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CSR Assignment

Over view of Purchasing Unit

The Purchasing Department is responsible for coordinating the acquisition of goods and services

with different entities of LUMS and suppliers; it ensures that LUMS gets the best value for

money. The purchasing department identifies suitable suppliers, works to reduce the costs of

bought in items, ensures that there are no shortages using tactics like multiple sourcing etc. The

entities include other departments of LUMS and the student body also. The unit has currently

eight employees. The head of the Purchasing Unit reports directly to the Vice Chancellor. The

position of the unit in the organization chart is given in Exhibit I.

The purchase process is initiated by the user by submitting an approved purchase order,

requisition, given in Exhibit III, to the purchase department. The order requisition should be

approved by the department head. The raised requisition is collected in the purchase department

by the Assistant/Purchase Officer which is then forwarded to the Finance department to verify

the budget of the department. After the verification, Assistant Manager of procurement approves

the requisition for purchase of the goods.

The goods are brought from the different parties according to the type of good that has to be

bought. LUMS has made long term contracts with some companies for certain goods for

example the binding files, computers etc. But if the procurement is really big for example

erecting new buildings then the unit calls for the quotation. The purchase unit gives high priority

to the specific user need for which the goods are to be purchased. The unit looks for particular

quality, brand etc that is needed by the user. The Assistant Manager of the procurement stated

that if there are three options and if the required quality is not offered by any of the options but a

higher quality is offered by one of them, then that option is chosen in spite of its higher price.

But in such a case, he also stated that unit will have to give justification to the Finance

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department for choosing that option. But the decision is mostly in favor of purchase unit.

However if all three or any two are meeting the quality criteria then they select the one with the

lowest price.

The Finance department checks each transaction made by the purchase unit so its job is to

perform internal audit. There is also external audit but it is conducted in Finance Department

only. The external auditors audit purchasing audit only when there is some confusion in the

finance department.

Stakeholders

After the discussion with Assistant Manager, Purchase Unit, we found many parties being

affected by the Purchase Unit. The stakeholders of purchase unit are shown in Exhibit II. The

main stakeholder is the department or party who has raised the purchase requisition order. On the

basis of their need the unit will be choosing the good and supplier. But the supplier plays an

important role as they control the quality and price of the good. Since the finance department

checks each and every transaction of the purchase unit, it is also an important stakeholder.

LUMS name will be used in all the transactions so LUMS itself is the biggest stakeholder. Again

the students are the main part of LUMS and all the units are working for the best interest of the

students, so they also have their say in the purchasing unit. The employees can also give certain

suggestions during the purchase of goods. Lastly, goods which purchasing unit buys will be

affecting the environment of LUMS thus making it a silent stakeholder.

CSR Activities: It was difficult to judge the CSR aspect of the Purchasing unit as the manager

didn’t possess that much knowledge regarding CSR, so in order to help educate and probe deeper

we took help of a Corporate Social Responsibility (CSR) Checklist for companies.1

1
Corporate Social Responsibility (CSR) Checklist for Electronics Companies by Ritu Kumar.

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Then CSR Checklist for companies provides guidance in four areas: Health and Safety,

Environment, Labor and Supply Chain. The Checklist promotes social and environmental

responsibility beyond legal compliance i.e. a company may apply the standards in this checklist

to supplement the requirements to fully comply with the laws, rules and regulations of the

countries in which it operates. Information collected from the department through the Checklist

is given in Exhibit IV.

Findings: Managerial decision making is based on the egoism approach. In egoistic model the

self-interests are the primary determinants of a person’s behavior. The purchasing unit doesn’t

look for what the supplier end is doing. The unit is indifferent to what is happening behind the

curtain i.e. if the suppliers from where the goods are being bought are involved in CSR activities

or not won’t affect the buying decision of the unit. The buying decision is only dependent on the

fulfillment of the criteria at the lowest price. For fulfilling the criteria, the unit can go for higher

price also.

Within the department, CSR activities go on to some extent. The unit is decreasing the paper

usage by using electronic system as described in Exhibit V. For example the unit has recently

begun to use the “indent raising system software” which used to be done on paper in earlier days.

Besides that, the employees are aware of turning off lights and computers when leaving the

office. The usage of dust bin to collect paper waste and plastic waste is observed. As per the

Asst. manager, the employees are treated in a non discriminatory equitable manner. They work

cohesively in a group.

The economic responsibilities of Purchasing Unit remain the bedrock foundation for its

business as employees are concerned about their evaluation which is linked with economic

responsibility. Legal responsibilities of Purchasing Unit are also vital. Regulatory know-how in

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complex environment gives a competitive advantage. Ethical responsibilities are not wholly

catered by the unit as it is mostly concerned about the financial performance and the approach is

towards self interest of the unit. The model is given in Exhibit VI.

Theoretical Frameworks

1. Action research model

2. Maintaining objectivity (objectivity test)

3. Stakeholder typology: power, legitimacy, urgency

A: Action research model

Recommendations:

1. Working with Suppliers to Implement CSR: In order to raise consciousness of Procuring

with a CSR perspective, LUMS can conduct CSR-conscious Procurement Conferences. At the

conference LUMS management should explain the CSR concepts regarding legal and regulatory

compliance, information security, the environment, human rights, (Exhibit VII) and explore as

well as enhance their understanding on CSR Procurement. LUMS management should also

express their expectation from the suppliers to become CSR conscious companies, in order to

have continued relations as best partners.

2. CSR-conscious Procurement Implementation System: LUMS should place purchase orders

with only those suppliers that contribute to the sustainability of society. If for some reason a

supplier violates the CSR requirements of the basic purchase agreement, they should make them

take immediate action to solve the issue and report to LUMS. Based on the contents of that

report, LUMS may take action to reduce or suspend business with that supplier. An evaluation

system should be used as given in Exhibit VIII.

3. CSR at the heart of Business: Establishing a leadership agenda

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Establishing CSR at the heart of business and thereby achieving higher business performance

does not require new management techniques but rather, new management perspectives.

For this purpose, the critical change factor is leadership inclination which is almost absent in the

purchasing unit as they believe that they are only responsible for baseline performance, and

evaluating suppliers on the basis of CSR is beyond their responsibility. For business leaders

wanting to move from conviction to a commitment to CSR in their organizations, there is a need

for a leadership agenda that can help them in communicating with their stakeholders, especially

staff. The leadership agenda has four key elements given in Exhibit IX.

4. Baseline Analysis: know where your organization stands: After interviewing the purchasing

unit employees we got to know that they have no grasp of the range of CSR activities being

undertaken either locally or globally. They are just concerned about their daily activities and

performance standards on which they are evaluated. The amount of work that they do on a daily

basis has no accountability on the basis of CSR framework. A route map should be provided to

the employees by the management so that they can guide their behavior towards CSR activities.

An example of such a route map is given in Exhibit X.

2. Maintaining objectivity (objectivity test)

Analysis

Visibility Test: Any action LUMS production unit takes should pass the test of transparency.

That is how comfortable would they be if any f their actions of links with suppliers come under

public scrutiny.

Generality Test: Coupled with visibility are their actions beneficial to society and would it be a

better world if they become the general norm?

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Legacy Test: The Managers must question themselves constantly that is this how we want to be

remembered, or if we make some change would we be known in a better light?

Recommendation: What we recommend is that firstly they need to be aware of CSR; how a

triple bottom line exists and how the production department should be accountable on all three

accounts. Unless they have the awareness and knowledge they can not begin to associate with it

and then they would not care about the above tests as they would not think anything is wrong.

But once that awareness base is crossed then these tests can govern their everyday actions.

3. Stakeholder typology: power, legitimacy, urgency

Analysis: A complete classification of the stakeholders is given in Exhibit XI.

Recommendations

Based on the stakeholders potential for cooperation, depicted in Exhibit XII, following

strategies should be adopted.

Collaborate: For stakeholders with both high potential for threat and cooperation, the team

should collaborate with them. These stakeholders can be a mixed blessing to the unit. An

example would include the LUMS Management – with its power to create rules and regulations

that could stifle the unit and its potential role

Involve: For stakeholders with a low potential for threat (low power/urgency) but a willingness

to cooperate, the unit should involve these groups in their plans. An example would be the

suppliers and environmental interest groups with a relatively low level of threat due to the fact

that they generally have less power and urgency in their claims as compared to the consumers

and employees. However, these stakeholders should be involved as they have high potential for

cooperation and the unit should make use of this. This could result in the gathering of important

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information, current concerns on the ground or tapping of expertise from, for example,

environmental interest groups.

Monitor: Stakeholders with low potential for cooperation and low threat should be constantly

monitored by the unit to ensure that they will not become a threat in the near future in today’s

rapidly changing world. A stakeholder with low potential for threat could become a serious threat

overnight because of changing roles, power personalities, etc. Hence, it is important to continue

monitor these stakeholders to prevent any potential threats from escalating further.

Defend: These are the stakeholders with a high potential for threat and a low potential for

cooperation. An example would be different departments competing for the same budgets and

employee promotions. The unit will do well to defend against the actions of these stakeholders

such as politics.

Conclusion:

Many a time’s ethics and social responsibility are left to gut feel or managed in an unsystematic

manner. What we are proposing all throughout this paper is to make it a routine part of ones

lives. As if one leaves CSR on instinct everyone has a different instinct and hence a different

perspective and in this confusion the CSR benefit suffers. If we follow the models proposed and

make them visible in the department, also gain acceptance from the over arching administration

they would also be tempted to adopt them. Also employees need to be trained to understand and

adopt them. The best practices of any department are bare if they do not support the right actions

and duties. Hence it is crucial to include CSR within them.

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Exhibit I

Exhibit II

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Exhibit III: Purchase Indent

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Exhibit IV: The CSR Checklist

Health and Safety (H&S)

Yes/No Comment
Does senior management demonstrate their commitment No Senior management never talked about
to Health & Safety CSR practices, so never thought about
eg H&S policy endorsed by senior management? giving it any importance.
Does the company have a formal H&S system? (eg No I don’t know. HR might have it but it has
OHSAS 18001) been never communicated to our
department.
Does the company have the appropriate H&S resource (eg Yes Doctor sits in the Sports Complex and
H&S manager, nurse, first aiders, fire fighters, etc) attends patients.
Do workers have the appropriate information, instruction No Our department never got any training on
and training on H&S issues? the CSR aspect.
Is there a fully operational Health & Safety Committee Don’t We never got any information on that.
(composition, frequency of meetings, minutes of know
meetings, etc)?
Is there a fully operational accident investigation and No There is no documentation if an accident
reporting system (management monitoring, investigation occurs at workplace.
reports, close out of actions, etc)?
Are the appropriate health systems in place (pre- No Mostly the employees go to Shalimar
employment medicals / health surveillance, access to hospital to avail such facility.
doctor/nurse etc)?
Is the company appropriately prepared for a fire or other Yes Fire extinguishers are placed at different
emergency (alarms, sprinklers, fire extinguisher, drills, places but no maps regarding evacuation
etc)? is displayed anywhere.
Does the company have the appropriate controls in place Yes Guards, locking mechanisms and security
to manage risks from moving machinery (guards, personnel are provided at Lums.
interlocks, lock-out /tagout, etc)?
Is there a work permit system in place – If yes what does N/A
it cover?
Are hazardous chemicals/materials used (eg. solvents, Don’t These materials are mostly used in the SS
dusts, asbestos, pesticides) – please provide detail? know department so our department have no
knowledge about it.
Does the noise exposure of employees exceed 85 dB (A)? Don’t We don’t have any instrument to check
know that.

Environment

Key Issue Yes/No Comment

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Does the company have to comply with an environmental Don’t

permit? know
If yes, does it?
Does the company have a formal environmental Don’t
management system? (e.g. ISO 14001) know
Does the company meet its water effluent consent? How Don’t Lums have water treatment plant. This
often does it test for key parameters, e.g. BOD/COD, pH, know water is used for watering the fields.
SS, oil?
Does the company meet the requirements of any air No
emissions consent? Does it test for key parameters, e.g.
SO2, NOx, particulates?
Is the nature of activities likely to affect air quality at the No Our department is situated in a place
workplace, on the site and/or in the surrounding area e.g. where there is no dust and vehicle
plant and vehicle emissions, dust? emission.
Are large quantities of waste, or hazardous wastes, No Dust bins for waste are used.
produced? What is the disposal route?
Does the company use/make Ozone depleting substances No It may be contributing by purchasing
e.g. CFCs? How are they being phased out? such substances as we only look for user
specifications
Is the company a significant energy user? Are there options No We only use electricity and Lums have a
for energy efficiency improvements? backup generator system for that.
Is the company a significant water user? Are there options No We use water for drinking and washroom
for water efficiency improvements, e.g. re-cycle? uses only.
Are there noise and/or other nuisances? No
If so, please detail

Labor

Compensation / Working Hours Yes/No Comment

Is the basic wage level (unskilled workers) higher than the Yes Lums follow the Government standards.
minimum wage?
Is the average monthly overtime within the limits set by No No overtime practices in our department
national/international (e.g. ILO) standards?
Is there a premium rate for overtime payment? No No overtime practices in our department
Child Labour Avoidance Yes/No Comment
Is there a procedure for verifying the age of workers? Don’t HR department would have the
(supply chain) know information.
Do any children accompany their parent(s) onto the Don’t HR department would have the
business premises? know information.
Freely Chosen Employment Yes/No Comment
Does the employer hold workers’ identity documents? Yes
Are workers provided with employment contracts No

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including any requirements for overtime work?

Do workers have to pay a deposit when they start work? If No
yes, is this refundable?
If migrant labour is used locally, are there contractual No
terms which limit workers’ ability to leave their jobs
before the contract expires?
Consultative Workplace Structures Yes/No Comment
Are workers members of a labour union or an alternate No No labour union at Lums.
worker association?
Have workers been provided with any form of No No formal training have been given to
induction/training regarding their working conditions? any department.
Non-Discrimination Yes/No Comment
What is the ratio of female to male employees? Yes No females.
Are there more women (as compared to men) employed as No No females.
contract workers?
Are crèche or similar facilities provided to women No No females.
workers?
Does the company have a policy on sexual harassment? Yes It was recently given by the new Vice
Chancellor.
Non local work force/access to facilities Yes/No Comment
Will the business import a non local work force requiring Don’t
accommodation and facilities for more than 3 months? know
Do existing or proposed facilities or services (housing, Don’t
education, food, water, and health) give cause for know
concern?

Supply Chain

Yes/No Comment
Are any aspects of the company’s supply chain of Yes Supplier logistics, warehousing, etc
particular concern in relation to environmental and social
issues?
Does the company have a Code of Conduct for suppliers? Yes It has some rules but not on CSR
aspect.

Exhibit V: Paperless Invoicing

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Exhibit VI: Pyramid of Global Corporate Social Responsibility and Performance5

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Exhibit VII: Working with Suppliers to Implement CSR3

Exhibit VIII: CSR-conscious Procurement Implementation System3

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Exhibit IX: Leadership Agenda2

Exhibit X: Route Map2

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Exhibit XI: Stakeholder typology: Power, Legitimacy, And Urgency

` Power Legitimacy Urgency

Lums Coercive-force/threat Organizational
Management
Employees Societal/ Time sensitivity
Individual
Students Societal/ Time sensitivity
Individual
Finance Coercive-force/threat Organizational Criticality
Department
Suppliers Utilitarian- Time sensitivity and
material/incentive Criticality (Minor)
Environment Environmental Agencies
User Utilitarian- Time sensitivity and
(Customers) material/incentives Criticality

Exhibit XII: Stakeholders Potential for Cooperation with Organization4

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Bibliography

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1. Corporate Social Responsibility (CSR) Checklist for Electronics Companies by Ritu Kumar,

the Energy and Resources Institute (TERI) Europe, UK

2. http://www.olympus-global.com/en/corc/procurement/procurement.cfm

3. http://www.panasonic.net/csr/procurement/

4. https://wiki.smu.edu.sg/MGMT003/Clean_Energy

5. Managing ethically with global stakeholders: A present and future challenge by Archie B.

Carroll

6. Grant T. Savage, Timothy W. Nix, Carlton J. Whitehead, and John D. Blair, “Strategies for

Assessing and Managing Organizational Stakeholders,” Academy of Management Executive

(Vol. V, No.2, May 1991), 64.

7. Ethics and Social Responsibility for International Firms, Chapter 17 of International

Management.

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