How Pakistani corporates can maximize their CSR impact: The Engro example

The idea of social change is a tempting one. And even more tempting is the idea of institutionalized social change. Ask a fresh graduate, trying to get a well-paying sales position, in their favorite consumer goods company, and you will not hear the end of how their profitable enterprise is making the world a better place. They will throw a list of the CSR projects that their company overtook in the last year to prove how they are an integral part of social justice.

But what is CSR? How does it work? Does it even work? And how much of it is needed?

Corporate Social Responsibility (CSR), (which can also be named anything else based on how privy a company is to jargon) is a company’s voluntary expenditure on social causes. Its donations, charity and so on. It serves as a tool for companies to stand true to their mission statements and their values.

On the face of it, CSR sounds like a no brainer, much like charity. But there is an existing debate that surrounds the topic, not only making it controversial, but also making it a head scratcher for policy makers around the world.

The Debate:

In recent years, the concept of Corporate Social Responsibility (CSR) has taken center stage in the business world, sparking intense debates among industry experts, activists, and stakeholders. As companies face increasing pressure to address social and environmental issues, the discussion around CSR’s merits and drawbacks has intensified. Let’s have a look at what this discussion entails

The Pros:

There is no doubt that CSR serves a greater purpose. Any influx of cash for social causes is an addition to the existing pool. But that is not all the benefits that CSR has. But that is not all the benefits that CSR provides. It can be beneficial to companies too in more ways than one. 

Embracing CSR initiatives can bolster a company’s reputation, leading to increased customer loyalty and positive word-of-mouth. Consumers are more likely to support brands that are actively contributing to social causes. This indirectly translates in terms of sales and revenue for the company. It gives a company the sort of PR that could reel in a whole different share of consumers. Knowing that one brand is likely to change the world with your money, is a good incentive to choose that brand over others.

A strong commitment to CSR can also attract skilled and socially-conscious employees who want to work for organizations aligned with their values. This could lead to a motivated and dedicated workforce.

The Cons:

One would wonder how something as selfless as charity be misconstrued? For starters it is but an issue of consent and representation. A company has many shareholders. These shareholders buy a share in the companies with the hope of making financial gains and obtaining returns. 

And here is the catch. When a company undertakes CSR projects, it involves the input of its board and senior management. But a minority shareholder might have close to no say in the expenditure. For someone only concerned with the profitability of their own stock in a company, any additional burden on the profits is essentially a portion of equity lost. It can especially be financially burdensome for smaller companies, diverting resources from core operations.

So apart from putting financials under crunch, it becomes an issue of representation. What if the minority shareholder is already content with the amount of charity that they allocate from their pool of wealth? Where is their say in the company’s undertaking additional social responsibility at the behest of their equity.

Then there comes the issue of greenwashing. What if a company is not doing as much good as it would project? Critics have long argued that CSR is more of a marketing stunt than it is a will to bring social change. In greenwashing, a company would reap the PR benefits of being associated with social change without really making a dent in the status quo. This would translate more into their balance sheet in terms of revenue than it would set it back with the mere peanuts that they threw in as emotional bait.

A company could also be seeking an escape from its internalized problems with CSR. While it may be money for societal good, it could be to divert the focus from its internalized problems like labor exploitation and unethical supply chain practices. Apart from these questions there is another part of the debate.

Is it enough?

The answer to this question varies from country to country. For the first world, one company could have the profits to solve the majority of the problems while in the third world, the collective profits of all the companies could not make even a dent in the social system.

For a country like Pakistan, it is almost impossible for one, two or even many companies to solve the collective problems. And this is how companies get to decide what they want to contribute to. Something that resonates with their brand’s image. Their mission statement or their collective sentiments. And it can be surprising, how much a company can achieve on one front, if it dedicates its efforts. Let’s take the example of one of the biggest corporations in Pakistan and how its dedicated efforts brought about a change in athlete development.

What can big money achieve: The Engro Foundation example 

When most companies would rather spend on education, human rights and gender rights in Pakistan. Engro Foundation, a CSR arm of Engro corporation, also decided to invest in the country’s athletes. Pakistan, a country that has given birth to a number of great athletes in various disciplines still has not been able to place itself on the global sports map, other than cricket.

A fair example of that is volleyball. Volleyball is “arguably the second most popular game of Pakistan apart from cricket.” as per the assistant coach of the Pakistan volleyball team. Whether it really is the second most popular game is debatable but there is no doubt in the fact that volleyball is a popular game.

Despite being so popular, and despite having the sixth largest population of the world, the Pakistan Volleyball Federation (PVF) has no accolades to show for it. It is sad how the immense talent in Pakistan is deprived of the opportunity to compete at the world stage. With lack of sponsors and funding, the PVF has forever been reliant on pennies sent its way by the already financially strapped state of Pakistan.

“The financial struggle used to be to a point where our last Federation Chairman had to sell one of his properties to send the team to compete at an international tournament.” says Muhammad Saeed the Assistant coach of the Pakistan volleyball team. 

However, with a much needed cash injection and a sponsorship provided by Engro, Pakistan team has been able to change its fortune. The team now has international coaches, a streamlined process of talent scouting, and access to world class training facilities, along with proper health and nutrition management.

Therefore the raw talent of Pakistan has been turned into players that eventually won the Central Asian Games in 2022. “We are now eyeing a spot in the next international volleyball world cup and the 2028 olympics and it has all been due to the help of engro.” says the Pakistan team captain, Mubashir Raza.

But this is just one of the many causes that the Engro foundation serves and as we will later find out how money spent on volleyball might just be less than 0.5% of Engro’s profits. Imagine what could be achieved if companies, especially big ones, were to spend only a fraction of what they were earning towards one particular cause. 

Now that we know what CSR can achieve, what about the debate over CSR.

What is a possible solution?

There is more to CSR than meets the eye. A country like Pakistan that has overheads to doing business, changing political climate and extraneous risks, would always pose a threat to the company’s bottom line. Therefore what a company is comfortable in committing throughout its operational cycle for it to still turn out as a profitable entity at the end of the year, raises questions.

Far-sighted policy makers of the world recognized the problem with CSR long ago. And have since developed a mechanism for making it easier to bring corporate money into non-profitable causes. 

Countries such as China, UK, Indonesia and even India, have put up a mandatory CSR threshold. This way, CSR, no longer remains the prerogative of the company, rather it becomes an imposition, much like taxes.

Not only that, this standardizes the process of CSR expenditure. The Companies Act 2013 of India mandates it upon companies to spend 2% of their 3 year declared profits on CSR. Companies can go above and beyond that limit and they have.

If we compare that to Pakistan, a country that is in no way any less socially downtrodden than India, even companies with vast CSR portfolios barely touch this 2% mark. Engro, for example, barely spent 2% of its 3 year profits on CSR, in the last 3 years. To put that number in context, their 2% amounted to around Rs 2.96 billion, while their profits were Rs 142.8 billion from the last 3 years. But engro is considered a CSR heavy, almost a benchmark for CSR in Pakistan. The same percentage for a company like Nestle, another huge company, stood at 0.19%, which amounts up to Rs 73 million out of its cumulative profits of 36.7 billion in the last 3 years.

Conclusion

Pakistan is a country of charitable people, and so is the essence of our constitution. There is a strong case for a mandatory CSR share but for that to happen, the state must be able to ensure baseline security to operations. Otherwise at the current pace, companies will not think twice before faltering on such a mandate.

As the world evolves, so will the debate around CSR, as businesses continue to navigate the delicate balance between profitability and meaningful social impact. Even with voluntary CSR, the key lies in transparent reporting, genuine commitment, and long-term vision, ensuring that CSR initiatives deliver tangible benefits for society and create a more responsible and sustainable corporate sector.