2. T ERI-Europe and the New
Academy of Business have
been working with various partners
groups, especially the more
vulnerable income groups, in the
three countries. We hope that this will
on an initiative to understand and assist in eventually elaborating a
encourage corporate responsibility home-grown agenda of corporate
across South Asia. The initiative seeks responsibility sensitive to the social,
to raise awareness and stimulate a cultural, and economic situation in
proactive corporate responsibility Bangladesh, India, and Sri Lanka.
agenda in three South Asian This report presents the results of
countries—Bangladesh, India, and Sri the initiative’s second activity—an
Lanka. The partners are the Centre agenda-setting survey on corporate
for Policy Dialogue (Bangladesh), responsibility in Sri Lanka. The
TERI (India), and LGA Consultants survey explored the views and
(Sri Lanka). The project is funded by expectations of workers, company
the Asia Division of the Department executives, and civil society groups
for International Development, UK. towards the social, economic, and
Our vision is to contribute to a environmental responsibilities of
positive change towards business companies operating in Sri Lanka. It
practices and attitudes that support was the first to include workers in a
sustainable development and poverty survey on corporate responsibility.
eradication in the region. The focus is The survey was carried out in 2003
on expanding the knowledge base of through a partnership between TERI-
corporate practices in South Asia Europe, LGA Consultants, and the
relating to working conditions within Sri Lanka Business Development
factories; living conditions in Centre in Colombo. The results
surrounding communities; presented in this report are intended
environmental protection; and to provide a better understanding of
corporate accountability and attitudes and practices and develop
transparency. In this way, we aim to targeted training materials for
provide useful information and tools company executives, workers, and
(such as training materials) for South community representatives.
Asian companies and civil society
3. Understanding and Encouraging Corporate
Responsibility in South Asia
Update Two: Sri Lanka
Altered Images
the 2003 state of corporate responsibility
Ritu Kumar
David F Murphy
Rochelle Mortier
Chandana Rathnasiri
Lalith Gunaratne
i
Altered Images: the 2003 state of corporate responsibility
5. Contents
Contents
Understanding corporate responsibility in Sri Lanka 1
Corporate responsibility in Sri Lanka 2003: a snapshot 7
Conclusions and next steps 21
References 24
iii
Altered Images: the 2003 state of corporate responsibility
6. Acknowledgements
Acknowledgements
The authors wish to record their appreciation of the
assistance rendered by TERI, India, especially the
following.
P Ms Mudita Chauhan-Mubayi and Ms Parikrama
Gupta for editing;
P Mr R Ajith Kumar for design, layout, and
typesetting;
P Mr R K Joshi for cover design and graphic
illustrations; and
P Mr T Radhakrishnan for production supervision.
iv
Understanding and Encouraging Corporate Responsibility in South Asia
7. Understanding corporate responsibility in Sri Lanka
1 Understanding corporate responsibility
in Sri Lanka
C urrent business perspectives
and practices in Sri Lanka are
products of both the island’s colo-
the total employment (47.8%). On
a sectoral basis, the service sector is
the largest sector for employment
nial trading past as well as its (42.6%), while the agriculture sec-
present turbulent political circum- tor accounts for 32.4%, and indus-
stances. Commerce in Sri Lanka is try for 25.7%.
rooted in a long history of interna- The Sri Lankan private sector
tional trade with its former colonial has not always enjoyed government
powers – the Portuguese, the encouragement and public support.
Dutch, and the British – as well as In the 1960s and the early 1970s,
with neighbouring Asian countries. large numbers of private companies
Private companies were formed in and foreign-owned enterprises,
the early part of the 18th century, across all sectors, were nationalized.
and Sri Lanka’s stock market was Large industrial companies, for ex-
set up in the latter half of the 1800s. ample in the steel and cement sec-
Sri Lanka has around 240 compa- tors, as well as tea plantations and
nies currently listed on the Co- newspaper publishing concerns fell
lombo Stock Exchange and can be under government ownership and
compared – at least in scale – with management. In 1977, with a new
Bangladesh (around 208 listed government in place, the corporate
companies). 1 Employment in the sector was given the impetus to act
private sector is just under half of as an engine of economic growth in
1
Details at <http://www.bangladeshcapitalmarket.com/>, last accessed on 15 March 2004
1
Altered Images: the 2003 state of corporate responsibility
8. Understanding corporate responsibility in Sri Lanka
a bid to create a liberal, market- socially responsible practices. The
driven economy. This ambition was majority of Sri Lankans can hardly
however short-lived, as Sri Lanka envisage environmentally sustain-
slipped into a state of ethnic civil able initiatives, human rights pro-
war in the early 1980s. By the end of tection, and gender equality being
the 1990s, official estimates put the integrated into business practices.
number of lives lost due to the war
at around 60 000. While the war has Four models of corporate
been mostly confined to the north responsibility
and the east of the island, its impact The four models of CR (corporate
on the corporate sector has been responsibility) outlined here illus-
significant due to the inherent po- trate the evolution of the business
litical and business risk. It is then model, as well as the ways in which
perhaps unsurprising that the Sri businesses have viewed and en-
Lankan corporate sector tends to be gaged in social responsibility within
cautious and conservative. South Asia.
Sri Lankan society is highly po-
liticized and there is a general pub- Ethical model
lic perception of the private sector The origins of the first ethical
being exploitative. Recent large- model of CR lie in the pioneering
scale privatization on the island – efforts of 19th century corporate
such as that of bus services – has re- philanthropists such as the Cadbury
sulted in companies being accused brothers2 in England and the Tata
of ‘cherry-picking’ the profitable family in India. The pressure on
routes and services. Those routes Indian industrialists to demonstrate
that are deemed unprofitable are their commitment to social progress
left with either a low level of service increased during the Independence
or no service at all. With this experi- movement, when Gandhi developed
ence of recent private sector deve- the notion of trusteeship, whereby
lopment, the public is sceptical of the owners of property would
change and mistrusts the motives of voluntarily manage their wealth on
business. People generally do not behalf of the people.
expect companies to engage in
2
John and Benjamin Cadbury, brothers from Birmingham, pioneered the development of
chocolate around 1847.
2
Understanding and Encouraging Corporate Responsibility in South Asia
9. Understanding corporate responsibility in Sri Lanka
I desire to end capitalism almost between the state and society were
as much as the most advanced clearly defined for the state enter-
socialist. But our methods differ. prises. Elements of CR, especially
My theory of trusteeship is no those relating to community and
makeshift, certainly no camou- worker relationships, were en-
flage. I am confident that it will shrined in labour law and manage-
survive all other theories. ment principles. Sri Lanka broadly
Gandhi (1939), followed the same political evolu-
cited in Bose (1947) tion around this time, and this
model prevailed until the change of
In Sri Lanka, there is little evidence government in 1977.
of such corporate philanthropy in
the early 20th century. Philanthropy Neo-liberal model
tended to be directed towards reli- Indeed, the global trend towards
gious causes by philanthropists who privatization and deregulation can
were also owners of companies. be said to be underpinned by a third
These wealthy families tended to model of CR—that companies are
donate money for the renovation of solely responsible to their owners.
Buddhist places of worship. An ex- This approach was encapsulated by
ample of this was the renovation of the American economist Milton
the Kelaniya Temple with funds do- Friedman,3 who in 1958 challenged
nated by the Wijewardene family. the very notion of CR for anything
other than the economic bottom
Statist model line.
A second model of CR emerged in
India after Independence in 1947, If anything is certain to
when India adopted the socialist destroy our free society, to
and mixed economy framework undermine its very foundation,
with large public sector and state- it would be a widespread
owned companies. The boundaries acceptance by management of
3
Recipient of the 1976 Nobel Prize for Economic Sciences, Friedman is widely regarded as
the leader of the Chicago school of monetary economics, which stresses the importance of the
quantity of money as an instrument of government policy and a determinant of business cycles
and inflation. Friedman has also written extensively on public policy, with emphasis on the
preservation and extension of individual freedom.
3
Altered Images: the 2003 state of corporate responsibility
10. Understanding corporate responsibility in Sri Lanka
social responsibilities in some the Buddhist concept of dhana, is
sense other than to make as an integral part of life on the island.
much money as possible. This is The religious model would suggest
a fundamentally subversive that local shareholders of firms
doctrine. should engage in philanthropy.
Friedman (1958) However, this rarely happens in
practice. Most Sri Lankan
Many in the corporate world and corporates are also not aware of the
elsewhere would agree with this more secular, humanitarian reason-
concept, arguing that it is sufficient ing, which underpins CR, or of the
for business to obey the law and growing international trend towards
generate wealth, which through a stakeholder mindset.
taxation and private charitable
choices can then be directed Stakeholder model
towards social ends. The rise of globalization has also
The Sri Lankan corporate sector brought with it a growing consensus
has not opened up in any significant that with increasing economic
sense towards philanthropic giving rights, business also has to face up to
and wider social responsibility. This its social obligations. Citizen cam-
is possibly due to a lack of initiatives paigns against irresponsible corpo-
to educate and raise local awareness rate behaviour, along with consumer
of the possibilities in these areas. It action and increasing shareholder
is also partly a result of an inherent pressure, have given rise to the
conservatism in the private sector, stakeholder model of CR. This view
which mostly resembles the neo- is often associated with R Edward
liberal approach to CR. Freeman,4 whose seminal analysis
Sri Lanka is a predominantly Bud- of the stakeholder approach to stra-
dhist society. Nearly 70% of the popu- tegic management in 1984 brought
lation is Buddhist; philanthropy, or stakeholders into the mainstream of
4
Pioneer of the stakeholder and ‘business ethics’ concept in the context of corporate respon-
sibilities, Freeman developed a framework for identifying and managing the critical relation-
ships of the modern corporation. His conceptual crystallization of stakeholder analysis has
become a staple of both academic writing and business academic models. Freeman’s contribu-
tion to education at the intersection of business and society is also extensive. He has won
numerous teaching awards and is well known for his innovative approach to pedagogy.
4
Understanding and Encouraging Corporate Responsibility in South Asia
11. Understanding corporate responsibility in Sri Lanka
management literature (Freeman of commercial viability and
1984). According to him, ‘a business successes.
stakeholder in an organization is any Wheeler and Sillanpää (1997)
group or individual who can affect, or
is affected by, the achievement of the The experience of the past decade
organization’s objectives’. has served to reinforce this view-
However, it was not until the point. With companies facing in-
1990s that the idea of the creasing scrutiny in the global
stakeholder corporation gained economy, the CR agenda now en-
prominence in business practice. compasses a wide range of issues in-
David Wheeler and Maria Sillanpää cluding provision of product
(formerly with The Body Shop) quality, safe products at fair prices,
captured the essence of the ethical business practices, fair em-
stakeholder model in the following ployment policies, and environmen-
statement. tal performance. In addition, there
is increasing focus on the growth of
The long-term value of a corporate power and therefore the
company rests primarily on: the need for greater accountability and
knowledge, abilities and commit- transparency to society, for example
ment of its employees; and its through reporting, corporate gov-
relationships with investors, ernance, and stakeholder dialogue.
customers and other Indeed, there is a growing con-
stakeholders. Loyal relationships sensus throughout the world that
are increasingly dependent upon companies need to go beyond their
how a company is perceived to traditional ‘economic’ roles; the fol-
create ‘added value’ beyond the lowing analysis from the Centre for
commercial transaction. Added Development and Enterprise in
value embraces issues like South Africa aptly demonstrates
quality, service, care for people this.
and the natural environment
and integrity. It is our belief It is in the interests of the corpora-
that the future of the development tion and the business sector as a
of loyal, inclusive stakeholder whole to become more self-
relationships will become one of conscious social actors. Both the
the most important determinants individual firm and the voluntary
5
Altered Images: the 2003 state of corporate responsibility
12. Understanding corporate responsibility in Sri Lanka
business association need to think civil society. Most companies per-
hard and strategically about their ceive CR as sponsorship of sporting
role in society, and their relation- activities, donations to charities,
ships with government and others. and other social service activities.
To do anything else is counter- The main exception is in the gar-
productive. ment industry, where there is some
Bernstein and Berger (2000) evidence of companies champion-
ing broader CR values and practices.
The evidence on CR in Sri Lanka The garment industry is also Sri Lan-
suggests that a neo-liberal model of ka’s largest export sector, comprising
CR is prevalent. However, this around 52% of total export earnings.
needs to be qualified and tempered The broader CR agenda is also prac-
against the reality that there is a lack tised and aspired to in a few local sub-
of knowledge and understanding of sidiaries of MNCs (multinational
the broader definition of CR. corporations). ✤
CR is a novel concept for Sri
Lankan companies, employees, and
6
Understanding and Encouraging Corporate Responsibility in South Asia
13. Corporate responsibility in Sri Lanka 2003: a snapshot
2 Corporate responsibility in Sri Lanka 2003:
a snapshot
T ERI-Europe commissioned
LGA Consultants Ltd to con-
duct an initial survey of the state of
child abuse, domestic violence,
environment, and anti-tobacco
and alcohol production.
CR in Sri Lanka. The Sri Lanka
Business Development Centre car- The survey was carried out in
ried out the survey. 5 It was designed Colombo, where the largest concen-
to capture the experiences and per- tration of corporate entities in
ceptions of CR practices from the Sri Lanka is located. The poll sur-
following three sets of stakeholders. veyed 150 employees, 70 company
Workers of companies in the managers, and 16 public repre-
sectors of tea and other planta- sentatives.
tions, garments, ceramics and The survey provides an overview
tiles, shoes, financial services, of company practices as well as em-
food, telecommunications, phar- ployee and civil society experiences
maceuticals, fertilizer, tobacco, and perceptions of CR. It attempts
energy, leather, construction, to register factors that influence the
and travel and tourism opinions of companies as well as
Company executives and those that shape expectations of CR.
managers from the above sectors A summary of the main findings is
Civil society groups represent- provided here.
ing the interests of child labour,
5
More on the Sri Lanka Business Development Centre at <http://www.slbdc.org>, last
accessed on 15 March 2004
7
Altered Images: the 2003 state of corporate responsibility
14. Corporate responsibility in Sri Lanka 2003: a snapshot
Main findings brought about through high-profile
cases of corporate exploitation, has
What are the key drivers for
been a strong impetus for compa-
corporate responsibility in
nies to focus on CR practices. This
Sri Lanka?
has placed pressure on local sub-
The few Sri Lankan companies that sidiaries of international MNCs to
have recently adopted socially re- be more accountable and responsi-
sponsible practices have done so ble. One sector where this is in-
mainly to meet the requirements of creasingly evident is the garment
international buyers of goods pro- sector in Sri Lanka. Here, compa-
duced in Sri Lanka. The formal nies tend to perform better on CR
requirements for CR practices, practices relative to other sectors,
especially in terms of working con- due to their mainly export-oriented
ditions and worker welfare, act as business models and accelerated
strong signals for Sri Lankan scrutiny and standard setting by
corporates interested in doing busi- their parent companies. An example
ness in international markets. Sri of this is Slimline, a garment manu-
Lankan corporate practices are also facturer set up in 1993 with interna-
increasingly under greater scrutiny tional partners and brand name
by international NGOs. Interna- customers. Slimline’s CR practices,
tional and local reporting of abuses specifically in redefining mutually
of labour practices and human beneficial relationships between
rights are now more widespread. (1) the management and the work-
International NGOs are mainly re- ers and (2) the management and the
sponsible for making Sri Lankan cor- community, helped mitigate a criti-
porate practices transparent to an cal situation with a previously po-
international community, that is keen litically charged labour force and
to drive sound business principles in a dissatisfied local community. One
globalized world. There is also evi- of the main drivers for change was
dence of a small number of local com- the pressure levied by international
panies that are taking a proactive clients and partners to improve
approach to world-class CR. worker welfare and working condi-
The increased social conscious- tions in their supply chain (Kumar,
ness of Western civil society, forthcoming).
8
Understanding and Encouraging Corporate Responsibility in South Asia
15. Corporate responsibility in Sri Lanka 2003: a snapshot
Are corporate responsibility of Sri Lanka, together with the Sri
policies and practices consist- Lankan Chamber of Commerce.
ent in Sri Lankan companies? This is, however, a limited commer-
cial and financial view of govern-
In general, most Sri Lankan compa-
ance, which is used mainly to
nies surveyed had written mission
mitigate fraud and financial risk,
statements. These statements, how-
and to effect accountability.
ever, tended to be – for the most
The majority of firms surveyed
part – cosmetic in nature. The ma-
also indicated that they do not sup-
jority did not include a statement of
port political funding. However, de-
commitment to stakeholders. Over
spite this overwhelmingly negative
70% of the companies stated that
response, it is well known that Sri
they did have a code of conduct,
Lankan companies generally do
business principles, and ethics but
fund political parties. It would ap-
most were either unwilling or un-
pear that these companies do not
able to provide evidence of these.
wish to disclose their relationships
Around 70% also stated that train-
or affiliations with various political
ing on ethical practices was avail-
parties.
able for employees, but again no
About 78% of the firms (Figure 1)
evidence could be provided to sup-
surveyed acknowledged their social
port this. It was evident that most
responsibilities as employers, and
companies surveyed did not under-
this is evident in their mission state-
stand the importance of having a set
ments and annual reports. It ap-
of publicly available principles to
pears customary for an employer to
guide their corporate behaviour.
express commitment to social re-
On the specific issue of corrup-
sponsibility in annual reports and
tion and political patronage, more
other company publications. How-
than 75% of the firms surveyed did
ever, only 28% of companies con-
not have any policy statement. Only
duct employee satisfaction surveys
one firm complied with the guide-
and there is little evidence to sug-
lines set out for good practice by
gest that employee views are incor-
Transparency International. Good
porated into corporate policies.
governance is understood locally in
Policy-making tends to be the do-
a narrow sense, comprising the cor-
main solely of top management.
porate governance rules set by the
This is characteristic of the rather
Institute of Chartered Accountants
9
Altered Images: the 2003 state of corporate responsibility
16. Corporate responsibility in Sri Lanka 2003: a snapshot
the strong preference for confiden-
tiality and the not insignificant local
inter-firm rivalry and competition.
Around 80% of the companies
surveyed are not members of a local
or international business associa-
tion that would set standards or
guidelines for business conduct.
Just three companies surveyed
stated that they followed interna-
tional guidelines in designing
labour policies. Two followed the
charter of international labour ini-
Figure 1 Acknowledging social tiatives, which is a requirement for
responsibility as an ISO (International Organization for
employer Standardization) certification, and
one followed the guidelines set by
the Fair Labour Association.
feudalistic management style that ap-
pears to have been adopted by some
senior executives in Sri Lanka.
Are best practices and
international standards
taken into account?
Over 70% of the companies sur-
veyed do not adhere to any national
or international benchmark on best
practices, corporate governance,
safety measures, waste treatment,
and so forth (Figure 2). There are
no formal means for inter-firm
comparison and benchmark deve-
lopment. This lack of local enthusi-
Figure 2 Conformity to national or
asm for sharing information and
international benchmarks
working collectively may be due to
10
Understanding and Encouraging Corporate Responsibility in South Asia
17. Corporate responsibility in Sri Lanka 2003: a snapshot
A significant number of firms sur-
veyed have won national and interna-
tional awards for performance. These
include the Green Globe Certifica-
tion awarded to Aitken Spence Ltd,
the Best Factory in South Asia hon-
our awarded to Unichella Garments,
and the Visa Card Award to HSBC.
Seylan Bank (Sri Lanka) was a run-
ner-up in the corporate social respon-
sibility award in the field of poverty
alleviation—the first Asian award in
this field given by the Asian Institute
of Management.6 Figure 3 Commitment to the
Universal Declaration of
Are labour rights established Human Rights and to
and enforced? international labour
Only 33% of the sample agreed that standards
they have a commitment to the Uni-
versal Declaration of Human Rights do not apply to part-time or tempo-
and to international labour stand- rary staff.
ards (Figure 3). Most companies do About 38% of the surveyed firms
not understand that human rights have a strategy to implement labour
are a core component of the broader policies and carry out audits to
corporate social responsibility check whether implementation is
agenda. Around 46% of companies effective. About 40% have a board
have a publicly available corporate member responsible for implemen-
framework for human resource tation. Around 54% develop targets
management that includes labour and procedures for policy imple-
standards, employee relations, com- mentation, although, in most cases,
munication, training, health and sufficient resources are not made
safety, and equal opportunities. The available for proper policy imple-
rules and policies of most companies mentation. Half of all surveyed
6
Details at <http://www.aim.edu.ph/home/announcement.asp?id=425>, last accessed on
15 March 2004
11
Altered Images: the 2003 state of corporate responsibility
18. Corporate responsibility in Sri Lanka 2003: a snapshot
companies report on their labour Representatives of labour unions
practices. However, just one of belonging to India, Pakistan, Bang-
the 50 firms surveyed conforms to ladesh, and Sri Lanka have resolved
SA 8000, the auditable international to set up a labour commission of the
standard for companies seeking to South Asian region to monitor the
guarantee the basic rights of workers enforcement of labour rights
[SA stands for social accountability]. (Mishra 2003). This reinforces the
Almost all companies stated that resultant view of this survey, that
they do not engage in unfair dis- there is a problem with enforce-
missals. However, there is consider- ment. External enforcement
able evidence in the media and through the legal process as well as
employee protests, that some firms holding firms accountable through
have been party to cases of unfair other means, such as adverse pub-
dismissal. Only 16% of the compa- licity and lobbying, appears to be
nies stated that they had faced ma- low.
jor legal disputes relating to labour
Are worker health and safety
policies and practices.
Local labour laws are compre-
properly prioritized?
hensive in attempting to protect There is a relatively higher commit-
employees. However, the cost of liti- ment to health and safety in the
gation is prohibitive for most. In ad- workplace, compared to other la-
dition, a culture of corruption bour-related policies. As many as
ensures that officers of various em- 85% of the firms believe that they
ployee benefit organizations, such provide clean, healthy, and safe
as the Employment Provident Fund working conditions (Figure 4). Also,
or the Employment Trust Fund 70% have reported that they pro-
may, sometimes, be open to bribes, vide proper training on health and
in order to avoid legitimate cases safety to their staff, while 64% claim
being subject to legal process. The to have adequate procedures for im-
serious problems surrounding liti- plementation. The surveyed em-
gation in Sri Lanka are pervasive, ployees echoed this view; most
not only in the area of industrial re- believed that health and safety sys-
lations, but also in civic life, and tems were monitored regularly and
impede the enforcement of law and enforced.
the safeguarding of the rights of Training on health and safety is
employees. mainly aimed at workers on the
12
Understanding and Encouraging Corporate Responsibility in South Asia
19. Corporate responsibility in Sri Lanka 2003: a snapshot
issues appears, in some cases, not to
be understood.
Only four of the surveyed firms
appear to formally report accidents
publicly. Some take prompt action
as laid down by the Workmen’s
Compensation Act, and some re-
port accidents internally to the top
management. The common under-
standing is that most cases are set-
tled through informal means
(commissions, bribes, etc.) without
public disclosure. Around 22% of
Figure 4 Maintenance of good the firms were subjected to fines
working conditions and prosecutions, indicating that
some form of legal process is avail-
able and the law is enforced to some
shopfloor and covers fire drills, ex- degree. Around 25% of the firms
plosions, toxic emissions, burns, had faced civil suits.
and wounds. Managers and super-
visors in some firms are trained in
Is there evidence of child
procedures to deal with explosions
labour or gender and racial
and terrorist attacks. However, only
discrimination in the
around one-third of the companies workplace?
audit the implementation of health Child labour is prohibited by legis-
and safety procedures and policy. lation in Sri Lanka. Large compa-
Very few firms report on health and nies generally do not employ
safety incidents, and most are not children aged under 14 years. Em-
aware of benchmarks that could be ployment of children as domestic
set in this area. One company re- servants is also prohibited by law;
sponse to the question of external while there is general awareness of
reporting was that there was no this, children are sometimes em-
need for external reporting as ac- ployed in some households.
tion was taken immediately. The There is evidence of both gender
need to report, measure, and effec- and racial discrimination in the
tively manage health and safety workplace in Sri Lanka. Although a
13
Altered Images: the 2003 state of corporate responsibility
20. Corporate responsibility in Sri Lanka 2003: a snapshot
relatively high proportion of com- the majority of the workforce, and
panies surveyed (63%) have policies companies such as Slimline have
to ensure equal opportunities (Fig- implemented progressive practices
ure 5), covert discrimination exists. to support female staff by encourag-
Around 56% of the employees sur- ing equality and supporting and
veyed believed that their companies addressing gender differences.
preferred to employ women only To contextualize gender dis-
from a certain age group, while 90% crimination, certain gender-related
disagreed with the statement that statistics for Sri Lanka are helpful.
their company preferred not to em- Women comprise 37% of the total
ploy women. Women tend to be dis- labour force of 8 million.7 The un-
criminated against in certain employment rate for women stands
companies and sectors, especially at around 16% compared to nearly
those requiring employees to work 10.6% for men. The adult illiteracy
late evening shifts. However, in the rate for women is 11% compared to
garment industry, women comprise 5.6% for men.
Discrimination on the basis of
race, social origin, school, and po-
litical affiliation is pervasive in Sri
Lankan society, and is generally
reflected in the workplace. Compa-
nies with ownership and manage-
ment from a particular ethnic group
tend to hire employees from the
same ethnic group. They do not ac-
tively seek to encourage diversity
through their recruitment policies.
Are workers paid satisfactory
wages?
All firms state that their remunera-
Figure 5 Policies for equal
tion policies are fair. However,
opportunity
worker demonstrations and union
7
Details at <http://devdata.worldbank.org/genderstats/genderRpt.asp?rpt=profile&cty=
LKA,Sri%20Lanka&hm=home>, last accessed on 15 March 2004
14
Understanding and Encouraging Corporate Responsibility in South Asia
21. Corporate responsibility in Sri Lanka 2003: a snapshot
action and protests suggest other- (first year), and 2575 SLR (~37
wise. There can be wide variation in dollars) for sewing machine opera-
wages by industry sector. In Sri tors and iron operators (first year).
Lanka, there is no single national In most cases, the minimum wages
minimum wage. 8 The Wages Board are too low to attract workers, and
Ordinance regulates wages and firms need to pay wages higher than
other payments for persons em- the stipulated minimum. The
ployed in 39 different trades and employees surveyed were mostly
sectors. The current minimum happy with wages, overtime pay,
monthly wages for the garment and labour conditions.
manufacturing trade, last increased
in April 1998, are 2000 SLR (Sri
Are employee human rights
adequately safeguarded in the
Lankan rupees) (~29 dollars) for
workplace?
trainees and helpers, 2525 SLR
(~36 dollars) for unskilled workers There is evidence that the rights of
employees to join trade unions, not
to work overtime, and to be safe-
guarded from sexual, physical, or
mental harassment are compro-
mised in Sri Lanka in varying
degrees (Figure 6).
In Sri Lanka, almost all leading
trade unions are affiliated with the
main political parties of the coun-
try, and operate on a political
agenda rather than on a company-
specific, work-oriented remit. Sri
Lankan employers therefore tend to
view trade unions as a problem, and
trade unionism as a vehicle for
worker association is rejected and
Figure 6 Support for trade union
actively discouraged by companies.
activities
In July 2003, a case made legal
8
Details at <http://www.dol.gov/ILAB/media/reports/oiea/wagestudy/FS-SriLanka.htm>,
last accessed on 15 March 2004
15
Altered Images: the 2003 state of corporate responsibility
22. Policies to prevent harassment
Corporate responsibility in Sri Lanka 2003: a snapshot
history in Sri Lanka when a referen-
dum was held at Polytex Garment
Industries, to decide on the eligibi-
lity of a trade union to represent the
workers. As many as 82% of the
workers voted in favour of such re-
presentation. The concerned trade
union was considered not to repre-
sent any party or political affiliation
(SLDN 2003). In July 2003, the
ILO (International Labour Organi-
zation) made a formal complaint to
the Sri Lankan government regard-
ing violations of the principles of Figure 7 Policies to prevent
freedom of association and the right harassment
to collective bargaining. The case
concerned the Jaqalanka Ltd fac-
tory where the management and Sexual harassment of Sri Lankan
others, including Sri Lanka’s Board migrants, domestic workers, and
of Investment, are alleged to have workers employed in the plantation
intimidated workers during the sectors and free trade zones was
weeks preceding an election, to de- highlighted in an ILO statement in
termine whether the union had 40% September 2003, when the director
membership and could therefore be of the ILO’s Colombo office
recognized as a collective bargain- launched a code of conduct and
ing agent (ILO 2003). procedures, which would address
Only 30% of the surveyed firms sexual harassment in the workplace
have a policy to prevent sexual, in Colombo (Kannangara 2003).
physical, or mental harassment of Most permanent full-time work-
staff (Figure 7). Although the lack ers are covered by laws that prohibit
of policy does not necessarily mean them from regularly working more
that violations take place, there is than 45 hours per week (a five-and-
some evidence to suggest that har- a-half day workweek). Although all
assment does take place and that the firms surveyed agreed that they
these incidents are not reported due conform to working time legisla-
to the staff ’s fear of losing their jobs. tion, 40% force their employees to
16
Understanding and Encouraging Corporate Responsibility in South Asia
23. Corporate responsibility in Sri Lanka 2003: a snapshot
work overtime (Figure 8). While this welfare, tend to practice social phi-
is illegal, companies tend to prey on lanthropy by providing scholarship
their employees’ fear of losing their awards to universities, donations to
jobs to enforce overtime work. hospitals, and donations to commu-
This is particularly prevalent in nities adversely affected, for exam-
export-oriented companies strug- ple, by drought. Only 27% of the
gling to meet delivery and shipping companies stated that they conduct
deadlines. community opinion surveys and
18% stated that they report on com-
munity welfare in their annual re-
ports and company news bulletins.
Just under half the companies
tended to recruit staff and make
purchases from the local commu-
nity. Other firms had no clear policy
on supporting their local communi-
ties in an economic sense (Figure 9).
When company plans have a po-
tential effect on the local commu-
nity, just 33% of companies stated
that they have a formal policy for
prior consultation with their com-
Figure 8 Employees forced to work munities. It would appear that
overtime NGOs and other community
groups are not particularly active in
enforcing corporate accountability
How well do companies
to their local communities. Just 9%
support the community?
of the firms stated that they were
Community partnership activity is a targeted by civil society groups, for
novel concept for most firms in Sri policies or plans that affected the
Lanka. While some appear to be wider community. The issues that
aware of a responsibility to support most affected local communities
and invest in their communities, tend to be environmental, such as
most do not commit to this. The the disruption of the ecological ba-
small minority of companies, who lance, toxic waste emissions, and
subscribe to the idea of community water and air pollution.
17
Altered Images: the 2003 state of corporate responsibility
24. Corporate responsibility in Sri Lanka 2003: a snapshot
Figure 9 Factors to ensure rights and needs of the communities
A few firms encourage their em- any practices in place to suggest an
ployees to engage in community ac- awareness or sense of responsibility
tivities. Examples of this include for the environment. Environmental
fundraising for local cancer hospi- regulations do exist in Sri Lanka but
tals, campaigns to channel aid to are often violated by companies.
drought-affected areas, organiza- The media tends to report on these
tion of and support to peace violations when the lives and liveli-
marches and rallies in favour of the hoods of local people are affected.
recent government peace initiative, One-third of the companies sur-
and assistance to disabled soldiers. veyed have a public environmental
policy, and a similar proportion has
Are environmental protection
policies that commit to continuous
policies and practices in place?
improvement on environmental prac-
Two-thirds of the companies sur- tices. About 27% of the companies
veyed had neither any policies nor train employees on environmental
18
Understanding and Encouraging Corporate Responsibility in South Asia
25. Corporate responsibility in Sri Lanka 2003: a snapshot
protection and participate in volun- publish environmental reports
tary environmental programmes; (Figure 10).
24% of the companies have a board Most companies do not have an
director responsible for environ- overall environmental management
mental issues; and 18% believe that system. Only 25% of companies
they set aside adequate resources stated that they had such a formal
for environmental protection and system. None of the firms surveyed
Figure 10 Key factors: environmental policy and implementation
19
Altered Images: the 2003 state of corporate responsibility
26. Corporate responsibility in Sri Lanka 2003: a snapshot
had obtained ISO 14000 or Eco- 33% have programmes promoting
Management and Audit Scheme ac- designs for the environment, cover-
creditation. Around 30% of the ing energy, materials, toxic reduc-
companies appear to have a policy tion, recyclables etc. None of the
of minimizing and preventing firms surveyed had quantified the
waste. There is almost no awareness market benefits of environmentally
of the need to conserve water. Most preferable products, and 30%
companies do not see water as a stated that they regularly reported
scarce resource and therefore have to consumers on environmental
no policies or practices to prevent risks, and provided instructions on
water wastage. The larger compa- safe disposal of material. None of the
nies do not practise material recy- firms surveyed appeared to have
cling or the usage of recycled faced any legal action relating to a
materials. A few small firms operat- breach of environmental regulations.
ing in niche markets appear to have Meanwhile, two Sri Lankan ho-
some initiatives on using recycled tels were recently awarded the
materials. prestigious Green Globe award for
In terms of managing and mini- sustainable tourism. The Kandalama
mizing the environmental risks as- Hotel received this accolade in 1999
sociated with goods and services and has recently obtained ISO
produced by the firms, just 24% of 14001 accreditation. In 2001, the
the companies stated that they had award was won by The Deer Park
appropriate policies in place. About Hotel. ✤
20
Understanding and Encouraging Corporate Responsibility in South Asia
27. Conclusions and next steps
3 Conclusions and next steps
T his survey has revealed a
number of areas where there is
considerable scope for improving
perhaps necessitated attention and
action to be focused on perpetrators
of humanitarian abuses other than
CR practices in Sri Lanka. the corporate sector. For example,
the recruitment of child soldiers
Lack of understanding and and child abuse are issues that have
awareness of corporate been highlighted in the local and
responsibility foreign press.
A significant finding of this survey is Nevertheless, there is significant
the need for training and develop- opportunity to educate and raise
ment to counter the lack of under- awareness on CR, at least in terms
standing and awareness of the of a traditional business perspec-
broader stakeholder approach to tive, so as to meet the requirements
CR. The historical and social rea- of international buyers of Sri
sons for this include the relatively Lankan goods. The importance of
small size of the private sector, a export-oriented business for the Sri
feudal culture of management re- Lankan economy is critical. There is
sulting from a colonial past, and a also potential for Sri Lankan
massive disparity in income levels corporates to improve their local
between executive management and reputation through CR initiatives.
shareholders and workers. The seri- The need to educate and establish
ous political upheaval and civil war such practices is perhaps most ur-
of the past two decades has also re- gent due to the political nature of
sulted in other significant humani- the corporate sector. It could be
tarian and social problems that have considered particularly useful to
21
Altered Images: the 2003 state of corporate responsibility
28. Conclusions and next steps
have external guidelines and en- based on mutual respect and coop-
forcement of CR to counter the cor- eration rather than suspicion.
porate sector’s inherent tendency
for political manoeuvring, in a Civil society in the initial
country subject to high political stage of understanding
risk. corporate responsibility
The perspectives elicited from Sri
Room for improved enforce- Lankan civil society in this survey
ment of national labour suggest that the concept of civil ac-
policies and worker rights tivism has possibly been thwarted
This survey also indicates a prob- by two decades of politicization and
lem with the enforcement of labour control. Civil society is, under-
rights in Sri Lanka. The checks and standably, mainly focused on sig-
balances in the form of due legal nificant concerns arising directly
process and trade unionism, for ex- and indirectly from the civil war.
ample, to help protect and defend There is an opportunity to increase
the rights of workers, appear to be awareness of the role of civil society
ineffective, thwarted, or actively in encouraging and initiating local
discouraged in Sri Lanka. While the CR practices. Opportunities for
issues with Sri Lanka’s legal process mutually beneficial partnerships
will take time to resolve, a between corporates and NGOs also
stakeholder approach to building ought to be explored.
employee relationships based on
employee participation in policy- Limited understanding of
and decision-making can mutually sustainable development
benefit both the employees and the and links to corporate
management. Raising awareness of responsibility
employee rights and training in The survey indicates that there is
building mutually beneficial em- scope to increase education and
ployee–management working rela- training on sustainable develop-
tionships could provide significant ment in the context of CR. The ben-
benefits without having to resort to efits of, and the necessity for,
labour policy enforcement. This sustainable development needs to
could be an important initial step in be encouraged across all sectors in
forging responsible relationships Sri Lanka, and not, as it is perhaps
22
Understanding and Encouraging Corporate Responsibility in South Asia
29. Conclusions and next steps
perceived today, as an attractive fea- these areas through sustainable
ture for the hotel industry which practices, could serve as an initial
attracts international awards and kick-start into action in this area.
attention, and commands premium
prices. Next steps
A United Nations Environment This report has served to highlight
Programme report in 2001 high- some key areas that require the at-
lighted the five top areas of environ- tention of managements, workers,
mental concern in Sri Lanka: civil society, and the government in
(1) land degradation by soil erosion, order to improve the effectiveness
(2) waste disposal, (3) pollution of and scope of CR in Sri Lanka. There
inland waters, (4) biodiversity loss, is considerable potential for col-
and (5) depletion of coastal re- laborative action and capacity
sources. An analysis and training building at the local level to intro-
programme for corporates and civil duce and sustain the agenda for CR
society representatives on how com- in Sri Lanka. ✤
panies can effect improvement in
23
Altered Images: the 2003 state of corporate responsibility
30. References
References [Available online at <http://
Ansoff H I (ed.). 1969 www.icftu.org/displaydocument.asp?
Business Strategy, p. 239 Index=991218328&Language=EN>,
Harmondsworth, England: Penguin last accessed on 17 March 2003]
Bernstein A and Berger P L (eds). Kannangara A. 2003
2000 Need for eradicating sexual harass-
Business and Democracy: cohabi- ment at workplaces stressed
tation or contradiction?, p. 8 Sri Lanka Daily News, 18 September
London: Centre for Development and 2003
Enterprise [Available online at <http://
www.dailynews.lk/2003/09/18/
Bose N K (ed.). 1947 new24.html>, last accessed on
Selections from Gandhi 17 March 2004]
Ahmedabad: Navajivan Publishing
House Kumar R. Forthcoming
Slimline Case Study
Freeman R E. 1984 New Delhi: TERI Press
Strategic Management:
A Stakeholder Approach Mishra B. 2003
Boston: Pitman Publishing Company S Asian labour unions plan a
commission
Friedman M. 1958 The Times of India, 11 December 2003
Three major factors in business [Available online at <http://
management: leadership, decision- timesofindia.indiatimes.com/cms.dll/
making and social responsibility html/uncomp/
[Talk delivered at Eighth Social Science articleshow?msid=187351>, last
Seminar, 19 March 1958, as summa- accessed on 15 March 2004]
rized by W A Diehm in Social Science
Reporter, and cited in Ansoff 1969] SLDN (Sri Lanka Daily News). 2003
Referendum decides on trade
Gandhi M K. 1939 union representation
The Harijan (Poona), 16 December Sri Lanka Daily News, 2 August 2003
1939 [Available online at <http://
[cited in Bose 1947] www.dailynews.lk/2003/08/02/
ILO (International Labour Organiza- new30.html>, last accessed on
tion). 2003 17 March 2004]
ILO Complaint: Sri Lanka: Wheeler D and Sillanpää M. 1997
anti-union tactics in Jaqalanka Ltd The Stakeholder Corporation: a
(EPZ) (Complaint letter to the blueprint for maximising share-
Sri Lankan government) holder value, p. ix
London: Pitman Publishing Company
24
Understanding and Encouraging Corporate Responsibility in South Asia
31. About TERI-Europe
A charity set up by TERI, India and approved by the Charity Commission for
England and Wales, TERI-Europe endeavours to strengthen the linkages be-
tween India and Europe by (1) exploring common grounds for
solutions to global problems like climate change, (2) setting up databases to
facilitate appropriate technology choices in various sectors of the economies,
(3) informing European industry about business opportunities in India’s
energy and environment fields, and (4) promoting dialogue between
organizations on pertinent issues like corporate social responsibility.
Further details at <www.teriin.org/teri-eu/index.htm>
About New Academy of Business
The New Academy of Business is an independent business school with a
vision to build a just and enterprising future. It works with entrepreneurs,
educators, managers, activists, policy-makers, and other change agents to
produce educational activities and resources. Its major activities are
teaching, collaborative research, organizational learning, and eLearning.
Further details at <www.new-academy.ac.uk>
About LGA Consultants (Pvt.) Ltd
With a focus on building a sustainable future for the world, LGA Consultants
provides international consulting services in the areas of renewable energy,
rural energy, and business development. It has undertaken projects on climate
change, marketing, and human resources training for donor
agencies and governments either on its own or in partnership with local/
international consultants. It has an alliance with Sage Training (Pvt) Ltd, a
human resources development and training organization based in Australia
and Sri Lanka. The focus in Sri Lanka is on leadership and soft skills
development.
Further details at <www.sagetraining.com>
