In the midst of these transformative global changes, businesses in Pakistan are finding themselves at a crossroads
Human capital is the cornerstone of thriving, productive economies, and Pakistan is no exception. Yet, like many nations around the world, Pakistan faces an array of challenges that threaten to undermine social mobility, increase inequality, and hinder economic growth.
In a global context marked by peaking inflation, accelerated climate change, energy and food crises, geopolitical tensions, and the lingering impacts of the COVID-19 pandemic, the imperative of addressing these challenges has never been more pressing.
The erosion of social cohesion and the polarization of society are significant risks in this environment, which could further compound the economic decline. The decline in societal harmony and increasing social unrest are recognized as top global risks in both the short and long term. It is estimated that this erosion of social cohesion could decrease gross domestic product (GDP) by as much as 1%. To address these challenges, a multifaceted approach is needed — one that encompasses government actions, progressive taxation, and a fundamental shift in the role of businesses.
Businesses in the Changing Landscape
In the midst of these transformative global changes, businesses in Pakistan are finding themselves at a crossroads. Traditionally, businesses have primarily focused on generating profit and providing employment. However, in the face of evolving geo-economic pressures, energy transitions, and rapid technological advancements, there is growing momentum for businesses to expand their role in addressing societal challenges.
While much attention has been devoted to embedding environmental sustainability practices within companies, there has been less cohesion when it comes to a common framework and operationalization of the people-centered impact of businesses. This article argues that businesses must play a pivotal role in addressing these challenges and presents a framework to guide their efforts.
Challenges Faced by Businesses
Before delving into the framework, it is essential to understand the challenges faced by businesses in Pakistan:
Complexity: There are numerous frameworks globally attempting to measure and capture business impact on society. Over 600 sustainability standards, industry initiatives, and guidelines exist worldwide. However, these frameworks often lack practical guidance on how businesses can operationalize strategies that consider the impact on workers, value chains, consumers, and communities while accounting for regional, sectoral, and cultural nuances.
Quantifiability: Unlike environmental sustainability, which benefits from robust scientific research and metrics, assessing “social net zero” is more challenging. Many companies tend to focus on quantifiable metrics such as gender representation and training hours provided, which may not capture the holistic impact or subjectivity of social issues.
Capacity: The social agenda within companies is often concentrated in specific functions, such as the Chief Human Resource Officer or Chief Diversity and Inclusion Officer. While these functions are vital, a more comprehensive impact can be achieved through strategic planning across all business functions.
Reactivity: Without a fundamental framework, many companies may adopt a reactive approach to social issues, responding to current events or new regulations rather than proactively addressing the root causes of inequality and social divisions.
The Framework: Operationalizing Equality of Opportunity
The Business Framework for Operationalizing Equality of Opportunity, as suggested by the recent World Economic Forum’s Report, for Pakistan, it provides practical guidance for businesses to establish sustainable practices that promote equality of opportunity systematically. It is designed to assist business leaders, whether they are just beginning to define their stakeholder impact strategy or are looking to refine existing strategies.
Defining Equality of Opportunity
In Pakistan’s context, defining equality of opportunity is a critical first step. This definition should consider the unique socioeconomic challenges and realities faced by the workforce, value chains, consumers, and broader communities in the country.
Equality of opportunity refers to the principle that all individuals, regardless of their background, characteristics, or circumstances, should have an equal chance to access and pursue opportunities in various aspects of life, such as education, employment, healthcare, and social participation.
It embodies the idea that one’s success or failure should not be determined by factors beyond their control, such as race, gender, ethnicity, socioeconomic status, religion, or disability. Instead, it emphasizes a level playing field where individuals can compete and achieve based on their merit, skills, and efforts. Equality of opportunity seeks to eliminate discrimination, bias, and systemic barriers that might hinder certain groups from fully participating in and benefiting from society’s opportunities and resources, aiming to create a fair and just society where everyone has an equitable chance to reach their full potential.
Defining the Stakeholders
Identifying and prioritizing stakeholders is essential for businesses in Pakistan. These stakeholders encompass the workforce, value chain, consumers, and broader communities. Tailoring strategies to meet the specific needs of these stakeholders is essential.
In the context of a business or organizational setting, stakeholders are individuals, groups, or entities that have a vested interest in the activities, decisions, and outcomes of the organization. These stakeholders can be classified into various categories, each with its unique interests and roles. The primary stakeholder categories typically include:
- Shareholders or Owners: These are individuals or entities that hold ownership shares or equity in the organization. Their primary interest is often financial, seeking returns on their investments in the form of dividends or capital appreciation.
- Customers: Customers are individuals or entities that purchase goods or services from the organization. They have a significant stake in the quality, price, and availability of the products or services they receive.
- Employees: Employees are the workforce of the organization. They have a stake in their employment conditions, salaries, benefits, and overall workplace well-being.
- Suppliers: Suppliers provide the organization with the necessary materials, components, or services to operate. They have an interest in maintaining a stable and mutually beneficial relationship with the organization.
- Creditors: Creditors include banks, financial institutions, or bondholders who have extended credit or loans to the organization. Their stake lies in the repayment of debts and the financial stability of the organization.
- Government and Regulatory Bodies: Government agencies and regulatory bodies oversee and regulate the organization’s activities. They have a stake in ensuring compliance with laws and regulations and may also be interested in tax revenue generated by the organization.
- Communities and Society: The local community and society at large can be stakeholders, particularly when the organization’s operations impact the environment, local employment, or the overall well-being of the community.
- Competitors: Competing businesses in the same industry or market can also be stakeholders, as they have an interest in market dynamics, competitive positioning, and industry trends.
- Non-Governmental Organizations (NGOs) and Advocacy Groups: NGOs and advocacy groups may be stakeholders if they focus on issues related to the organization’s operations, such as environmental concerns, social justice, or consumer rights.
- Media and Public Opinion: The media and the public can influence the organization’s reputation and public perception, making them stakeholders with an interest in the organization’s actions and behavior.
It’s important to note that the influence and significance of these stakeholder groups may vary depending on the organization’s size, industry, and specific circumstances. Effective stakeholder management involves recognizing and balancing the interests of these groups to ensure the organization’s success, sustainability, and responsible conduct.
Identifying Business Functions
To effectively promote equality of opportunity, businesses in Pakistan need to align their efforts across various core functions. These functions may include People and Human Capital, Research and Development, Sales, Marketing and Communications, Production, Government and Public Relations, Finance and Investments, Information Technology, and Procurement and Logistics. Collaboration and synergy among these functions are vital.
Within an organization, business functions, often referred to as departments or organizational units, are distinct components responsible for specific roles, tasks, and activities. While the names and exact functions may vary depending on factors such as the organization’s industry, size, and structure, several common business functions are typically found in many organizations.
Human Resources (HR) plays a vital role in managing personnel, including responsibilities related to recruitment, employee relations, training and development, compensation, and benefits. The Finance and Accounting function is responsible for financial planning, budgeting, accounting, financial reporting, tax compliance, and financial analysis.
Marketing and Sales departments are pivotal for promoting products or services, conducting market research, managing advertising, and enhancing brand identity, while Sales focuses on generating revenue through the sale of products or services. Operations and Production manage day-to-day processes such as manufacturing, product delivery, supply chain management, and quality control.
The Information Technology (IT) function oversees technology infrastructure, software development, data management, cybersecurity, and IT support. Research and Development (R&D) focuses on innovation, product development, and enhancing existing products or services.
Customer Service and Support are responsible for addressing customer inquiries, complaints, and support requests to ensure a positive customer experience. Legal and Compliance teams ensure adherence to applicable laws and regulations, handle contracts, and manage legal risks.
Public Relations (PR) and Communications departments manage the organization’s reputation, public image, and communication with the media and stakeholders. Supply Chain and Logistics functions are tasked with managing the movement of goods, materials, and information from suppliers to customers while optimizing the supply chain process.
Strategic Planning and Business Development encompass long-term goal setting and growth opportunity exploration, including partnerships and mergers and acquisitions. Quality Assurance and Control ensure that products or services meet quality standards and customer expectations.
Facilities and Administration oversee physical office spaces and infrastructure maintenance, while administration manages administrative tasks and support services. Environmental, Social, and Governance (ESG) or Sustainability units focus on sustainability initiatives, corporate social responsibility, and ethical practices.
Risk Management assesses and mitigates potential risks and uncertainties impacting the organization, while Corporate Communications manages internal and external communication, including corporate messaging and employee engagement. Sales Operations support the sales team with tools, processes, and data to improve efficiency and effectiveness, while Marketing Research and Analytics units conduct market research and analyze data to inform marketing strategies.
Product Management is responsible for product development, launch, and lifecycle management, and Training and Development focuses on employee training, skill development, and career advancement. The specific structure and nomenclature of these functions can vary, and some organizations may have specialized functions based on their industry and requirements. Effective collaboration among these functions is essential for the organization’s success in achieving its objectives.
The Role of the Regulator – Securities and Exchange Commission of Pakistan (SECP)
The Securities and Exchange Commission of Pakistan (SECP) plays a pivotal role in the Equality of Opportunity Framework by acting as a key regulator and promoter of fair and equitable business practices in the country. In this context, the SECP should actively support and enforce the principles outlined in the framework. Its role involves ensuring that businesses operating within the securities and exchange domain adhere to the principles of equality of opportunity.
This can be achieved by mandating transparency and disclosure requirements related to diversity and inclusion, corporate social responsibility, and other relevant aspects that contribute to social equity.
The SECP can also collaborate with businesses to encourage the development and implementation of diversity and inclusion policies, monitor their progress, and enforce compliance with relevant regulations. Furthermore, the SECP should actively engage with stakeholders, including investors, to promote awareness and accountability regarding businesses’ efforts in advancing equality of opportunity. Overall, the SECP’s role as a regulator should align with the framework’s objectives, fostering an environment where businesses contribute to shared prosperity and inclusive growth in Pakistan.
Using the Framework
Businesses can utilize this framework in the following ways:
Reflect and Assess: Evaluate their current contributions to fostering equality of opportunity, identify gaps, and adjust their strategies as needed.
Create Pathways: Develop strategies to promote equality of opportunity through their core functions.
Consider Impact: Analyze the impact of their daily actions and functional strategies on stakeholders in their workforce, value chains, consumers, and broader communities.
Engage and Collaborate: Participate in intra- and inter-industry exchanges on best practices, policies, and partnerships to drive meaningful change.
The Business Framework for Operationalizing Equality of Opportunity in Pakistan offers a roadmap for businesses to proactively address the root causes of inequality, social divide, and declining social mobility in the country. By aligning their efforts with this framework, businesses can contribute to shared prosperity, economic growth, and a more inclusive society in Pakistan.
As businesses in Pakistan use this framework to reflect on their social inclusion strategies, they should seek input from stakeholders, build cross-functional collaboration, and engage with partners from civil society, labor unions, and the international community. This collaborative approach will be essential in creating holistic strategies that promote equality of opportunity and shared prosperity in the Pakistani context.
The framework provides a valuable tool for businesses to navigate the changing landscape and actively contribute to building a more equitable and prosperous future for Pakistan.