Corporate social responsibility and the plantations
Dr N Yogaratnam Chairman, Tree Crops Agro
Consultants
In the developing and under-developed economics of the world, where
problems of poverty and hunger still pose serious threats, efforts to
improve the material welfare of the population may well receive top
priority, and the production of material goods becomes the sole mission
of business.
But, there is an increasing awareness among industrialised nations
that a price has to be paid for unrestrained and unregulated economic
growth in the form of deterioration in the quality of the environment,
which in turn affects the quality of life of the people.
In Asia, a similar concern is being voiced about some of the
undesirable social outcomes of unregulated development.
Evidence of such side effects are provided by a polluted
environmental and problems and the indiscriminate depletion of scarce
natural resources.
For example, there had been many cases of pollution of rivers caused
by effluents discharged from rubber factories and palm oil mills which
have seriously affected the livelihood of many fishing communities.
Indeed it had been estimated that the amount of pollutants discharged
by palm oil mills in some countries exceeded the sewage discharge of the
entire population.
This, however, has now been minimized by appropriate waste disposal
systems.
The need, therefore, for companies to demonstrate a greater social
concern has now become a major issue in plantation management.
It is not long before people begin to point accusing fingers at the
business community and its activities for having caused some of the
social ills apparent in the society.
This is not surprising because the modus operandi of business in all
democratic systems, is one of free private enterprise with achievement
of profits as the primary objective.
What has frequently been overlooked is that freedom of operation must
co-exist with self-induced responsibility.
For a company to become involved in the social area there must be
first of all awareness by the company of its social role.
Next is, social involvement in order to fulfill its social
responsibility.
This must be followed by social reporting whereby reports are
published concerning the company's social performance.
The final step is a social audit where the effectiveness of such
social performance can be evaluated.
Thus corporate social responsibility may be conceived as consisting
of four progressive levels of corporate participation reflecting a
hierarchy of objectives to be achieved. Such a hierarchy is illustrated
in Figure 1.
Level 4 Social audit
Social reporting
Social involvement
Level 1 Social awareness
Figure 1. The hierarchy of social objective
Social awareness
The philosophy of top management is the primary factor contributing
to awareness. Any commitment to social action appears to stem from the
initiative of top management.
The second factor is legislation relating to social performance
areas. Such legislation includes the Employment Ordinance, Trade
Descriptions Act, Sale of Food and Drugs Ordinance, and in particular
the Environmental Quality Act, which is intended to protect the
interests of parties like employees, consumers and the community at
large.
As a factor contributing to social awareness, alignment with parent
company practice receives relatively high attention.
This is more evident among foreign-owned subsidiaries or partners /
collaborators.
In fact several companies produce social responsibility policy
guidelines prepared by parent companies overseas.
The significance of these factors contributing to social awareness is
further emphasized when the companies indicate their understanding of
corporate social responsibility as;
(a) The only responsibility of business is to produce abundant goods
and services guided by the profit motive. In this way business will be
contributing to the material well-being of society.
(b) The social responsibility of business is evidenced by an active
concern for the social impact of the economic activities of business.
This is a responsibility for social performance of business operating as
an economic unit.
(c)The social responsibility of business extends beyond its
responsibility for the social side effects of its economic activities
and includes active involvement by business in activities of broad
social concern.
Social responsibility is thus conceived along two dimensions: social
performance of business as an economic unit and social performance when
business assumes a broader role as a social unit.
Social involvement
Four major social performance areas can be identified;(a) Human
resources (b) Product/service to consumers (c) Community involvement and
(d) Physical environment.
It is also relevant to point out that consideration of social
performance cannot be completely dissociated from that of economic
performance for, in many ways, these two activities complement each
other in contributing to a company's long-term profits.
Greater emphasis is thus given to major social performance areas like
human resources and product/service to consumers, where the potential
impact from these activities can be associated, directly or indirectly,
with the profitability of a company.
Together with financial and physical resources, human resources
represent one of the most vital inputs in the economic production
process.
Hence, interest in the welfare of employees is very much driven by a
desire to develop a loyal, capable and dedicated work force that can
demonstrate a high level of productivity, as it is motivated by a sense
of social concern.
In the same way, the survival of a company hinges very much on
ensuring that its products are relatively safe in application, of
acceptable quality and reasonably priced.
On the other hand, community involvement which can only be remotely
related to profitability has been given the least consideration.
Human resources
Human resources have been regarded by many companies as their most
valuable asset. For this reason it is only logical to expect a business
entity to consider the interests and welfare of its employees.
The various factors concerning human resources on average companies
tended to give quite - significant - attention to employee safety on the
job; "moderate" attention to facilities that will improve the well-being
of employees; job enrichment in job design; supplementary financial
assistance for housing, transportation and sustenance; "minor" attention
towards overcoming problems associated with drug abuse and alcoholism;
and very minimal attention to the employment of physically handicapped
individuals; pre-retirement counselling; and adjustments to
post-retirement payments.
Product/service to consumers
It is interesting to know that, except for consumer education which
has an overall "moderate" involvement, all other factors relating to
product quality, responsiveness to consumer complaints, product safety,
completeness and clarity of labelling, warranty provisions and content
and quality of advertising, receive above moderate involvement.
The product quality and responsiveness to consumer complaints receive
top priority.
Factors like product safety, content, quality of advertising, and
consumer education, receive the lowest attention from the plantation
industry.
This is not surprising because the produce of plantations, for
example, tea, rubber and palm oil, are sold to large institutional
buyers and consequently, these factors are less important.
In consumer education the lowest attention is paid by companies in
the plantation industry. Product information about the produce of
plantations has already been widely disseminated so that consumer
education is considered unnecessary. This is undesirable.
Community involvement
Attention towards activities associated with the well-being of the
community has been given less consideration by companies compared with
the previous two social performance areas.
Looking at the overall attitude towards the values of
community-related activities, companies are only involved in these
activities to a "minor" to "moderate" extent.
With regard to another relevant factor, namely, crime Prevention,
high priority is given to it by the plantation industry.
Traditionally, companies in the plantation industry employ and
maintain their own system of security.
This practice has become necessary due to frequent disputes and
unrest in plantation areas.
Physical environment
The degree of involvement by companies in activities concerned with
physical environment is also very limited.
With regard to ways of mitigating or solving problems affecting the
environment, five areas of concern are recognized: air pollution, water
pollution, noise pollution, energy conservation, and conservation of
natural resources.
Corporate social reporting
In many cases, the social involvement is more extensive than is
proper social reporting. This has resulted in criticism from some
quarters that the business community has not been performing in a
socially responsible manner.
Considering that annual reports of private companies are normally
prepared for very limited circulation, these companies could see no
tangible benefits for reporting on anything beyond meeting statutory
requirements. Consequently, those companies which indicated some form of
social disclosure in the annual reports are represented by public
limited companies.
No formal reporting format was used in disclosing social performance
information. Disclosure was largely in the form of passing references
contained in the Chairman's statement.
In the absence of systematic and formal reporting, companies could
find themselves in a difficult position to refute allegations that such
ad hoc disclosure was intended as a public relations gimmick and there
was no genuine desire to promote the image of good corporate
citizenship.
Moreover, companies also tended to disclose more about
employee-related activities compared to other social performance areas.
This may suggest that corporate social involvement is much greater
than companies have indicated in their annual reports.
Lack of proper reporting format and besides, their circulation is
being limited to company personnel, may be a discouraging factor.
Cost of preparing social performance information may not be costly.
Social auditing
It appears that most plantation companies have not yet reached this
final stage in the practice of social responsibility, when the
effectiveness of the social performances are evaluated.
Tea trade
Although global tea business is always concerned with the imbalances
in tea markets, yet, there are also a number of issues at the production
level that need consideration.
Looking at labour, social and ecological issues in the global tea
sector, a sad picture of large scale violation of internationally
accepted standards emerges.
ILO core conventions on labour issues are not respected. Issues such
as wages, health and safety, working hours and regular employment paint
a grim picture.
To address the persistent imbalance in production and consumption of
tea, a number of initiatives have been undertaken.
The FAO in the early 1990s, launched a program to increase black tea
consumption by highlighting health aspects.
The global tea industry has undertaken some initiatives in the field
of corporate social responsibility to address social and environmental
issues.
Critical analysis of quality and effectiveness of these initiatives
however indicates that labour rights, social issues, environmental
concerns and economic imbalances are not being adequately addressed.
Although there is a clear trend of growing interest in food safety
issues - imposing higher standards of tea production for the sake of
consumers, health and safety concerns of workers of the tea industry are
generally neglected.
Ceylon Quality Certification (CQC)
This a Quality Management System (QMS) for tea factories approved by
the Sri Lanka Tea Board.
Ethical Tea Partnership (ETP)
ETP is a partnership between many global tea partners that aims to
monitor social conditions of tea production around the world.
ETP does not include a serious stakeholder approach. Workers are not
involved in monitoring or verification processes. Absence of
transparency is a discouraging factor.
The ETP's audit reports are not made public, which makes it
impossible to asses the true impact of the initiative on the livelihood
of the workers involved ETP, the only CSR initiative of any standing in
the tea sector, still has a long way to go to make a difference in the
fulfilment of the rights and improvements of the livelihood of workers
on tea estates and tea processing factories.
Fair trade labelled tea
Fair trade labelling stands out among the half - hearted CSR
initiatives in the tea industry. However, Fair trade is only relevant
for a niche market, and not for the mainstream tea market.
Tea Supply/value chain
Tea supply /value chain responsibility, where a wide range of
stakeholders are involved, is an under-developed concept of the tea
industry.
Generally speaking, CSR initiatives do not offer more than a token
involvement of stakeholders on an advisory level.
Direct involvement of workers or worker's organizations on an equal
basis in remedying problems is very rare.
Uniliver sustainable tea initiatives
Apart from being a member of the ETP, it has its own sustainable
development program, one of which focuses on tea; the Sustainable
Agriculture Initiative for Tea.
IUF Code of Conduct of the tea sector
International Union of FOOD, Agriculture, Hotel, Restaurant,
Catering, Tobacco and Allied Workers Association's aim of the initiative
was to draw up a model Code of Conduct for tea sector from the
perspective of the trade union movement, on standards in the field of
social environment.
Rainforest tea gardens initiative
This initiative aims to develop a model tea ecosystem that provides a
livelihood for the workers on the plantations and for neighbouring
farmers, while at the same time restoring bio-diversity, based on Analog
Forestry.
The Dutch tea initiative
This civil society initiative calls upon companies selling tea in the
global market to assume their responsibility for sustainable production
and trade.
It believes in a multi-stakeholder approach as key to improve labour,
social, ecological and economic conditions in the tea sector in tea
producing countries.
All the plantation companies in Sri Lanka are aware of the social
role of their business and, secondly, they have been involved to
different degrees in various socially-relevant activities.
However, of the social performance areas, relatively greater
corporate attention is directed to improving human resources and
product/service to consumers compared to rendering community-related
services or alleviating environment deterioration.
It appears that any further progress by companies in undertaking
greater social responsibilities and reporting may come from the larger
companies with multinational link in their business.
It is these companies which have more experience with various
socially-relevant activities through their overseas parent company
connections and which also, in view of their bigger size, would have the
capacity to become more socially involved.
Despite the weak social and environmental components in tea
production, the tea trade is still highly profitable due to smart
marketing, fierce competition, and product innovation, at least for the
successful market players. |