7/22/2019 Merck & Samarco - CSR Analysis

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CSR_Assignment-2

Abhinav Prakash, 0006/49, SectionB

Mercks Ivermectin Vs. Samarcos PROECOS

Samarcos_PROECOS

Though PROECOS expands on the Bento Rodrigues program; it has a much

larger scope in trying to focus more on Strategic Leadership in terms of

CSR. Along with the 25 towns and 50,000 people who will be affected

PROECOS involved other stakeholders which was not the case with

Samarcos other CSR initiatives. The main operative behind PROECOS

will be GAIA which basically will involve community in much more

sustainable socio-environmental projects. This will be more beneficial as

compared to projects which Samarco has undertaken till now since

PROECOS will focus more on building a network of partners for meetinglocal demands. In terms of brand building and putting Samarco as a

company that has integrated quality, environmental and health safety and

community relations policy, PROECOS is poised to become the companys

flagship CSR initiative. As far as future dependence on the community is

concerned (building of second pipeline), PROECOS will build a positive

relationship with the communities which will improve the companys image

in the areas, surrounding its facilities. The total funds required are $

528,000, which basically is largest expense company will undertake

towards CSR till now.

Mercks Ivermectin

Mercks Ivermectin is a drug which is astonishingly effective against legion

of parasites in cattle, horses, etc. With the result of its effectiveness duly

observed just after its induction, Merck extended the analysis to develop

Mectizan, a drug for river blindness, affecting large number of people

especially who cannot afford the drug. A significant advantage which

Merck could leverage was the amount of investment in Ivermectin which

obviates the possibility of allocation of heavy resources to develop its

human formulation. Onchocerca Volvulus (virus) had already affected 18

million people and the potential reach was 85 million. Hence, such project

is poised to be a hit and would additionally be a relief to numerous affected

people.

However, the RoI on such investment does not exist and effectively its NPV

is negative, from a business perspective. Along with the same, riverblindness was a disease which hit mostly the third world countries of

Africa, Middle East and Latin America. Concordantly, the probability of

funding, even from WHO, amounts to nada. From another perspective,

since the river blindness affected the poor people in the rural and remote

areas of the third world, there wasnt any chance to price the medicine high.

Studies showed that it takes 12 years and $ 200 million to bring a new drug

to market. Had the new drug failed or it had side effects, the sales of

Ivermectin were also supposed to go down leading to a great financial loss.

Conclusion

Both cases are in many ways similar, since both companies have been

identified with CSR initiatives in the past and ultimately both are caught up

with the same choice, whether to go for the expansive project or stay back.

Given Mercks experiencein the case of distribution channels while trying

to distribute its drug in Africa, where the project came through ultimately, I

think Samarco should give a go-ahead to the PROECOS project. The scale

and scope of PROECOS might be a stumble to pass through, but the host of

benefits this project brings along will prove remarkably beneficial in

Samarcos pathway to leadership in CSR. The Second Right of Way,

which will a major consideration for Samarco, when it decides to increaseits capacity might get bogged down in resistance from the local

communities, if PROECOS is not undertaken. Along with the same,

PROECOS involves local talent and along with the know-how developed

from earlier CSR projects taken up by Samarco, the probability of its failure

is miniscule. We should recall that Merck also solicited external help, in

terms of expert panel and foundations to assure its drugs are properly

distributed.