however, it is

still higher than the fertility rates in the neighboring countries such as
Bangladesh, Sri Lanka, Nepal, and India (Economic Survey of Pakistan,
2012). The United Nations (2013b) estimates that the population of
Pakistan will be doubled in the year 2050. This would make Pakistan the
world’s fourth largest country with 335 million inhabitants.
Furthermore, reports from various international development organiza-
tions reveal that Pakistan’s competitiveness and socioeconomic develop-
ment potential is continuously declining in the past few years. For example,
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the recent report of the United Nations (2013a) reveals that Pakistan’s
ranking on Human Development Index (HDI)3 has declined from 120 in
1991 to 136 in 2005. At present, Pakistan’s HDI ranking stands at 146.
This declining trend in Pakistan’s HDI ranking suggests that the country’s
progress in areas such as education, health, and income is now worse than
that of Congo (142) and Ghana (135), countries with far weaker economies.
Similarly, the latest report of the World Economic Forum (2013) indicates
that Pakistan’s ranking on the Global Competitive Index (GCI) also
declined. The GCI rank of Pakistan in year 2007 2008 was 92 out of 131
countries. However, the ranking dropped from 92 to 124 in 2012 2013 out
of 144 countries. This suggests that Pakistan’s competitive position is fall-
ing on areas such as basic infrastructure, macro-economic environment,
and health and primary education.

STATE OF CSR IN PAKISTAN

The notion of CSR is relatively a new phenomenon in Pakistan, nonetheless
the interest in and awareness of CSR is steadily growing in the country. In
the developed world, CSR has become a key element for corporate legiti-
macy and trust in the society which determines the long-term survival of
business. However, in Pakistan business environment, the notion of CSR is
still a buzzword for many companies and individuals who often misunder-
stand its true spirit or ignore it (Waheed, 2005). In many Pakistani compa-
nies, the term CSR has been mystified with philanthropic activities
(Waheed, 2005), workers rights, and labor laws (Khan, 2012). The corpo-
rate practitioners are largely unacquainted about the activities, responsibil-
ities, and ramifications of CSR practices onto their businesses (Khan, 2012;
Waheed, 2005). The problem lies at both ends, the general public in
Pakistan is less aware of the role of corporate sector in society, while
 174 AYMEN SAJJAD AND GABRIEL EWEJE

corporations lack knowledge about the true philosophy of CSR (Ehsan &
Kaleem, 2012). However, as highlighted earlier, CSR is not only limited to
charity or philanthropic activities but, rather, it involves corporate commit-
ment to a broad set of responsibilities around social, economic, and envir-
onmental outcomes to deliver shared value to corporate stakeholders.
In particular, CSR is different from philanthropy as philanthropy often
relates to one-off financial grant, which does not necessarily require busi-
ness donor to make successive payments or involve in any kind of planning
and implementation of community development initiatives (Mahapatra &
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Visalaksh, 2011). Waheed (2005, p. 12) argues that “CSR extends beyond
the random act of generosity to include such commonplace values as pay-
ing taxes, open disclosure, labor standards and customer sensitivity.”
Accordingly, the legitimacy of such philanthropic commitments by busi-
nesses may be criticized because of inadequate accountability and transpar-
ency issues at implementation level (Mahapatra & Visalaksh, 2011).
Accordingly, Timms (2002), the Minister for Trade and Industry in UK,
states that “the key for corporations is that CSR activity is seen not as PR,
not as philanthropy, but as mainstream to the business justified not just
by altruism but on sound business ground.” This conceptualization of CSR
clearly recognizes the holistic nature of CSR, which sets CSR apart from
philanthropy, donations, or other charitable activities to include a resilient
focused strategy for internal and external stakeholder groups. For instance,
internal CSR policy may include areas such as environmental protection
and energy efficiency, development of environmental management system
(EMS), and human resource strategy, fair labor treatment, and OHS
at work. While the external CSR strategy may be focused on community
welfare activities such as promoting education, health, and human welfare
(Waheed, 2005).
Khan (2012) point outs that there are no CSR-specific laws or obliga-
tions in Pakistan which ensure ethical compliance, and as a result CSR is
purely practiced on a voluntary basis. Consequently, in 2013, Securities
and Exchange Commission of Pakistan (SECP) issued a voluntary guide-
line on CSR (SECP, 2013). Similarly, NGOs and advocacy groups are also
instigating the need for government and businesses to promote CSR
practices. Several advocacy and research organizations, such as CSR
Association of Pakistan, National Forum for Environment and Health
(NFEH), Corporate Social Responsibility Center Pakistan, Sustainable
Development Policy Institute, Triple Bottom Line Pakistan, Corporate
Social Responsibility Pakistan, and Responsible Business Initiative
Pakistan are promoting CSR culture and awareness in the Pakistani
 Corporate Social Responsibility in Pakistan 175

private sector. Specifically, these organizations provide a neutral forum for

stakeholder dialogue, CSR awareness to public and businesses, CSR-
related capacity building interventions in the private sector, and research
work related to CSR.
A number of studies reported that the conditions of CSR in Pakistani
corporate sector are not encouraging. Naeem and Welford (2009) conducted
a comparative CSR study of Bangladeshi and Pakistani companies. The
study reveals that CSR is relatively underdeveloped in both countries and
many companies were seen to be failing to engage in many aspects of CSR
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such as anticorruption, gender equality, child labor, and community giving.

However, MNCs in Pakistan and Bangladesh are advanced in terms of CSR
compared with local firms. In a similar vein, Baughn et al. (2007) examine
CSR of 15 Asian countries relative to economic, political, and social condi-
tions. They also compared CSR practices of Asian companies with other
regions, for example, Africa, East/Central Europe, and Australia/New
Zealand. The study found that CSR performance of companies in Pakistan
fall below the average as observed in other regions such as East/Central
Europe, Latin America and African countries. Baughn et al. (2007) argue
that there is significant relationship between CSR and country’s economic,
political, and social contexts, which indicates that the progress in these areas
plays a major role in shaping CSR practices in a country. Thus, countries
with least economic development, like Pakistan, demonstrate low levels of
CSR. Similarly, Jeswani et al. (2008) in a comparative study of Pakistan and
UK private sector explored environmental dimension of CSR. They charac-
terized environmental CSR performance into four categories indifferent,
beginner, emerging, and active. The research found that 75 percent of
Pakistani companies fall into the indifferent and beginner categories, which
indicate that many companies in Pakistan lack pro-environmental pro-
grams. According to Jeswani et al. (2008), the majority of Pakistani compa-
nies are facing acute challenges, which are making it difficult for them to
actively promote environmental responsibility including lack of awareness,
insufficient financial resources, absence of regulatory framework and poli-
cies, nonavailability of technology, and shortage of expertise to deal with
complex environmental issues.
In terms of OHS, thousands of workers in Pakistan are regularly
exposed to hazardous employment and poor OHS conditions. In practice,
it is the rule rather than exception that many factory workers in Pakistan
are exposed to unsafe working environment on a daily basis. These workers
often encounter occupational injuries and diseases as the majority of com-
panies lack OHS policy and procedures. For example, in September 2012
 176 AYMEN SAJJAD AND GABRIEL EWEJE

there were fire outbreaks at two factories in Pakistan which claimed lives of
over 300 workers (ur-Rehman, Walsh, & Masood, 2012). The primary rea-
sons for above terrible incidents were insufficient safety instruments such as
fire alarms and sprinklers in the factories, inadequate safety measures in
building design, lack of fire exits, and inhumane behavior of factory own-
ers/management. In particular, the factory exits were closed by the manage-
ment to restrain workers from stealing goods, which in turn increased
death causalities as workers were unable to escape factory premises and
many of them died due to suffocation and jumping from the roof. These
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accidents raise serious questions about the performance of Pakistani com-

panies in implementing OHS practices and the role of government officials
who often ignore the volition in the factories and receive bribes from the
owners to overlook the loopholes in the system.
On the other hand, the regulatory framework in Pakistan concerning
OHS and labor laws is evolving but yet incomprehensive to address multi-
faceted issues related to OHS. The concerns over appalling OHS conditions
and lax safety laws have been often raised by numerous NGOs in Pakistan.
The NGO sector often reiterated that government of Pakistan should take
corrective measures to improve OHS conditions in the private sector but
unfortunately the issue has received little attention from the government
(Human Rights Commission of Pakistan, 2010). For example, the existing
regulations, Factories Act 1934, Hazardous Occupation Rules 1978 (Awan,
2001), and Labor Policy 2002, either partially relate to OHS or outdated to
manage the complexity associated with existing OHS issues in Pakistan
(Pasha & Liesivuori, 2003). Therefore, there is a significant need for the
government to formulate comprehensive rules and regulations to improve
OHS awareness and surveillance as well as reporting on occupational
injuries so as to minimize the health-related risks in the private sector.
In addition, several studies reveal that OHS issues such as long working
hours, low awareness on OHS, lack of safety instruments, inadequate OHS
training, and ineffective monitoring are common concerns in many manu-
facturing sites in Pakistan (e.g., Kamal, Malik, Fatima, & Rashid, 2012;
Malik, Maan, Pasha, Akhtar, & Ali, 2010; Munir, Ashraf, Nasir, Hensel, &
Iqbal, 2012; Pasha & Liesivuori, 2003). However, there is a growing
need for Pakistani industries to improve the status of OHS to meet the
emerging challenges of globalization and attain a competitive position in
the international market. Pasha and Liesivuori (2003) conducted OHS sur-
vey of 50 industries in the Punjab province of Pakistan. The findings of the
survey indicate that OHS conditions were not satisfactory. Majority of fac-
tory workers were illiterate with no formal training in OHS procedures.
 Corporate Social Responsibility in Pakistan 177

However, the OHS conditions of export-oriented industries such as sports

goods, textile, and surgical instruments manufacturers are relatively
advance compared to the non-export industries, but still OHS procedures
were poorly organized in the former. Similarly, OHS awareness is limited
in the textile sector in Pakistan (Malik, 2010; Malik et al., 2010). Workers
are not trained in the use of technical facilities and unaware of procedures
to be followed in case of emergency. On-site medical and OHS monitoring
mechanisms are inadequate in the textile factories and workers are largely
ill-informed about their legal rights and privileges regarding OHS. In a
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similar vein, Munir et al. (2012) study the ergonomic and occupational
health performance in the sugar industry of Pakistan. The findings suggest
that OHS training and education programs as well as safety measures
are inadequate in the factories. Excessive noise, poor ventilation, and
lighting problems were found to be negatively affecting workers’ health
conditions. Khan (2012) points out that sugar companies do not publish
self-regulatory code of conduct or a handbook of ethical behavior. In parti-
cular, financial reporting is a regular practice in the sugar industry, but
social audits are perceived as of a little value with insignificant business
repercussions. While, (Lund-Thomsen, Nadvi, Chan, Khara, & Xue, 2012)
found that majority of football stitching workers employed in sports good
manufacturing in Pakistan suffered OHS problems. For example, deformed
fingerprints, shoulder and elbow inflammation, and arms and back pain are
common OHS issues observed in football stitching workers.

MNCs’ CSR in Pakistan

In recent years, MNCs are actively involved in CSR initiatives to enhance

their global visibility, transparency, and reputation by becoming vibrant
local players in the markets where they source, manufacture, and sell their
products and services. In line with the global trend, MNCs in Pakistan are
also taking a lead role in promoting CSR initiatives. The MNCs’ CSR
orientation is usually dominated by the company’s country of origin (Ali,
2004) and their inherent sustainability values. However, various external
factors such as increased social activism and public scrutiny toward social
and environmental issues, reputational risks in global value chains, interna-
tional information sharing on corporate failure on CSR-related areas, and
social legitimacy concerns are also motivating MNCs to integrate CSR prin-
ciples in their strategic and operational decisions. It is noteworthy to suggest
that the level of awareness regarding the role of MNCs in SD activities in
 178 AYMEN SAJJAD AND GABRIEL EWEJE

Pakistan is growing in various shareholder groups. However, at present the

Pakistani public is rather less informed about the responsibility of MNCs in
achieving SD outcomes. Nevertheless, a number of MNCs such as ICI,
Unilever, Shell, Procter & Gamble, Siemens, and Nestle are playing an
exemplary role in the social and environmental development of Pakistan.
It has to be said that there are some key areas where MNCs are contri-
buting to SD in Pakistan at the community level including support for
health and education, poverty alleviation programs, emergency relief, and
rehabilitation services to the people affected by natural calamities,
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company-sponsored foundations for community welfare services, and part-

nerships with NGOs to deliver social benefits to the local communities. On
the other hand, the internal CSR aspects of MNCs include carbon foot-
prints reduction, optimization of water and energy usage, reduction in
waste, sustainable procurement, and developing OHS at work. For exam-
ple, Siemens contributed 2.5 million Euros toward flood relief in Pakistan
in different projects such as installation of filtration plants which provide
clean water to flood victims in 2010 and 2011. The filtration plants supply
clean water to 8,000 people every day and have a life span of 10 years
(Siemens, 2012). Another example of MNC is Unilever Pakistan Limited
(UPL), which has numerous initiatives around social and environmental
social responsibility. For instance, the company developed partnerships
with local and international NGOs to improve health care provision and
investment in early childhood education. In this regard, Unilever in 2012
spent Rs. 29.2 million on philanthropic activities focusing on health and
education and another Rs. 128.7 million was spent on community invest-
ment and welfare schemes (UPL, 2012a). On the company level, Unilever
achieved a reduction in CO2 by 457 tons per year through its cross-docking
project. Similarly, Unilever’s joint logistics contributed to a reduction in
CO2 by 272 tons per year. Other areas of Unilever CSR practices include
sustainable packaging, sustainable sourcing, improvement in OHS, and
encouraging diversity at work (UPL, 2010), energy conservation, reduction
in water use, and packaging reduction (UPL, 2012b). These examples
clearly reflect that MNCs are actively involved in CSR activities in the
Pakistani business sector.

CSR in Large Local Companies in Pakistan

The extent to which the local Pakistani businesses embrace and practice
CSR varies and it largely depends on the factors such as market in which a
 Corporate Social Responsibility in Pakistan 179

company operates, size and type of business, and the values and beliefs of
owners/managers. Yet, large local companies are relatively well-informed
about CSR notion compared to SMEs in Pakistan. The examples of large
local Pakistani companies that have explicit and formalized CSR programs
include Engro Corporation Limited, Fauji Fertilizer Limited, Lucky
Cement, English Biscuit Manufacturing Limited, and Attock Refinery.4 The
CSR practices and approach of large local companies is somewhat similar
to the way MNCs practice CSR in Pakistan. These businesses produce
CSR/sustainability reports using the guidelines set by the global reporting
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initiative (GRI).5 The areas where these companies contribute to commu-

nity welfare schemes in Pakistan include improvement in health and
education sectors, poverty alleviation programs, sponsorships in sports,
infrastructure development for local communities, technical and vocational
development programs, emergency relief and rehabilitation services,
company-sponsored foundations for social welfare services, tree plantation
projects, and partnerships with NGOs in areas like health, education, and
relief services to enhance societal well-being. On the other hand, at the orga-
nizational level, large local companies are involved in developing EMS,
human resource management systems, programs for OHS at work, and
training for anticorruption procedures. Contributions of some of these com-
panies are recognized by the national CSR/sustainability forums such as
NFEH and CSR Association of Pakistan. One of the large local companies,
Engro Corporation limited, a Pakistani business conglomerate, has a range
of CSR initiatives around environmental sustainability including efficient
resource utilization, product stewardship, water consumption, energy
consumption, product packaging, and green office project. On the social
development side, Engro established Engro Foundation, which invests in
initiatives that ensure the provision of health, education, technical and
vocational training, housing and infrastructure, and rehabilitation services
to people affected by floods in Pakistan (Engro Corporation Limited, 2011).

CSR in Pakistani SME Sector

The role of SME sector cannot be overlooked in the SD process of a country.

According to Small and Medium Enterprise Development Authority
(SMEDA) Pakistan, the SME sector represents nearly 90 percent of all
businesses in Pakistan. The sector contributes about 40 percent annually to
the GDP and employs 80 percent of the nonagriculture labor force in the
country (SMEDA, 2013). However, the progress of CSR in the Pakistani
 180 AYMEN SAJJAD AND GABRIEL EWEJE

SMEs is at an emerging state. However, in the past, the Pakistani

SMEs have been criticized for various CSR-related issues such as child
labor, inadequate remuneration, and poor health and safety standards
(Bhutta, 2006). Accordingly, foreign buyers are increasingly expecting local
suppliers to demonstrate their CSR commitment by adopting global stan-
dards related to fair labor practices and environmental stewardship. Yet,
the concept of CSR in Pakistani SME sector is not fully envisaged as an
explicit strategy in response to the increasing social and environmental
issues.
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Predominantly, the existing focus of so-called CSR initiatives in SMEs

in Pakistan is driven by the fulfillment of economic and legal responsibil-
ities. However, this is not to argue that Pakistani SMEs completely restrain
themselves form philanthropic and ethical responsibilities. Cultural and
moral values as well as religious beliefs have considerable influence that
direct owners and managers to participate in philanthropic and ethical
responsibilities. Notwithstanding, there are few cases where Pakistani
SMEs voluntarily and strategically responded to CSR issues through
public-private partnerships or joint action projects. For example, to reduce
pollution, the leather tanning cluster in Kasur, Pakistan, has installed com-
mon effluent water treatment plants (Lund-Thomsen, 2004). By and large,
market-driven factors dominate the internal ethical and moral values
of owner/managers regarding CSR engagement in Pakistani SMEs. The
majority of export-oriented SMEs practice CSR because of the growing
pressures emanating from the international branded buyers. It is now a
mandatory requirement that export-oriented Pakistani SMEs must comply
with codes of conduct set by the international buyers. In case of noncom-
pliance, a local supplier will face serious consequences such as termination
of contract and no future business relationships with the international
buyer (Bhutta, 2006). In addition, there is also a requirement from foreign
buyers for local firms to obtain international certifications such as ISO
14000 and SA8000. However, SMEs often lack the knowledge and
resources needed for such process upgrading and the costs of implementing
standards (Nadvi & Halder, 2005).
According to Nicholls (2002), companies adopt defensive and proactive
strategies in response to ethical and moral issues. Defensive strategies relate
to compliance against the basic legal requirements, whereas proactive stra-
tegies promote an active supra-legal behavior toward CSR issues. It can be
argued that foreign buyers pursue defensive strategies to minimize their
global supply chain risks and they pursue compliance-based approach
rather than actively engaging and collaborating with their supply chain
 Corporate Social Responsibility in Pakistan 181

partners in Pakistan. Specifically, the issue of power abuse and unrealistic

contractual obligations by powerful foreign buyers has been pointed out by
number of scholars. Bhutta (2006) argues that foreign buyers often award
short-term contract to the local suppliers based on the cheapest price with-
out the need to stick with one manufacturer. Accordingly, these demands
put immense pressure on the local manufacturers to reduce cost of produc-
tion to stay competitive. For example, a surgical instrument manufactured
in the local factory in Sialkot, Pakistan, costs $1 to produce, while the
foreign buyer sells the same product to hospitals in the developed world at
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a price of $80 (Bhutta, 2006). Similarly, Khan and Lund-Thomsen (2011)

found the same trend in the soccer ball manufacturing in Pakistan where
international brands only pay h2.5 to local manufacturer, but the same ball
is sold in the outlet store in Europe for h15. According to Khan and
Lund-Thomsen (2011), local suppliers in Pakistan view compliance to the
western-based CSR requirements and codes of conduct as western eco-
nomic and cultural imperialism. There is a perception in the local firms
that international brands are unaware of local realities and challenges and
that the concerns of local manufacturers are often overlooked. In general,
little or no assistance is being offered to the local suppliers to improve CSR
issues. For example, the costs of CSR initiatives including provision of
minimum wage and adequate health and safety conditions are often not
shared by foreign buyers. Against this background, it can be argued that it
might be very difficult for the local SMEs to invest significant resources to
CSR practices that enhance community well-being. Thus, issues such as
financial constraints, lack of knowledge, and lack of government support
are still major barriers for Pakistani SMEs to integrate CSR in their
operations.

CONCLUSIONS AND FUTURE DIRECTIONS

In this chapter, the notion of CSR has been reviewed in the Pakistani
business context. The findings of this analysis suggest that CSR is relatively
a recent phenomenon in Pakistan; however, it is steadily taking its roots
in the business environment. The private sector has a considerable
potential to contribute to the SD in Pakistan. Issues such as poverty, lack of
education and health facilities, OHS hazards, and environmental issues
need immediate attention from the private sector. This study suggests
that the implementation of CSR varies from company to company,
 182 AYMEN SAJJAD AND GABRIEL EWEJE

depending on the size, industry, and the market requirements in which a

firm operates.
MNCs and some large local firms are at the forefront in terms of CSR
initiatives. These companies are actively involved in implementing a variety
of CSR practices both at the organizational and community levels. On the
other hand, many local companies, especially SMEs, are lagging behind in
CSR implementation. Moreover, export-oriented SMEs to a certain extent
promote CSR practices and adhere to codes of conduct because of the
growing pressures from foreign buyers. In addition, SMEs attempt to
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satisfy the social and environmental expectations of foreign buyers at a

minimum level rather than practicing CSR principles in its true spirit. Their
reactive response toward CSR is natural since many SMEs are struggling
for survival and facing intense challenges such as acute energy deficit.
These problems have made difficult for SMEs to sustain their operations.
Further, there is a considerable pressure from international buyers to pro-
vide products at reduced cost and at the same time comply with codes of
conduct which seems to be creating a situation where SMEs for their survi-
val can only fulfill least CSR-related obligations. According to Rossouw
(1994, p. 45), when companies are facing conditions where the fear of
extinction and rejection dominates then “moral conditions are often over-
ridden by the prospect of material gain” or companies adhere to the moral
minimum rather than proactively engaging in moral principles. Conversely,
the structural and regulatory deficiencies in Pakistan are yet another reason
that persuades companies to manipulate the system and avoid CSR engage-
ment. Regulations such as OHS laws are outdated and in other cases where
guidelines exist (such as labor policy), the guideline is not implemented and
monitored appropriately by the Pakistani government.
Thus, a synchronized effort is required to develop CSR culture in the
Pakistani business sector that delivers a shared value to stakeholders and
society at large. First, there is an urgent need for government to develop a
national CSR policy through consultative process involving businesses,
trade unions, chambers of commerce, NGOs, academia, and other stake-
holder groups. The inputs from multiple stakeholders would help in identi-
fying the development needs in the country and policy challenges that need
priority attention. In addition, governments have a distinctive role in the
progress of CSR and SD through development and implementation of leg-
islative framework. The major responsibilities of democratic government
includes maintaining rule of law, protection of human and labor rights,
and provision of equal opportunities and basic facilities to all its citizens.
According to Waheed (2005, p. 26) “governments that respect human rights
 Corporate Social Responsibility in Pakistan 183

have more open and transparent laws and financial systems, less corrup-
tion, a better-educated workforce, more stability and more security.”
However, in the case of Pakistan many of these aspects need an urgent gov-
ernment attention to improve socioeconomic development of the country.
Second, civil society organizations including NGOs and advocacy groups
have a vital role in developing CSR awareness in the public and cultivating
CSR culture in Pakistan. These organizations can play a significant role in
highlighting pressing CSR needs to the government and the corporate sec-
tor in Pakistan. Also, civil society organizations have expertise in areas of
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social and environmental improvement, therefore civil society and business

partnership can resolve many social and environmental issues in Pakistan.
Finally, the business sector needs to develop and understand that in order
to compete in international markets; it is rather indispensable these days
not to ignore CSR-related responsibilities. Specially, Pakistani SMEs can
work in clusters in which they can collectively deal with the requirements of
international buyers and address CSR problems in their local communities.

NOTES
1. The term “circular debt” relates to a situation when government keeps the
consumer price of electricity below the cost of production. This results in govern-
ment to make a budget allocation for managing deficit or borrow loan to pay oil
importers and power plants for electricity generation.
2. Development that meets the needs of the present without compromising the
ability of future generations to meet their own needs (WCED, 1987).
3. HDI refers to the country’s development on education, health, and income
dimensions.
4. See annual sustainability/CSR reports of large Pakistani companies at http://
www.csrcp.com/index.php/reporting-data-base/search-reports
5. GRI has developed a “Sustainability Reporting Framework” that is widely
used around the world to measure and report sustainability/CSR performance of a
company.

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