Remember Financial Management 101, back in school - profit maximisation is the sole motive of a typical firm, we were taught. And that we see mostly around, especially when it comes to the SME sector. Yes, any business is to work on driving maximum economic benefits, rest fall in the domain of philanthropy.
Nonetheless, its a myopic view - a short term approach, not sustainable over decades. For any business to prosper in the long run; it needs to focus on social and environmental returns in addition to economic returns. As the social fabric of the world is breaking and environment is degrading, the cost of doing business is inching up and ease of doing business is falling - hampering new entrants.
Yes, the onus falls on public domain, and it is the government job to provide education, health, better environment and any other thing that falls in the social domain. But the stake of businesses is increasing - more goods and services are being provided by the private sector.
Barring the ethical and social responsibility, its not economically viable in the long run to sustain in the absence of adequate focus on people and planet instead of just eyeing on profit.
This is a tragedy of common - a free riding problem - mostly people and businesses rely on others for enabling and sustainable conditions, and the result is suboptimal provisioning. Its a market failure - invisible hand not working, a regulator shall pop in. And these days non-government actors based on funding of international donors, agencies and MNCs are more active than government in creating awareness and providing platform for having a better world to live in.
An awareness event took place in Bangalore, India, last week arranged by an Indian organisation Prakruthi and it gathered stakeholders from India, Pakistan, Bangladesh and Nepal under one roof. The idea was to create awareness on Corporate Social Responsibility (CSR) and share some research work.
The idea of triple bottom line that quantifies economic, social and environmental returns in one balance sheet is new to the region and a virgin territory in Pakistan. Some best brains in the world are working on it, and revolutionary change in the international accounting system to incorporate all the relevant returns to all the stakeholders, not just the shareholders, may well be seen.
India is much ahead in this process, and there are few organisations actively working on these issues for many years. Pakistan is following the suit. Recently a study launched by Sustainable Development Policy Institute (SDPI) being published by Prakruthi contextualized and conceptualized the CSR in Pakistan.
CSR is often confused here with consumer welfare and public relation practices, and there is little distinction between the CSR and philanthropy. It is mostly confined to multinationals and some self motivated local business groups. The civil society in developed world has pushed most MNCs to have global CSR programs, and we see that in their respective local agendas.
Sooner or later, the culture is going to be inculcated amongst the domestic counterparts. But for that, better and clearer laws and regulation to be formed in the domain of corporate, environmental, labour and consumer protection laws. A good lead is been taken by SBP as number of prudent regulations have been introduced on how to CSR to be taken account with corporate banking. Rest shall follow!