There’s a shift happening in south Asia as corporations transition from philanthropy to a results-based and longer-term approach to sustainability

Across south Asia, philanthropic giving has a long tradition. The transition from that philanthropic activity to strategic sustainability is happening but at different rates and in different ways across the region.

The past two decades of economic growth have created a core of super-successful companies, mainly Indian, that now have international reach and are highly aware of sustainability reporting and programming. Tata Industries, for example, has created an index to measure and enhance what it sees as its “sustainable human development” work. The index is already in its third edition.

A handful of other corporations are also leading a trend that embraces the western model of reporting. In fact, India has the biggest increase in reporting globally, according to KPMG’s Corporate Responsibility Reporting Survey 2013. Since 2011, the previous year KPMG polled, there’s been a massive leap in large companies reporting – from about 20% of large companies to now nearer 70%.

“If anyone still thinks that Asia is a corporate responsibility dead zone, this survey is clear evidence that they should think again,” says Sharad Somani, head of climate change and sustainability at KPMG in Singapore.

More investment

Beyond reporting, a lot of money is being spent on sustainability projects themselves. Gas and oil refining giant Reliance Group, India’s largest private company, has thus far had the highest annual sustainability spending in India, at Rs285 crore ($49m).

Many of Reliance’s “sustainability” activities might at first seem philanthropically focused. It funds the largest corneal-replacement medical service in the country, for example, and has partnered with the Indian government’s Ministry of Environment and Forests to create a national marine biodiversity centre.

Yet Reliance says it strives – especially in health and education – to foster self-reliance for Indians, and is vocal about its embracing of sustainability as a core business strategy.

Reliance generally does well in getting the message across about its sustainability leadership. Its sustainability reports get A+ GRI ratings, and the company is canny about social media: when it was accused some opposition politicians of working less-than-transparently with the government to raise gas prices, it used text messages to journalists and thought leaders to rebut the allegations.

Next door, in Pakistan, reporting and programming is happening, thought slightly less actively than in India.

Natasha Qamar, communications adviser at Shell Pakistan, says Shell has faced a challenge in implementing the right kind of sustainability programmes.
“Sustainability is still seen as philanthropic activity in [some of] south Asia,” Qamar says. “Shell is one of the first companies in Pakistan to move away from philanthropy. For us, if it’s not aligned with what our themes are, then it doesn’t make sense – it’s not really sustainable. And that is something the market is struggling to understand. Expectations can be very different from what we are trying to do.”

The corruption challenge

For multinational corporations that have adopted advanced responsibility standards, doing business in a place like Pakistan where corruption is still high is tough, Qamar adds.

“Shell doesn’t pay bribes,” she says. “At Shell Pakistan employees have to report gifts and are registered in a system that tracks interaction with stakeholders. It’s stringently monitored.” Shell carries out anti-bribery and anti-corruption training, and works with its supply chain to cut labour rights violations, Qamar says.

Child labour is a huge and ongoing issue in south Asia, and especially in Pakistan. Finnish forestry company Stora Enso found this out in 2014 when a Swedish TV4 investigative team documented young children toiling in extreme heat collecting paper from a trash dump for delivery to a Stora Enso joint venture company.

While Stora Enso had conducted a supply chain study before starting to work in Pakistan in 2012, the company says child labour is a “socio-cultural” issue that can’t be eradicated with typical supply-chain measures. These events caused a small storm of press reaction in Sweden. Stora Enso says it won’t abandon Pakistan and that it will proceed “as quickly as possible” towards child labour eradication in its chain.

While sustainability performance may not be a primary concern among the general Pakistani population, the country’s Securities and Exchange Commission has taken note of the need for better reporting, has released voluntary guidelines for corporate responsibility, and is now working with Pakistan’s main accountancy body to standardise reporting and harmonise corporate governance in the country.

In Sri Lanka, strategic sustainability initiatives are still new, but are catching on, with a few companies such as Brandix finding their reporting and their programming (and awards they have received) as beneficial to their brand image domestically, and for business development internationally.

While each of the countries of south Asia is at a different stage of getting companies thoroughly on board with investing time and effort in sustainability, there is also some consensus in the region that socially oriented business could be a way for companies here to leapfrog worn-out models and make a bigger difference in ameliorating the social and environmental woes that current capitalist models can’t seem to eradicate.

Microfinance solutions

This is where Bangladesh shines, not least through the influence of Grameen microfinance founder Mohammad Yunus, who continues to promote south Asia as a premier social business incubator. The Yunus Centre, which coordinates the Grameen efforts, has now helped more than 100 social businesses as well as partnered with a growing list of multinationals to establish, for example, Grameen Intel, Grameen Danone, Grameen Veolia and Grameen BASF.

Yet perhaps the overall progress of sustainability in South Asia can best be illustrated by a recent Coca-Cola initiative in Bangladesh. Mostly positively received, the project is called “Happiness Arcade”. In the city of Dhaka (population 15 million), Coke put out six video game arcades in April that can only be played once a plastic Coke bottle has been inserted into the mouth of the machine, which is then recycled.

In one week the company collected thousands of Coke bottles, which it ground into pellets for further uses, though not as bottles. The Happiness Arcade is still perhaps more PR stunt than strategic sustainable initiative – even the advertising agency that created it admits the difficulty in measuring its value in “ROR (return on recycling)” terms.

Coca-Cola for its part plans to continue with the arcade scheme and spread it to other countries, saying the arcade is invaluable for raising awareness.

April Streeter is an associate with One Stone. A certified B Corporation, One Stone has a global team offering sustainability consultancy and communications expertise, based in Stockholm, Edinburgh, Sydney, Portland and Washington DC.

Case study: Saathi Pads Project empowers women

Saathi Pads is a start-up company with a big social enterprise and sustainability vision: make sanitary pads from banana plantation waste while providing employment to local women.

Currently only operating in two villages, Saathi Pads hopes to expand immediately to five villages. The brainchild of Harvard MBA student Amrita Saigal and her MIT engineer partner Kristin Kagetsu, Saathi Pads has spent more than three years in incubation.

Saathi has established partnerships with local banana farmers to source the raw materials for the sanitary pads. Access to menstrual supplies is a major challenge in India and south Asia, with millions of girls regularly missing school.

Saigal says Saathi’s business model is meant to be local, with local women selling door-to-door as well as providing health information.

The first pilots in Mumbai and Kerala went well, and Saigal says the company’s revenue will come from sales to local women of small-scale machines that manufacture the pads, and sales of the banana plant materials needed to make them. She estimates a payback time for the $500 machine of about three months.

Saathi hopes to employ 500 women and provide the pads to a market base of 320,000 women within five years, at a cost of $0.02 per pad. Initially the pads will have polypropylene backs and adhesive, and the next step is making them fully biodegradable. “We can do this now,” Saigal says, “but not to hit the end price point. We think it is important to solve problems one at a time. Hopefully we will figure out a way to hit the low price with [all] biodegradable materials in the near future.”

 

Case study: Selco turns the lights on

By Marielle Welander

Forty-four per cent of the population of India still lacks electricity, according to Deloitte. Social Electric Light Company (Selco) is helping remedy the problem through the design and sale of photovoltaic solar generators to communities in southern India.

Selco was created in 1995 by Harish Hande in the state of Karnataka in southern India and has sold more than 150,000 solar home systems. The company’s award-winning business model involves pairing rural residents with local banks for loans so that they can afford Selco’s solar equipment.

Sarah Alexander, adviser on sustainable energy policy at Selco, says the emphasis is on making sure customers have the products they need. “As a system integrator, we bought components from different manufacturers and then customised the product to suit the needs of end users,” she says.

Selco helps consumers, such as street vendors, switch to solar from kerosene lamps, which are both more costly to maintain and polluting.

Selco also gives local entrepreneurs help in getting funding to start independent PV battery-charging businesses. Selco has created 295 jobs at 40 service centres, where most employees are recruited locally.

Selco often acts as guarantor on behalf of its clients for bank loans. “India is blessed because the government has an extensive network [of rural banks] which makes Selco less capital-intensive by leveraging third party financing to increase affordability for end users based on their cash flows,” Alexander says.

However, access to end-user financing and skilled human resources is still the main impediment to the growth of the company, she says.

Marielle Welander is an researcher with One Stone.

 

Case study: losing the digital divide

By Marielle Welander

Pakistan’s government established the Universal Service Fund – a financial mechanism similar to that used in many developing nations – to close the “digital divide” and help fund telecom services for underserved, rural areas of the country. USF’s role is to finance and oversee the provision of reliable phone and internet connections. Since 2007 the company has focused on eight main areas in Pakistan and partnered with telecom providers such as Telenor, Mobilink, Warid and PTCL.

In a country where corruption is a problem at all levels of government, USF has strived to build a transparent model for providing communications technology in Pakistan at published national tariffs.

According to USF founder Parvez Iftikhar, mechanisms put in place to deter corrupt practices include: posting all the results of competitive bidding of service providers on the company’s website; checking completed work by neutral technical auditors; releasing payments only on completion of milestones designated within the project timeline; and conducting audits of company practices every six months.

Through this model USF has been able to circumvent some of the corruption that is endemic to the telecom sector in Pakistan, as well as improve the trust between the public and the private sector telecom firms. That trust is still a challenge in Pakistan, Iftikhar says. The government’s move in 2013 to take approximately $500m from USF to pay off government debts did not help.

By the end of 2013, USF had implemented telecom services for more than 3,800 previously unserved villages. In remote areas, grid connections for powering base stations and other equipment can be non-existent or unreliable. Thus USF has encouraged solar technology for base stations and all other equipment.
Iftikhar says the decision to use solar was first practical, second environmental. The cost of diesel – typically used for electricity generators in rural areas – would have made operational costs prohibitively high.

Marielle Welander is an researcher with One Stone.

coca-cola  corporate accountability  corruption  long-term sustainability  philanthropy  South Asia briefing