Student Research Projects/Outputs No.

003

ImplementingCorporateSocialResponsibility inHealthSector
SamLee MBA2005
ChinaEuropeInternationalBusinessSchool 699,HongFengRoad Pudong,Shanghai PeoplesRepublicofChina

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Index WhatisCSR WhyNow? CSRinHealthSector Ex.Bayer LearningPoints WhatisCSR? CorporateSocialResponsibility(CSR)hasbeenanuprisingissueforlasttwodecades.Ithas beendevelopedfromUSandEuropesimultaneouslyoverseriesofirresponsibleactivities from large MNCs (MultiNational Companies). Since the beginning of the new concept, globalcompanieshaverevisedtheircodeofconductsandethicalregulationstobeableto provetotheirstakeholdersthattheyarearesponsiblebusinessentityandthattheprofit given back to the shareholders are not from unethical practices. CSR involves multiple stakeholders, including the government, shareholders, employees, consumers, media, suppliers,NGOs,andthegeneralpublic. CSRhasbeendefinedbymanygroups.Althoughtheyallbearsimilarmeaningsrelatingto taking responsibilities of the society as a business entity, its definition has been getting wider from a traditional point of view of philanthropy and volunteerism to doing the businessinaresponsibleway. WhatisclearisthatCSRisbecomingoneofthecleartopicsofinteresttothestakeholders.

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At the current stage of CSR development, rather than spending a certain portion of a companys profits for a good cause, most updated CSR guidelines tell companies to concentrate on earning the money in a responsible way. And the cost of changing the current steps of making money to a more responsible way is considered as a CSR investment towards the society and the company itself, heavily emphasizing sustainable development.Thus,CSRcouldbedefinedasaresponsibilitythatacompanyhastowards its stakeholders in earning profits. Traditional way of thinking CSR as a donation or a volunteerism is only a very little part of current CSR, which has been started to be considered as a part of a corporate strategy for many multi national companies. Large companies need to build social issues into strategy in a way which reflects their actual business importance. says Mr. Ian Davis, Managing Director of McKinsey & Company, throughanarticleonEconomist. WhyNow? CSRismoreabouthowonemakesmoneyratherthanhowonespendstheirmoney.CSR hasbeenviewedbyseveralcompaniestobetheirnextblueoceanstrategy.Withallthe interest from stakeholders from around the world, CSR will be stressed more and even maybeenforcedinthecomingfutureforeverybusinessentity.Companieswillneedtoact upontheissue,pressuredfromitsstakeholders,whetherthebusinesslikesitornot.ISO (International Standard Organization) has been producing ISO 26000 on Corporate Responsibilities, to be launched in 2008, and many countries are developing their own CorporateResponsibilitiesguidelinesfortheircompanies.Thetimeframeatthemoment lookslikealasttrainforearlybirdstogetonboard.Infewyears,everycompanywillbe lookingattheirresponsibilityguidelinesandthosewhostartedearlyenoughwillgetabig headstartonthematterwithrelativelyeasymaintenancetodo.Bottomline,ifacompany startsnowtoconsiderCSRastheircorporatestrategyandbuildsasystematicapproachto

Sam Lee

theissue,itwillsavelotsoftroubleandresourcesinthefuture. CSRinHealthSector Health Sector clearly stands out as a leader, when discussing the CSR issues. Part of the reason will be its close relation to its multiple stakeholders of society, government, and otherprivatesectors.Anotherpartofthereasonmaybethatitswayofmakingprofitshas abiggerrelationshiptopeopleslivesbyaffectingtheirhealthproblemsratherthanother businessentities. There are numerous epidemic diseases and other serious diseases in the world which needs close attention, both from public sector and private sector (i.e. HIV/AIDS, Avian Influenza,andetc.).Inorderforauthoritiestotakeclosemeasuresandkeepthediseases undercontrol,criticalamountofresourceisessential.Thisiswhenpublicturnstoprivate sectorssupport.However,justbybeinginthissectordoesnotgiveoneanobligationto contributetothesesocialhealthissuesasitbearslotsofproblems.Andthereisalotmore tosupportingtheseissuesforaprivatesector,asdescribedinthedefinitionofCSR. Healthcare companies have been blamed in the past for their issues including different prices on some critical medications sold over the world. They simply cannot lower the price in countries where the critical amount is needed (e.g. HIV preventive medicine in Africa) since theyve had incidents where the donation has been sent back to the local blackmarket.ThisalsohasaproblemwithIPregulationstodealwith.Althoughthereare not clear solutions for these problems, the matter is being seriously looked in to for improvement.Bottomline,Pharmaceuticalcompaniesarewillingtosharetheirknowhow under no extra cost to provide medicine to these patients if IP laws and black markets problemsareresolved.Thisisonlyasingleproblemoutlinedfrommanyother.However,

Sam Lee

they healthcare companies needs to constantly think of innovative CSR approaches with pressuresfromtheirstakeholders. There are two foremost jobs of Health Sector companies before they solve the complex issuesofhelpingtheneedy. First of all, the business units have to be earning in a responsible way. This has to be communicated to supply chain, marketing, finance, HR, and other departments throughout the company. If a company is contributing to HIV/AIDS issue but with the moneyfromillegaltransactionorfromsellingmedicinespackagedbychildren,whatgood isit? Second,HealthSector,justlikeotherbusinesssectors,needstofocusoncertainareasto contribute to the society and link it with their business. This does not have to directly relate to their products or services and this would be the clear difference of healthcare companies compared to other industry companies. However, overall, there needs to be cleareffectsandcompaniesneedtorealizethat.Asaresult,bydoingbusinessandmaking money,businesscouldbecontributingtothesociety.Thisiscertainlynotaneasytaskbut notimpossible. Whenabovetwopartsareimplementedasacorporatestrategy,acompanyinthehealth sector would be recognized by the public rather than be blamed upon for only chasing aftertheprofit. HereisagoodexampleofaHealthcarecompanythatisdoingverywellinCSR. <BayerinChinaandGermany>

Sam Lee

Bayer,althoughachemicalcompany,isbetterknownasahealthcarecompanyanda companythatproducesAspirintoconsumers.Thisisoneofthereasonsthatthey concentratealotonPublicHealth.TheyhavedefinedtheirfocusonDisabledpeopleand HIV/AIDS. ThisinitiativeisdriveninChinabytheBayerChinaCommunicationteam.Bayersupports numerousactivitiesonHIV/AIDSinChina.Theideahasbeenclearlycommunicatedwithin thecompanyandChineseemployeeshavechangedthemselvestolovingtheinitiatives aftermanyattemptsbythemanagementfortheiremployeestoreallyfeelit.Currently theyhavehiredmanydisabledpeopleandareeventryingtorecruitHIV/AIDSaffected employeesonatrialbasis.InChinacurrently,itisveryhardtospotdisabledpeopleonthe street,whomhavenotbeenacceptedaspartofasociety. BayerhasstartedcallingtheirCSRpracticesasinnovations.Explanationtothis InnovationsmeanthattheBayersmanagementhasconcludedthattheirCSRpractices ishelpingtheBayerChinasbusinessgreatlybothinternallyandexternally.BayerChinas CommunicationdepartmentheademphasizesthatCSRshouldnotbesomethingtogive backtothesocietybutsimplyabusinessstrategyforacorporationthatisimpactingthe society. Usingthecommunicationsbackground,theCSRteamlaunchedaStudiesprogramwith TsinghuaUniversityonHIV/AIDSprogramforjournalists.BybringingChinasimportant journaliststodiscussaboutwhathasbeenconsideredasaprovocativeissueinChina,has beenarealsuccessforBayerscommunicationstrategies.Bayerhasproventothemthat Ajournalistcansavemorelivesthandoctors. Bayer China also is the biggest supporter of Special Olympics and has close communications with the athletes regularly. Bayer China currently has a team of eight people working full time for their CSR communications team working on five different

Sam Lee

focuses that they have identified. It is one of the biggest CSR team in a single company operatinginChina. To surprise, Bayer China is dealing with all the initiatives, not Bayer Healthcare. Internal employeehasmentionedoncethatBayerssocialactivitiesdonothelpBayerHealthcare orotherBayeraffiliatessalesatall.Asmentioned,Healthcarecompaniesshouldbeaware ofearningdirectgainsfromtheirCSRactivities.ThenwhatgainsdidBayerhave? First, employee satisfaction of Bayer China is well above average. Turnover rate, new employee recruitment performance of Bayer has greatly increased since Bayer has been acknowledged in public. Second, Bayers brand awareness has increased tremendously, placingBayerasoneofthe topGermanbrandsinChina. Third,stakeholdersaroundthe world, including ones in Germany, developed firm beliefs in Bayer Chinas operations. Lastly, Bayer has been acknowledged by the PRCgovernment as one of the mostethical MNCsinChina.Withallthesegainsthataresomewhathardtomeasure,Bayer(including Bayer Healthcare)s sales most likely did increase due to Bayer Chinas activities. Bayer Healthcare is looking in to Micro Financing these days by helping poor rural people to launchtheirownbusiness.Again,thisdoesnothaveadirectrelationshiptotheirsalesbut willeventuallyhelpBayersreputationinChina. Bayer HQ in Germany concentrates more on sustainable development and global partnershipssuchastheonewithUnitedNationsonEnvironmentalprotectionorGlobal Compact missions. Also, they have partnered with WHO (World Health Organization) to helpAfricanpeoplessleepingsicknessproblem. ThereclearlyisadifferencebetweenChinasoperationandtheHQs.Onethingnotableis thatregionaloperationhasadeeprelationshipwiththecountrysdevelopmentstageand

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theproblemsthatthesocietyhas.InChina,thesocietysgrowthstillisunbalancedwith therecenteconomicgrowththatthecountryhas.Thuslotsofimpactcouldbeachievedby private sectors when they concentrate on certain issues. Bayer has done it well in that sense. BayerChinassuccessstoryiscurrentlyspreadingtoJapan,Korea,andotherneighborhood countries.SuccessisnotguaranteedsincethesecountriesaremoredevelopedthanChina butitwillbeagreatcommunicationstrategyexperiment. LearningPoints 1.InHealthcareindustry,CSRisharderthannormalindustrialcompanies.CSRshouldnot directlygivebenefitstocompanysgrowthorrevenuesinarelativesense.Customersare morejudgmentaltowardshealthcarecompanieswhentheyareengagedinasocialcause. Thus,CSRshouldnotbeconsideredasaPRshow. 2.RegionalandHQoperationisdifferentintermsofCSR.RegionalCSRstrategieswillhave moreimpactonthesociety.Thiswillworkwellindevelopingcountriesandmaynotwork wellindevelopedcountries. 3. CSR, in general, will improve both internal and external relationships with different stakeholdersaroundthecompany.