Bangladesh’s businesses are a late arrival to the corporate responsibility table. A handful of innovative companies in the clothing, banking and energy sectors are showing the way forward
Keen to move Bangladesh out of the LDC (least-developed countries) league and into the middle-income rankings – and well on its way to achieving this status by 2021, according to the World Trade Organisation – the private sector in Bangladesh is all about business. And that means growing companies fast, whatever it takes.
Unfortunately, that means the rule of law, good governance and social and environmental responsibility are largely cast aside by the majority of companies.
Corporate responsibility gets lip service from some – ad hoc donations to schools or hospitals and other forms of philanthropy – and is ignored by others. Not only are Bangladeshi companies missing the big picture of how corporate responsibility can help them achieve their growth aims, but the serious accountability gap is having a deleterious effect on the foreign investment Bangladesh so badly needs.
In the World Bank’s 2012 ranking of the ease of doing business in 183 economies around the world, Bangladesh ranks near the bottom in most aspects.
“We do see good examples of corporate responsibility. But these are a handful of companies,” says Shahamin Zaman, chief executive of the Bangladesh CSR Centre.
While few companies seem to see the responsibility, and the opportunity, to take action on issues such as corruption, human rights, the environment and climate change, there are some promising trends. In 2009 when the UN Global Compact network in Bangladesh was formed, few companies understood what they were signing up to, Zaman says. Today the 43 members, half of them companies, have a much better understanding of what is expected of them. And while corporate responsibility reports are published by only a few, Zaman expects that to change in coming years.
“Five years ago we wouldn’t have discussed corporate responsibility at all,” Zaman says. “Today most of the major sectors are taking up the issue, especially the export sectors. There is a lot of potential.”
Banking on it
The banking sector is seizing that potential, aided by the forward-thinking policies of Atiur Rahman, governor of the Bank of Bangladesh, the country’s central bank. He issued a 2008 directive defining objectives for corporate responsibility engagement in the finance sector, and pushed for reporting along Global Reporting Initiative guidelines.
Few have taken it to that level. A 2011 study by Dr Mohammad Azim of the Swinburne University of Technology in the UKshowed that while almost half of Bangladesh’s finance companies provide social disclosure, most is qualitative, amounting to about half a page on average. But, it is a start.
The finance sector can “contribute hugely by catalysing corporate responsibility practices in their real sector corporate clients, promoting inclusive economic and social development”, Rahman says.
Foreign banks in Bangladesh have pioneered corporate responsibility. Standard Chartered promotes green banking, and in 2011 launched a global website to support climate change education. A roadshow covering all of Bangladesh’s 64 districts will take these messages to the nation’s young people.
HSBC, the world’s first carbon-neutral global financial organisation, and English-language newspaper the Daily Star, started its Climate Awards in 2011 to identify best business practice in climate mitigation.
Bangladesh and microfinance are synonymous, thanks to Grameen Bank, but less well known are the laudable corporate responsibility practices of some of the country’s non-bank financial institutions.
Among these, the Industrial Development Leasing Company stands out as a leader, asserting that corporate responsibility is about “creating long-term value”. Having joined the Global Compact in 2007, it published its first annual sustainability report in May 2012, and is the first signatory from Bangladesh to the United Nations Environment Programme Finance Initiative promoting environmental practices. In 2012 it conducted a carbon footprint analysis of three of its branches, a starting point for working towards carbon-neutrality.
Simmering concern
In Bangladesh, climate change seems to be serious business for everyone but the private sector, according to Saleem Huq, a climate change expert with the International Institution for Environment and Development and a senior adviser at Action Research for Community Adaptation in Bangladesh.
“The problem in the business sector is that there is no immediate profit incentive for them to engage in the climate change issue. They see it as another cost,” he says.
However, as companies learn more about climate change impact, business opportunities will emerge and “corporate responsibility is one of the tools they have at their disposal”, Huq says.
Thanks to government support – and international donor funds – for renewable energy, particularly solar power, some energy companies are emerging as corporate responsibility leaders.
Rahimafrooz, a billion-dollar conglomerate spanning the automotive, electronics, energy and retail sectors, has developed battery technology for solar home systems geared to rural households and has installed more than 200,000 such systems. Grameen Shakti, Grameen’s energy business, has installed more than 220,000 solar home systems and is training rural women to build them.
With nearly 70% of households in Bangladesh unconnected to the electricity grid, solar power has brought the benefits of electric lighting, phone charging and radio to many people for the first time. The World Bank has helped install more than 1.2m domestic solar power systems in rural Bangladesh.
Engineering firm Prokahushali Sangsad has assisted in capacity building for solar power, forming women’s co-operatives to produce the systems. The firm launched the Institute for Clean Energy Training and Research to step up efforts to build competence in the field.
“We wanted to bring women into the energy workforce in the delivery mode as opposed to just being on the receiving end,” says Hasna Khan, director of Prokahushali Sangsad.
“These are seeds of innovative activity,” Huq says. “They’re niche players at the moment, but they have the potential of tipping the sector into the general direction of renewable energy.”
The social fabric
The elephant in the room – when it comes to corporate responsibility activism – is Bangladesh’s huge ready-made garment industry. According to a McKinsey survey of textile buyers, only 50 to 100 manufacturers of about 5,000 can be said to have “very high” standards.
Among these is Viyellatex, which produced the first GRI report in Bangladesh in 2009-10. It has earned awards for its energy-saving technology in manufacturing as support of workers’ welfare and is constructing Leed-certified factories. It takes an integrated triple bottom line approach to sustainability.
Viyellatex is not typical, says Edward Probir Mondol, former executive director of CSR Bangladesh and currently a lead consultant at Sustainability International. “Most of the garment companies are doing the bare minimum. The only way to improve their performance is through pressure from buyers.”
Probir Mondol credits the Bangladesh Garment Manufacturers and Exporters Association for being proactive on child labour, but says many labour abuses still exist.
But even the best examples of corporate responsibility practice pale in comparison with the enormous challenges Bangladesh faces. With corruption entrenched, and no regulatory pressure to do better, most companies lack the commitment to change the status quo.
“While corporate responsibility should be done voluntarily, in Bangladesh a top-down approach is often the most effective,” Zaman says.
“You find a lot of greenwashing,” Mondol adds. “For most companies, the narrow view of corporate responsibility as philanthropy prevails.”
But despite the odds, Bangladesh may yet embrace corporate responsibility as a route to economic development and innovation, rather than an anchor weighing it down.
“We are seeing a new crop of entrepreneurs – young and innovative – using a corporate responsibility approach to build their businesses,” Mondol says. This is a trend that is set to grow, he believes.
Fertile ground for business
Iftekhar Enayetullah is a patient man. He had to wait 18 years before his brainchild, Waste Concern, became such a success in Bangladesh that it is now being replicated across Asia and Africa. It was worth the wait, he says.
By treating waste as a resource rather than a problem, he and co-founder Masqsood Sinha developed products with high market value, giving Bangladesh a new understanding of what it means to be a sustainable business.
In 1994, after graduating from Dhaka’s Engineering University, Enayetullah looked around his native city. He saw towering mountains of waste, thousands of jobless, low-skilled people, and a struggling agriculture sector. And he saw a single solution to all three problems.
He rattles off the statistics: 4.9m tonnesof waste are generated in Bangladesh annually; Dhaka’s 15 million residents produce 5,000 tonnes of waste every day and almost half of it is uncollected. About 70% of Bangladesh’s waste is organic and biodegradable.
Land-hungry Bangladesh cannot afford to landfill any more waste. And its poor soil needs a healthy dose of fertiliser to support the agriculture sector. By hiring people to collect the waste, and by turning it into compost and fertiliser, Waste Concern created a solution to an environmental problem that also put people to work.
Waste Concern employs 1,600 people; proper collection and treatment benefits about half a million, Enayetullah says. The company was founded as a social business to gain the non-profit status that would allow funding from international donors. It spurred the creation of 56 registered waste recycling firms in Bangladesh, both not-for-profit and for-profit firms, and places such as Sri Lanka, Cambodia and Vietnam are following suit.
“We estimate that collecting one tonne of waste equals one job, so with 16,000 tonnes of waste being collected in Bangladesh each day, you create 16,000 new jobs,” he says, adding that use of organic fertiliser in combination with chemical fertiliser brings 30% higher yields and cuts the need for chemicals by 20%.
The government can do more to create a level playing field, he adds. There are “huge” government subsidies for chemical fertilisers but not for organic, he points out. And the garment industry doesn’t pay customs taxes on the import of machinery, but the solid waste recycling business does. Banks, too, could loan money at lower interest rates, given that “what we are doing is a model for poverty alleviation”.
Enayetullah considers Waste Concern both a social business and a for-profit company; it created a for-profit sister company so that it can take loans to implement the projects. Perhaps symbolic of a new wave of corporate responsibility minded entrepreneurs in Bangladesh, he doesn’t see the contradiction.
“There is a concept that social enterprises should not make a profit,” he says. “But if you don’t make a profit, how can you finance it? We serve people, communities, society as a whole, creating a social impact as well as a financial benefit. This is a good approach for Bangladesh. The more jobs you create, the more people you bring out of poverty.”