Abstract
The case revolves around the management-labour union relationship in Hinopak Motors, the manufacturer of world renowned Hino diesel trucks and buses in Pakistan. Following UN Global Compact (UNGC) framework; Hinopak is committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, the environment and anti-corruption. The process of implementation of UNGC framework started in 2010. It was expected to not only address labour rights issues, but also to take care of the human rights, transparency in businesses and strive for viable work environment at the company. After six years of continuous efforts Hinopak achieved the obvious outcome in terms of congenial work environment but faced pressure on the financials of the firm. The Hinopak management team wonders can a business in Pakistan grow and flourish even after spending on CSR as per the guidelines of UNGC principles.
Introduction
As a researcher and a case writer, the author of this case has always been in search of unusual experiences, practices and gestures at the workplace which may add new dimensions to the business studies. In this pursuit, the author was having an informal chat with Mr Muhammad Akram the General Manager Human Resource (GM-HR) of Hinopak, Pakistan. The central point of discussion was the relationship of the company’s management with the collective bargaining agent (CBA)—commonly known as labour union—and particularly work environment at Hinopak. Passing through the peripheral part of discussion and reaching the core, that is, Management-CBA relationship at Hinopak, the GM remarked that ‘we are fortunate as we have pleasant history of Management-CBA relationships here’. He further added, ‘not only labor rights but also we take care of the human rights, transparency in businesses and strive for viable work environment at the company following the guideline of UNGC principles’ (United Nations Global Compact, 2017). He continued, ‘despite the obvious outcome of UNGC principles i.e. a congenial work environment, the financials of the company is a little bit bumpy, though not bad’. The statement of the GM aroused interest of the author, as such institutions are rare in Pakistani industrial context. Hence, the statement became the inspiration for going deep into the Hinopak’s corporate work environment and corporate social responsibility (CSR) practices in the line of UNGC principles and its impacts on the company’s performance.
The bumpy financial performance as indicated by the GM provided a lead to the author of this case to explore the issue with the top management. On deep digging, it was found that the top management is debating the following issues:
How UNGC principles are effecting the work environment and financials of the company? Can a business grow and flourish even by spending on CSR based on the UNGC principles in the developing countries, particularly in Pakistan? Can a business afford to live in line of the UNGC principles?
Difference of Opinion
The GM-HR got to manage the membership of UNGC, Pakistan, in 2010 and started implementation of its principles despite resistance from some of his colleagues in top tier at Hinopak. However, he enjoyed the support of lower cadre of employees and CBA. There was a debate among the top management over the cost of that implementation of UNGC principles. There were three different views regarding the CSR practices of Hinopak based on UNGC principles. One of those opinions was that in Pakistan like developing countries, UNGC principles is not feasible as it will further increase the expenses culminating into increased cost of production. Another opinion was that creating a congenial work environment by implementing these principles would lead to employee motivation and job satisfaction, which will increase labour productivity ultimately. The third view was that we are already practicing CSR and operating in line with the state law of industrial relations, which is Industrial Relations Act 2010.
Above debates’ answers are reflected under the headings, particularly ‘Living in Line with the UNGC Principles’ and ‘Financial Performance of Hinopak’ mentioned in the latter part of this case.
The Company
Hino Motors Japan and Toyota Tsusho Corporation in collaboration with Al-Futtaim Group of UAE and PACO formed Hinopak Motors Limited in 1986. In 1998, Hino Motors Ltd and Toyota Tsusho Corporation obtained majority shareholding in the company after disinvestments by the two founding sponsors. Hinopak Motors Limited assembles, manufactures and markets world-renowned Hino diesel trucks and buses in Pakistan. The company has a mission to provide its customer with safe, economical, comfortable and environment friendly means of transportation through commercial vehicles. The company is holding continuously top position in the Pakistani market for medium and heavy-duty vehicles for 17 years and is known for quality excellence. Backed by Hino’s expertise, Hinopak has achieved standard of quality that rivals the best in the region. Hinopak’s product range has been designed and built in Hino’s traditions of automotive excellence to be the leader in its category with over 60,000 vehicles on the roads of Pakistan. The main emphasis of Hinopak is to passengers’ safety and comfort in its all products. Hinopak is the trusted market leader with over 65 per cent market share in the Pakistani truck and bus industry and it is a vital contributor in saving of foreign exchange for the country.
Support, Network and Excellence
Hinopak has wide support network, ranging from leading brands in the automobile industry to the community affiliations in Pakistan. The two world-renowned auto companies, Toyota Tsusho Corporation and Hino Japan, provide valuable impetus to its marketing. Hinopak reaches its customers with 31 registered Hino dealers all over the country. Hinopak is the first in commercial vehicles sector to start the establishment of 3S dealership network, which offers sales, services and spare parts facilities under one roof. This comprehensive network of offices, 3S services’ dealers and spare parts dealers are strategically located throughout the country. Hinopak maintains a fleet of mobile workshops, which provide prompt and efficient back-up services to Hino consumers even at remote locations. It maintains an inventory at its own warehouses to ensure that genuine spare parts are readily available throughout the country. Hinopak has established a state-of-the-art product support centre, which is largest of its kind in the country. Hinopak is the first Pakistani automobile company that:
Received ISO-9001 and ISO-14000 certificates; Exports buses to Asian and African countries; Is recipient of ‘Quality Excellence Awards’; Introduced ‘3S’ concept in heavy-duty commercial vehicles market; Is recipient of Employers’ Federation of Pakistan’s ‘Golden Jubilee’ award for human resource and industrial relations, and ‘Excellence in Productivity’ award; Is recipient of ‘Corporate Excellence Award’ from Management Association of Pakistan.
Living in Line with the UNGC Principles
HINOPAK has outlined its values by identifying company’s name in acronym by using alphabets symbolic of different aspects of values as H: Honesty at all cost and in all spheres of business; I: Integrity—We do what we say at personal and corporate levels; N: Non-bureaucratic—pragmatic in systems and processes; O: Openness to customers, markets and criticism; P: Purpose oriented always keeping the end in mind; A: Altruism—fostering healthy relationship with society and environment; and K: Kaizen—continuous improvement. Hinopak’s corporate philosophy is to develop prosperous society around its sets of values which has been articulated as ‘contribution to the development of a more prosperous and comfortable society by providing the world with a new set of values’ (Hinopak, 2011, p. 6). The company has been translating its corporate philosophy into reality by undertaking socially responsible business practices. Hinopak actively promotes the dignity of human being, labours well-being, environment protection and curbs corruption in its operations and management—the four areas of CSR, which are at the core of the UNGC principles (Annexure I).
Principles in Practice
For promoting human rights, Hinopak is committed to respect and to protect the dignity of people in its areas of operations. Communication on Progress (COP) 2013 report (Hinopak, 2013), sent to the UNGC by Hinopak, assures it stakeholders of sincere efforts to further improve the health and safety for the people who work at the company, sound labour-management relations and its contribution to human resource/community development. It mentions, ‘Hinopak is committed to avoiding complicity of human rights abuses in all its areas of operations.’ It further maintains that the company upholds freedom of association and the right of workers to collective bargaining (Hinopak, 2013). Hinopak is committed to the elimination of all forms of forced or compulsory labour in all areas of its own operations or at the end of business partners’ operations. The children’s engagement in all areas of Hinopak and partners’ business operations is prohibited as per the report. It prohibits any form of discrimination in employment terms and conditions (Hinopak, 2011). Guided by Hinopak’s mission and social responsibility principles, the company is promoting environmentally responsible thinking marked by sincere demonstration of better environment and friendly practices. For this purpose, the company uses environment friendly technologies that reduce negative impacts on the environment from its operations and products. Hence, company ensures effective environment risk management and compliance across all over business activities, from product design/development to product sale. Hinopak is committed to continue with ‘no-tolerance’ policy to any corrupt practices at the company and at the end of its partners and vendors. In the proceeding paragraphs, the major principles are being examined with the actions taken at Hinopak below (Hinopak, 2013).
Human Rights Protection
As mentioned above, UNGC classifies Human Rights Protection under three broad areas:
Protection of internationally proclaimed human rights
Internationally proclaimed human rights include, safety and security, health and fitness, as well as education and development.
Safety and security
Hinopak ensures safety and security of staff integrated with health, safety and environment (HSE) concept. The HSE department is regularly visited by the HSE committee led by the GMs. The director production conducts periodic HSE meetings to reinforce safe practices at the workplace. The committee also ensures that there must be personal protective equipment (PPE) available for all persons entering the plants. To promote the safe practices, training and counselling sessions are conducted with the employees, and if needed, warnings given for noncompliance. Further to ensure ‘zero accident’ policy, internal and external safety audits are conducted regularly. On the recommendations of the internal/external audit, corrective measures are taken quickly. Routine checks of fire/safety exits are done to ensure safe exits/evacuation by at the time of emergency. Besides the above workplace safety measures, a security and communication team and systems are in place to handle emergency situations.
The result of the ‘zero accident’ policy is bearing fruits and has brought down the company’s PPE noncompliance to negligible at both the plants. Effective safety programmes/initiatives have brought down the rate for major and minor accidents. As compared to 2009’s major (7) and minor (1) accidents, the company recorded no major and (1) minor accident since June 2010 till this date.
Health and fitness
Health and fitness programme includes games, tournaments and other recreational activities which are the regular activities at Hinopak. Cricket, arm wrestling, tug of war, badminton, volleyball, etc., for men, and for women staffs, miscellaneous sports and recreational activities, such as cooking competition, badminton, racing and tug of war, are being organized for the last 5 years. A good number of staff participate in these sports from the cross-functional areas. Besides, daily morning exercise is participated in not just by employees but by transient stakeholders/visitors also join Hinopak staffs in the morning exercise. To discourage smoking, most of the Hinopak factory areas have been declared non-smoking zone. However, limited areas on each plant have been designated for the smokers. The popularity of Hinopak’s health and fitness programme can be gauged by the fact that health awareness activities are being attended by estimated 1300 people (including employees and contractors’ staff) from June 2010 to date (Hinopak, 2011).
Education and development
Hinopak proactively pursues the education and developmental goals set at the national and international levels. As discussed above, the company has adopted a public school in August 2008 and named it SITE Model School in SITE area, near its plant in Karachi, where underprivileged community’s 846 children are getting primary and secondary education. Hinopak added a registered technical wing to SITE Model School in August 2009 just after a year of taking it over. First batch of Technical School Certificate-Part II (TSC-Part II) students will complete their certificates soon. Presently, students enrolled in the TSC programme are 50. New in-take for the 3-year apprenticeship programme saw induction of 34 apprentices in April 2011. Besides the new induction, 17 apprentices of the graduating batch were absorbed in the company’s workforce. Besides, for further support to the workers’ children, scholarship and books are provided. Management’s children are encouraged for education by awarding them ‘Academic Achievement Award’. Hinopak is continuously giving Hinopak Skill Promotion Scholarship to 10 students of Pakistan’s renowned engineering school with a purpose to develop quality human resource in the field of auto industry. The same objective is also achieved by providing internship opportunities to 100 students every year in June (summer) and December (winter) seasons.
Protection from human rights abuse
Hinopak strictly follows the Standing Orders (Ordinance) 1968 of Pakistan and the Japanese Sarbanes-Oxley Act 2002 (J-SOX) to protect labour’s rights and to prevent their abuses. For the second consecutive year running, the J-SOX audit was conducted to check strict adherence to the code of conduct. Besides, Hinopak’s codes of conducts to prevent labour’s abuses are updated to make the codes simpler for employee’s clarity.
Hinopak is an equal opportunity provider to all in all aspects of employment including training, promotion and other benefits. Female engineers can be found at our plant, which is a rare phenomenon in Pakistani culture. Female interns are also placed on shop floor in both the plants. For the gender equality and to prevent the sexual harassment, the company is seriously considering to implement the policy ‘Protection Against Harassment of Women at Workplace Act 2010’, which has already been developed by the Employers Federation of Pakistan in collaboration with the International Labour Organization (ILO).
Freedom of association and collective bargaining
Hinopak is very much in compliance with the Industrial Relations Act 2010 (IRA 2010) and has allowed employees to join any trade union of their choice. Here, the workers are represented by a registered Labor Union. Hinopak Motors Employees Union is existing since the company’s pre-Japanese ownership from 1969. The last election of the union was held on 31 May 2010, with the required support of management. As required by the IRA 2010, five Worker-Management Participation Committees, which include the CBA to address the issues pertinent to workers’ terms of employment, work conditions, etc.
The twelfth collective bargaining agreement was successfully signed in February 2010, enhancing workers’ benefits and promising cooperation from them in terms of productivity, quality, housekeeping, etc. The same is continued till this date.
Industrial relations are periodically monitored through the ‘Industrial Relations Committee’ which is chaired by GM-HR, admin and HSE and participated by CBA’s general secretary and president, and the HR and ER managers.
Labours’ Rights
Labour rights protection at Hinopak can be seen in two contexts: (i) in the context of industrial relations and (ii) staffs capacity building which is also human resource development for the company. The two are being discussed under separate headings below.
Industrial relations
Though the concern for labour rights at Hinopak has been already covered under the heading ‘Freedom of association and collective bargaining’, in the proceeding paragraphs, some concrete steps taken by the management to protect labour rights are worth mentioning here. As mentioned above, the majority shareholding in the company Al-Futtaim of Dubai, Hino Motors Limited and Toyota Tsusho Corporation of Japan formed Hinopak Motors Ltd in 1986. Before taking over by the three companies as a joint venture with the Government of Pakistan, Hinopak, which was previously known as Republic Motors, was controlled by the PACO—a government body. As a result, there was a culture of public sector where union was very strong and the labourers had inflexible attitude and any new investor was scared of the prevailing discouraging environment within a public sector company.
As soon as the new company commenced its business on 1 February 1986, it interacted with the trade union of the workers and mutually agreed to base their industrial relations foundation on the following four principles:
No interference in each other areas of work Respect for each other Transparency in the business Resolution of issues through dialogue
Accordingly, CBA’s demand for increase in salary was accepted by the management and due to this policy; labour’s productivity increased and Hinopak performed better than the previous years (Financial Statement, Annexure II).
Human resource development (HRD)
Though human resource development has always been a priority for Hinopak even before the privatization of the company, the HRD really started in 1998 when management decided to explore opportunities for training and development of the employees. The HR department focused on the following areas of HR:
On-Job-Training in Japan Succession Planning Education and Training Improving the Work Condition
The above activities are being discussed separately under the proceeding paragraphs.
On-job-training in Japan
In the late 1980s, Japanese auto companies were looking for the skilled and unskilled workers due to the expansion in these industries. The management of Hinopak found this as an opportunity for the human resource development of the company. Hence, Mr Fasih-ul Karim Siddique, the then General Manager HR, initiated a note to the then Managing Director for sending 20 batches of 20 workers each to Japan over the period of 4 years on-job-training at Hino Motors Japan and Toyota Tsusho Corporation. The proposal was approved and over the period of 4 years from 1988 to 1992 about 400 Hinopak workers (75 per cent of the total work-force of Hinopak) got the opportunity to work and learn on payment of moderate stipend by the sponsoring companies and on paid official leave by Hinopak. This new concept of on-job-training was an enriching experience for the workers and a productive human resource development programme for the company.
Succession planning
In order to find the hidden talent within the organization and to prepare future leadership, Hinopak started ‘Executive Development Program’. Under this programme, in the month of Ramadan in 2002, all the executives were encouraged to give presentation on their own functional areas for improvement which ultimately have positive effect on Hinopak’s growth and development. This programme turned out to be very successful which provided leadership to the company at all levels and upward movement of the existing employees became easy. As a result, out of 14 DGMs, 12 were promoted at this level from the ranks, and only two were hired from outside the company till 30 June 2012 (M. Akram, Personal Communication, 14 July 2012).
Education and training
When Hinopak chalked out a plan for educating and training their employees, the continuing education programme was started by the company. Engineers were encouraged to enhance their professional portfolios by acquiring business management degrees. Under this programme, 26 Hinopak engineers were granted paid leave and educational expenses by the company. However, there was a fear that the engineers, who will get higher qualification or other professional degrees, might not come back and leave the company as they would get better opportunities somewhere else. The management debated these higher education facilities for the young engineers. There was one opinion that it would be a loss of the company as more educated engineers will not come back and the amount spent on them for their education would go waste. While the other opinion was that first of all the majority of the better-qualified officers would come back, even they do not the better qualified human resource would remain part of the auto industry. Even in this case, Hinopak will be the indirect beneficiary as the auto industry needs more trained human resource. The result of this programme does not show high turnover, though some of them left the company.
Improving the work condition
To further improve the physical environment of the company, the CBA office bearers were involved in housekeeping. The CBA office bearers, most of the time, used to complain about the physical setting of the work, when got the responsibilities of keeping things in order, they took keen interest and improved the working conditions in real sense. The responsibilities assigned to the CBA further strengthened the CBA-management relationship and enhanced the ownership of the organization to the workers.
Environment Protection
At Hinopak, environmental concerns are addressed under the five sub-headings which are as follows.
Environmental management system (EMS)
As a responsible corporate company, Hinopak has adopted ISO 14001 standard to ensure effective environmental risk management and compliance across all its business activities ranging from designing to product sale. Specific EMS requirements for each of the various business activities are set for effective and efficient performance. These requirements include adoption of Hino Japan Environmental Charter, implementing SMART objectives, promotion of environmental action plans and commitment to facing environmental challenges resulting from changing business activities.
Environmental education
Hinopak ensures that the personnel’s work has the significant positive environmental impacts. For the purpose, appropriate education and training are given to them. This includes also those personnel working as suppliers and contractors to Hinopak. Approximately 80 new employees including workers were given orientation on environment management systems (EMS). This year, orientation was also organized for incoming senior management employees.
Promoting environmental audit
Environmental audits are conducted at Hinopak on biannual basis to ensure that HPML environmental management system confirm to the requirements of ISO 14001 standard and improvements have been made to this system where necessary. Through these audits, Hinopak identifies the areas where there is a room for improvements and take corrective action accordingly. Qualified lead auditors and seven internal auditors who, apart from their regular job, participate in audit execution as and when required. In 2008, two internal audits were conducted, in which altogether 21 minor NCRs and observations were highlighted. No major NCR was raised.
Reducing environmental risks
We have a well-defined emergency, preparedness and response management system to identify and reduce risks associated with emergency situations. The main scope of the plan is to minimize injuries to personnel, protect the environment and prevent damage to company assets. Emergency response plan (ERP) has been developed to respond to emergencies such as fires, smoke, explosions, spills (raw materials and products) and medical emergencies. Different teams are also formulated such as fire-fighting team, spill control team, medical team and security and communication team. The ERP trainings are organized for all employees and for the contractors working in HPML premises.
Environmental initiatives in 2010–2011
World Environment day was celebrated at Hinopak with great zeal and enthusiasm on 5 June 2011 in collaboration with Total Atlas Lubricants Pakistan Pvt. Ltd. This day is being celebrated by Hinopak for the past several years nationwide by holding Free Tune up Camps, Tree plantation and School’s Children projects exhibition on various environmental aspects. This year, three schools participated with a total of 200 students and teachers in Hinopak’s tree plantation campaign. Following specific activities were undertaken:
Tree Plantation Activity Awareness Program on Marine Environment for the Students of SITE Model School Installation of Garbage Disposal Drums at Green Turtle Breeding areas at Karachi beach Beach Cleaning Activity of the company’s employees (phase I) Activity at Sands Bit Beach (phase II)
Anti-corruption
Hinopak strongly believes in transparency in all its conducts. For the purpose, it incorporates the concepts of ethical practices and anti-corruption policies in the training and in its orientation programmes for the employees. Hinopak has constituted various committees to propagate and oversee the functions with reference to the fair and transparency in its operations. One such committee is The Whistle Blowing Committee (WBC). The WBC meets quarterly as minimum requirement and monthly as desirable. ‘Trust’ invoked twice in the Hino Credo containing overall company mission, core principles and CSR Charter, where complying with laws and regulations and maintaining high ethical standards were a major focus. Hino Spirit Principles on ‘Sincerity, the Value of Integrity’ contains guidelines that employees follow in respect of anti-corruption.
Internal and external control
Internal Control Framework guides Hinopak in following the J-SOX (Japan’s version of Sarbanes-Oxley Act). Five internal audits were conducted within the period from June 2010 to May 2011, and two external audits were conducted in October 2010 and March 2011. Internal controls/value additions were provided in the following areas: rules for dealer incentive calculation, rules for advertising and sales promo activities, online stationery issuance processing and financial reporting.
An independent audit committee ensures monitoring of compliance activities. All three members of the committee are non-executive directors. At the same time, external auditors publicly attest Hinopak’s financial reporting integrity as contained in the annual reports:
Corporate governance complaints Companies Ordinance 1984 and other taxation laws Stock exchange regulations
International standards
J-SOX complaints
International Accounting Standards
International Financial Reporting Standards
HR and other processes improvement
HR processes, such as payroll, leave application and attendance management, were automated to ensure data integrity and avoid manual errors/tampering.
Recruitment and hiring policy is very vocal on transparency and merit; multiple assessments ensured all hiring were done objectively.
Proposals/quotations from multiple vendors/suppliers sought, reviewed and seen by multiple Hinopak personnel before approval.
Financial Performance of Hinopak
Hinopak moved forward integrating the UNGC principles in its corporate culture and among its other CSR and UNGC initiatives; its overall performance has improved. In this context, an analysis of company’s 6 years financial results after it embraced the UNGC Principles in the year 2005 presents a revealing picture in Table 1 and subsequent graphs.
The last 6 years’ sales figure of the company shows a consistent growth with a moderate start of 4 per cent in 2006 and substantial increase by 20 per cent, 90 per cent, 74 per cent, 45 per cent and 38 per cent in the years 2007, 2008, 2009, 2010 and 2011/2012, respectively, in comparison to the year 2005 as a base year.
The trend in production of trucks (in units) as compared with the year 2005 shows a growth of 14 per cent, 30 per cent, 50 per cent and 13 per cent in the years 2006, 2007, 2008 and 2009, respectively, with a decline of 13 per cent in 2010 and 48 per cent in 2011/2012, respectively.
Similarly, the trend in production of buses (in units) compared with the year 2005 shows a growth of 26 per cent, 136 per cent, 205 per cent and 59 per cent in the years 2006, 2007, 2008, 2009 and 2010 with a decline of 32 per cent in 2010 and again an increase of 44 per cent in the year 2011/2012.
With an increase in sales and production, the company witnessed (Table 2) an increase in profits as compared to the year 2005 by 34 per cent and 137 per cent in the years 2006 and 2007. Interestingly, while the company’s sales in the years 2008–2009 and 2009–2010 went up by 90 per cent and 74 per cent, truck production went up by 56 per cent and 13 per cent, and bus production went up by 205 per cent and 59 per cent as compared to the corresponding figures of the year 2005. The company after increase of 34 per cent and 137 per cent in profit in 2006 and 2007 as compared to 2005 made 70 per cent less profit in 2008–2009 and registered a loss of 113 per cent in 2009–2010, and again 89 per cent and 55 per cent less profit, respectively, in 2010–2011 and 2011–2012, respectively.
Hinopak’s 6 Years’ Performance
In financial terms, however, the company continued to make net profit after tax in successive years of 2005, 2006, 2007 and 2008, whereas the company incurred a net loss of ₹130 million in the year 2009 and thereafter earned a modest profit of ₹40 million and ₹173 million in the years 2010–2011 and 2011–2012, respectively.
Conclusion
Conclusion is being presented with the answers to the questions raised at the start. The performance of Hinopak after signing the UNGC and practicing its principles provides the answers to the basic questions raised at the start of this case as follows:
How UNGC principles are effecting the work environment and financials of the company? Can a business grow and flourish even by spending on CSR based on the UNGC principles in the developing countries, particularly in Pakistan? Can a business afford to live in line of the UNGC principles?
Financial Highlights
The answers to the three questions are ‘yes’ practicing the UNGC principles helps improve the performances of businesses at both the financial and strategic front. Labour-management relations at Hinopak are exemplary—this harmonious relationship is based on mutual trust, respect and transparency. No strike, cessation in work or loss of work hours due to strike or lockout in Hinopak’s history have been recorded. Workers’ active engagement in company affairs/operations has resulted in increased productivity and raised morale. As commented by Mr Siddique Baloch, President of Hinopak employees union ‘here, employees have corporate work environment with mutual trust; respect for fundamental human rights and opportunities for their professional development’. They are proud of being a member of the ‘Hinopak Family’. He further added ‘We feel Hinopak is our second home and we work in a family setting’ (S. Baloch, Personal Communication, 1 August 2012).
‘Shareholders are getting a meaningful financial return and the community at large is benefitting from the economic and social development by the modest means of transportation in terms of employment and social investments’ (F. K. Siddiqui, Personal Communication, 11 July 2010). The managing director of the company endorses the Hinopak management’s commitment to the UNGC 10 principles by saying ‘it strives to increase our sphere of influence beyond the company by including all other stakeholders and ensure greater positive impact’ (Hinopak, 2011).
Despite the company has been passing through ups and downs in terms of revenues and profit in the last 6 years, it has consistently increased employee productivity and improved performance in product quality and company image. The financial loss mentioned in the year 2009 is mainly due to the rising value of the foreign currencies (yen and USD in this case) and the falling value of Pakistani rupee resulting in heavy exchange losses. This has been further aggravated by the slowing economic growth, power cuts, double digit inflation, natural calamities and man-made commotions in the last 4 years. What is important, however, is that the driving force behind the company’s sustained performance is reflected by its consistent increase in sales, production and employee productivity since 2005. ‘These encouraging signals are the reflections of Hinopak’s commitment to Global Compact Principles and it’s CSR oriented Social Sustainability programs’ (F. K. Siddiqui, Personal Communication, 13 December 2012).
Footnotes
UNGC Principles: Dimensions and Objectives
The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with its above-mentioned 10 universally accepted principles. By doing so, business, as a primary driver of globalization, can help ensure that markets, commerce, technology and finance advance in ways that benefit economies and societies everywhere.
As social political and economic challenges (and opportunities) affect businesses everywhere more than ever before, many companies recognize the need to collaborate and partner with governments, civil society, labour and the United Nations. This ever-increasing understanding of the challenges is reflected in the Global Compact’s rapid growth. With over 8700 corporate participants and other stakeholders from over 130 countries, it is the largest voluntary corporate responsibility initiative in the world.
Endorsed by the Secretary General United Nations, the Global Compact is a practical framework for the development, implementation and disclosure of sustainability policies and practices, offering participants a wide spectrum of work streams, management tools and resources—all designed to help advance sustainable business models and markets. Overall, the Global Compact pursues two complementary objectives:
Mainstream the 10 principles in business activities around the world Catalyse actions in support of broader UN goals, including the millennium development goals (MDGs)
With these objectives, the Global Compact has shaped an initiative that provides collaborative solutions to the most fundamental challenges facing both business and society. The initiative seeks to combine the best properties of the UN, such as moral authority and convening power, with the private sector’s solution-finding strengths, and the expertise and capacities of a range of key stakeholders. The Global Compact is global and local; private and public; and voluntary yet accountable. The benefits of engagement with the UNGC include the following:
Adopting an established and globally recognized policy framework for development, implementation and disclosure of environmental, social and governance policies and practices. Sharing best and emerging practices to advance practical solutions and strategies to common challenges. Advancing sustainability solutions in partnership with a range of stakeholders, including UN agencies, governments, civil society, labour and other non-business interests. Linking business units and subsidiaries across the value chain with the Global Compact’s Local Networks around the world—many of these in developing and emerging markets. Accessing the United Nations’ extensive knowledge of and experience with sustainability and development issues. Utilizing UN Global Compact management tools and resources, and opportunities to engage in specialized work streams in the environmental, social and governance realms.
Finally, the Global Compact incorporates a transparency and accountability policy known as the COP. The annual posting of a COP is an important demonstration of a participant’s commitment to the UN Global Compact and its principles. Participating companies are required to follow this policy, as a commitment to transparency and disclosure is critical to the success of the initiative. Failure to communicate will result in a change in participant status and possible expulsion.
In summary, the Global Compact exists to assist the private sector in the management of increasingly complex risks and opportunities in the environmental, social and governance realms, seeking to embed markets and societies with universal principles and values for the benefit of all.
Acknowledgements
This case is sponsored by the United Nations Global Compact Pakistan Local Network. The UN Global Compact is a framework for businesses that are committed to aligning their operations and strategies with 10 universally accepted principles in the areas of human rights, labour, the environment and anti-corruption. Launched in 2000, the UN Global Compact is the largest corporate citizenship initiative in the world. More than 5200 companies from 130 countries, as well as 700 civil society and international labour organizations, are engaged in the initiative and are working to promote responsible corporate citizenship. Web site: