Professional Documents
Culture Documents
Report On
Corporate Social Responsibility in
Pharmaceutical Industry India
Submitted In Partial Fulfillment of the Requirements
For The Bachelor degree of commerce
(2015-2016)
(Calcutta University )
By
Punam Kedia
Roll No. ---------Bcom Final year
Project Guide
DECLARATION
I hereby declare that this report is original based on my own work and that this
Report or any part thereof has not been submitted by me for any other degree or
course requirement. All references have been duly acknowledged.
Signature of student
PREFACE
The conceptual knowledge acquired by management students is best manifested in the projects.
As a part of curriculum of Bcom third year, I have got a chance to prepare a report on corporate
social responsibility in Pharmaceutical industry India. The present project gives a perfect vent
to my understanding of the Human Resource specially the most modern concept of CSR and
Community Relations.
The project report entitled Corporate Social Responsibility in Pharmaceutical industry
India.
The report will provide all the information regarding the CSR policies & practices in
Pharmaceutical industry India and their importance in Organization.
I also hope that this report will be beneficial for my next batches and for those who are related to
this topic.
ACKNOWLEDGEMENT
On the very outset of this report, I would like to extend my sincere & heartfelt obligation towards all the
people who have helped me in this work. Without their active guidance, help, cooperation &
encouragement, I would not have made headway in the project.
I am extremely thankful and pay my gratitude to my faculty guide ----------------- for her valuable
guidance and support for completion of this project.
Any omission in this brief acknowledgement does not mean lack of gratitude.
Thanking You
Punam Kedia
1. Introduction
Indian corporations, like those in other countries, have had a long tradition of being engaged in
social activities that have gone beyond meeting a corporations immediate financial objectives.
However, since the late nineties, CSR activities have increasingly come under the lens both of
policy makers as well as of corporations stakeholders as governance issues acquired increasing
prominence. At the policy level, the formal focus on CSR started in India with the issuance of the
Corporate Social Responsibility Voluntary Guidelines in 2009 by the Ministry of Corporate
Affairs (MCA, 2009) that culminated in the enactment of Section 135 of the Companies Act 2013
(MCA, 2013) making CSR spending as well as CSR disclosure mandatory for specific types of
companies. Significantly while CSR issues have been gaining in prominence across countries,
India became the first country, and at the time this article is written, the only country to have
made CSR activity mandatory for large and profitable companies incorporated into law. In all
other countries CSR efforts by corporations have been kept largely voluntary, with only a select
number of countries mandating corporations to disclose such activities.
et al. (2006) rightly observe that CSR continues to be a fertile ground for theory development
and empirical analysis (McWilliams et al. 2006, p. 2). In general, therefore, CSR relates to those
responsibilities of corporate operations that go beyond the financial aspects of its performance.
Classic management and economic theories have tended to adopt a functionalist viewpoint
toward business and capitalism.
The definition of CSR has evolved over the years. A sample of such definitions found in the
academic literature and those advocated by international agencies are provided in Box 1.
Country-specific perspectives on CSR including India are provided in Box 2. As is evident from
the two Boxes, CSR has been conceptualized in terms of a wide range of corporate behavior,
starting at one extreme with the maximization of shareholder profits within the rules of the game
(Friedman, 1970) to the other extreme of an all-encompassing objective of balancing economic,
social and environmental objectives to serve shareholder and stakeholder interests as defined by
UNIDO, World Bank and the World Business Council for Sustainable Development (WBCSD).
The notion of CSR in-built in most of these definitions is that CSR is essentially a voluntary
activity that serves as a bridge between the corporation and the society, with the goal of the
corporation re-defined from maximising only shareholder interests (the shareholder primacy
view) to the interests of all its stakeholders.
Then again, the ideas of business entities social sensibility and good citizenship are hardly novel,
and can be traced back a long way. As the following discussion on earlier literature demonstrates,
the mainstream concepts of corporate social responsibility and sustainable development
essentially convey the same message as sustainability, and academics frequently use them
synonymously with (corporate) sustainability.
Social concerns began to infiltrate management education after the Second World War, with
social responsibility first emerging as an academic topic in the 1950s. Bowen (1953) was a
pioneer in delineating the social responsibilities of businessmen, stating that corporate social
responsibility refers to the obligations of businessmen to pursue those policies, to make those
decisions or to follow those lines of action which are desirable in terms of the objectives and
values of our society (Bowen 1953, p. 6). This was a landmark initiative to define the concept,
and earned Bowen the designation Father of corporate social responsibility (cf. Carroll 1999, p.
270). Among the notable contributors to the literature in the 1960s are Davis (1960), Frederick
(1960) and McGuire (1963). Davis argued in favor of social responsibility from a managerial
viewpoint, and stated that it referred to those decisions and actions of managers that were taken
for reasons at least partially beyond the firms direct economic and technical interest (Davis
1960, p. 70). Frederick viewed the concept from a stakeholder perspective, and held that
businessmen should oversee the operation of an economic system that fulfills the
expectations of the public (Frederick 1960, p.60). McGuire (1963) drew a more succinct
definition by asserting that businesses must accept a social responsibility that extends beyond
economic and legal obligations. In this period, the publication of Rachel Carsons landmark book
Silent Spring in 1962 launched the worldwide environmental movement in the wake of
environmental disasters brought on by corporate negligence and ignorance in the U.S. (Carson
1962). Inspired by the mass social movements of the 1960s in Europe and America, public
acceptance of companies social responsibilities also began to gain ground.
Profuse theorization on and conceptualization of companies social responsibilities emerged from
scholars in the fields of sociology, management and business ethics in the 1970s (cf. Carroll
1979, Ackermann and Bauer 1976, Davis 1973, Johnson 1971). Similar to Frederick (1960),
Johnson (1971) also held a stakeholder view and considered managers corporate social
responsibility as utility maximization, rather than profit. Carrolls (1979) CSR model proved to
be immensely popular, and has been cited widely. He conceptualized four hierarchical but
mutually inclusive responsibilities for a corporation: economic (to be profitable), legal
(regulation-compliant), ethical (acting in a righteous and fair manner) and philanthropic
(contributing to a broader civic society for educational, cultural or recreational purposes).
Building on Carrolls work, Wartick and Cochran (1985) ventured to formulate a general model
for corporate social performance (CSP).
Eventually, the 1980s and 1990s saw the concept of corporate social responsibility evolve
theoretically and receive much empirical attention (cf. Wood 1991), and complemented the
growing trend of theoretical focus on the environmental dimension. 1999 saw the publication of
Natural Capitalism, espousing for the first time that companies can combine positive financial
results with pollution reduction, if they rethink certain operating procedures and use of materials
(cf. Hawken et al. 1999). This book popularized the idea of natural capital and challenged the
conventional notions of accounting that cataloged environmental impacts of a firm as
externalities. The natural capitalism theory focused heavily on resource efficiency, and advocated
ways to exploit the market systems for environmental advantages.
On a more inclusive level, Freeman (1984) formulated the stakeholder theory, which proposed
that the firm must meet the expectations of external groups or individuals who may have an
effect on the firms performance. The rationale behind the stakeholder theory is that it would be
beneficial for firms to link up with stakeholders (as opposed to only shareholders) to legitimize
and maintain their license-to-operate (Howard-Grenville et al. 2006). Donaldson and Preston
(1995) expanded Freemans theory and maintained that the normative base of the theory to
engage in stakeholder activities should be regarded as fundamental.
A more moral take on the stakeholder theory is found in the corporate stewardship theory (cf.
Worrell and Appleby 2000, Davis et al. 1997, Donaldson and Davis 1991), which adds a new
dimension to the CSR and business ethics debate. This theory suggests that firms should
exclusively focus on carrying out their social duties and responsibilities, without regard to the
financial consequences of such acts.
Jones (1995) introduced an instrumental theory for stakeholder management, enhancing the
stakeholder theory and surmising that the high returns on regular and trusting interaction with
stakeholders make firms strive for better ethical performances and give them significant
competitive advantages.
In a similar line of thought, the concept of corporate citizenship emerged (cf. Marsden and
Andriof 1998). As a broader concept, corporate citizenship (CC) deals with businesses interplay
in society beyond their economic roles, and Birch (2001) regards this as the next step to CSR.
According to Carroll (1999), it is an extension of the operationalization of businesses role in
society in the management literature. Matten and Crane (2005) clearly separate it from CSR, and
argue that CC is strategic in nature, whereby assuming that stabilities in the social, environmental
and political scenarios are profitable for business (Windsor 2001, Wood and Logsdon 2001).
Crouch (2006) agrees with Matten and Crane (2005) that CC is not synonymous with CSR, and
that CC views the organization in a wider perspective (than CSR). However, regardless of
scholarly debate upon the depth and breadth of these (closely-related) concepts, quite a few
global companies (e.g. Novartis) treat CC and CSR as synonymous.
Strategic application of CSR can also be discussed within the perspectives of the resource-based
view of the firm (RBV) (cf. Barney 1991, Wernerfelt 1984). This view presupposes that firms
need to exploit their resources (e.g., assets, capabilities, competencies, firm attributes etc.) in
such ways that these resources become sources of sustainable competitive advantage. In his 1995
article on the natural-resource-based view of the firm, Hart applied the RBV framework to a
firms environmental responsibilities (Hart 1995), stating that there is a positive correlation
between environmental responsibility and financial performance. While Russo and Fouts (1997)
confirmed Harts assertions, their contemporaries Preston and OBannon (1997) found a few
negative correlations. However, as Roman et al. (1999) show in their comparative compilation of
studies investigating the social and financial performance link, negative correlation between
these two have been increasingly rare or inconclusive in later years, while the literature on
positive correlations has become increasingly robust.
In summation, a number of theories in management science (and economics) have contributed
toward developing a modern CSR concept. There have also been concepts within the CSR realm
that stress various nuances of the notion. Nevertheless, the theoretical maturation of CSR has not
yet been concluded. The following section discusses scholarly attempts at defining CSR.
Archie B. Carroll has defined CSR as the complete range of duties business has towards the
society. He has proposed a 3-d conceptual model of corporate performance. According to
Carroll, a firm has the following four categories of obligations of corporate performance: -
Halals return on resource model of corporate performance recognizes the fact that the corporate
social responsiveness is a quite difficult task as no corporate posture is value free. A firm can
only attempt to form a workable coalition among groups having diverse interests, engaged in
creating value for distribution among members of coalition. The social issues may become
conflicting beyond a certain level of economic activity. The coordination between economic and
ethical decisions is necessary so that the future of the firm and shareholders may be safeguarded.
2.3.3. Ackermans Model
This model defines CSR in three different phases:
research can be shown by analyzing the extent to which findings can be generalized to other
industry (Tashakkori, 2003).
Biocon began its journey as an enzyme company in 1978 and has evolved into a fully integrated
biopharmaceutical enterprise focused on healthcare. It is engaged in drug development, clinical
testing and the commercial production of biopharmaceuticals, as well as industrial enzymes. It
was also the first biotech company from India to be listed in the stock market. A fast-growing
company, Biocon markets its product in over 50 countries and has a local office in New Jersey,
USA. It employs approximately three thousand employees, of whom 15 percent are women. At
the end of financial year 2006, Biocon's posted revenue was USD 157 million, with profits of
USD 30 million.
4.2.
Company History
Biocons Chairperson and Managing Director Kiran Mazumdar-Shaw initially trained as a brewmaster in Australia, and worked as a consultant upon her return to India in 1975. After a while,
she moved to the UK and came in contact with Ireland based company Biocon Biochemicals
Ltd., who offered to set up an establishment with her in India to produce bio-products from
locally sourced raw materials. Thus, Biocon India came into being in 1978.
From its Inception on November 29, 1978 until today, the timeline of Biocon can be divided into
three different segments, underpinning the lifeline of the company according to corporate focus
and maturation rate. These are described as follows.
products commonly used in the brewing industry a plant enzyme called Papain and a marine
hydrocolloid50 named Isinglass. The equity stake in Biocon India was divided as 70-30 between
Mazumdar and Biocon Biochemicals.
The following years saw the initiation of two subsidiaries, Biochemizyme India Ltd. established
in 1982 focused on enzyme R&D, while Helix Biotech Ltd. established in 1989 was primarily a
pharmaceutical biotechnology company. Both of these had other shareholders and investors, both
from India and Ireland. After a multiple change of hands, Biocon India consolidated majority of
the shares, and these companies began operating in 1992 and 1998 respectively. It was also
around this time that Biocon expanded its R&D activities into koji technology, a Japanese solidstate fermentation process technology to develop new enzymes. This proved to be a highly
successful endeavor at later stages, with Biocon profits touching the one million USD mark by
late 80s. In 1989, Mazumdar received the distinguished civilian award Padma Shree from the
Indian Government for her contribution to the advent of biotechnology in India.
In 1999-2000, Biocon acquires all of Glentecs shares, and amalgamated Biochemizyme and
Helix into Biocon Ltd.
Becoming an independent company, Biocon entered into an aggressive expansion plan, which
culminated from 2002 (in the Growth Phase as discussed below). It had already entered the
human healthcare field around 1997. The Statin production was very successful and contributed
to 78 percent of Biocons turnover by 2000. 2000 was also the year that Biocon established
Clinigene, a subsidiary that would focus on longitudinal clinical studies in selective disease
segments. In May 2000, Biocons proprietary bioreactor PlaFractor based on solid matrix
fermentation received a U.S. 2001 and world-wide patent. Biocons first fully automated
submerged fermentation plant to produce specialty pharmaceuticals was also commissioned in
2000. It gained the approval of the USFDA to market cholesterol-lowering lovastatin, the first
Indian company to achieve this feat. The Biocon Biopharmaceuticals Private Limited (BBPL), a
joint venture with Cuba-based CIMAB SA was formed in 2002 to produce drugs for cancer
treatments.
In December 2004, Biocons market capitalization stood at just over USD one billion. In the
2003-2004 financial year, the revenue increased 39 percent to over USD 121 million from the
year before. Biopharmaceuticals business increased by 33 percent and contributed to 79 percent
of the sales, while R&D revenue increased by 75 percent. This led to a 63 percent growth in net
profit. The financial performance continued to be impressive through 2004-2005, with income
increasing a further 34 percent. Biopharmaceuticals posted a growth of 28 percent, while
Syngene and Clinigene grew by 71 percent. Total revenue stood at USD 157 million at the end of
2006. Overall, the company registered a 31 percent growth from the previous year.
Meanwhile, Biocon entered into a number of strategic partnerships with companies around the
world, with an aim on joint research, discovery and distribution for certain drugs. In 2004,
Biocon entered into strategic partnership with North Carolina based Nobex Corporation a
privately held developmental stage drug delivery company. This research collaboration foresees
the co-development and commercialization of oral insulin for diabetes treatment at a global scale.
Later in 2004, it announced another strategic research collaboration with Vaccinex Inc. a
privately held biotech company based in Rochester, New York. This partnership aims to discover
and co-develop fully human therapeutic antibody products for cancer, inflammation and
autoimmune diseases.52
While Biocon would be responsible for proof of concept, product and process development, both
companies would be jointly responsible for global clinical trial and marketing. The BBPL joint
venture with CIMAB continued successfully meanwhile. Corporate analysts believe that Biocon
owes its success largely on its ability to interpret the future demands in the field of Indian
biotech, and molding the company to fulfill them. Chairperson and Managing Director (CMD)
Mazumdar leads the company from the front, and her energetic persona influences the employees
through and through.
The phenomenal achievements of Biocon did not go unnoticed, and accolades and honors poured
down upon both the company and Mazumdar. Gracing the cover pages of leading business
magazines also became regular. The New York Times in fact christened her Indias Mother of
Invention on their 16 August 2003 issue. Along with winning numerous businessperson of the
year award, came government tributes. The local State Government awarded her the Daughter of
Karnataka Award in 2003. In 2005, the Indian Government honored Mazumdar with the highly
prestigious civilian award Padma Bhushan for her contribution in the growth of biotech
industries in India. The following table presents a summary of the major events in the lifeline of
Biocon Limited, since its inception in 1978 until present.
Syngene
Clinigene
BBPL
Calibration Laboratories), the Indian Governments arm for accrediting scientific research
laboratories. It is the first lab in India to be accredited by CAP (College of American
Pathologists), setting a benchmark for other laboratories in India. The clinical lab strives to
achieve the highest industry standards in all aspect related to clinical testing, e.g. by using predefined databases and visit-specific collection kits, and succeeds in offering fast and accurate
trials. The human pharmacology unit carries out a variety of bioavailability,55 bioequivalence and
other pharmacokinetic56 studies on human volunteers at a premier Bangalore hospital. Clinigene
pledges to operate by high bioethics standards, and its study processes adhere to local and
international regulatory requirements such as the ICH-GCP guideline57 of the USFDA.
BBPL
CIMAB SA is the commercial branch of Centro de Inmunologa Molecular (CIM), one of Cubas
leading scientific research centers focusing on biopharmaceutical products. In 22February 2002
Biocon entered into joint venture with CIMAB to form Biocon Biopharmaceuticals Private
Limited (BBPL). BBPL manufactures and markets biotech-based life saving drugs. CIMAB has
core competency in production of drugs for cancer treatment, also the focus of BBPL. While
BBPL was decided to produce drugs for cancers of the head and neck area initially, a successful
research collaboration would lead to producing drugs for other cancer treatment as well. Biocons
equity participation in BBPL is 51 percent.
4.6. CSR at Biocon
Biocons CSR activities are largely centered on social aspects that relate to healthcare and
education. The HR division of the company organizes activities such as vaccination drives
against polio and hepatitis B in the area, usually carried out by staff volunteers.
However, it felt the need to further consolidate its existing activities in this regard, as well as take
up more concentrated projects. As a result, the Biocon Foundation was initiated in December
2004 with the aim of identifying and implementing projects that would have a positive social and
economic impact in the surrounding community. The Biocon Foundation operates the micro
health insurance program, which is discussed in the following section B.4.2.
4.6.1.
Similar to most Indian corporate entities, Biocons fundamental understanding of the triple
bottom line is corporate citizenship focused and relying heavily on the social side. The Biocon
management believes that a companys social responsibility is based on four pillars: first and
foremost is community investment, followed by positive employee relations, good environmental
practices and sound ethical conduct. It is worth mentioning that the top management team
perceives employee relationship and ethical business practices as components of social
responsibility.
It is interesting to note that Biocon does not necessarily use its own medicines for the ARY
scheme, but sources them through a third party (Karuna Trust). It provides the infrastructural
support for the clinics, training costs for the clinic workers and sponsors the auxiliary programs.
The medical know-how comes from Narayana Hrudayalaya (i.e. which medicines to stock up on,
which treatments to cover, etc.).
The roots of the ARY scheme can be attributed to the bottom-of-the-pyramid model propagated
by Prahalad and Hart (2004). As indicated by the bottom-of-the-pyramid approach, ARY is a
model of business liaison at the bottom rung of the financial pyramid. Since the recipients are
actually paying for the services that they receive, the Biocon Foundation and its partners
establish a business relationship through the ARY program, somewhat moving away from pure
philanthropy. In fact, Biocon prefers it to be a fee-paying service, as they feel the transaction
makes the recipients value the scheme more in comparison to benefits they would get free.
4.7.1.
ARY operates under two premium schemes. The Individual Scheme comes to INR 180 (approx.
CHF 6.00) per member per year. Enrollment as part of the family scheme has three levels: INR
180 per member per year for two members, INR 150 (approx. CHF 5.00) per member per year
for three members, and INR 120 (approx. CHF 4.00) per member per year for four or more
family members.
At the pilot phase, the applicants residency in Anekal Taluk was the first eligibility criterion. It
subsequently brought the neighboring Kanakpura Taluk under its wing. The successful applicants
need to produce proof of residence for themselves and their family in the Taluk through, e.g., a
ration card, voters ID card, driving license, passport, PAN 59 card or bank account. Residents
between 0 and 70 years are eligible to apply.
4.7.2.
The benefits of the scheme include free outpatient consultation, generic medicines at special
rates, diagnostic tests at discounted rates, hospitalization, and free surgical interventions. There
are certain conditions applicable to obtaining the insurance plans benefits. For example,
treatment is only available in a general ward of one of the network hospitals.
The scheme includes a cashless facility for surgical treatment to the value of the covered amount.
Over 1,600 listed surgical treatments, such as hernia operations, appendicitis, hysterectomy as
well as cardiac bypasses are covered. The scheme covers both pre- and post-operative surgical
treatments.
Hospitalization (without surgery) is covered for three days, which includes the fees in respect of
the room, professional fees and routine investigations. Individual members are allowed one
admission per year (for a maximum of three hospital days). Members enrolled under the family
pack are eligible for a maximum of 50 percent of the total number of enrolled members. The
cover excludes medicines and medical consumables, e.g., oxygen and ventilator charges.
The Biocon Foundation supervises the scheme, thus ensuring that the members get the services to
which they are entitled. The Karuna Trust handles the marketing and distribution of drugs for the
network hospitals and BioCare pharmacies, thus reducing the price of the medicines considerably
due to economies of scale.
4.7.3.
Auxiliary Programs
Desai reveals that in the first months of the projects pilot year, an overwhelming 90 percent of
the patients had water- and sanitation-related ailments. This prompted Biocon Foundation to set
up a supplementary Hygiene Promotion Program for the members. She states,
When the people realize the link (between good hygiene practices and
wellbeing), and realize the benefits they get, the (hygiene promotion)
program will become sustainable.
The hygiene promotion team conducts a set of three sessions at each venue. The first session
deals with personal hygiene issues, the second with environmental health issues, such as waste
disposal, dealing with drainage and blockage, sanitation, potable water etc. These two sessions
are followed by a review session. Two local NGOs helped design the hygiene promotion program
and are responsible for running it: the Belaku Trust, a local NGO focusing on women and
childrens health and Grameen Koota, a Karnataka-based
Biocons external social responsibility activities center on pediatric healthcare, with polio and
hepatitis B vaccinations being the major initiatives. Biocon is a partner of Rotary Internationals
Toward a Polio-Free World project. The HR department organizes the Biocon Pulse Polio
Program, whereby employees volunteer to administer polio drops to children under the age of
three.
Secondly, Biocons educational support activities comprise academic sponsorships. The company
provides financial assistance to national and international institutes with regard to biotech
projects. It also provides sponsoring for two Bangalore-based educational institutions: an
entrepreneurship development center at local business school the Xavier Institute of Management
and Entrepreneurship (XIME), and faculty chairs at the Institute of Bioinformatics and Applied
Biotechnology (IBAB), a local government research institute.
Biocon also undertook purely philanthropic activities during major natural disasters. The
company and individual employees volunteered time and resources during the Gujarat
earthquake in 2001 and the Indian Ocean tsunami in 2004.
Biocon has been involved in a number of environmental awareness programs in Bangalore city.
The most prominent of these was its partnership with the Bangalore Agenda Task Force (BATF),
a private public partnership in the urban governance of the city. Biocon assisted in BATFs solid
waste management initiative Swachha Bangalore, a door-to-door collection of household wastes.
Furthermore, Biocon erected eco-friendly traffic booths and bus shelters in Bangalore that have
solar powered lights and feature environmental awareness messages. Apart from its partnership
with BATF, Biocon played a role in the greening and beautifying of a considerable part of Hosur
Road, the highway that leads to the corporate headquarters.
4.9. Managerial Attitudes toward CSR at Biocon
Positioning among its Peers
With its long-term association with various healthcare and environmental awareness programs,
and the resulting visibility in the media, the latter and NGOs regard Biocon as a leading
corporation with regard to CSR initiatives. It therefore comes as no surprise that the Biocon
management too claims that their company is the leading CSR-oriented corporation in India. It is
interesting to note that while very proud of their work in the social sustainability area, Biocon
employees are reluctant to compare themselves with their peer companies, stating that social
responsibility comes from within Biocon, led by the CMD Mazumdar. As Desai states,
While Biocon has earned plaudits for its social sustainability activities, and these activities have
been a crucial component of Biocons corporate identity, their integration into its core business
strategies has yet to occur. Ensuring a robust financial bottom line is still the first priority.
5. Conclusion
Biocon definitely thrives on the positive publicity that is generated by involvement in CSR
issues. Though it considers ARY to be its flagship CSR initiative, it does undertake a host of
other programs. It has a robust employee development scheme, ranging from the initial one-hotmeal-a-day to health check-up, education allowances etc. It also engages its employees in its
CSR initiatives within the community such as immunization camps. For both its employees and
the community, health and education related initiatives occupy considerable standing and Biocon
has made laudable advances in this regard. Comparatively, the environmental initiatives seem
weak, and its involvement with the BATF can be interpreted as a service to the community as
well. Although health, education and women empowerment were listed as the three areas were
Biocon conducts its social initiatives, in reality there were no specific initiatives for promoting
women empowerment.
Looking at Biocons CSR practices through the lens of Gandhian trusteeship, one can surmise
that the company has made some strong strides toward fulfilling its role as a social trustee.