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A Research Report On

Corporate Social Responsibility in

Pharmaceutical Industry India

Submitted In Partial Fulfillment of the Requirements

For The Bachelor degree of commerce

(2015201!"

(#alcutta $ni%ersit& "

By

Punam Kedia

Roll No. ----------

Bcom Final year

Project Guide



DECLARATIN

I hereby declare that this report is original based on my own work and that this

Report or any part thereof has not been submitted by me for any other degree or

course requirement. All references have been duly acknowledged.

Name: unam !edia

"atch: #$%&'%(

)ignature of student



PREFACE

*he conceptual knowledge acquired by management students is best manifested in the pro+ects.

As a part of curriculum of "com third year, I have got a chance to prepare a report on cor'orate

social res'onsibilit& in Pharmaceutical industr& India. *he present pro+ect gives a perfect ventto my understanding of the -uman Resource specially the most modern concept of /)R and

/ommunity Relations.

*he pro+ect report entitled Cor!orate "ocial Re#!on#i$ility in Pharmaceutical industr&

India.

*he report will provide all the information regarding the /)R policies 0 practices in

Pharmaceutical industr& India and their importance in Organi1ation.

I also hope that this report will be beneficial for my ne2t batches and for those who are related to

this topic.



ACKN%LEDGE&ENT

On the very outset of this report, I would like to e2tend my sincere 0 heartfelt obligation towards all the

people who have helped me in this work. 3ithout their active guidance, help, cooperation 0

encouragement, I would not have made headway in the pro+ect.

I am e2tremely thankful and pay my gratitude to my faculty guide ----------------- for her valuable

guidance and support for completion of this pro+ect.

Any omission in this brief acknowledgement does not mean lack of gratitude.

T'an(in) *ou

Punam Kedia



1.Introduction

Indian corporations, like those in other countries, have had a long tradition of being engaged in

social activities that have gone beyond meeting a corporation4s immediate financial ob+ectives.

-owever, since the late nineties, /)R activities have increasingly come under the lens both of

policy makers as well as of corporations4 stakeholders as governance issues acquired increasing

prominence. At the policy level, the formal focus on /)R started in India with the issuance of the

/orporate )ocial Responsibility 5oluntary 6uidelines in #$$7 by the 8inistry of /orporate

Affairs 98/A, #$$7 that culminated in the enactment of )ection %;& of the /ompanies Act #$%;

98/A, #$%; making /)R spending as well as /)R disclosure mandatory for specific types of

companies. )ignificantly while /)R issues have been gaining in prominence across countries,

India became the first country, and at the time this article is written, the only country to have

made /)R activity mandatory for large and profitable companies incorporated into law. In all

other countries /)R efforts by corporations have been kept largely voluntary, with only a select

number of countries mandating corporations to disclose such activities.

Chapter 2: Literature review

2.1. CSR defnition

*he dilemma on the relevance of /)R in corporate activity is ine2tricably linked with defining

the scope of /)R for a corporation. A review of the e2isting literature on /)R reveals that there

is a diversity of opinions and ambiguity on the elements that constitute socially responsible

behavior on the part of corporates.# Arriving at an agreed'upon definitional construct for /)R is

important, first from the point of view of the entity which is responsible for /)R, i.e., the

corporation, and second from the point of view of the entity that is impacted by /)R, i.e., thesociety at large, and finally from point of view of the entity that seeks to connect the firm and

society, i.e., the regulator. In any national conte2t, the debate on the e2tent to which /)R

activities should be regulated should at least begin with a consensus among these three entities on

what constitutes /)R.

<*he term 9/)R is a brilliant one= it means something, but not always the same thing, to

everybody. *o some it conveys the idea of legal responsibility or liability= to others, it means

socially responsible behavior in an ethical sense= to still others, the meaning transmitted is that of

>responsible for,4 in a causal mode= many simply equate it with a charitable contribution= some

take it to mean socially conscious= many of those who embrace it most fervently see it as a mere

synonym for >legitimacy,4 in the conte2t of >belonging4 or being proper or valid= a few see it as a

sort of fiduciary duty imposing higher standards of behavior on businessmen than on citi1ens at

large.? 95otaw %7@#, p. #&

As the following discussion will show, even after three decades have past since 5otaw4s

observations, /)R is still notoriously difficult to define as a concept despite an ever'growing

body of scholarly and popular work. 8atten and 8oon 9#$$ identify three reasons that lie at

the root of this conundrum. Birstly, it is a comple2 concept with inherent value +udgments that

have relatively compliant application rules. )econdly, a plethora of concepts is usedsynonymously with /)R, and scholars disagree over the e2tent of their similarity and

interchangeability *he third reason complicating the process are the regional and conte2t



et al. 9#$$( rightly observe that /)R continues to be a >fertile ground for theory development

and empirical analysis4 98c3illiams et al. #$$(, p. #. In general, therefore, /)R relates to those

responsibilities of corporate operations that go beyond the financial aspects of its performance.

/lassic management and economic theories have tended to adopt a functionalist viewpoint

toward business and capitalism.

*he definition of /)R has evolved over the years. A sample of such definitions found in the

academic literature and those advocated by international agencies are provided in "o2 %.

/ountry'specific perspectives on /)R including India are provided in "o2 #. As is evident from

the two "o2es, /)R has been conceptuali1ed in terms of a wide range of corporate behavior,

starting at one e2treme with the ma2imi1ation of shareholder profits within the rules of the game

9Briedman, %7@$ to the other e2treme of an all'encompassing ob+ective of balancing economic,

social and environmental ob+ectives to serve shareholder and stakeholder interests as defined by

CNIDO, 3orld "ank and the 3orld "usiness /ouncil for )ustainable Development 93"/)D.

*he notion of /)R in'built in most of these definitions is that /)R is essentially a voluntary

activity that serves as a bridge between the corporation and the society, with the goal of the

corporation re'defined from ma2imising only shareholder interests 9the shareholder primacyview to the interests of all its stakeholders.

2.2. CSR in India

*he first formal attempt by the 6overnment of India to put the /)R issue on the table was in the

issuance of /orporate )ocial Responsibility 5oluntary 6uidelines in #$$7 by the 8inistry of

/orporate Affairs 98/A, #$$7. rior to this, the importance of /)R was discussed in the

conte2t of corporate governance reforms, such as in the Report of the *ask Borce on /orporate

E2cellence by the 8inistry of /orporate Affairs 98/A, #$$$. 3hile the report made a business

case for /)R as well as highlighted the social benefits stemming from it, the discussion was

recommendatory in nature and there were little actionable points. It is in the 5oluntary 6uidelines

of #$$7 that the core elements of a /)R policy was spelt out that included care for all

stakeholders, ethical functioning, respect for workers4 rights and welfare, respect for human

rights, respect for the environment and activities to promote social and inclusive development.

*he 6uidelines specifically drew a distinction between philanthropy and /)R activities, and

highlighted the voluntary nature of /)R activities that go beyond any statutory or legal

obligation. *he 6uidelines of #$$7 were followed in #$%% by the National 5oluntary 6uidelines

of )ocial, Environmental 0 Economic Responsibilities of "usiness, also issued by the 8/A

98/A, #$%%.

2.3. Development o the Theoretical Concept

-ardin 9%7(F populari1ed the concept of the tragedy of the commons, which highlights the

conflict that inevitably result from resource allotments between individuals and the community.

-e argues that multiple sources4 limitless demands on a finite resource would lead to over'

e2ploitation and mistreatment of the resource, ultimately depleting it completely. *his idea led to

the first insights into modern >sustainability4 in the Gimits to 6rowth discourse of the %7@$s

98eadows et al. %7@#, although earlier scholars have advocated about balancing nature

conservation with economic activities 9cf. Gumley and Armstrong #$$. Nevertheless, until the

%77# Earth )ummit in Rio, neither politicians, nor N6Os, nor business leaders had given the

concept of sustainabilityH/)R center stage as a principal human challenge for the #%st century



*hen again, the ideas of business entities4 social sensibility and good citi1enship are hardly novel,

and can be traced back a long way. As the following discussion on earlier literature demonstrates,

the mainstream concepts of corporate social responsibility and sustainable development

essentially convey the same message as sustainability, and academics frequently use them

synonymously with 9corporate sustainability.

)ocial concerns began to infiltrate management education after the )econd 3orld 3ar, with

social responsibility first emerging as an academic topic in the %7&$s. "owen 9%7&; was a

pioneer in delineating the social responsibilities of >businessmen,4 stating that corporate social

responsibility <refers to the obligations of businessmen to pursue those policies, to make those

decisions or to follow those lines of action which are desirable in terms of the ob+ectives and

values of our society? 9"owen %7&;, p. (. *his was a landmark initiative to define the concept,

and earned "owen the designation <Bather of corporate social responsibility? 9cf. /arroll %777, p.

#@$. Among the notable contributors to the literature in the %7($s are Davis 9%7($, Brederick

9%7($ and 8c6uire 9%7(;. Davis argued in favor of social responsibility from a managerial

viewpoint, and stated that it referred to those decisions and actions of managers that were <taken

for reasons at least partially beyond the firm4s direct economic and technical interest? 9Davis%7($, p. @$. Brederick viewed the concept from a stakeholder perspective, and held that

<businessmen should oversee the operation of an economic system that fulfills the

e2pectations of the public? 9Brederick %7($, p.($. 8c6uire 9%7(; drew a more succinct

definition by asserting that businesses must accept a social responsibility that e2tends beyond

economic and legal obligations. In this period, the publication of Rachel /arson4s landmark book

>)ilent )pring4 in %7(# launched the worldwide environmental movement in the wake of

environmental disasters brought on by corporate negligence and ignorance in the C.). 9/arson

%7(#. Inspired by the mass social movements of the %7($s in Europe and America, public

acceptance of companies4 social responsibilities also began to gain ground.

rofuse theori1ation on and conceptuali1ation of companies4 social responsibilities emerged from

scholars in the fields of sociology, management and business ethics in the %7@$s 9cf. /arroll

%7@7, Ackermann and "auer %7@(, Davis %7@;, ohnson %7@%. )imilar to Brederick 9%7($,

ohnson 9%7@% also held a stakeholder view and considered managers4 corporate social

responsibility as utility ma2imi1ation, rather than profit. /arroll4s 9%7@7 /)R model proved to

be immensely popular, and has been cited widely. -e conceptuali1ed four hierarchical but

mutually inclusive responsibilities for a corporation: economic 9to be profitable, legal

9regulation'compliant, ethical 9acting in a righteous and fair manner and philanthropic

9contributing to a broader civic society for educational, cultural or recreational purposes.

"uilding on /arroll4s work, 3artick and /ochran 9%7F& ventured to formulate a general model

for corporate social performance 9/).

Eventually, the %7F$s and %77$s saw the concept of corporate social responsibility evolve

theoretically and receive much empirical attention 9cf. 3ood %77%, and complemented the

growing trend of theoretical focus on the environmental dimension. %777 saw the publication of

Natural /apitalism, espousing for the first time that companies can combine positive financial

results with pollution reduction, if they rethink certain operating procedures and use of materials

9cf. -awken et al. %777. *his book populari1ed the idea of >natural capital4 and challenged theconventional notions of accounting that cataloged environmental impacts of a firm as

t liti *h t l it li th f d h il ffi i d d t d



On a more inclusive level, Breeman 9%7F formulated the stakeholder theory, which proposed

that the firm must meet the e2pectations of e2ternal groups or individuals who may have an

effect on the firm4s performance. *he rationale behind the stakeholder theory is that it would be

beneficial for firms to link up with stakeholders 9as opposed to only shareholders to legitimi1e

and maintain their license'to'operate 9-oward'6renville et al. #$$(. Donaldson and reston

9%77& e2panded Breeman4s theory and maintained that the normative base of the theory to

engage in stakeholder activities should be regarded as fundamental.

A more moral take on the stakeholder theory is found in the corporate stewardship theory 9cf.

3orrell and Appleby #$$$, Davis et al. %77@, Donaldson and Davis %77%, which adds a new

dimension to the /)R and business ethics debate. *his theory suggests that firms should

e2clusively focus on carrying out their social duties and responsibilities, without regard to the

financial consequences of such acts.

ones 9%77& introduced an instrumental theory for stakeholder management, enhancing the

stakeholder theory and surmising that the high returns on regular and trusting interaction with

stakeholders make firms strive for better ethical performances and give them significantcompetitive advantages.

In a similar line of thought, the concept of corporate citi1enship emerged 9cf. 8arsden and

Andriof %77F. As a broader concept, corporate citi1enship 9// deals with businesses4 interplay

in society beyond their economic roles, and "irch 9#$$% regards this as the ne2t step to /)R.

According to /arroll 9%777, it is an e2tension of the operationali1ation of businesses4 role in

society in the management literature. 8atten and /rane 9#$$& clearly separate it from /)R, and

argue that // is strategic in nature, whereby assuming that stabilities in the social, environmental

and political scenarios are profitable for business 93indsor #$$%, 3ood and Gogsdon #$$%./rouch 9#$$( agrees with 8atten and /rane 9#$$& that // is not synonymous with /)R, and

that // views the organi1ation in a wider perspective 9than /)R. -owever, regardless of

scholarly debate upon the depth and breadth of these 9closely'related concepts, quite a few

global companies 9e.g. Novartis treat // and /)R as synonymous.

)trategic application of /)R can also be discussed within the perspectives of the resource'based

view of the firm 9R"5 9cf. "arney %77%, 3ernerfelt %7F. *his view presupposes that firms

need to e2ploit their resources 9e.g., assets, capabilities, competencies, firm attributes etc. in

such ways that these resources become sources of sustainable competitive advantage. In his %77&

article on the natural'resource'based view of the firm, -art applied the R"5 framework to a

firm4s environmental responsibilities 9-art %77&, stating that there is a positive correlation

between environmental responsibility and financial performance. 3hile Russo and Bouts 9%77@

confirmed -art4s assertions, their contemporaries reston and O4"annon 9%77@ found a few

negative correlations. -owever, as Roman et al. 9%777 show in their comparative compilation of

studies investigating the social and financial performance link, negative correlation between

these two have been increasingly rare or inconclusive in later years, while the literature on

positive correlations has become increasingly robust.

In summation, a number of theories in management science 9and economics have contributedtoward developing a modern /)R concept. *here have also been concepts within the /)R realm

th t t i f th ti N th l th th ti l t ti f /)R h t



2.. Concentric Circle ! CSR

In %7@%, the /ommittee for Economic Development issued a report throwing light on different

dimensions of responsibilities to be fulfilled by the corporate. *he responsibilities of corporations

are described consisting of three concentric circles.

+a, Inner Circle /lear cut, basic responsibilities for the efficient e2ecution of the economic

function, products, +obs and economic growth.

+$, Intermediate Circle Encompasses responsibility to e2ercise this economic function with a

sensitive awareness of changing social values and priorities. Eg. 3ith respect to environmental

conservation, hiring and relations with employees, e2pectation of customers for information,

safety factors, etc.

+c, T'e uter Circle Newly emerging and still amorphous responsibilities that business should

assume to become more broadly involved in actively improving the social environment.

2.2. Cla""ifcation o Social Re"pon"i#ilit$

. Re#!on#i$ility to/ard# it#el0 - It is the responsibility of each corporate entity run business

and to work towards growth, e2pansion and stability and thus earn profits. If the corporation is to

achieve social and economic ends, organi1ational efficiency should be boosted up.

1. Re#!on#i$ility to/ard# Em!loyee# - Employees are the most important part of an

organi1ation. Bollowing are some of the responsibilities which a business entity has towards its

employees'

*imely payment

-ygienic environment

6ood and impartial behavior

-ealth care through yoga

Recreational activities

Encouraging them to take part in managerial decisions

2. Re#!on#i$ility to/ard# #'are'older# - It is the responsibility of corporate entity to

safeguard the shareholders4 investment and make efforts to provide a reasonable return on theirinvestment.

3. Re#!on#i$ility to/ard# #tate - Out of the profit available, the state is entitled to a certain

share as per the income ta2 laws. Ctmost transparency has to be e2erted regarding the profit

0loss account and the balance sheet.

4. Re#!on#i$ility to/ard# con#umer# - *he /ompany should maintain high quality standards

at reasonable prices. It should not resort to malpractices such as hoarding and black marketing.

5. Re#!on#i$ility to/ard# en6ironment - It is the responsibility of the organi1ation to

contribute to the protection of environment. It should produce eco 'friendly products. 8oreover,

industrial waste management must be taken care of.



2.3. Social Re"pon"i#ilit$ %odel"

*here are some models which describe the evolution and scope of social orientation of

companies. Notable ones include /arroll4s model, -alal4s model and Ackerman4s model.

2.3.1. Carroll&" %odel

Archie ". /arroll has defined /)R as the complete range of duties business has towards the

society. -e has proposed a 3-d conceptual model of corporate performance. According to

/arroll, a firm has the following four categories of obligations of corporate performance: '

-IERAR/-J OB RE)ON)I"IGI*IE) OB "C)INE))

Economic *he firm being an economic entity, its primary responsibility is to satisfy economic

needs of the society and generation of surplus for rewarding the investors and further e2pansion

and diversification.

Le)al *he laws of the land and international laws of trade and commerce has to be followed and

complied with.

Et'ical Ethical responsibilities are norms which the society e2pects the business to observe like

not resorting to hoarding and other malpractices.

Di#cretionary Discretionary responsibilities refer to the voluntary contribution of the business

to the social cause like involvement in community development or other social pro+ects

pertaining to health and awareness of the masses.

2.3.2. 'alal&" %odel

-alal4s return on resource model of corporate performance recogni1es the fact that the corporate

social responsiveness is a quite difficult task as no corporate posture is value free. A firm can

only attempt to form a workable coalition among groups having diverse interests, engaged in

creating value for distribution among members of coalition. *he social issues may become

conflicting beyond a certain level of economic activity. *he coordination between economic andethical decisions is necessary so that the future of the firm and shareholders may be safeguarded.



Fir#t !'a#e - *op management recogni1es social problem

"econd !'a#e 7 *he /ompany appoints staff specialists to look into the issue and find measures

to tackle it

T'ird !'a#e - Implementation of the strategy derived by the specialists

2.. Corporate Social Re"pon"i#ilit$ a" a Strate*$

/)R needs a proper and step by step implementation. Andrew 9%7F$ has developed an approach

to the question of strategic choice. -is four key questions suggest the approach that companies

may follow in determining their level of /)R activity. *hose four questions are following:

a. Determinin) r)ani8ational Com!etencie# what can we doK

$. Loo(in) at Indu#try t'reat# and o!!ortunitie# what might we doK

c. E9aminin) t'e 6alue# o0 (ey im!lementer# what do we want to doK

d. Determinin) t'e #ocial re#!on#i$ility what ought we to be doingK

"y finding out answers to these questions managerial decisions can be molded towards serving a

strategic need. *his means /)R in practical terms is an ongoing process, constantly monitoring

the environment and inter and intra firm relationships. "urke Gee and eanne 8. Gogsdon 9%77(

suggest that there are five dimensions of corporate strategy that are critical to the success of /)R

process in terms in terms of value creation by the firm. *hey are:

a. Centrality - /)R initiative activities should be close to the firmLs mission and ob+ectives.

$. "!eci0icity- )trategic /)R initiatives should specifically benefit the firm. *he firm should be

able to capture the benefits of /)R initiatives.

c. Proacti6ity- /)R initiatives should focus on the dynamics of stakeholder e2pectations i.e. to

capture the changes in socio'environmental , political and technological factors.

d. :oluntari#m- /)R decisions should be discretionary and thus they should be taken up by the

firm voluntarily.

e. :i#i$ility- )trategic /)R initiative should build firm>s image and add up to the goodwill by

creating positive media attention. It can also mitigate negative image of the firm.

*he linkage between strategy and /)R is quite noticeable. As strategy implies choice there e2ists

many opportunities to not only generate multiple options but also the choice between different

modes of action, in a manner to attain corporate ob+ectives more effectively. *he question of

trade'off rests between a body corporate defining a path of action that is governed by the need

and desire for profits and social responsibility as well. A managerial decision' making grid can be

thought of to help corporate generate multiple options.

/orporate )ocial Responsibility becomes strategic when it fetches substantial economic benefits

to the firm, in particular, supporting the core business activities and thereby contributing to the

accomplishment of its mission in the optimal manner enriching the firm and the society as well.



Chapter 3 Re"earch %ethodolo*$*his section of the research study describes the methodology to be undertaken by the researchers

to obtain the research data in order to reach the research finding. It is a process of academic

activity and is composed of identification of the problem, hypothesis construction= systematic

process of data collection and data evaluation= deduction of the final inference and lastly,

concluding the entire research and structuring a set of conclusions 93ilkinson, #$$;.

3.1. Re"earch de"i*n

*he nature of this report is E2ploratory Research. E2ploratory Research is defined as an

investigation into a problem or situation which provides insights to the researcher. *he research is

meant to provide details where a small amount of information e2ists. It may use a variety of

methods such as trial studies, interviews, group discussions, e2periments, or other tactics for the

purpose of gaining information.

*his study4s principal research question is primarily of an e2plorative nature, seeking to

understand how Indian pharmaceutical companies view and act with regard to /)R. As the previous discussions revealed, there is a dearth of literature e2ploring this phenomenon in the

field. Although there have been various studies suggesting the probability of emerging theories

within the conte2t, there is still a lack of concrete conceptual evidence to serve as a basis for

further research.

*his pro+ect adopts a multiple case study approach, with an in'depth analysis and a comparison

of the /)R conte2t in selected Indian pharmaceutical companies. A multiple case study approach

is considered more reliable than a single case study, as it strengthens the e2ternal validity 9Jin

%77, Dyer and 3ilkins %77%. As Jin 9%77 observes, scholars within political science and

sociology have distinguished between the components of the multiple case study approach and

+udged the >comparative case method4 to be a distinctive form, but the two terms are used

interchangeably within organi1ational and management research. /onsequently, in keeping with

the tradition, the terms >multiple case approaches4 and >comparative case method4 are used

synonymously in this study.

3.2. Data "ource"

*his is a research paper based on secondary data analysis. Data for this pro+ect is being collected

from secondary sources like books, +ournals, maga1ines, websites and newspapers. Different

books on /)R have been used to gather information on the topic= further different websites on

/)R and also information regarding *ata power have been used.

3.3. Relia#ilit$ ! +alidit$

Researcher needs to ensure high reliability and validity of its research instrument in order to

proof authenticity of instrument used and applicability of findings. It facilitate in analy1ing the

effectiveness of instrument used for collecting information for the research. Bor the purpose of

this paper, questionnaire has been selected as ma+or research tool, so reliability is aimed at

evaluating accuracy and relevance of the research. Another important aspect is validating the

research instrument and its finding by ensuring its applicability in real world scenario= forinstance to e2tent to which these findings can be implemented by other companies to improve

/)R in their businesses *here are different types of validity associated with research instrument



research can be shown by analy1ing the e2tent to which findings can be generali1ed to other

industry 9*ashakkori, #$$;.

Chapter : ,iocon Limited

,uildin* an Indian Social Ca"e or Su"taina#ilit$

.1. Compan$ ,ac)*round

"iocon Gimited 9"iocon pioneered the biotechnology movement in India, and is among the

leading biotechnology companies in Asia. In terms of market capitali1ation, it occupied the top

spot in Asia and the %( th spot in the world in #$$&. "ased in "angalore, it is the brainchild of

visionary woman entrepreneur !iran 8a1umdar')haw.

"iocon began its +ourney as an en1yme company in %7@F and has evolved into a fully integrated

biopharmaceutical enterprise focused on healthcare. It is engaged in drug development, clinical

testing and the commercial production of biopharmaceuticals, as well as industrial en1ymes. It

was also the first biotech company from India to be listed in the stock market. A fast'growing

company, "iocon markets its product in over &$ countries and has a local office in New ersey,

C)A. It employs appro2imately three thousand employees, of whom %& percent are women. At

the end of financial year #$$(, "ioconLs posted revenue was C)D %&@ million, with profits of

C)D ;$ million.

.2. Compan$ 'i"tor$

"iocon4s /hairperson and 8anaging Director !iran 8a1umdar')haw initially trained as a brew'

master in Australia, and worked as a consultant upon her return to India in %7@&. After a while,

she moved to the C! and came in contact with Ireland based company "iocon "iochemicals

Gtd., who offered to set up an establishment with her in India to produce bio'products from

locally sourced raw materials. *hus, "iocon India came into being in %7@F.

Brom its Inception on November #7, %7@F until today, the timeline of "iocon can be divided into

three different segments, underpinning the lifeline of the company according to corporate focus

and maturation rate. *hese are described as follows.

.3. The Initial -"ta#li"hment ha"e

Brom the setting up of the +oint venture between "iocon "iochemicals Gtd. and 8a1umdar in



products commonly used in the brewing industry M a plant en1yme called apain and a marine

hydrocolloid&$ named Isinglass. *he equity stake in "iocon India was divided as @$';$ between

8a1umdar and "iocon "iochemicals.

*he following years saw the initiation of two subsidiaries, "iochemi1yme India Gtd. established

in %7F# focused on en1yme R0D, while -eli2 "iotech Gtd. established in %7F7 was primarily a

pharmaceutical biotechnology company. "oth of these had other shareholders and investors, both

from India and Ireland. After a multiple change of hands, "iocon India consolidated ma+ority of

the shares, and these companies began operating in %77# and %77F respectively. It was also

around this time that "iocon e2panded its R0D activities into >ko+i4 technology, a apanese solid'

state fermentation process technology to develop new en1ymes. *his proved to be a highly

successful endeavor at later stages, with "iocon profits touching the one million C)D mark by

late F$s. In %7F7, 8a1umdar received the distinguished civilian award adma )hree from the

Indian 6overnment for her contribution to the advent of biotechnology in India.

*he Intermediate *ransition hase

*his period in the lifeline of "iocon 9%7F7'#$$# e2hibited its transition from an En1yme

producing outfit to a modern and integrated biotechnology company. It began with a change of

ownership, when the global 8N/ Cnilever acquired "iocon "iochemicals in %7F7, and merged

it with its subsidiary uest International. *his translated in Cnilever owning the ;$ percent of

"iocon India as well. Cnilever invested heavily in the up and coming Indian company and even

offered to buy out 8a1umdar in the early %77$s when the Indian 6overnment increased the

foreign equity investment cap for Indian companies. 8a1umdar however, held on to her shares

and ventured into e2ploring the contract research field. *he result was the formation of "iocon

subsidiary )yngene International rivate Gtd. in %77;. "iocon continued to hone its e2pertise in

fermentation technology, opening up business opportunities with pharmaceutical producers. In

%77(, "iocon entered the biopharmaceutical market with the production of statins, which are

drugs for lowering cholesterol. 8eanwhile, Cnilever sold its specialty chemicals division 9of

which uest International was a part to European chemical giant I/I in %77@, and agreed to sell

its shareholding in "iocon to the Indian promoters. 3ith I/I selling its shares to 8a1umdar,

"iocon India became an independent entity. In %777, 8auritius'based investment company



In %777'#$$$, "iocon acquires all of 6lentec4s shares, and amalgamated "iochemi1yme and

-eli2 into "iocon Gtd.

"ecoming an independent company, "iocon entered into an aggressive e2pansion plan, which

culminated from #$$# 9in the >6rowth hase4 as discussed below. It had already entered the

human healthcare field around %77@. *he )tatin production was very successful and contributed

to @F percent of "iocon4s turnover by #$$$. #$$$ was also the year that "iocon established

/linigene, a subsidiary that would focus on longitudinal clinical studies in selective disease

segments. In 8ay #$$$, "iocon4s proprietary bioreactor laBractor based on solid matri2

fermentation received a C.). #$$% and world'wide patent. "iocon4s first fully automated

submerged fermentation plant to produce specialty pharmaceuticals was also commissioned in

#$$$. It gained the approval of the C)BDA to market cholesterol'lowering lovastatin, the first

Indian company to achieve this feat. *he "iocon "iopharmaceuticals rivate Gimited 9""G, a

+oint venture with /uba'based /I8A" )A was formed in #$$# to produce drugs for cancer

treatments.

.. The Current /rowth ha"e

*he phenomenal growth of "iocon continued through the new millennium. *his is characteri1ed

by e2pansions into new fields of business, as well as new strategic partnerships. As a means to

support its ambitious capital e2pansion plans, the company went for an initial public offering

9IO in #$$, with an aim to raise INR three billion 9about C)D (@ million &%. It issued %$

million equity shares under the IO, equivalent to %$ percent of its post'issue capital at a face

value of INR &.$$. *he bid opened on %% April at INR ;& against an offer price of INR ;%&, and

closed on %F 8arch. *he IO was an e2traordinary success, with "iocon closing the first day of

listing on the bourses with a market value of C)D %.%% billion. 3ith the issue being subscribed;# times, it became the second Indian company to cross the one billion C)D mark on the day of

listing. 3ith a $ percent direct control of stake following the issue, 8a1umdar became the

richest woman in India, and occupied the %&th position in the country4s billionaire list.

In December #$$, "iocon4s market capitali1ation stood at +ust over C)D one billion. In the

#$$;'#$$ financial year, the revenue increased ;7 percent to over C)D %#% million from the

year before. "iopharmaceuticals business increased by ;; percent and contributed to @7 percent

of the sales, while R0D revenue increased by @& percent. *his led to a (; percent growth in net



)yngene and /linigene grew by @% percent. *otal revenue stood at C)D %&@ million at the end of

#$$(. Overall, the company registered a ;% percent growth from the previous year.

8eanwhile, "iocon entered into a number of strategic partnerships with companies around the

world, with an aim on +oint research, discovery and distribution for certain drugs. In #$$,

"iocon entered into strategic partnership with North /arolina based Nobe2 /orporation M a

privately held developmental stage drug delivery company. *his research collaboration foresees

the co'development and commerciali1ation of oral insulin for diabetes treatment at a global scale.

Gater in #$$, it announced another strategic research collaboration with 5accine2 Inc. M a

privately held biotech company based in Rochester, New Jork. *his partnership aims to discover

and co'develop fully human therapeutic antibody products for cancer, inflammation and

autoimmune diseases.&#

3hile "iocon would be responsible for proof of concept, product and process development, both

companies would be +ointly responsible for global clinical trial and marketing. *he ""G +oint

venture with /I8A" continued successfully meanwhile. /orporate analysts believe that "iocon

owes its success largely on its ability to interpret the future demands in the field of Indian

biotech, and molding the company to fulfill them. /hairperson and 8anaging Director 9/8D

8a1umdar leads the company from the front, and her energetic persona influences the employees

through and through.

*he phenomenal achievements of "iocon did not go unnoticed, and accolades and honors poured

down upon both the company and 8a1umdar. 6racing the cover pages of leading business

maga1ines also became regular. *he New Jork *imes in fact christened her >India4s 8other of

Invention4 on their %( August #$$; issue. Along with winning numerous businessperson of the

year award, came government tributes. *he local )tate 6overnment awarded her the >Daughter of

!arnataka Award4 in #$$;. In #$$&, the Indian 6overnment honored 8a1umdar with the highly

prestigious civilian award adma "hushan for her contribution in the growth of biotech

industries in India. *he following table presents a summary of the ma+or events in the lifeline of

"iocon Gimited, since its inception in %7@F until present.

.0. Structure o the ,iocon /roup

As seen in Bigure %#, "iocon 6roupLs corporate structure comprises of "iocon Gimited 9the

-olding /ompany, along with its two subsidiaries, )yngene International rivate Gimited

9)yngene and /linigene International rivate Gimited 9/linigene It also consists of the +oint



*he "iocon 6roup

)yngene /linigene ""G

Bigure %#: *he /orporate )tructure of "iocon 6roup

9)ource: based on company information

)yngene

/ontract research gained much popularity in the %77$s, and subsequently many international

pharmaceutical players began to engage in outsourcing of R0D. "iocon also looked for

opportunities to e2pand in this area, and as a result )yngene was incorporated on November %F,

%77;. A 77.77 percent owned subsidiary of "iocon, )yngene is a /ustom Research /ompany

9/R/ speciali1ing in synthetic chemistry and molecular biology. It provides customi1ed R0D

services in early stage drug discovery anddevelopment to third party pharmaceutical and

biotechnology sectors. *hey boast of >state'of'the'art facilities, dedicated connectivity and highly

qualified researchers PQ on a strong platform of confidentiality and intellectual property

protection,4&; and claims to offer competitive value advantage to their clients in the field of

outsourced R0D.

/linigene

Incorporated on August #$$$, /linigene is a %$$ percent owned subsidiary of "iocon that

conducts clinical studies on disease segments, e.g. non'insulin dependant diabetes, lipidemia&

and asthma. /linigene has two ma+or units M the /linical Gab and the -uman harmacology



/alibration Gaboratories, the Indian 6overnment4s arm for accrediting scientific research

laboratories. It is the first lab in India to be accredited by /A 9/ollege of American

athologists, setting a benchmark for other laboratories in India. *he clinical lab strives to

achieve the highest industry standards in all aspect related to clinical testing, e.g. by using pre'

defined databases and visit'specific collection kits, and succeeds in offering fast and accurate

trials. *he human pharmacology unit carries out a variety of bioavailability,&& bioequivalence and

other pharmacokinetic&( studies on human volunteers at a premier "angalore hospital. /linigene

pledges to operate by high bioethics standards, and its study processes adhere to local and

international regulatory requirements such as the I/-'6/ guideline&@ of the C)BDA.

""G

/I8A" )A is the commercial branch of /entro de InmunologSa 8olecular 9/I8, one of /uba4s

leading scientific research centers focusing on biopharmaceutical products. In ##Bebruary #$$#

"iocon entered into +oint venture with /I8A" to form "iocon "iopharmaceuticals rivate

Gimited 9""G. ""G manufactures and markets biotech'based life saving drugs. /I8A" has

core competency in production of drugs for cancer treatment, also the focus of ""G. 3hile

""G was decided to produce drugs for cancers of the head and neck area initially, a successful

research collaboration would lead to producing drugs for other cancer treatment as well. "iocon4s

equity participation in ""G is &% percent.

3.5. CSR at ,iocon

"iocon4s /)R activities are largely centered on social aspects that relate to healthcare and

education. *he -R division of the company organi1es activities such as vaccination drives

against polio and hepatitis " in the area, usually carried out by staff volunteers.



-owever, it felt the need to further consolidate its e2isting activities in this regard, as well as take

up more concentrated pro+ects. As a result, the "iocon Boundation was initiated in December

#$$ with the aim of identifying and implementing pro+ects that would have a positive social and

economic impact in the surrounding community. *he "iocon Boundation operates the micro

health insurance program, which is discussed in the following section "..#.

..1. ,a"ic nder"tandin* o the Triple ,ottom Line

)imilar to most Indian corporate entities, "iocon4s fundamental understanding of the triple

bottom line is corporate citi1enship focused and relying heavily on the social side. *he "iocon

management believes that a company4s social responsibility is based on four pillars: first and

foremost is community investment, followed by positive employee relations, good environmental

practices and sound ethical conduct. It is worth mentioning that the top management team

perceives employee relationship and ethical business practices as components of social

responsibility.

.. The -conomic" o (R4

)imilar to its neighbors in )outh Asia, health insurance is viewed as a lu2ury, and not a necessity

in India. *he established health insurance companies focus their attention on the urban affluent

rung of the society offering e2pensive packages, and consequently, only %$ percent of the

population has some form of health financing scheme. -owever, for a country that does not have

a national health service, the costs of a ma+or illness can easily spiral sky high, and owing to this

reason many are reluctant to seek proper medical care for their ailments. *he situation is direr in

the rural areas, where access to medicines and e2perienced health practitioners are few and far

between to begin with. )o, there was clearly demand for the services of a scheme such as ARJ in

the areas where the scheme was launched.

It is interesting to note that "iocon does not necessarily use its own medicines for the ARJ

scheme, but sources them through a third party 9!aruna *rust. It provides the infrastructural

support for the clinics, training costs for the clinic workers and sponsors the au2iliary programs.

*he medical know'how comes from Narayana -rudayalaya 9i.e. which medicines to stock up on,

which treatments to cover, etc..

*he roots of the ARJ scheme can be attributed to the bottom'of'the'pyramid model propagated

by rahalad and -art 9#$$. As indicated by the bottom'of'the'pyramid approach, ARJ is a

d l f b i li i h b f h fi i l id )i h i i



establish a business relationship through the ARJ program, somewhat moving away from pure

philanthropy. In fact, "iocon prefers it to be a fee'paying service, as they feel the transaction

makes the recipients value the scheme more in comparison to benefits they would get free.

..1. remium and -li*i#ilit$

ARJ operates under two premium schemes. *he Individual )cheme comes to INR %F$ 9appro2.

/-B (.$$ per member per year. Enrollment as part of the >family scheme4 has three levels: INR

%F$ per member per year for two members, INR %&$ 9appro2. /-B &.$$ per member per year

for three members, and INR %#$ 9appro2. /-B .$$ per member per year for four or more

family members.

At the pilot phase, the applicant4s residency in Anekal *aluk was the first eligibility criterion. It

subsequently brought the neighboring !anakpura *aluk under its wing. *he successful applicants

need to produce proof of residence for themselves and their family in the *aluk through, e.g., a

ration card, voter4s ID card, driving license, passport, AN &7 card or bank account. Residents

between $ and @$ years are eligible to apply.

..2. ,eneft" and Service"

*he benefits of the scheme include free outpatient consultation, generic medicines at special

rates, diagnostic tests at discounted rates, hospitali1ation, and free surgical interventions. *here

are certain conditions applicable to obtaining the insurance plan4s benefits. Bor e2ample,

treatment is only available in a general ward of one of the network hospitals.

*he scheme includes a cashless facility for surgical treatment to the value of the covered amount.

Over %,($$ listed surgical treatments, such as hernia operations, appendicitis, hysterectomy as

well as cardiac bypasses are covered. *he scheme covers both pre' and post'operative surgical

treatments.

-ospitali1ation 9without surgery is covered for three days, which includes the fees in respect of

the room, professional fees and routine investigations. Individual members are allowed one

admission per year 9for a ma2imum of three hospital days. 8embers enrolled under the family

pack are eligible for a ma2imum of &$ percent of the total number of enrolled members. *he

cover e2cludes medicines and medical consumables, e.g., o2ygen and ventilator charges.



network hospitals and "io/are pharmacies, thus reducing the price of the medicines considerably

due to economies of scale.

..3. (u5iliar$ ro*ram"

Desai reveals that in the first months of the pro+ect4s pilot year, an overwhelming 7$ percent of

the patients had water' and sanitation'related ailments. *his prompted "iocon Boundation to set

up a supplementary -ygiene romotion rogram for the members. )he states,

3hen the people reali1e the link 9between good hygiene practices and

wellbeing, and reali1e the benefits they get, the 9hygiene promotion

program will become sustainable.

*he hygiene promotion team conducts a set of three sessions at each venue. *he first session

deals with personal hygiene issues, the second with environmental health issues, such as waste

disposal, dealing with drainage and blockage, sanitation, potable water etc. *hese two sessions

are followed by a review session. *wo local N6Os helped design the hygiene promotion program

and are responsible for running it: the "elaku *rust, a local N6O focusing on women and

children4s health and 6rameen !oota, a !arnataka'based

.6. Social Su"taina#ilit$

"iocon4s involvement with social advancement goes back a long way. Even before it became a

high profile, billion'dollar company, smaller steps were taken in this regard. One e2ample of

which is the subsidi1ed meal canteens for the company4s unskilled labor to ensure that they have

at least one square meal a day. "iocon4s social sustainability'related activities have come far

since then. Apart from the concentrated ARJ program, "iocon conducts a number of social

advancement initiatives run by the -R department. *he successful implementation of these

programs has brought accolades for "iocon in the form of various /)R awards, both local and

national. "ased on their beneficiaries, these activities branch off in two directions: internal and

e2ternal.

As mentioned earlier, "iocon views positive employee relationship as a form of social

responsibility. -R activities such as employee training, in'house development, internship etc.

therefore fall under this heading "iocon has a comprehensive internship program for both local



average of & interns working at various departments. "iocon4s -R practices have led it to be a

top employer of choice in India, and it en+oys a low turnover rate of three percent. "iocon

provides its employees with facilities such as an in'house healthcare center, and an annual health

camp where the doctors of the /linigene subsidiary conduct check'ups on site. *his has also

helped "iocon to reduce spending to one'tenth of the previous costs by cutting down on traveling

time to outside facilities.($

Another employee facility is a crTche for the employees4 children, which was set up across the

street from the company - in partnership with the missionary institution )t. Brancis )chool.

"oth male and female employees can use this crTche for their children. Every employee is also

entitled to an education allowance, which pays all e2penses for up to two children at the primary

school level. )imilar schemes are available for employees who wish to further their studies.

"iocon4s e2ternal social responsibility activities center on pediatric healthcare, with polio and

hepatitis " vaccinations being the ma+or initiatives. "iocon is a partner of Rotary International4s

>*oward a olio'Bree 3orld4 pro+ect. *he -R department organi1es the "iocon ulse olio

rogram, whereby employees volunteer to administer polio drops to children under the age of

three.

In addition to healthcare, "iocon4s second focus is on education. Birstly, this consists of

advancing rural education and knowledge creation. Initiatives in this category include various

scholarships, awards, practical assistance to the economically disadvantaged, and installation of

science laboratories and libraries. *he company provides rural schools with financial assistance

during their construction, buys computers for them and trains their teachers to use computers.

*he company provides sponsorship for organi1ations that work with physically and mentally

challenged children, such as 8itra yothi, )hristi )pecial Academy, /hristel -ouse, National

Association for the "lind etc.

)econdly, "iocon4s educational support activities comprise academic sponsorships. *he company

provides financial assistance to national and international institutes with regard to biotech

pro+ects. It also provides sponsoring for two "angalore'based educational institutions: an

entrepreneurship development center at local business school the Uavier Institute of 8anagement

and Entrepreneurship 9UI8E, and faculty chairs at the Institute of "ioinformatics and Applied

"iotechnology 9I"A", a local government research institute.



"iocon also undertook purely philanthropic activities during ma+or natural disasters. *he

company and individual employees volunteered time and resources during the 6u+arat

earthquake in #$$% and the Indian Ocean tsunami in #$$.

.7. -nvironmental Su"taina#ilit$

3ith regard to the environmental impact of biotech products, "iocon propagates a message that

is similar to that of the rest of the "iotechnology Industry: biotech byproducts have a positive

impact on environmental pollution.(% *he /ompany nevertheless still puts considerable emphasis

on environmental pollution prevention and proper waste disposal. "iocon4s environmental

sustainability stems from its endeavors to compete and operate at the international level that go

beyond Indian regulatory requirements. *he company has state'of'the'art health and safety

guidelines, and these are rigorously implemented at all levels of the manufacturing cycle. *he

"iocon manufacturing unit is an I)O %$$%'certified facility.

"iocon has been involved in a number of environmental awareness programs in "angalore city.

*he most prominent of these was its partnership with the "angalore Agenda *ask Borce 9"A*B,

a private public partnership in the urban governance of the city. "iocon assisted in "A*B4s solid

waste management initiative )wachha "angalore, a door'to'door collection of household wastes.

Burthermore, "iocon erected eco'friendly traffic booths and bus shelters in "angalore that have

solar powered lights and feature environmental awareness messages. Apart from its partnership

with "A*B, "iocon played a role in the greening and beautifying of a considerable part of -osur

Road, the highway that leads to the corporate headquarters.

3.7. %ana*erial (ttitude" toward CSR at ,iocon

o"itionin* amon* it" eer"

3ith its long'term association with various healthcare and environmental awareness programs,

and the resulting visibility in the media, the latter and N6Os regard "iocon as a leading

corporation with regard to /)R initiatives. It therefore comes as no surprise that the "iocon

management too claims that their company is the leading /)R'oriented corporation in India. It is

interesting to note that while very proud of their work in the social sustainability area, "iocon

employees are reluctant to compare themselves with their peer companies, stating that social

responsibility comes from within "iocon, led by the /8D 8a1umdar. As Desai states,



3hile "iocon has earned plaudits for its social sustainability activities, and these activities have

been a crucial component of "iocon4s corporate identity, their integration into its core business

strategies has yet to occur. Ensuring a robust financial bottom line is still the first priority.

%ana*ement o CSR at ,iocon

*he /)R programs in "iocon are managed under two divisions. "iocon Boundation is in charge

of the micro'health insurance program, headed by the manager of the "iocon Boundation. *he

-R division coordinates all the other initiatives, i.e. on one hand the internal -R development

programs, and on the other the e2ternal social sustainability programs such as immuni1ation

camps, crTche, etc. *he deputy manager of -uman Resources heads these activities. -e is also

responsible for providing the department of corporate communications with the relevant

information for conveying the activities to both internal and e2ternal audiences.

0. Conclu"ion

"iocon definitely thrives on the positive publicity that is generated by involvement in /)R

issues. *hough it considers ARJ to be its flagship /)R initiative, it does undertake a host of

other programs. It has a robust employee development scheme, ranging from the initial >one'hot'

meal'a'day4 to health check'up, education allowances etc. It also engages its employees in its

/)R initiatives within the community such as immuni1ation camps. Bor both its employees and

the community, health and education related initiatives occupy considerable standing and "iocon

has made laudable advances in this regard. /omparatively, the environmental initiatives seem

weak, and its involvement with the "A*B can be interpreted as a service to the community as

well. Although health, education and women empowerment were listed as the three areas were

"iocon conducts its social initiatives, in reality there were no specific initiatives for promoting

women empowerment.

Gooking at "iocon4s /)R practices through the lens of 6andhian trusteeship, one can surmise

that the company has made some strong strides toward fulfilling its role as a social trustee.

csr in bicon

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