Corporate Citizenship Consideration at IMCL: A Case Study

Introduction

While going through the publications of Indus Motor Company Limited (IMCL) on ‘Concern Beyond Cars’ for finding information related to IMCL’s initiatives for protecting environment, the above lines caught the author’s attention. On reading these lines again he understood that the lines refer to the strong commitment of the IMCL towards its corporate social responsibility (CSR) in line of the 10 principles of United Nations Global Compact (UNGC) (Annexure 1). The message was so clear and tempting that he could not resist going through the secondary information; rather, he decided to meet the Chief Executive Officer (CEO) to talk to him on his significant statement, ‘… giving back to our employees and community…’. A meeting was fixed with Parvez Ghias, the CEO of IMCL, with the help of Fasih-ul-Karim Siddiqui. The meeting, held at Sindh Club’s bakery ‘Britto’, was attended by Parvez Ghias, and two of his colleagues, Babar Salim and Atif Ahmed from Corporate Planning who provide oversight on IMCL social development projects.

Fasih-ul-Karim Siddiqui took the lead in introducing the participants of the meeting informally and provided a twine for the discussion. The author’s first query was ‘how does IMCL plough back more in UNGC principles, especially, when its 500 thousand vehicles on roads of Pakistan are one of the potential sources for environmental pollution?’ He further asked ‘do you think IMCL’s contributions to the society merit a case writing?’ After listening to me, Parvez Ghias replied calmly,

[A]s far as environmental issue is concerned, it’s the Government of Pakistan responsibility to make the regulation and ensure that compliant fuel is available in the country. The company for its part will ensure that vehicles produced are equipped with necessary exhaust systems to meet the environmental emission standards. The problem in the country is that we still do not have Euro2 specification diesel fuel available. The bulk of pollution mainly stems from trucks and buses operating on diesel and other vehicles emitting smoke because of poor maintenance by their owners. Our gasoline cars are fully compliant and when Euro2 diesel becomes available, we will ensure that our vehicles that run on this type of fuel are compliant within the transition period agreed with the government. The contribution of passenger cars to pollution is comparatively small because many of these vehicles are running on CNG (Compressed Natural Gas). In other countries, all vehicles beyond a certain age must pass the road worthiness examination to ply on the roads. Unfortunately, our country neither has inspection standards nor are there any testing laboratories. Besides, irrespective of the size and kinds of vehicle, traffic congestions on the roads are the main cause of smoke and noise pollution in the city. We have recently commissioned a study to evaluate the cost of congestion and for last five years funded a research project on road safety.

He further added, ‘Our project, “Concern Beyond Cars” includes community development, environment protection measures and research on the road safety, and traffic congestion.’ In the answer to the author’s second question, he said, ‘you are welcome to observe the IMCL’s philosophy and practices of our concern beyond cars. If our contributions to the citizenship consideration are worthwhile to inform others through the academic channels, I would say welcome to you for such an initiative’.

Parvez Ghias’s candid response to the queries intensified the author’s interest for knowing more about a car manufacturer’s commitment to the citizenship consideration through environment protection, traffic congestions and road safety. A date for IMCL’s visit was set on a request to Parvez Ghias, and the meeting became an informal discussion about things which were beyond the business that IMCL was undertaking.

IMCL

IMCL’s vision is to be the most respected and successful enterprise in terms of customer satisfaction and it aims to delight customers with a wide range of products and solutions in the automobile industry with the best people and technology. The Company aims to demonstrate responsible corporate conduct throughout the entire spectrum of its activities and operations. It ranges from providing safe products to voluntary support for a broad range of social activities with business connects. IMCL adheres to environmentally safe industrial practices and respecting workplace human rights, thus aligns its corporate activities with citizenship considerations (IMCL, 2012).

IMCL was incorporated in 1989 as a joint venture between the House of Habib, Toyota Motor Corporation and Toyota Tsusho Corporation of Japan. The Company manufactures and markets Toyota brand vehicles in Pakistan. The main product offerings include several variants of the flagship ‘Corolla’ in the passenger cars category, and ‘Hilux’ in the light commercial vehicles segment. The Company currently employs 2,000 persons with a market share of 23 per cent, with an annual turnover of about PKR 76 billion.

The manufacturing facilities and offices of IMCL spread over 100 acres at Port Qasim, Karachi, and its products are delivered to end customers through a strong network of 35 independent 3S Dealerships across the country. The Company has sold nearly 500,000 Complete Built Up/Complete Knock Down vehicles since its inception in Pakistan. It has demonstrated impressive performance, both in terms of volumetric increase and through the development of human talent embracing the ‘Toyota Way’ of quality and lean manufacturing. The Company’s modest beginning of 20 vehicles per day production in 1995 has increased to 220 units daily in 2012. Over the years, IMCL has made large scale investments for enhancing its capacity and in meeting customers’ requirement for new products. Today, Corolla is the largest selling automotive brand model in 1,300 cc and above category cars in Pakistan and it also has the distinction of being the largest seller among Toyota’s Asian market (IMCL, 2012).

The Company invests heavily in training of its over 2,000 workforce, creating a culture of high-performing teams which are dedicated to the continuous improvement in their respective areas. The core values of the Company encourage employees to pursue high standards of business ethics and safety. At the IMCL, the staff is encouraged to communicate candidly and to even share the bad news. Here, respect for people is at the core of the IMCL’s value. The bi-annual survey shows that there is a prevalence of high morale of employees, congenial work environment and job satisfaction at the Company.

The Company has played a major role in the development of the entire value chain of the local auto industry in the job creation and technology transfer to 60 auto parts’ vendors. IMCL is also a major contributor of taxes to the government exchequer, being one of the largest business entities in Pakistan.

CSR Theories and Approaches

Despite increasing popularity of the CSR concepts and practices, the subject is not without its critics. Noble Laureate Milton Friedman and his followers, though small in number, do not agree that a business has anything to do with CSR; rather they argue that the social responsibility of business is to increase its profits and pay taxes to the state for taking care of the society (Hartman, 2002). Though there are various approaches to explain CSR, all carry a thread that is giving back to society by the businesses. CSR is basically the employment of strategies by organizations that demonstrate their attachment to the community (Oliver, 1991). Commission of the European Communities (2006) defines CSR as is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. It is about enterprises deciding to go beyond minimum legal requirements and obligations stemming from collective agreements in order to address societal needs. Carroll (1999) is of the view that the social responsibility of a business spreads over the economic, legal, ethical and discretionary expectations a society has of organizations operating in an economy. Baker (2009) underscores the positive impact of a business on the society out of its processes. The World Business Council for Sustainable Development highlights the importance of CSR in the following words, ‘Corporate Social Responsibility is the continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large’ (WBCSD, 2009). In a nutshell, CSR is all about the ways of doing business which benefits the society in terms of its vibrancy and prosperity.

For the proponents of CSR, there are three approaches generally applied by the businesses. Oliver (1991) took lead in examining the three CSR strategies. The first is the ‘acquiescence’, for which a business organization accepts and acts in accordance to the community rules. In this case, a business firm helps the community to take care of their interests with no economic gain in return. The second strategy is ‘compromise’ in which the firm takes care of the community’s interest in expectation of the economic return. This is ‘cause’-related marketing in which contribution to community cause is linked to increased business activities. The third strategy is an ‘emblematic acceptance’ in which a business firm pretends of acquiescence by linking itself to a community cause, but not making any significant contribution to it. It was hypothesized that the type of strategy adopted by a business has a significant impact on a consumer’s evaluation of the business’ community attachment. As a result of the research undertaken by Oliver, the ‘acquiescence’ strategy was found to be the most effective, and the ‘symbolic acquiescence’ strategy was found to be least effective. Besides, in the same study, community attachment was checked with the type of CSR strategies employed by the type of businesses ownerships. It was found that large nonlocal businesses were regarded by consumers as economic-oriented and their operators were unaware of local issues (Brennan & Lundsten, 2000; Miller & Terry, 2000).

CSR at IMCL

The Corporate Planning Department is responsible for CSR activities at the IMCL. CSR is part of the IMCL philosophy of business. IMCL has been playing a role in helping the underprivileged communities living in the surroundings to meet their health and education challenges since the inception of the IMCL under the project ‘Concern Beyond Cars’. However, it is from the year 2006 that CSR got a central place among the IMCL’s activities with the provision of 1 per cent of profit before tax (PBT) annually. In the last 5 years, IMCL has contributed PKR 200 million in CSR activities. Besides, IMCL has been at the forefront on the call of the nation in need. It has been actively engaged in the relief efforts of rehabilitating the sufferers of the earth quake in 2005, those effected of the war on terror in 2007–2008, and to the survivors of the 2010–2011 floods that devastated the country.

As a signatory to UNGC, IMCL has successfully internalized 10 UNGC principles (Annexure 1). Accordingly, in recent years, IMCL has expanded its CSR activities for the benefits of the community at large for sustainable development. Hence, environment, traffic congestion and road safety have become important segments of its ‘Concern Beyond Car’ project since 2006. Environment protection measures have been at the core of the CSR activities undertaken in and outside the IMCL plant, since the very beginning. There are 21 listed activities of environmental protection which also include underground facility management, emission control and the protection of Naran and Saif-ul Muluk lakes ⁴ (Annexure 2).

Changing Paradigm of the Corporate Social Responsibility at IMCL

Parvez Ghias took charge as the CEO of IMCL in August 2005. He holds a degree in Chartered Accountancy (CA) and is a fellow of the Institute of Chartered Accountants, England and Wales. He also serves as an independent director on the board of Standard Chartered Bank (Pakistan) Limited and Dawood Hercules Corporation Limited.

Parvez Ghias’ years of experience at the business management level in Pakistan and abroad exposed him to the benefits of being socially beneficial. He strongly believes that corporate entities should responsibly invest in the communities where they operate and partner non-government organizations (NGOs) to leverage each other’s strengths. Ghias was also moved by the soaring figures of road accidents in Karachi. Besides, the frequent complaints for the road congestion in the city by friends, families and employees were also a matter of concern for him.

Initially, IMCL’s social development work mainly comprised supporting charitable organizations philanthropically, a one off call to help people in rehabilitation, affected by calamity, or undertaking environmental pollution, clean-up of lakes, for example, Saiful Muluk, etc. While, such a support still continues, a turning point in this reference was seen when Parvez Ghias took charge of IMCL as CEO, after which the Company started to look for sustainable solutions to the problems being faced by the people, especially in relation to the IMCL business. Ghias found that the annual allocation for charity and helping surrounding communities was about PKR 40 million, and most of it was being disbursed through various NGOs/community-based organizations. Ghias was happy that at IMCL, there was a strong consideration for the citizenship and giving back to society; however, he was not comfortable with the idea of just distributing money to address people’s temporary needs without the engagement of IMCL employees. According to him, the Company needed to allocate some portion of the annual corporate contribution towards finding sustainable solutions for segments of the society with maximum touch points. Hence, he further discussed the issue with his colleagues and other stakeholders and sought suggestions for utilization of the CSR funds keeping this strategy in mind.

Parvez Ghias started thinking the research projects on traffic accidents and road congestions, and alleviation of the environmental pollution through CSR projects. He was of the view that since motor vehicles were one of the sources of road congestions and also added to the pollution in the city, IMCL needed to find the remedial measures for the issues related to the IMCL business, directly or indirectly. The Company initially honed in on the Road Traffic Injury Research Project (RTIRP) in collaboration with the Jinnah Postgraduate Medical Centre, the NED Engineering University, and Aga Khan University Hospital to evaluate the nature, location, magnitude and major causes of traffic hazards in Karachi. Subsequently, a second project titled ‘Toyota Research on Traffic Congestion’ (T-RTC) was initiated with the assistance of the NED Engineering University to evaluate the economic cost of chaos on road. The projects’ details are given below.

Road Traffic Injury Research Project

Road safety continues to be one of most serious public health issues of the nation, affecting everyone—whether one drives, walks or cycles. Since Pakistan lacked researched information on road accidents, at this stage it was too early to ask the government for a road safety policy. So, in 2006, IMCL started the project with an objective to conduct a series of researches on road accidents, black spots and their causes in the city of Karachi, which could be used for policy making by the government at a later stage. By 2007, the project was mature enough to find the causes and problems of road conditions. As a result of this research project, Karachi’s road accident data of 5 years (2007–2011) were collected and managed in a presentable form. The eye opening result of this project was that the youngsters, under the age of 25 years, were the most vulnerable to road accidents. Besides, motorcyclists/pillion riders were also the prime susceptible segment of the motorists to road hazards. The project accumulated details of 163,105 accidents in a 5-year period.

In light of the researched findings, the RTIRC designed and operated awareness programmes of road accidents. The programme included ‘Road Safety Education and Concerts’ for children and youth in 80 schools and colleges reaching about 25,000 students, and ‘Road Safety Art Contests’ at various schools, road safety trainings to the traffic wardens in Lahore to help them in the implementation of road-related rules and regulations. The researched data on the road accidents were also shared with the management and boards of the corporate organizations. IMCL hosted the ‘1st National Road Safety Conference’ in 2007 which provided a forum to the stakeholders to discuss their challenges and suggest possible solutions to overcome those challenges. The Company decided to further strengthen this project at the national level. For this purpose, other multinational companies were also invited to join the project. Shell Pakistan joined the IMCL’s initiatives to upscale the project at the national level. In 2010, in collaboration with Shell Pakistan, IMCL hosted ‘2nd National Road Safety Conference’ on the theme of ‘Helmet for Motorcycle Users’.

Toyota Research on Traffic Congestions Project: Level b

The Toyota Research on Traffic Congestion project was the first of its kind in Pakistan, as the issue of traffic congestion critically affected the people belonging to all walks of life in the country. As a pilot project it dealt specifically with the traffic congestion caused on the section of the National Highway between the Jinnah Airport Star Gate and Steel Mills turn off. The issue of traffic congestion in Karachi is the worst among the developing countries. The Japan International Cooperation Agency (JICA) ⁵ (2006) study revealed that the traffic growth in Karachi was at a galloping pace, without having a matching infrastructure in the city. The seriousness of the issue, highlighted by JICA, demanded effective policies and strategies to overcome the problem. Abul Kalam, the Vice Chancellor of the NED University, in his keynote speech at the project launching ceremony in 2006, observed that there was no policy in place which could reduce traffic congestion to zero. According to him, appropriate analysis was needed for the evaluation of the congestion’s gravity in Karachi. Other experts highlighted the negative effects of the road congestions, such as wastage of time for motorists and passengers, and delays that result in fuel losses, late arrival of students, employees, and entrepreneurs which finally resulted in increased cost of production of goods and services and loss of businesses, etc.

The project was based on utilizing various techniques, such as extraction of traffic volume from video clips, traffic congestion index; scenario-based congestion, and cost estimation of congestions. The research was conducted on a scientific basis by following relevant international research standards. The project was to identify the bottlenecks that obstruct the smooth flow of traffic and assessing their impact in economic terms. Various authorities and departments, such as the Sindh Traffic Police, the National Highway Authority, the Government of Sindh, the City District Government Karachi, Port Qasim Authority, Pakistan Steel Mills, Landhi Association of Trade and Industry and Bin Qasim Association of Trade and Industry were invited to actively participate and support the project, as the findings of the research were to be shared with all the stakeholders.

Project Outcomes

As an outcome of the two above mentioned projects:

Sets of researched information regarding road congestions and road safety were shared with the stakeholders and concerned bodies.

Projects’ Success and Limitations

Since the projects are continuing, at this stage their partial success can be identified. Some of the successes of the projects can be mentioned, as the projects have achieved their short-term objectives for making the concerned bodies and target groups aware of the road conditions in Karachi. Due to this research, governments at the federal and provincial levels are now aware of the prevailing road conditions and road hazard issues in Karachi better than before. Based on the data, NGO’s operating ambulances have repositioned themselves to the vulnerable spots to be able to respond to accidents quickly, while hospitals are better equipped to deal with emergencies effectively. Pedestrian crossings and overhead bridges have been built at the appropriate places.

The work of RTIRP was acknowledged by national and international bodies. The project was taken over by the World Health Organization as a part of the United Nations Decade of Road Safety Reforms. IMCL won the prestigious Asian Institute of Management CSR Award in 2007 for its initiative to work on reducing road hazards. In view of the innovative business practices demonstrated by IMCL, its CEO Pervaiz Ghias was invited to join a team of international entrepreneurs and responsible business innovators as a key note speaker in the plenary session jointly hosted by the Global Compact Networks of Pakistan, Bangladesh, Vietnam and the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) at the RIO+ 20 Corporate Sustainability Forum ⁵ of the UNGC in Rio de Janeiro Brazil on 17 June 2012. Encouraged by the advantages and appreciation by the international bodies for providing the basis of policy formulation on minimizing the road accidents, IMCL is now partnering with NED Engineering University to undertake another research project to evaluate the economic cost of road congestions.

Though the research projects have been appreciated locally and at the international levels, the purpose of these projects can be achieved if their outputs are applied for the policy making by the government. Hence, Parvez Ghias and his team have a challenge ahead, for providing the research exercises further with the advocacy and lobbying with the governments and with other road authorities. Will Ghias and his team go further to get a policy developed and implemented by the governments (Federal and Provincial) in future? Research projects like RTIRP and T-RTC can really be effective, if the question is answered meaningfully by the CSR team of the IMCL.

Annexure 1

Annexure 2