The idea that private firms have a corporate social responsibility to better society has caught the attention of executives everywhere.
The annual report of virtually every large company claims its mission is to serve some larger social purpose besides making profits. For example, Hindustan Lever's website explicitly states that its corporate social responsibility is rooted in its Corporate Purpose the belief that "to succeed requires the highest standards of corporate behaviour towards our employees, consumers and the societies and world in which we live." Do companies really act on CSR or is this just lip service?
This article examines the case of "Fair & Lovely", a skin whitening cream, marketed by HLL. I chose this particular case study because HLL is often praised in the business literature as a socially responsible company. Also, Fair & Lovely is mentioned as a positive example by business guru C K Prahalad, who is a member of the board of directors of HLL.
Fair & Lovely, the largest-selling skin whitening cream in the world, is certainly doing well. Launched in 1978, it holds a commanding 50-70 per cent share of the skin whitening market in India, a market that is valued at over Rs 1,200 crore (Rs 12 billion) and growing at 10-15 per cent per annum. HLL christened Fair & Lovely as one of its six "mega brands" and has successfully launched new product formulations from lotions to gels and soaps.
Beyond doing well, HLL claims that it is also doing good. The company argues that 90 per cent of Indian women want to use skin whiteners because it is "aspirational ... A fair skin is like education, regarded as a social and economic step up". Prahalad cites a young female street sweeper who expressed pride in being able to use a fashion product that is tailored for her needs; she now "has a choice and feels empowered." Prahalad contends that Fair & Lovely is making the poor better off by providing "real value in dignity and choice."
Not doing good
Many dermatologists and activists in women's movements dispute these claims that Fair & Lovely is "doing good" and improving social welfare.
Since Fair & Lovely is not categorised as a pharmaceutical product, HLL has not been required to prove efficacy. Many dermatologists are sceptical of the efficacy of whitening creams.
Dr R K Pandhi, head of the Department of Dermatology at All India Institute of Medical
Sciences, says that he "has never come across a medical study that substantiated such claims [of whitening]." Some dermatologists go further and are concerned about safety. "Actually, these are drugs," says Anil Gangoo, president of Indian Association of Dermatologists, Venereologists and Leprologists, "that are sold as cosmetics, to avoid legal control." His association has tried many a time to draw the government's attention to this issue. The authorities promise to look into it, but never move an inch. "The cosmetic lobbies are very powerful," explains Gangoo.
More controversial than its safety and efficacy is the manner in which Fair & Lovely is marketed. Fair & Lovely's heavily aired television commercials typically contain the message of a depressed woman with few prospects who gains a brighter future by either attaining a boyfriend/husband or a job after becoming markedly fairer from using
Fair & Lovely.
These advertisements have attracted much public criticism, especially from women's organisations.
Brinda Karat, general secretary of the All India Democratic Women's Congress, calls the Fair & Lovely advertisements "highly racist" and "an affront to a woman's dignity". After a lack of response from HLL to their complaints, AIDWC filed a complaint with the government, which eventually banned two of the advertisements in 2003. Ravi Shankar Prasad, India's then information and broadcasting minister, said, "Fair & Lovely cannot be supported because the advertising is demeaning to women and the women's movement." The Maharastra State Commission for Women recently gave to Fair & Lovely the dubious "award" for the most gender-insensitive television advertisements.
More disconcerting is evidence that young schoolgirls use fairness creams. The poor also are a significant target market for Fair & Lovely. HLL markets the product in "affordable" small-size pouches to facilitate purchase by the poor and, as cited by Prahalad, it is a product that is targeted at those at the "bottom of the pyramid".
Unilever's response
After the government banned two of its commercials, HLL was unrepentant and argued that its Fair & Lovely commercials were about "choice and economic empowerment for women".
C K Prahalad buys this argument, and uses exactly the same words when he says that the woman who uses Fair & Lovely "has a choice and feels empowered". Unlike Prahalad, women's movements clearly do not buy this argument. This is not empowerment. The way to truly empower a woman is to make her less poor, financially independent, and better educated.
Social and cultural changes also need to occur that eliminate the prejudices that are the cause of her deprivations. If she was truly empowered, she would probably refuse to
buy a skin whitener in the first place.
HLL does not appear to be living up to its professed Corporate Purpose, at least, in the case of Fair & Lovely. But, to be fair to HLL, it is not alone in its hypocritical behaviour. Research has shown that for most large public companies, "CSR is little more than a cosmetic treatment."
Constraints on free markets
Should women have the right to buy Fair & Lovely? Yes. Should HLL have the right to make profits by selling Fair & Lovely? Yes, it is a free market. HLL after all did not create the sexist and racist prejudices that, at least, partially feed the demand for this product. Although, it is likely that the company has helped to sustain these prejudices
however unwittingly.
For example, it is more difficult to launch and expand a movement to empower women in the pervasive presence of sexist advertisements. These advertisements drown out the efforts and voices of women's organisations such as the AIDWC that are working to promote equality and social justice for women.
HLL acting to maximise profits of Fair & Lovely is probably detrimental to public welfare. Due to the divergence between private profits and public interests, it would be socially desirable to put some constraints on the free market for Fair & Lovely. One solution is for HLL to exercise its CSR and act according to its own professed values and
"highest standards".
Pervasive government intervention has resulted in low economic growth in India for many decades. Free markets are clearly better at creating value and delivering rapid growth. But, in totally free markets, the profit maximising behaviour of firms sometimes results in negative consequences to public welfare.
Far from unique, examples like Fair & Lovely are quite common. In that case, some constraints need to be imposed on the behaviours of firms. Mechanisms to achieve these
constraints are corporate social responsibility voluntarily exercised, self-regulation by the industry, activism by civil society, and government regulation. Such constraints judiciously applied might actually improve the functioning of the market.