ETHICAL & SOCIAL ISSUES

AT
CIPLA LTD.

A Report submitted in partial fulfilment of the requirements for the degree of

Master of Business Administration

By

SANJAY NANDAKUMAR

REGISTER NUMBER
2128225

Under the Guidance of

PROF. DR. SIMON K. JOHN

MBA PROGRAMME
SCHOOL OF BUSINESS AND MANAGEMENT
CHRIST (DEEMED TO BE UNIVERSITY), BANGALORE

October 2021

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 TABLE OF CONTENTS

S.No Content Pg No.

1 Introduction 3

2 Social issues in Cipla 4

3 Impact on Stakeholders – Social issues 5

4 Sustainable Development Goal 6

5 Ethical issues in Cipla 7

6 Impact on Stakeholders – Ethical issues 9

7 Infographics 11

8 Conclusion 12

9 References 12

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 CIPLA Ltd.
Introduction:

Cipla Limited is a pharmaceutical company based in Mumbai, India. Founded by nationalist

Indian scientist Khwaja Abdul Hamied as The Chemical, Industrial & Pharmaceutical
Laboratories in 1935. Cipla makes drugs to treat cardiovascular disease, arthritis, diabetes,
weight control, depression and many other health conditions. Founded prior to Indian
independence and on the principle that India needed to become self-sufficient in supplying
medicine to its people, Cipla has emphasized self-reliance and the right of all people to health
and access to medicine, regardless of their economic circumstances or where in the world they
happen to live. Cipla cooperates with other enterprises in areas such as consulting,
commissioning, engineering, project appraisal, quality control, know-how transfer, support, and
plant supply.

Cipla’s journey began in 1935 when the founder, Dr. K. A. Hamied, set up an enterprise with the
vision to make India self-sufficient in healthcare. Over the past 77 years, they have emerged as
one of the world’s most respected pharmaceutical names, not just in India but worldwide. They
have 34 state-of-the-art manufacturing facilities that make Active Pharmaceutical Ingredients
(APIs) and formulations, which have been approved by major international Regulatory Agencies.
They have over 2000 products in 65 therapeutic categories; with over 40 dosage forms, covering
a wide spectrum of diseases ranging from communicable, non-communicable, common and
emerging diseases to even rare diseases.

Research and Development (R&D) centre is focused on developing innovative products and drug
delivery systems, giving the country and the world many ‘Firsts'. Today, they are one of the

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world’s largest generic pharmaceutical companies with a strong presence in over 170 countries.
They maintain world-class quality across all products and services.
Social issues:

Definition:
Social difficulties arise when a decision, circumstance, or conduct contradicts a society's moral
ideals. Individuals and businesses alike may become embroiled in these conflicts, as any of their
acts may be called into question on ethical grounds. Individuals and companies alike are
impacted by these issues in their interpersonal and organisational relationships.

Social issue in Cipla:

A production plant was commissioned for a new cancer drug in Mumbai. The commission went
on for 6 months. After commissioning the plant started operating with 60 tons per day and the
capacity of the plant is 75 tons. The plant started generating more heat than the calculated units,
due to the rapid exothermic reaction. This heat lead to the disinfection of the water output. The
water that is supposed to leave the company as treated water, exited as infected one into the
ocean.

The engineers were not aware of this initially but they knew about the excess heat generated
from the furnace. This issue was not taken up seriously by the engineers. After few weeks, this
water went and destroyed the aquatic beings in the ocean. This issue was raised up by the local
people living in the surrounding. A complaint about the water pollution was raised to the
SIPCOT industrial committee.

The SIPCOT management along with the pollution board officers went on an inspection to Cipla.
The water outlet to the ocean was checked for quality and failed to meet the norms. The
production was immediately stopped and the plant was sealed until further notice. A case was
filed against the company and it faced heavy loss.

Cipla’s response to the issue:

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The engineers from Cipla stated that they were not aware of the pollution taking place as initially
when the plant was commissioned, the outlet water meet the quality norms. It was later
discovered that due to the excess heat generated from the furnace caused the pollution. Cipla
then offered a remedy for the pollution caused. It said that it would first look into the heat
generated and correct it. And then it compensated the pollution caused by placing artificial coral
reefs. The seal was broken and the production started. Still, the management was not able to
control the heat, which lead to infected water, so it setup a new water treatment plant. This water
treatment plant, neutralised the pollution water from the plant and then let it go to the ocean. In
this way Cipla sorted out the pollution issue and the drug production continued.

Impact on the Stakeholders:

Internal Stakeholder

Management:
The management was solely responsible for the pollution and losses that occurred. Not being
aware and ignorance has led to this issue. The management had faced bad ethical image amongst
the people, suppliers and consumers. The brand name of “Cipla” was also hit hard. The plant was
shut down and this led to the loss for the company. This problem should have been highlighted
by the project department who were responsible for the plant commissioning.

The management suffered a heavy loss. It had to shut the plant for 6 months, which led to the
production loss, and it had to cover the damages caused by the polluted water. It also had to bear
the expenses of the employees’ salary during the shutdown of the plant too. Following this
incident the management then took meticulous steps in following the government norms of waste
discharge. It also introduced a new rule that any technical glitches, however minor they are, it
should be registered by the safety department and later be avoided during the production.

Employees:

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Employees faced high consequences and were put under high pressure. Employees from the sales
departments suffered the most, as the customers created a high demand for the product whereas
the supply was nil due to plant shut down. This lead to the loss of many customers. The shift had
an impact on the company's sales volume and, as a result, the marketing team's productivity. The
engineer were also put under pressure from the management side for the ignorance of the
pollution caused. During the plant shut down they had only half salary pay. Employees were also
afraid of losing their job. The employees especially the engineers became meticulously careful in
the production and made sure nothing goes wrong or is taken for granted hereafter.

External Stakeholders:

Customers:
Over the years, Cipla had many trusted customers. It had a strong bond with the customers
because it did not compromise with the quality of the product. But when the plant was sealed, the
demand increased and there was no supply from Cipla. This resulted in customers drift to other
suppliers thus breaking the strong bond with Cipla. The competitors increased and Cipla started
losing its potential in the market. Cipla then had a tough time to retain its customers after the
plant started production.

Suppliers:
Suppliers play an important part in a company's success. Companies like to work with suppliers
who are concerned about the environment, produce high-quality products, and respect their
employees' rights. Negative publicity has an impact on both the company and its suppliers. When
the plant was shut, the raw material supply from the suppliers were stopped. This effected the
suppliers’ revenue and the suppliers drifted towards other customers. Some suppliers lost faith
and did not turn back to Cipla even after the issue was corrected.

Shareholders:
Shareholders suffer enormous financial losses when the production was paused. The loss of
dividends was one of the effects of the pollution issue on shareholders. The management paid a

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significant amount of money to compensate the pollution caused. As a result, shareholders were
forced to forfeit bonuses. Furthermore, the company's stock value plummeted, reducing profit.
Some of them eventually lost faith in the company and decided to sell their stock. Cipla started
losing many shareholders and its market share shattered to the bottom.

Sustainable Development Goal Disregarded-

Sustainable Development Goal#6 : Clean Water and Sanitation

This issue that Cipla faced was clearly against clean water and sanitation. It clearly follows the
target that, “By 2020, improve water quality by reducing pollution, eliminating dumping and
minimizing release of hazardous chemicals and materials, halving the proportion of untreated
wastewater and substantially increasing recycling and safe reuse globally”. The way this
company ignored this issue, throws a very bad image on the management and portrays an image
that the company doesn’t strive to be ethical and safe company of the future.

Steps taken by Cipla

A water treatment plant was setup to treat the polluted water. This water treatment plant,
neutralised the pollution water from the plant and then let it go to the ocean. In this way Cipla
sorted out the pollution issue.

First person perspective (Suggestions):

For an efficient production of an organisation, maximum production should be done with the
minimal expenses or resources. Cipla had built a new water treatment plant to treat the waste
water. Instead it could have installed new cooling towers which can remove the heat and thus the
water might not get affected. The installation cost of cooling towers is more than the water
treatment plant, but the operational cost of cooling towers is much more less than the treatment
plant. In this case, the operational expense would have reduced.

Ethical Issue:

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Cipla is one of the top pharmaceuticals company in India. Cipla that uses the latest
pharmaceutical Technology to funnel over seven decades of experience in to one capsule cures,
one drop that defends and one puff that protects.

Cipla Ltd has seen addressing the social issue of “decent work and economic growth”. Cipla is
determined to work achieving SD Goal8# by 2020 as much as possible.

VISION STATEMENT – To heal India and to become the biggest and the most admired
pharmaceutical company in India.

MISSION STATEMENT – Cipla commits itself to endeavor to satisfy their customer’s needs in
every manner possible: through by developing and marketing an effective, safe, quality product
and by offering products at a price affordable by all patients, excellent service.

Ethical issue in Cipla:

Cipla is famous for its cancer and HIV/AIDS treatment. During the end of its financial year,
Cipla had to meet its target which it was quite lagging. From the pressure form the management
to meet the target, the production department had to follow few unethical steps. The production
department bypassed few steps and compromised in terms of quality. An issue was disrupted by
this unethical act.

The quality measured was altered slightly and was written as per the quality norms. Cipla
completed 4 batches that indulged in this unethical practice. The 4 batches were sold to the
customers. After these 4 batches, it went back to its usual routine in terms of quality check. The
customer then raised the complaint that the products did not match the quality as per the Material
Safety Datasheet.

Cipla’s response:
Cipla considered this complaint as technical error and promised it would not happen again. But
this dissatisfied the customers. As these customers had a strong bond, it questioned on why the

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Quality department did not highlight this to the production department. Technical errors happen
during production but it should be highlighted to the engineers. Cipla then happen to conduct an
ethical code so that it can retain its customers.

Impact on stakeholders:

Internal stakeholders:

Employees:
Due to this unethical behavior, the management lost its trust on the employees. This had affected
the higher level managers and officers, because under their pressure only their subordinates
carried out their command. This lead to a distrust between the high level and the lower level
employees.

Management:
Cipla was known for its trust and quality. But the management failed to keep up the trust. The
management faced heavy criticism amongst the customers. No excuses were accepted by the
customers. The brand name “Cipla” was affected.

External Stakeholders:

Customers:
The customers were disappointed by improvise done to the quality of the product. They lost their
trust and further they had to cross check all the products that were received from Cipla. This
actually created a bad image of Cipla amongst the customers. The customers started reducing
their purchase from Cipla, this led to the fall in sales and revenue.

Shareholders:

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Because of the bad image that was formed and the fall of sales, the share price went on a steep
fall. Many shareholders were disappointed by this and some sold their shares. Others felt that the
market for Cipla is not stable and new investors did not prefer to invest in Cipla.

Steps taken by Cipla to resolve its issue:

ETHICAL CONDUCT IN CIPLA LTD.

Businesses should conduct and govern themselves with Ethics, Transparency and Accountability
The Company has a Code of Conduct which provides an ethical road map to its Directors and
senior management. The Code prescribes that all Directors and senior management shall show
honesty, integrity, as well as high moral and ethical standards in their work, and shall not engage
in any business, relationship or activity which might detrimentally conflict with the interest of
the Company. It provides guidance on making the right decisions and doing only right things.
The Code further goes on to state that in order to avoid any kind of ethical violations in the
organization, Directors and Senior management employees shall also make certain that all their
actions in the conduct of business are totally transparent. The Company is taking steps to extend
its policy on ethics and transparency to other key stakeholders. No significant complaints from
the Company’s stakeholders were found to be pending for redressal at the end of the reporting
year.

First person perspective (suggestions):

Firstly no compromise must have been done in terms of quality. Incase to achieve the target at
the end of the financial year, the production rate should have been increased and the production
could have been working overtime. Compromising in quality is an unethical measure and this
has led to more loss than not achieving the target.

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Infographics:

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Conclusion:

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While establishing the new plant, Cipla went wrong because it was not aware of the exothermic
reaction which caused to generate profound heat. That was the first plant in India so mistakes can
be learnt through trial and error. Otherwise, Cipla had no intention in polluting the environment.
After this incident, Cipla introduced a new set of MSDS (Material Safety Data Sheet), where
even the smallest compound used in the manufacturing had its measures under the norms. It
became very conscious about the waste discharge from the company.

Cipla Limited has rarely been accused for Ethical misconduct. In the above mentioned
case, the Drug Control General of India (DGI) agreed with Cipla that the clinical trials were
conducted properly after investigating thoroughly. The code of conduct designed by Cipla Ltd.,
is followed strictly. As an outsider, I’ll say that the company has been ethical at all times as even
after intensive research, one ethical misconduct showed up, that too which happened many years
ago.

References:

www.esg.censible.co/companies/Cipla
www.business-standard.com/article/current-affairs/cipla-initiates
https://sdgs.un.org/goals
www.researchgate.net/
https://studymoose.com/case-study-about-ethical-conduct-in-cipla

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