NOTIONS of ‘giving’ and ‘sharing’ are ingrained in multicultural and religious texts and practiced as charity and philanthropy. However, the spirit of giving has to come from within core values of responsibility, integrity and ethics because ‘how’ profits are made is as important (if not more) than ‘what’ is given away. Business for Social Responsibility defines CSR as, ‘Business decision making linked to ethical values, compliance with legal requirements and respect for people, communities and the environment around the world.’ The first premise has always been, ‘Do no harm to people or planet’, which holds good as much as the second, ‘doing well by doing good’, premise. ‘The World has enough for people’s need, not for peoples greed’, said Gandhiji.
Corporate Social Responsibility (CSR) has many definitions and perspectives. It continues to evolve the world over and has expanded its significance and role to fit into broader developmental concepts such as sustainable development. It is also referred to as corporate citizenship, corporate social investment, corporate/ business sustainability, and so on. The triple bottom line concept – ‘People, Planet, Profits’ by John Elkington caught the imagination of the world and became a popular term, especially since it is inclusive of consumer interests. The concept of ‘giving’ through trusts has always been a part of the Indian business tradition as established a century ago by the Tatas with the early work of its founders Jamsetji Tata and Sir Dorab Tata, though it had not been articulated in terms of CSR as understood today. Traditions of ‘giving’ existed even in pre-independent India and the idea of ‘Trusteeship’ during the freedom struggle by Mahatma Gandhi had many converts among Indian business families such as the Bajajs and Birlas. Religion and charity have always been linked in India with business, founded on ‘giving’ as a good business principle. The term loksamagraha finds mention in chapter III (20) of the Gita. Loksamagraha means binding men and their communities together, regulating them in such a way that they acquire strength from mutual cooperation among the serving elements, including the corporates. In a post-liberal society, a similar attitudinal shift is required from consumers as well. If consumers were informed enough to prefer quality above promotional and packaging hype, and if convenience and accessibility ceased to be the prime driving factors controlling consumer preferences, would the market change its focus to investing in quality rather than appearance?
Mahatma Gandhi advocated the system of trusteeship, which requires that the owner of property should regard himself as its protector and not its master. He saw the customer as central to business. Influenced by Gandhi, some of the businessmen in India saw their business empires as a ‘trust’ held in the interest of the community at large. The theory of trusteeship envisaged economic equality in the ideal state. Pre- and post-independence businesses made a significant contribution to support schools, colleges and hospitals, and later shifted to supporting technical training, public health and rural development. However, why was building trust and quality in the product itself never considered?
The Dalai Lama spoke about interconnectedness’ as a rationale of responsibility. CSR in the Indian traditional sense of business was about corporates striving for societal good. The concept of ‘social good as part of business’ was ingrained in India in the early years and showed the way to the rest of the world. Arising out of this sense of responsibility was the CSR imperative in the Indian business context. This is reflected in the words of J.R.D. Tata, who said that ‘no success or achievement in material terms is worthwhile, unless it serves the needs of the people.’
Post-independence, the democratic set-up and the rights enshrined in the Indian Constitution helped shape a new socio-political order in which development of society required industrialisation. The pre-independence governance through the then existing feudal system fell short of the aspirations of people and their quest for development.
Hence, post-independence, a democratic set-up prioritising development with emphasis on public sector organizations was conceptualised around a focus on community development. Even today some PSUs continue to connect with local communities and create access to assets in rural areas through educational, health, sports and infrastructure facilities. In late 1980s, a belief emerged that governmental control over development led to the ‘quota raj’ or ‘licence raj’. As a result, the social responsibility of business suffered. Liberalisation of the economy in 1991 saw the private sector become an entity in itself. This new economic era was a catalyst for radical transformation in the corporate social responsibility practices in India. The change was twofold: transformation of the conceptual understanding of corporate social responsibility and innovations at the implementation level. At the conceptual level, there was a fundamental transformation from the charity oriented approach to the stakeholder oriented approach where the target group was seen as stakeholder in the community whose well-being was integral to the long-term success of the company. According to J.J. Irani, ‘No industry can survive in isolation of the community in which it operates.’ Conventional businesses that maintain the ‘business of business is business’ and that they have no specific sense of a larger responsibility beyond profits. Neo-liberals believe the free market can ensure ‘fair’ development. When that was found to be not quite the case and pressure for greater state control mounted, CSR emerged as a counter response to this pressure: Businesses wanted to self-initiate acts of responsibility in order to earn the right not to be regulated.
Hence CSR is a voluntary step taken by businesses, not only for society but in pragmatic self-interest. For those practising CSR it is expected that the first threshold to ‘do no harm’ to people and the planet is being followed
before the second dictum, ‘do good’ can be achieved. In developing economies, it is pertinent to then ask whether beyond this business can become a positive force for development, especially where poverty is endemic and inequalities increase despite a healthy GDP growth. Perhaps two decades after liberalisation, an alternative inclusive, equitable paradigm is required that goes beyond capitalism, beyond a measurement of growth merely as GDP and perhaps it is time to learn from Bhutan, a country that has 60% forest cover, and talk about gross national happiness (GNH). The four pillars of GNH are equitable socio-economic development, conservation of the environment, preservation of cultural tradition and good governance as outlined by the Bhutanese.
Modern corporations have been held responsible for many environmental and societal problems that engulf consumer interest, and thus it seems natural that the responsibility to find solutions interest, and thus it seems natural that the responsibility to find solutions should also be placed on these corporations. Corporate social responsibility is seen as a tool to ensure that companies change products and processes that will cause less harm, and indeed, make things better for consumers. Of course, corporations must not be part of the problem if they want to be part of the solution! And if they do not even heed consumers who are key to their survival, how will they be accountable to society?
Research and experience have concluded that companies have earned benefits from engaging in CSR activities. These include stronger brand positioning, improved corporate image, market share and sales, ability to attract and retain employees, and appeal to investors and financial analysts. Academic research that has historically shown contradictory correlations between CSR and financial performance of companies, has recently been leaning towards confirming a positive correlation. This is a huge impetus that can fuel the responsibility debate and its implementation. The work of Jagdish Sheth outlining the new stakeholders – ‘The Digital Fish Bowl’ and ‘Firms of Endearment’ – talks about leadership, innovation and what makes good companies great!
In general, CSR or business responsibility can be described as an approach by which a company:
* Recognizes that its activities have a wider impact on the society in which it operates, and that development in society and consumer satisfaction, in turn, affects its ability to pursue its business successfully;
* Actively manages the economic, social, environmental and human rights impacts of its activities across the world, basing them on principles which reflect international values, reaping benefits both for its own operations and reputation as well as for the communities and consumers in areas in which it operates;
* Seeks to achieve these benefits by working closely with other groups and organizations – local communities, civil society, other businesses, and home and host governments.
In an ethical, responsible business the essential thrust is on values and integrity and the way business is conducted in consonance with broader societal values and the stakeholders’ long-term interests. The new issue at hand is ‘how to reconnect the corporation to the social and community concerns it was originally intended to serve.’ Ethical and responsible business conduct is a concept that is set to grow as a counter response to the failure of business to self-regulate. It presents a strong alternative to mainstream business models that are conceived on a typically self-centred capitalistic notion. The global financial and climate change crises have created an opportunity to reconceptualise business models and lead to a call for transformation of capitalism towards accountability, rather than unbridled profits at any cost. There is also a ‘budget foregone’ argument that journalists such as P. Sainath point to (Table 1) and which is doled out to the corporate sector in terms of tax holidays, exemptions, and subsidies in every budget by the government.
This makes the concept of giving back two per cent and reporting on it as is specified in the DPE guidelines since 2009 and the New Companies Bill (awaiting Rajya Sabha nod) a mere drop in the ocean in terms of giving back. Yet, even this was resisted as was the idea of affirmative action for the private sector by industry and its associations. Clearly, all is not well. Consumers have had to seek redress in consumer and civil courts to challenge malpractices in the marketplace. India’s position at 134 in the Human Development Index and 65 in the Hunger Index, out of 79 hungry nations, is actually eight slots behind Rwanda! While the number of millionaires has grown since liberalisation after 1991, the need for access to safe drinking water, housing, sanitation, education and health services seem to be a distant dream for a large proportion of the population estimated at anywhere from 50% (N.C. Saxena report) to 70% (Arjun Sengupta report). India’s formal sector is shrinking as well from a 10% to a worrying 8% or less, as outsourcing becomes the norm across sectors. The Occupy Wall Street movement that spread across countries symbolised consumer anger and disillusionment, which could have serious repercussions for ‘back to business as usual’ corporations that practice double standards in developing countries, violate the laws of the land and abuse human and environmental rights in pursuit of profits. As the world gets wired, a small community in Plachimada, Kerala, brings a local Coca-Cola plant to a standstill, a Plachimada bill seeks compensation of Rs 200 crore from the company, the Niyamgiri tribals say no to Vedanta mining of bauxite in Orissa and car makers are forced to pack up in Singur and Nandigram.
In today’s global scenario, companies are working harder to protect their reputation – and, by extension, the environment in which they do business. A large number of scandals have hit the headlines the world over involving corporates such as Enron, World Com, Lehman Brothers, BP, Shell, Nike, Gap and Walmart, among others. This has undermined trust in corporates and led to demands for government regulation. Similarly, non-government organisations (NGOs) often challenge the practices of multinational companies (e.g., the Coke, Pepsi expose in India by CSE and by the local community). Bhopal (Union Carbide) remains one of the worst industrial accidents in the world. Companies such as Monsanto continue to be in the eye of the storm with people questioning its impact on agriculture, rising input costs to the farmer, and so on. Massive corruption – major scams in India from 2G to Coalgate to banks coming under the scanner – have affected the trust in not just India Inc but in the free market, leading to a call for stronger regulation. Occupy Wall Street, an example of the influence of civil society on the rise of CSR is a significant protest movement initiated by the Canadian activist group, Adbusters. It began on 17 September 2011 in Liberty Square, Manhattan’s financial district, and spread throughout the fall of 2011 to around 100 cities in the United States and 1,500 cities globally. The movement was designed to address social and economic inequality, high unemployment, greed, as well as corruption and the influence of corporations – particularly from the financial services sector – on government. The protesters slogan, ‘We are the 99%’ refers to the growing income and wealth inequality in the U.S. between the wealthiest 1% and the rest of the population consisting mostly of urban consumers. ‘Occupy B schools’ to make management education more relevant, was also an idea that was mooted.
Official estimates of people living in poverty in India (three Planning Commission committees headed by Arjun Sengupta, N.C. Saxena and S. Tendulkar) range from 70% to 30% people living in poverty. Providing livelihood opportunities for hundreds of millions of poor and achieving basic amenities for them will require the combined,
collective efforts of a range of actors, not only governments and civil society but corporates as well. If the social environment fails, nothing can succeed, not even business. Products, used by consumers, are not made out of thin air. It is increasingly being recognized that community resources (water, land, minerals, forests) are used by industry in an unequal way. It remains the responsibility of consumers and communities across the planet, who use these products, to demand accountability from corporates that provide them with consumption options at the cost of exploiting three-fourths of human and environmental resources. It is not only the end products, but also the processes used by the industry which need to be questioned. Recognising its important role in encouraging CSR practices in India, the government has developed two important tools for business:
1. The Guidelines for Corporate Social Responsibility for Central Public Sector Enterprises (CPSEs) were introduced in March 2010 and provide a detailed approach to planning, implementation, research, documentation, advocacy, promotion and development of CSR projects and activities. The guidelines place a particular emphasis on measuring and monitoring impact. It specifies percentage of PAT, the need for baselines and need assessments for CSR projects. It asks Indian PSEs to work in partnership with civil society and institutions with independent third party evaluations. Annual MOU assessments will take stock of performance and include it in their performance reviews.
2. In March 2011, the Ministry of Corporate Affairs released the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, an updated version of guidelines first introduced in 2009.
Aimed at private sector corporations, the guidelines take into account the lessons from various international and national good practices, norms and frameworks, with a view to providing a distinctively ‘Indian’ approach. The guidelines have been articulated in the form of nine principles with associated ‘core elements’ to be put into practice (www.iica.in).
3. On 18 May 2012, the Ministry of Environment and Forests issued a draft paper on ‘Institutionalising Corporate Environment Responsibility’ in the public domain, asking for comments from all stakeholders within 45 days. It refers to the National Environment Policy (NEP) of 2006 and the environment commitments in Articles 48A and 51 A (G) strengthened by Article 21 of the Constitution. These guidelines were to be finalised by the latter half of 2012 (www.moef.nic.in).
4. The Companies Bill currently in Parliament is likely to make reporting on CSR mandatory. In addition to clauses 134 and 135, being the relevant clauses that detail CSR, many other forward looking amendments are also proposed.
5. In November 2011, SEBI mandated the top 100 companies by market capitalisation to report on CSR (www.sebi.gov.in). Government interventions are critical for regulating and monitoring both that standards are followed and to ensure that a weak regulatory environment does not encourage irresponsible practices. CSR expenditure, in developing economies, can also bridge development deficits that are required to deliver on social justice. Jagdish N. Sheth talks about four additional stakeholders today – suppliers and partners, community, governments, and the press, reinforcing the notion that companies operate in a ‘digital fishbowl’. At the AIMA conference in New Delhi in 2009, he presented the ‘Spice model’ (society, partners, investors, customers/consumers and employees) and seven ways to reinvent business – challenge the shareholder dogma; fuse purpose into profit; make ordinary people extraordinary; become a world class customer/consumer; innovate for affordability; nurture nature; and practice a culture of responsibility. Why be good? Why do the right thing, especially when so many around profit by doing wrong or taking short cuts? How much am I willing to pay to be good? These are tough questions. Fortunately as companies move towards closely integrating their agendas into their business strategies, it is beginning to pay off. Log on to the website of many Fortune 500 companies and you are likely to find a prominent link to its CR/CSR efforts.
However, it has also been seen that a company might prefer to pay a fine rather than adhere to environmental or human resource legislations. Explaining CSV at the 2011 World Economic Forum at Davos, Michael Porter stated, ‘We need to understand that what’s good for the community is actually good for business.’ Porter, who along with Mark R. Kramer authored the concept of Common Shared Values, has been promoting CSV as a more viable option than CSR. The new signature tune was CSV as a harbinger of the future for industry. The concept of shared value has been defined by them as policies and operating practices that enhance the competitiveness of a company, while also advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress. It could also surely work for consumers. The underlying challenge for CR is to demonstrate a clear link between a company’s own commercial objectives and the wider goals of society – of equity and inclusion for its people and the planet. A responsible company is one that is not just profitable, but ethical.
Yet, merely achieving these goals may not be enough if profits after tax are not usefully deployed, if employee well-being does not improve, if community programmes do not raise living standards, and if the company’s ecoefficiency fails to sustain the underlying natural resource base. It becomes mere tokenism which leads to trust deficits. Responsible business practises are the foundation of CSR. A stronger regulatory framework in India, combined with public, civil society and media pressure can make it more than an exercise in futility.
Ananya Mukherjee, Reed and Darryl Reed, ‘Partnership for Development: Four Models of Business Involvement’, Journal of Business Ethics, 2009, pp. 903-37.
C.V. Baxi and Ajit Prasad, Corporate Social Responsibility: Concepts and Cases, The Indian Experience. Excel Books India, Delhi, 2005.
Jagdish. N. Seth, The Self Destructive Habits of Good Companies and How to Break Them. Wharton School Publishing, 2007.
Pushpa Sundar, Beyond Business: From Merchant Charity to Corporate Citizenship, a historic study of Indian business involvement with the community. (mimeo)
The Prime Minister of India’s 10-point Social Charter for Industry http://www.pmindia.nic.in/speech
Guidelines for Corporate Social Responsibility for Central Public Sector Enterprises, Ministry of Heavy Industries and Public Enterprises, GOI, March 2010.
National Voluntary Guidelines on Social Environmental and Economic Responsibilities of Business, Ministry of Corporate Affairs, GOI, March 2011.
National Environmental Guidelines 2012. CSR Primer for Managers and Practitioners by Business and Community Foundation (BCF), http://www.bcfindia.org