Corporate Social Responsibility in Indian Pharmaceutical Industry
An Exploratory Study
Outlook of CSR in India
History of CSR in India
Philanthropy in Indian Society
Modern Form of CSR in Indian Society
Profile of Indian Pharmaceutical Industry
Rationale for Selection
CSR Activities by Indian Pharmaceutical Companies
Major Influences Over CSR Activities
Scope of CSR Activities
Comparison of Indian & Western Pharmaceutical Companies
This research paper is concerned with the recent practices of Indian pharmaceutical companies in the field of corporate social responsibility. For this purpose, various research questions were devised which were intended to explore the scope and nature of these CSR activities in comparison with international practices. The research was based on secondary data available on the subject matter. A careful analysis of the given information revealed that the concept of CSR is not new Indian pharmaceutical industry.
Instead of being based on specialized management theories, these CSR practices are driven by social, cultural and economic factors. Secondly, the history of subcontinent has also played its role in shaping CSR in India. After thorough analysis it was found that there is a considerable degree of variation between Indian and western pharmaceutical companies when it comes to CSR compliance. These efforts are mainly focused on healthcare, education and society’s welfare whereas environmental protection is a rather ignored area. It was also established that with the age of the pharmaceutical company, the scope of its CSR practices also varies greatly mainly because of availability of resources.
However, where the foundation of CSR has been laid down in Indian pharmaceutical industry, there is a need for strict regulations and legislations which would hold these pharmaceutical companies liable for environmental protection and providing long-term solutions to diseases.
Chapter 1: Introduction
Corporate social responsibility (CSR) refers to the commitment of a business to improving the quality of life of their clients or customers, their employees, the local community and the society at large. This term covers the efforts undertaken by the business towards sustainable economic development (Holme & Watts, 2006).
CSR initiatives seek to establish businesses as good corporate citizens in the society (Sagar & Singla, 2004). They are essentially the ethical responsibility of all corporations and businesses and are commensurate with the concept of “compassionate capitalism.” The efforts include everything done with the purpose of social upliftment and development. Other considerations for these activities include economic reasons, reduced risk, increased access to capital, larger market share, better supplier relationships, and especially increased customer satisfaction and loyalty (Agarwal, 2008). A study conducted by Mishra and Suar in India showed that responsible actions and dealings with primary stakeholders increased firm performance (Mishra & Suar, 2010).
The pharmaceutical companies exist in an industry that serves as a bellwether of economic liberalization, so they need to be very careful of their interactions with societal members as well as their positive contributions towards society (Mitra, 2012).
This research aims to conceptualize corporate social responsibility in the pharmaceutical industry of India and judge the scope and content of activities they carry out for the benefit of the community at large. For the purpose of this research, a secondary data is used for evaluation purposes and the comparison between the practices of Indian pharmaceutical companies and western companies is performed. The research is intended to evaluate the current status of CSR compliance in India. For this purpose, historical background along with development of pharmaceutical industry in India is evaluated. The evaluation of rationale behind the philosophy of CSR in India helped in performing a thorough analysis of the current CSR practices. Through this research, the literature review of the secondary data is performed in the light of given research questions by using explorative research methodology.
Chapter 2 Literature Review: Outlook of CSR in India
In order to under CSR has been flourishing in Indian pharmaceutical industry, it is important that a comprehensive overview of current practices of CSR in India economics is obtained. For this purpose, a correlation of current practices will be performed with the historical development of CSR in Indian economy. CSR has emerged out of basic business ethics. These business ethics are expected to set out a framework within which the enterprises operate (Caza et al. 2004). In Indian society, most of the concepts of CSR have been rooted out of basic regime of social welfare. As per the research conducted by Gopal and Karjat (2012), the whole process of CSR has been rolled out in Indian economy in four phases. The first phase was concerned with the charity and philanthropy. Values, cultural norms, traditions were the main driving forces which caused the CSR to gain grounds in Indian society.
2.1 History of CSR in India
The first period was prior to 1860 which is known as pre-industrialization era. In this era, the wealthy families of the region were contributing to overall welfare of the society. Building temples and helping the overall population in overcoming problems caused by natural calamities and epidemics was one form of social welfare. However, with the arrival of British colonies in sub-continent, this culture of social welfare changed its landscape. In the second phase, the movement of independence began in which major stress was levied on the industrialists to show their commitment to the society. This was precisely the time when figures like Mahatma Gandhi appeared as the sole examples of social workers. Where most of the industrialists focused on well-being, there were many who contributed to the society and the changing scenario of the subcontinent by developing a character of trusteeship. As put up by Mahatma Gandhi, the industries should be the temples of modern India. Trusts, schools, colleges, hospitals and other social welfare organizations came into existence during the same timeframe. In early 1900s when the struggle for independence was gaining grounds, the main focus of Gandhi regime was on rural development and women empowerment (Khan, 2008).
The third phase continued from mid of twentieth century. This was the time when Indian economy was presenting an outlook of mixed economy. The power was being transferred from the government to the private sector and many industries, and entrepreneurs along with private organizations emerged in this time period. Where the public sector tried to refrain from being a passive player, the resultant was higher tax rates, embargos, restrictions on the private organizations and licensing system. As a result of these troubles, a culture of malpractices emerged. The rich began to become richer and the overall balance of the state wealth got disturbed which lead to formation of labor laws, and other legislations related to corporate governance and environmental issues. The fourth phase of this economic and social change began after 1980s. This was the precise period when the Indian private industries and firms began to make efforts in promulgating a culture of corporate social responsibility which later on became an integral part of business strategy mode. From 1990s onwards, the major interest of western buyers was in environmental impacts of the productions being taking place in India. Therefore, special international standards were set so that the environmental and labor laws are considered for the continuum of business. Hence, in order to remain active in international industry, the Indian private companies were forced to comply with international CSR standards.
2.2. Philanthropy in Indian Society
When business ethics in the western society are based on the Abrahamic religious traditions, the CSR culture in Indian industry is also stemming out of Gandhism. The cultural and social outlook of Indian society helps in establishing a notion that there is a harmonious relationship between man and nature. The multifaceted presence of religious ideologies in the Indian culture gives the CSR practices in Indian industry a spiritual outlook instead of a realistic business practice. Hence, the idea is to give preference to salvation over worldly gains and urges to attain profit (Sharma & Talwar, 2005). Therefore, the current business practices of corporate social responsibility are based on spirit of voluntary sacrifices and sharing keeping the future gains and harmony in nature in consideration.
A simple example of the attempt of causing minimum harm to the society is the spirit of vegetarianism. The current model of CSR practices in Indian economy especially pharmaceutical industry is based on the social trusteeship theory which was based on the ideology of Gandhi. It was his idea of non-violence which later on formed the basis of struggle for independence and which acted as a concrete ground against British rule in the subcontinent. The idea of Gandhi trusteeship theory was to cause no harm to any living thing and nature itself, and acknowledgment of the rights of others along with compliance to basic grounds of morality. Since the evils of industrial developments without any consideration to social welfare, were causing harm to the roots of Indian society, Gandhi presented the philosophical theory of trusteeship which was intended to focus on women independence and rural development.
The whole idea of this Gandhi’s philosophy was based on the idea that everyone is equal before Almighty powers and whatever is in this world belongs to everyone. Therefore, those who are provided with more assets have responsibility of sharing them with the deprived ones in the society. Hence, the owners of the assets are actually trustees in nature who are expected to serve the society, take from their assets as per their needs and use their property to the best interest of society. It is important to note that Gandhi was a supporter of neither capitalism nor socialism. However, communism was an unacceptable theoretical model for him. He believed in giving everyone equal rights of continuing their lives; therefore, use of non-violence and unjustified means was not expectable for him at all.
Due to his compliance to socialism and capitalism, he presented an idea of economy which was capable of using its own resources and was able to flourish on its own without being dependent on external forces, and having a mechanism of self-governance. Therefore, it presented an amalgam of a capitalist model coupled with socialist regime.
2.3 Modern Form of CSR in Indian Society
1980s was the precise time period when Indian industrial model was gaining strength. Industries were expanding with new innovations and technological developments whereas diversification was being observed in every forte of industrial framework. Where industries and business empires were expanding, public expectations from these business houses also arose due to which the NGOs culture appeared. The main aim of these NGOs was welfare of the society and opposing actions by public and private sector which are causing harm to the general population of the country along with environmental considerations. Due to these consolidated efforts of the NGOs, an Environmental Protection Act came out in 1986 which was levied on many public and private organizations in consideration to the environmental protection (Divan & Rosencranz, 2001).
At the same time, the industry witnessed emergence of many conglomerates and the overall business community grew extensively. Many business empires like TATA, Birla, and Hindustan Lever came into emergence. With the expansion in overall business model, a need for the suitable talent also arose due to which the employment rate in the private sector also became high. Since it was the time of growth and development, the industry faced a competition in attracting the suitable talent. Therefore, employee retention and employee development practices were initiated by many corporations in order retain their talent (Sundar, 2008).
With the expansion of Indian economy, the new wave of globalization also left its mark in India where new business ventures and various opportunities appeared for Indian businessmen. Hence, in 1991, various reforms appeared which were initiated by government in order to facilitate business and trade development (Sawhney, 2004). Where the environmental protection act was formulated rather late and enough environmental damage had been done already, therefore aggressive efforts were made in formulating policies which were suitable for clearing the mess created by earlier industrial practices and also regulating the existing business processes.
With more privatization, the possibilities for foreign trade increased due to which Indian organizations were required to comply to international requirements of trade, labor and environmental management. A current profile of Indian industry consists of entrepreneurs, family businesses and business houses performing national as well as international trade. With an expansion in international trade and divulgence of Indian businesses into aggressive business practices, CSR gained more popularity. Where CSR has emerged as a defined integral business practice, its development as a consistent corporate policy model is yet to be taken place. It is important that instead of considering international best practices and trying to adopt them as they are, a customized model suiting Indian society and business needs should be formulated which would be accepted as welfare to the society and not the businesses themselves.
Series of events like causalities in coal mine, Jharkhand which killed hundreds of miners; and Bhopal gas incident which took place in 1984 and is still considered as one of the biggest casualties that have taken place in Indian. Other than the casualties that took place in the same timeframe were over 3500 whereas hundreds of thousands of people remain affected by the side effects of gas leakage. Even the ecosystem of the same locality is highly unsuitable for animals, plants and humans. The inhabitants of this region have appeared to be highly affected by the disaster that took place in 1984 (Tinsley & Anseley, 2011).
Where the legislations is now in place and has clear directives related to environmental and human life protection, it is important to note that there is not much emphasis levied on influencing the Indian business enterprises to undertake their responsibilities and practice the given CSR policies aggressively and religiously. The local NGOs and social activists are expected to play their role in this regard. However, since most of the trade comes from foreign organizations; therefore an influence from international bodies would make a difference (Sawhney, 2004). With the change in overall landscape of business practices taking place in India, the forms of CSR practices are also changing and have evolved from religious and social practices to formal strategic business policies.
There are several studies which support the notion that in the Asian economies, India is one of the pioneers to adopt CSR practices. As a matter of fact, many leading Indian business empires now appear to be publishing their CSR compliance details in their financial statements which appear to be a breakthrough in Indian history (Chambers et al. 2003; Khan, 2008). Since there is no governing body involved in active management of the CSR practices in India, therefore out of two percent of the organizations which are part of CSR regime, may be presenting false or inconsistence information in the name of CSR compliance (Chambers et al. 2003). Therefore, there is a need for a consistent effort which would ensure that CSR practices are not only religiously complied with but are also included in the public declarations as well.
According to the literary evaluation of Kumar et al. (2001), the current CSR model in India comprises of the original Indian form of teachings of Gandhi which is entailed in the Trusteeship Theory coupled with advocacy of Statism by Nehru. Other than this Indian version of CSR, the current Indian organizations appear to be following the western best practices as well. The models which are considered to be followed by today’s Indian organizations consist of traditional practices merged with Milton, Friedman’s liberal CSR model. This model argues that where there are various stakeholders in the organizations including leadership, employees, customers, vendors etc., the shareholders have the highest degree of importance.
In accordance with the principles defined by Friedman, many Indian organizations have appeared to following practices which would focus on shareholder’s interest and profit generation as well (Gopal & Karjat, 2012). As per the ideology of Friedman, the business is only responsible to its shareholders and is meant to generate profits only. Another western model which the Indian corporations have appeared to be following is Edward Freeman’s Stakeholders theory (Khan, 2008). According to the model presented by Freeman, the stakeholder’s satisfaction should be the sole objective of the business and their welfare and well-being must be taken into consideration.
This particular model is rather concurrent to the Gandhi’s trusteeship theory since most of the stakeholders form a large share of the society, therefore while taking care of the stakeholders and not the society itself, the business is actually complying with the CSR model. However, various researches have been conducted in this regard and there is evidence that the western theories do not fit the model of Indian organizations and they need to be customized accordingly. This is so because Indian industrial sector is mainly governed by the ideologies presented by national and religious figures whereas most of the western CSR models are presented by management scholars. This concrete differentiation makes the western theories rather unfit for Indian society (Mohan, 2001).
The main reason for non-compliance of Indian business enterprises to CSR practices is the distance that it bears from the core corporate objectives which makes CSR practices not a part of mainstream business operations. Since there is no return on investment visible, therefore, it is evident that lack of financial gains makes the compliance to CSR the least prior thing to do. However, as per the various studies conducted in the pursuit of evaluating the compliance to CSR standards by Indian businesses, it has been discovered that change has been initiated and many business leaders in Indian industry are actually taking necessary measures which would perform synergy between the earlier Philanthropic model and the new western regime (British Council et al. 2002). Transformations in the tradition model of organizational management and development of management into business leadership is also changing the landscape of social welfare performed by businesses as well.
It is also argued that the changing face of CSR in Indian economy is because of emergence of MNCs in the given industry. Ruud (2002) argued that MNCs in India are the drivers of the CSR agenda. They act in a more environmentally sustainable manner than local companies do, and follow stricter standards in accordance with those of their headquarters in the West. As a result, sustainable business practices often threaten the competitive advantage of MNCs that are more responsible. However, in response to that, it is argued that MNCs are more prone to profit making since they justify their presence in the foreign regions and conducting business over there; therefore, their practices are more profit oriented . Whereas other scholars present a notion that instead of a complete adherence to profit making or social welfare, the MNCs are more prone to maintaining sufficient profits along with risk management. Therefore, most of the MNCs have altered their overall business model and have been following localized policies mainly.
This adaptation makes them more acceptable in the Indian industry and also makes them liable to comply with already undermined CSR standards. Since MNCs are mistrusted in Asian economies, therefore, the general perception is that MNCs are not playing their due role and are not taking sufficient and concrete measures required for society’s welfare (Kumar et al. 2002). Most of the MNCs have appeared to adapt to local identity and have lowered their standards when it comes to CSR. In fact, if a comparison is made then the MNCs would found to be doing very little as compared to their western sister concerns.
Hence, to be more precise, there are various schools of thoughts available who govern the basic CSR practices in Indian industry. Where corporations appear to be following various social and environment welfare policies, they can be seen as being driven by the Gandhi’s trusteeship theory which is deeply rooted in philanthropic practices. On the other hand, another school of thought follows Nehruism and believes in the sovereignty of the state. There are also other groups who believe that western theoretical models are the most suitable ones. However, they all lead to a common conclusion that there is a higher degree of inconsistency in the efforts made in this regard and there needs to be a governing framework which would act as defining road map for these enterprises. While the principles of Gandhian trusteeship seem to be present in some form, the extent of its influence is inconclusive. Keeping the Gandhian trusteeship theory as the main driver of CSR in India, the following chapter focuses in more detail on the research gap and presents the questions aimed at addressing it.
2.4 Profile of Indian Pharmaceutical Industry
Rationale for Selection
There are various reasons which played key role in selecting the Indian pharmaceutical industry as the subject of this dissertation. Firstly, some of the pioneers of Industrialism in India are in pharmaceutical sector. There are giant groups which make maximum contributions to Indian economy and have a well-established market presence. Secondly, the pharmaceutical companies due to their historic presence are highly affected by Indian ideology of CSR and; therefore one can expect that they would comply with the CSR requirements since their foundations are based on typical culture of philanthropy. Also, these companies are further expected to by working under the influence of Gandhi’s theory of trusteeship as their leaders are the ones who belong to the era of 1960s onwards. There are also researches which have supported the notion that companies with higher revenues are expected to be better contributors to CSR practices in Indian society (Arora & Puranik, 2004). Therefore, the big business groups are expected to undertake major responsibility in this regard.
On the other hand, it is pharmaceutical companies who have major adverse impact on the environment as a result of their production activities and therefore, they appear to be more liable to take part in CSR activities in India. One of the strong grounds was presented by the President of Novartis himself by saying, pharmaceutical companies must be held at higher standards for social responsibility, because their consumers (patients) do not possess the ‘consumer sovereignty’ to buy or reject their products (Khan, 2008).
Indian pharmaceutical industry posses a distinguishing portfolio as compared to the other sectors. It is mainly involved in manufacturing of drugs and medicines along with other peripheral products. The industry thrives on the basis of new research and development and presence of old drugs as well. Basic value addition processes include research and development, production, packaging and logistics.
The industry focuses on manufacturing generic drugs and bulk units where both possess different nature. In the pharmaceutical industry, the generic are copies of branded drugs whose patent protection has expired, and they are bioequivalent26 to their corresponding branded drugs. Also referred to as unbranded formulations, these drugs are sold under their chemical names at a fraction of the price of the patented drugs. However, some companies do opt for the option of ‘branded generics’ — whereby they invest in marketing and differentiating these from other generics. Bulk drugs are the powder forms of active chemical therapeutic substances (e.g. vitamins, analgesics, etc.) that are the main ingredient in pharmaceuticals products. These are used for producing pharmaceutical formulations, whether generic or patented (Khan, 2008).
Chapter 3: Research Methodology
Research methodology presents a road map for conducted further research and deriving conclusive evidence out of research findings in order to reach a conclusion. There various methods available through which researches can be conducted however it is important to select the one which suits the overall requirement of the research question. However, other than the methods selected it is important that the researcher is aware of the limitations inherited with to the specific approach which is employed for the research and the relevant limitations are duly addressed during the research.
The method selected for this research is an explorative form of study. Other research questions are focused on finding out whether Indian pharmaceutical companies play their respective role in CSR activities and if they do, what are the selected mediums. Secondly, as compared to their respective western counterparts, are they equally aggressive in playing their respective role in society. For this purpose, secondary data will be used which will help in evaluating the respective activities and ideologies of Indian pharmaceutical companies.
3.1 Research Question
a) What are the major influences on the CSR activities of Indian pharmaceutical companies?
b) What is the scope of their CSR activities and which areas do they majorly focus on?
c) How do the Indian CSR activities relate to the endeavors of Western companies in the same industry? How are they different?
3.2 Limitations to the Research Methodology
There are various inherent limitations to this research such as scarcity of relevant research and secondary data. The data that will be used for research purpose is the one which is reflected in the statements of pharmaceutical companies and along with that, the information present on media will be sued. However, conclusive and concrete evidence will be required which would help us in reaching the desired conclusion. Since there has been much study conducted in this area, therefore instead of using other forms of research, explorative form of study is used since it helps in gaining the preliminary information about the subject matter being discussed. Therefore, instead of qualitative study, quantitative study will be used.
Where there is an argument that one could have used surveys and questionnaires for this method, it is important to note that many Asian managers are not very responsive to written surveys and consider it a laborious activity. On the other hand, information conducted through questionnaires are always susceptibility to misstatement since due to fear of management, and other undue influences coupled with personal interest and confidentiality factors, many managers are not responsive to survey methodology.
This research methodology will help us analyze the organizations in their natural settings with the help of secondary data available and will help us in observing the natural behavior of them towards CSR activities.
3.3 CSR Activities by Indian Pharmaceutical Companies
India’s economy has known the concept of CSR for a long time. CSR existed as corporate philanthropy and in the form of the Gandhian Trusteeship. Liberalization of the economy transformed the CSR model into a multi-stakeholder approach in which the corporation was responsible for all stakeholders. Corporations realized that long-term success and profitability was dependent on stakeholder satisfaction and CSR was a sure way to maintain stakeholder satisfaction. Especially since they did not exist in isolation, they had to repay the society they were a part of (Sharma, 2009). Business leaders have always been viewed as agents of social development.
Khan (2008) carried out a study to analyze the CSR activities of pharmaceutical companies in India. The author stated that the primary driver to CSR activities is a top management decision, followed by one by marketing or sales and corporate communications departments. The biggest barrier was judged to be financial restrictions. Sales and medical units are also opposed to the provision of free medicine to people.
Indian pharmaceutical companies primarily focus their CSR efforts on their employees, followed by the latter’s families and then the local community. These companies focus mainly on the social aspect of CSR not on the environmental side, any beyond primary needs of maintaining aesthetics and complying with government regulations.
Pharmaceutical companies basically focus on the education and training of their own employees because of the direct benefit they themselves get. Other education projects focused on educating the underprivileged, especially in rural areas. Along with that, there is a large focus on healthcare, which naturally follows from the nature of their business and the potential they have for contributing enormously to this field. Most healthcare activities are related to awareness building, prevention campaigns and research relating to HIV / AIDS, tuberculosis, hepatitis B, polio and malaria. This trend shows that companies carry out those CSR activities that are closely aligned with their actual business (Ibid).
The study also indicates that these companies carry out CSR activities only if they are financially viable. Thus, the Indian perception of CSR is radically different from the view held by Western companies that the financial, social and environmental aspects of decisions are equally important. On the contrary, companies in India focus on earning profits and helping the society in the process- the primary aim is profit (Khan, 2008).
CSR is not part of strategic corporate decision making; rather, it results as a by-product of some actions. The human resource epartment is usually responsible for CSR activities and most social sustainability projects carried out by them focus of the company’s employees. Biocon’s ARY, Wockhardt’s WHARF and Novartis’ NCLCA, if managed as a part of core business operations, would be excellent cases of steps taken to ensure sustainability. However, none of the respective companies view these projects as a part of their core business activities. The views of most managers of these companies, especially that of the managing director of Novartis, indicate that CSR if morally driven and predominantly rooted in a philanthropic attitude even today (Khan, 2008).
In India, another surprising trend was observed- stakeholder pressure was conspicuously absent. In the four large pharmaceutical companies under study, only Novartis had faced stakeholder pressure in the Glivec situation. However, even in this instance, Novartis disregarded the negative stakeholder opinion to a large extent. Thus, CSR activities in Indian pharmaceutical companies are basically driven by internal forces, not external pressure (Ibid).
The pharmaceutical industry of India is undertaking large scale endeavors to sensitize the public regarding HIV / AIDS and to develop drug regimes that are easier for the patients to follow. Thus, they are in effect striving towards effective AIDS management and fulfilling their social responsibility (Khanna, 2006).
Optimal drug regime adherence is at least 95% and studies indicate that 21% disease progression can be reduced by a 10% increase in proper drug usage (Nischal, et al., 2005).
In this regard, greater involvement of the pharmaceutical companies and innovative programs started in conjunction with doctors, make amazing inroads towards the containment and treatment of this disease. Also, fixed dose combinations (FDCs) in which the number of dosages is decreased reduce the chances of prescription errors, dosage errors, drug misuse etc. Indian pharmaceutical companies are working towards simplifying treatment by introducing FDCs. To decrease resistance towards AIDS treatment and increase the acceptance of AIDS patients, these companies are investing in mass education, multi-lingual campaigns, patient education books and online resources. Medicine accessibility has also been improved by creating special outlets for AIDS drugs and the cost of medicines have also been reduced by the pharmaceutical companies.
Most of the CSR drives and campaigns carried out by pharmaceutical companies are labeled as publicity stunts and as ways to increase company profits. Khanna (2006) refutes these allegations, saying that these efforts do not generate revenue for the companies. Rather, they make the concerned companies even more accountable to the public. Also, such endeavors create employment opportunities for a number of people such as service providers, counselors, supply chain and logistics companies etc. He concludes by highlighting the positive consequences of such CSR activities, especially in regards to the treatment of AIDS patients.
Unichem, an Indian pharmaceutical company, carries out several CSR activities including the conduction of blood donation drives, tree plantation drives, provision of medical assistance to employees and their families, and arrangement of knowledge session such as seminars and trainings for employees (Unichem Laboratories Ltd., 2009).
GlaxoSmithKline Pharmaceuticals Ltd. provides money, medicines, time and equipment to non-profit organizations, for the improvement of the health and education facilities of local communities, especially focusing on the women, children and aged community members. The company carries out a number of long-term projects along with short-term campaigns, as needed.
GSK India has established a rural health improvement trust, GRAMIN AAROGYA VIKAS SANSTHA (GAVS). This trust provides primary level healthcare and mobile teams visit 150 villages every week to provide curatives services. Some special camps are also established periodically to carry out cataract operations, administer Tetnus injections, test blood samples etc. Along with this GSK has established vocational training centers in Peth Taluka, Nashik since 2008 for imparting training to unemployed youths. Other endeavors include establishing a shelter for children under the age of sixteen, running a community college program, creating a primary healthcare center in a garbage dumping ground in Deonar Mumbai and extending support for the rehabilitation of cancer patients (GlaxoSmithKline Pharmaceuticals Ltd., 2012).
Another extensive study was conducted by Kiran and Sharma in 2011. The idea was to establish a relationship between the age of the pharmaceutical companies and their adherence to the CSR activities. It was observed that many pharmaceutical companies intend to provide educational, employment, healthcare facilities along with environmental protection. However, it is important to observe that these companies give to CSR. For the purpose of this research, various business models including pharmaceutical companies were selected. There were three groups of organizations: a) established market leaders b) medium-aged companies which have already adopted CSR activities and c) the beginners who were showing inclination to CSR. For the purpose of this research, ANOVA was used for delivering the correlation between the companies. It was found that as the age of the organization grows, so does the attention towards the CSR practices. This is so because older organizations have ample resources, time and manpower to invest on society’s and environment’s welfare. On the other hand, smaller organizations do show adherence to CSR policies but they are more concerned with their survival and growth.
The study further emphasized on developing a relationship between the domains of CSR and the interest of the companies in relation to their age. The study helped in highlighting the sectors in which the pharmaceutical companies are active in providing necessary CSR provisions. The framework also presents the differences in the prospective of the influence of these three sectors (health sector, education sector, environment sector) with regard to the organizational age that is, whether CSR initiatives of the firm with respect to health sector, education sector and environment sector are influenced by the organization’s age or not.
The study conducted by Kiran and Sharma depicted that there is a clear relationship between the age of the companies and the extensiveness of the activities that they perform in the given respect however there is a varied degree of interest when it comes to sectors of CSR. There were significant differences which were observed when the CSR initiatives were evaluated in the light of sector wise segregation. It was stated that if the companies are exercising more corporate social responsibility initiatives, they are expected to gain more benefits out of it in the form of expansion of goodwill and other business operations caused by growth. Where the organizations have managed to develop a health image, there is a higher possibility that there will be least government intervention if the organization bears a healthy image. Furthermore, a health organizational image will bear more and more customers and further investment to the organizations that have a healthy company profile. Finally, it’s the firm either a new firm or the older one that is going to be benefited more by the implementation of CSR initiatives. Earlier business firms focused only on profit earning motives. But this perception is changing now. For business organizations CSR is not only the passion but its commitment towards society. Profit sharing is there for the social upliftment of the society (Sharma & Kiran, 2011).
The study conducted by Kiran and Sharma presented an evidence that there is high degree of difference between the CSR practices undertaken by established organizations and the market beginners. As a matter of fact, due to this compliance to CSR practices, the age and the ideology of the originations can also be predicted easily. With the changing market landscape, corporate social responsibilities are becoming inevitable for a company’s survival. The study presented a notion that there is a clear relationship between the organizational insight and the age of the company along with their responses to the needs of healthcare, education and environmental sector. The best practices exercised by the market leaders act as the practical guidelines for the new comers and more and more new comers are showing their responsiveness to CSR initiatives. However, the responsibility rests on the market leader as to how they plan to continue to their corporate social responsibility exercises. So the results of the present study are indicative of the fact that there is a significant difference in CSR initiatives w.r.t health, education and environment by CSR leaders, adopters and initiators. In conclusion, the findings of this study provide insights into an area of growing concern of corporate firm’s initiatives towards society. The numerous corporate ambiguities those are inherent in business decisions regarding marring CSR initiatives with the business initiatives. Thus, any CSR activity which is strategic should be close to the mission and vision of the organization (Yeoh, 2007; Du et al., 2007; Bruch, 2005).
In order to support this idea presented by Kiran & Sharma, the case of Pfizer can be evaluated. Pfizer came into India around six decades back and after its arrival, it made many strategic alliances. Although Pfizer did changed its leadership model according to Indian regime but it also reflects the international CSR standards complied by its sister concerns. Recent activities of Pfizer include an extensive input in overall social welfare of Indian society. Be it education, healthcare, and employment along with environmental protection, Pfizer has managed to play its role successfully. In 2011, it was named in the leading top six pharmaceutical companies in India.
Currently, it is involved in many social activities such as Formation of the Academy of Clinical Excellence (ACE) in collaboration with Bombay College of Pharmacy to provide professional training to investigators and other clinical research personnel. In addition to that, Pfizer has also made strategic alliances with similar organizations in the pursuit of establishing the Indian Society for Clinical Research (ISCR), a professional society aimed at raising the standards of clinical research and also development of Pfizer Education and Research League (PEARL) which is a new initiative in which Pfizer seeks to partner with institutes to improve existing clinical research and continuing medical educational capabilities.
Other than its contribution to R&D, it has initiated many public awakening programs which are intended to make public aware of the prevailing diseases and the protective measures required in this respect. Other than that, there are various other activities which show the commitment of Pfizer to social welfare. For example, the mother and child healthcare project which was an extensive project of its kind. Pfizer began supporting the Mother and Child Healthcare Project in rural Haryana in 2002. We have adopted 41 villages for a primary healthcare programme that aims to reduce anemia in pregnant women and adolescent girls. The project promotes community health, including diarrhea management, antenatal care, child nutrition and immunization. Village health workers provide education, training and disease awareness. The project also aims to identify congenital abnormalities in high-risk pregnancy cases, especially neural tube defects and intrauterine growth retardation (Pfizer, 2012). It has also managed to take part in various other education related activities as well which involved educating the community about the natural calamities and also make them aware of the precautionary measures that would have helped the community. Other CSR activities include partnership to build India’s healthcare infrastructure, rebuilding Hope in Bhuj, construction of a school building in Nagapattinam and economic Rehabilitation Program. All these activities reflect that Pfizer is highly adhered to CSR activities. It has also taken
However if we observe the CSR practices that are undertaken by the sister concerns, it will be observed that the efforts of Pfizer international are more directive and cover the concerned disease area. For example, Pfizer international has taken concrete measures for combating AIDS especially in underdeveloped parts of the world. However, Pfizer India appears to be more concerned with the current affairs issues instead of long-term strategy against spreading of disease. Pfizer’s CSR practices in developed parts of the world are way more aggressive, community oriented and addresses the vital needs when it comes to global healthcare. However, in India it seems as if it’s only addressing the current affairs which may appear to be another publicity stunt.
Considering the given information, we have visualized the work of various researchers in the field corporate social responsibility and its compliance by the Indian pharmaceutical companies. This given research has helped us gather various facts about the general behavior exhibited by the Indian pharmaceutical enterprises. These researches developed a relationship between the historical and contemporary pharmaceutical companies and their strategy related to CSR. On the other hand, another major area of discovery was the correlation between the company’s age and their policies related to CSR activities. It was found out that the older the company is the better and more religiously it responds to requirements of the society.
Additionally, the choice of emphasis between healthcare, education and social services also varies with the age of the company. Another area which was the centre of attention was the difference of behavior exhibited by local pharmaceutical companies and the western pharmaceutical businesses towards CSR. It was found out that many big enterprises like GSK, Novartis and Pfizer are paying attention to corporate social responsibility however some of them need to bring their efforts at par with their western sister concerns. It was also identified that history of Indian culture has managed to have impact on the pharmaceutical companies’ policies towards society’s welfare and environmental protection. This is precisely the reason why older enterprises are more prone to respond to religious grounds whereas the modern or comparatively young companies are follow the benchmark set by the market leaders or western governing bodies. In order to gain customer base and global access to desired markets, today’s enterprises opt for basic CSR compliance which is more profit oriented behavior as compared to genuine welfare.
Chapter 4: Discussion & Analysis
Before analyzing the given information related to pharmaceutical practices in India, we need to rephrase the given research questions which are given as under:
a) What are the major influences on the CSR activities of Indian pharmaceutical companies?
b) What is the scope of their CSR activities and which areas do they majorly focus on?
c) How do the Indian CSR activities relate to the endeavors of Western companies in the same industry? How are they different?
An individual analysis of the data in the light of above mentioned research questions will give a directive approach to this analysis.
4.1 Major Influences Over CSR Activities
The above mentioned research helped us in analyzing the social, cultural and corporate factors which have a tendency of affecting the CSR activities of Indian pharmaceutical companies. First and foremost, it’s the religious and cultural ideological framework which acts as the skeleton for the current enterprises. The teachings of the religion along with philosophies of major figures such Gandhi and Nehru have acted as the rationale for many CSR activities performed by many organizations.
Secondly, many of them tend to follow western models as well. The idea of complying to follow western standards as well. Although pharmaceutical companies are mistrusted in Indian settings however their contribution to the society cannot be ignored especially the ones which are influenced by western practices. This is so because compliance to western standards has become a mandatory requirement for international trade. Many of the company not complying with international CSR legislations like labor laws, environmental protection regulations are not welcomed in the international community. Therefore, in order to expand the business processes, these companies tend to comply with CSR standards (Bruch, 2005).
Another important factor was the ideology of the management. Many of the business enterprises have their leaders or managers acting as change agents and these change agents have managed to introduce a wide range of CSR practices in India. With the passage of time, as the philosophy of management is evolved, so does the form of CSR compliance as well. Another substantial factor which can influence the nature of CSR practices is the age of the enterprises and availability of resources. It was observed that bigger enterprises like GsK, Biocon and Novartis had more resources available, therefore the range of their CSR practices was rather extensive. On the other hand, middle-aged companies Unichem Laboratories focus more on primary activities (Khan, 2008).
It has been established by the careful analysis of data presented in the form of researches that India is well-versed with the concept of CSR and its pharmaceutical industry is no different. Where most of the companies focus on CSR activities, they have various schools and philosophical models to follow. The current model reflects and amalgam of various western theoretical models as well as Gandhi’s theory of Trusteeship. Most of these companies focus on rural areas growth and women development which is once again influence by Gandhi’s regime. However, stakeholders’ benefits are also not ignored.
International competition, changing government regulations, best practices by market leaders, current events, natural calamities, management’s philosophy, age of the company and nature of the operations, local / multinational presence, nature of operations are some of the major factors which have played their role in changing the landscape of overall of pharmaceutical companies compliance to CSR. Further changes in these factors can alter the current face of CSR compliance in Indian pharmaceutical industry.
4.2 Scope of CSR Activities
Most of the Indian Pharmaceutical companies mainly focus on rural development and women welfare. Pfizer is one such example. It has extensive programs which deal with creating awakening among women regarding their health and children-related issues. Furthermore, it has also started many social activities related to rural areas. Similarly, GSK and Novartis are also involved in welfare activities. However, most of these activities are in the field of research and development, education, healthcare and general welfare along with environmental protection. Some of these bigger pharmaceutical companies have their own social welfare departments. Other than that some of them also have alliances with renowned social welfare organizations and NGOs.
It is important to note that as the size of the company grows, so does the diversity of its CSR practices. If example of GSK is taken, it will be noted that Gsk has been playing its role in research and development related to various diseases e.g. Project for early detection of Cancer with Bhakti Vedanta Hospital: Mira Road, Mumbai. However, like many other giant corporations, it is also playing its role towards rural and regional development. Programs like Residential shelter home for boys in Jodhpur, Rajasthan, Healthcare project, Institute for Indian Mother and Child, Kolkata, Shelter home for children – Behraich, Uttar Pradesh, Yuva Parivartan – GSK Livelihood Training Centres: Peth Taluka, Nashik, Maharashtra, and Tribal welfare projects in Peth Taluka, Nashik, Maharashtra, are examples of long-term commitment of Gsk to rural welfare. Most of welfare activities in urban areas are disease oriented such rehabilitation facilities for cancer patients etc. (Gsk, 2012).
Similarly, many other pharmaceuticals companies tend to have policies in place which are intended to provide benefits to their employees. Also, distribution of drugs and edibles along with other necessities, flexible pricing, welfare programs in case of natural calamities and development of infrastructure such as hospitals, schools, and rehabilitation facilities, hospice settings and clinics are also some of the development activities undertaken by these organizations. It is important to note that the scope of these pharmaceutical companies is mainly extended to society’s welfare and not much of a data is available related to their activities for environmental protection. This careful selection of scope also raises a doubt as if these CSR activities are another method of acquiring publicity and increase in customer base instead of a genuine effort for society’s welfare.
Where pharmaceutical companies are major contributors to environmental pollution, lack of data related to environmental protection makes the status of these companies rather dubious. Secondly, where there are healthcare regulations prevailing in the country, adequate information which would help in determining the labor state, is also not available. Therefore, the current scope of the CSR activities of these pharmaceutical companies is extended to only to education, healthcare, research and development and rural development along with disease cure. Not much attention has been paid to environmental factors.
4.3 Comparison of Indian & Western Pharmaceutical Companies
In the western model of management, financial, social and environmental sides of the business are considered to be of equal value. If most of the activities of western companies are considered, it will be evaluated that they are disease oriented and their operations do not consider CSR as an additional activity which has to be performed along with the other social activities. Instead, CSR is considered as main business activity along with other operations. Therefore, from labor conditions to environmental factors and community development, the pharmaceutical companies in west appear to be considering all aspects of CSR.
CSR is considered as of the main fields in management sciences. Management scholars have levied excessive stress on the responsibility which is borne by the business and management towards the society. Therefore, the western governments have acknowledged this responsibility and have bound the business enterprises with strict legislations which end up in religious compliance to such standards. On the other hand, many of these CSR activities are long-term based. Such as research and development programs by Gsk International, effort of creating awareness regarding Aids in undeveloped or developing countries and finding an efficient cure by Pfizer international explains that these activities are goal oriented instead of situation oriented (Vian et al., 2007).
Western CSR model is based on management sciences and has stemmed out of new leadership models. Along with addressing the impact of natural calamities, these efforts are focused on alleviating the life standards of the concerned public such as Pfizer’s effort of spreading knowledge about Aids in Africa which is an extensive and long-term project itself. On the other hand, the Indian pharmaceutical companies have based their CSR practices on the teachings of religious and social figures. Gandhi and Nehru have turned out to be the most influential personalities which have redesigned the face of Indian CSR activities (Khan, 2008).
It is because of the teachings of Gandhi that most of the Indian pharmaceutical companies have managed to ignore the requirements of urban areas completely and have only stressed on rural requirements and also development of children and women. Since most of the leaders of today’s giant pharmaceutical businesses belong to the same period (1960-1980); therefore it is evident that the business philosophies will also reflect their experiences. Distribution of healthcare facilities, infrastructure development and education are the main areas of CSR where Indian pharmaceuticals are active.
Other than the foundation of philosophies, the response of Indian and Western pharmaceutical companies to environmental requirements varies greatly. Bhopal Gas incident is one simple example which affected the lives of many and still has its residues remained in that region. However, no substantial efforts have emerged on surface which would address the after-effects of this incident. Other than the direct victims, the population living in that region has shown emergence of various diseases which are resultant of poisonous gas. But even giants in pharmaceutical sector have managed to disown this region (Khan, 2008; Tinsley & Ansell, 2011).
However, a rather similar incident known as the Cutter incident which made thousands of children susceptible to live polio virus took place in California in 1955. As a result of this incident, most of the members of the management stepped down and the company was sued where the damages were paid to the plaintive. Along with that, the company was held liable for breach of warranty and was subjected to various disciplinary actions along with drug recalls. Such measures define that there is an existence of strict regulatory structure which examines the CSR compliance by western companies. However, one may not find many such examples in Indian pharmaceutical history.
This chapter was concerned with evaluating the evidences which were gathered from secondary data available. A careful analysis was performed in the light of research questions available. It was found that there is a considerable degree of variation between Indian and western pharmaceutical companies when it comes to CSR compliance. Not only the bases of their CSR philosophies vary greatly but also the scope of their activities is also quite different. Even the CSR activities of companies in a multinational group also show these differences. Where western pharmaceutical companies are influenced by management philosophies and regulations, Indian pharmaceutical companies are under the impact of international competition, changing government regulations, best practices by market leaders, current events, natural calamities, management’s philosophy, and age of the company and nature of the operations, local / multinational presence, and nature of operations.
Chapter 5: Summary & Conclusion
Corporate social responsibility (CSR) refers to the commitment of a business to improving the quality of life of their clients or customers, their employees, the local community and the society at large. CSR initiatives seek to establish businesses as good corporate citizens in the society. They are essentially the ethical responsibility of all corporations and businesses and are commensurate with the concept of “compassionate capitalism.” The efforts include everything done with the purpose of social development. Other considerations for these activities include economic reasons, reduced risk, increased access to capital, larger market share, better supplier relationships, and especially increased customer satisfaction and loyalty.
This research is concerned with the development of CSR practices in Indian pharmaceutical industry and the current status of its compliance. As per the history of Indian Industrialization, 1980s was the precise time period when Indian industrial model was gaining strength. Industries were expanding with new innovations and technological developments whereas diversification was being observed in every forte of industrial framework. Where industries and business empires were expanding, public expectations from these business houses also arose due to which the NGOs culture appeared. The main aim of these NGOs was welfare of the society and opposing actions by public and private sector which are causing harm to the general population of the country along with environmental considerations. Due to these consolidated efforts of the NGOs, an Environmental Protection Act came out in 1986 which was levied on many public and private organizations in consideration to the environmental.
There are several studies which support the notion that in the Asian economies, India is one of the pioneers to adopt CSR practices. As a matter of fact, many leading Indian business empires now appear to be publishing their CSR compliance details in their financial statements which have turned out to be a breakthrough in Indian history. Since there is no governing body involved in active management of the CSR practices in India, therefore out of two percent of the organizations which are part of CSR regime, may be presenting false or inconsistence information in the name of CSR compliance Therefore, there is a need for a consistent effort which would ensure that CSR practices are not only religiously complied with but are also included in the public declarations as well.
As far as Indian pharmaceutical industry is concerned, there are various schools of thoughts available who govern the basic CSR practices in Indian industry. Where corporations appear to be following various social and environment welfare policies, they can be seen as being driven by the Gandhi’s trusteeship theory which is deeply rooted in philanthropic practices. On the other hand, another school of thought follows Nehruism and believes in the sovereignty of the state. There are also other groups who believe that western theoretical models are the most suitable ones. However, they all lead to a common conclusion that there is a higher degree of inconsistency in the efforts made in this regard and there needs to be a governing framework which would act as defining road map for these enterprises. While the principles of Gandhian trusteeship seem to be present in some form, the extent of its influence is inconclusive.
The method selected for this research is an explorative form of study. Other research questions are focused on finding out whether Indian pharmaceutical companies play their respective role in CSR activities and if they do, what are the selected mediums. Secondly, as compared to their respective western counterparts, are they equally aggressive in playing their respective role in society. For this purpose, secondary data has been used which has helped in evaluating the respective activities and ideologies of Indian pharmaceutical companies.
With the help of data available, it was found that the choice of emphasis between healthcare, education and social services also varies with the age of the company. Another area which was the centre of attention was the difference of behavior exhibited by local pharmaceutical companies and the western pharmaceutical businesses towards CSR. It was found out that many big enterprises like GSK, Novartis and Pfizer are paying attention to corporate social responsibility however some of them need to bring their efforts at par with their western sister concerns. It was also identified that history of Indian culture has managed to have impact on the pharmaceutical companies’ policies towards society’s welfare and environmental protection. This is precisely the reason why older enterprises are more prone to respond to religious motives whereas the modern or comparatively young companies are follow the benchmark set by the market leaders or western governing bodies. In order to gain customer base and global access to desired markets, today’s enterprises opt for basic CSR compliance which is more profit oriented behavior as compared to genuine welfare.
A careful analysis was performed in the light of research questions available and it was found that there is a considerable degree of variation between Indian and western pharmaceutical companies when it comes to CSR compliance. Not only the bases of their CSR philosophies vary greatly but also the scope of their activities is also quite different. Even the CSR activities of companies in a multinational group also show these differences. Where western pharmaceutical companies are influenced by management philosophies and regulations, Indian pharmaceutical companies are under the impact of international competition, changing government regulations, best practices by market leaders, current events, natural calamities, management’s philosophy, and age of the company and nature of the operations, local / multinational presence, and nature of operations.
Hence, it can be concluded that where Indian pharmaceutical companies are aware of CSR rather well, an aggressive is required on the part of government and market leaders to ensure that these CSR activities address the macro issues such cure to specific diseases and environmental protection as well. Furthermore, CSR needs to be separated from usual marketing practices and has to be amalgamated in core business activities.
References
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CSR & Indian Pharmaceutical Industry Page 3
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