Business and the Accountability Imperative by Rohan Preece

As the 2018 edition of the Status of Corporate Responsibility in India repeatedly illustrates, there are many examples today of businesses impacting people’s well-being, whether in the context of employment; in terms of human rights and environmental effects; through goods and services we consume; through Corporate Social Responsibility (CSR) defined in the Companies Act, 2013; and in other ways. Their multifaceted roles, and their far-reaching impacts, mean that businesses sometimes enable, but also sometimes serve to frustrate, community and individual access to a wide range of public goods and constitutional entitlements. This makes businesses highly significant, as shapers of both community and individual well-being and of core social and environmental outcomes.

In early modernity, the perceived requirement for a decisive contributor to and guarantor of cohesion and prosperity underpinned the justification for the State. Since then, the State-Citizen relationship has been widely framed in terms of a social contract, exemplified in India in the Constitution. The Constitution of India presupposes that Government is capable of acting constructively to ensure citizens’ achievement of certain Fundamental Rights, and, in this way, of promoting well-being. At the same time, citizens, through systems of representative democracy have at least some (albeit inadequate) opportunity to hold Government to account, and to do so based on the extent to which they are able to serve these ends.

However, whilst there are also frameworks, both historic and emergent, which serve to describe relationships of accountability between businesses and their publics, such responsibilities have tended to be framed differently, resting in her identity as a customer, a consumer, or a stakeholder. These frameworks of accountability have often excluded certain ‘stakeholder’ groups (such as marginalized communities impacted by business) even whilst, and sometimes because, they have privileged others (such as shareholders). Where they have been inclusive, they have often been voluntary, and lacking in teeth. Though there has been considerable progress in recent years, through legislation such as the Modern Slavery Act of the UK, and the French Corporate Duty of Vigilance law, coverage remains patchy at global, regional and many national levels, not least in India. There are thus inadequate and insufficient institutional mechanisms through which citizens can effectively hold businesses accountable, even whilst their work and wider impacts contribute to or impinge on Constitutional Rights. At the same time, there is also  evidence from communities that businesses’ involvement in delivery of key public goods is contributing to the creation of a culture of dependence on Corporations’ CSR for rights realisation. One reason this is problematic is because business is required neither to be formally accountable nor democratically responsible for their actual performance in this domain.

These developments raise questions of the extent to which constitutional entitlements and broader well-being of citizens now hinge on non-State actors. Questions, for example, of the degree that they depend, in certain areas in which business CSR programmes operate, and in other contexts where businesses are active, on strategic prerogatives of companies rather than the elected State. The recently launched Ayushman Bharat Yojana, which relies critically on the private sector, is a prime example of reliance on the private sector for public goods delivery. Insofar as non-State actors are depended on, questions of remedy in case of non-delivery of entitlements become pertinent: but to these there are not always satisfactory answers. These broader transitions also raise questions as to whether the authority of the State is undermined by incursion of businesses into spaces originally designated for it, such as the supply of core public goods like education and healthcare. They can result in diminished expectations of the State, and heightened (but not proportionately, or adequately) expectations of non-State actors.

Whilst such changes may not in and of themselves be problematic, a key concern is the extent to which citizens are equipped to navigate and respond effectively to an evolved scenario. For in a democracy, any institutionalised responsibility to contribute to the public good must be accompanied by an adequate measure of accountability for that contribution. What this means is that for every opportunity businesses take up to ‘do good’, or provide a public service, there must be a consonant handing over of power to the people that the good is intended for (in the same way that power should also be handed over to those at risk of harm by business, as envisaged in the third pillar of the UN Guiding Principles on Business and Human Rights).  This is the power that monitors, that asks questions, that is listened to, that receives answers, that reminds the service provider that in seeking to do good, it acts not for its own sake, but for others.

This is a power that should be enabled by business, but guaranteed by the firm hand of Government. And in a country such as India, it is essential, especially when businesses, in seizing the opportunity to serve, make many citizens at least partially dependent on them for the realization of the Fundamental Rights the Constitution promises.

Rohan Preece works as a Project Manager with Partners in Change

The views of the author are personal

Mind your own Business Responsibly. That is CSR! by Pradeep Narayanan

The year 2013 was a watershed moment for corporate social responsibility (CSR) in India, which probably became the first and only country to have “mandated” businesses to spend on CSR. The mandate for them was to “do or explain”, in the sense that they were asked to expend two percent of their profits or explain why they did not. The Act provided a set of guidelines and reporting framework for companies. The best thing that has happened since then is that CSR has got into the vocabulary across business in a big way.

Two years earlier, in 2011, the Ministry of Corporate Affairs launched one of the most progressive voluntary guideline framework called the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Businesses (NVGs), which defined responsible business very broadly; and in fact, made an explicit mention of Human Rights as one of its nine principles. The guidelines provided the most important benchmarks on responsible businesses for all businesses. It is a comprehensive guidelines and reflects an Indian narrative. The presence of the document helped different stakeholders to facilitate a constructive debate on CSR with human rights as the core theme.

However, the subsequent enactment of the Companies Act of 2013 derailed the entire debate on wider social responsibility and the debate of two percent assumed prominence. The two percent CSR started being used synonymously with community development by companies. The entire debate shifted to allocation of extra funds for ‘national  development’ sector rather than about making their core business operations responsible.

Is anything wrong in making ‘community development’ the core of CSR? Community development as CSR suddenly puts businesses on a pedestal, with CSR being an ‘additional’ task that businesses were doing for ‘national development’. In other words, CSR almost became a parallel process for companies to be seen as philanthropists, rather than as responsible corporate citizens. While CSR still is defined as such activities that are “beyond compliance”, the Company Act seems to have defined CSR not only as beyond compliance but also beyond core operations. The irony is that the businesses are now mandated by a law to comply a section that asks companies to go beyond compliance!

The Act specifies a minimum limit of two percent of profit to be the expense on CSR. Firstly, at a time when a number of companies are not yet allocating funds for CSR, it seems that two percent has almost been seen as the maximum limit, rather than minimum. Secondly, some companies are also trying to redefine some of their regular expenses as CSR expenses. For example, a pharmaceutical company, which used to organize health camps for promoting its new medicines, was alleged to include these health camp expenses as CSR expenses rather than product promotion expense. By definition, the law seems to stress that any expense on core business should not be considered as CSR expense. Therefore, often, companies’ expenses on CSR are not for their workers or supply chain or communities that may have been resettled by them, but such communities “adopted” by the business beyond their core area of operations. Probably, the challenge for the Act was that if they allowed expenses on their workers and compensations for resettlement or supply chain development as part of core operations as CSR expense, then two percent would hardly be enough.

However, now the trend will be that companies’ CSR activities would now be largely with “adopted” communities beyond their operations rather than with families of their contractual workers or members of supply chain or communities that may have been resettled by them, beyond their legally mandated activities. The companies would prefer to spend their CSR expenses on “external communities” or to donate to Government programmes than to spend on their own workers or supply chain fearing that the expense might get disallowed.

It is important to note that this is a time when businesses are reluctant to perform even their mandatory tasks, especially when it relates to contract workers or supply chain; for example, their living wage, skill development, associations, safe and secure space for women and disability. At this time, if the businesses have to take out additional 2 percent for CSR, where would this money come from? If these expenses have to be beyond even the community of workers and supply chain, it will be an impoverished understanding of corporations if it is assumed that they would take this money from profits!

If one speaks to any company, it is clearly seen that now when they calculate prices for product and services, 2 percent is included in the cost. If there is a pressure to reduce the cost to get orders, the line items that are vulnerable are in fact those related to research, training, workers and supply chain members for they are the ones who are not in decision-making spaces. Companies are more prone to compromise on safety norms, affirmative action and skill development for informal workers than on other expenses, including 2 percent CSR!

Will it be right to say that 2 percent CSR on community development is actually competing with expenses which otherwise would have been expended on safety norms, workers and supply chain – put simply as those activities beyond compliance in core business? If yes, the CSR strategy could probably be counter-productive to promoting sustainable core business.

Pradeep Narayanan is the Director at Partners in Change.
For more on PiC: http://www.picindia.org

A closer look at the India Responsible Index and how it contributes to inclusive growth

The India Responsible Business Index  (IRBI) is an index that looks at the policies and disclosures made by companies in the public domain and analyses the same from the lens of social inclusion. Dheeraj from Praxis Institute for Participatory Practices, which collaborated with Corporate Responsibility Watch (CRW), Oxfam India and Change Alliance, breaks down the Index and explains how it works.

 Praxis Institute for Participatory Practices (Praxis) and Partners in Change (PiC) 

1.What is the India Responsible Business Index (IRBI)? What does the Index measure?

A: The IRBI is an attempt to understand the extent to which the inclusion principle is being recognised and acted upon by corporates. IRBI is the only index of its kind that focuses on inclusion as a principle. When we talk of inclusion, we mean the openness of company systems and mechanisms with a special focus on marginalised groups and vulnerable identities. If we look at the National Voluntary Guidelines (NVGs) that were introduced by the Ministry of Corporate Affairs to ensure that businesses try to become responsible actors in society in 2011, four major principles are significant to the IRBI. These are Principle 3 on Employee Well-being, Principle 4 on Stakeholder Engagement, Principle 5 on Human Rights and Principle 8 on Inclusive Growth. Our Index measures two aspects: policy commitment of businesses, and whether they have systems in place to know how far these policies are being adhered to, or put into action. In knowledge, we try to understand if companies have systems to inform themselves on whether these commitments are being met or not. Knowledge often gets confused with performance but these are distinct. For example, if Company X has resolved all complaints related to sexual harassment while Company Y has disclosed that it has a certain number of complaints pending, both Company X and Y are marked the same. The Index does not measure performance, but knowledge. While these are easily confused, it is important to note the difference to fully understand the Index.

2. Why should companies adhere to these principles? What are the National Voluntary Guidelines?

A: The IRBI is an attempt to understand the extent to which the inclusion principle is being recognised and acted upon by corporates. IRBI is the only index of its kind that focuses on inclusion as a principle. When we talk of inclusion, we mean the openness of company systems and mechanisms with a special focus on marginalised groups and vulnerable identities. If we look at the National Voluntary Guidelines (NVGs) that were introduced by the Ministry of Corporate Affairs to ensure that businesses try to become responsible actors in society in 2011, four major principles are significant to the IRBI. These are Principle 3 on Employee Well-being, Principle 4 on Stakeholder Engagement, Principle 5 on Human Rights and Principle 8 on Inclusive Growth. Our Index measures two aspects: policy commitment of businesses, and whether they have systems in place to know how far these policies are being adhered to, or put into action. In knowledge, we try to understand if companies have systems to inform themselves on whether these commitments are being met or not. Knowledge often gets confused with performance but these are distinct. For example, if Company X has resolved all complaints related to sexual harassment while Company Y has disclosed that it has a certain number of complaints pending, both Company X and Y are marked the same. The Index does not measure performance, but knowledge. While these are easily confused, it is important to note the difference to fully understand the Index.

3. Why should companies adhere to these principles? What are the National Voluntary Guidelines?

A: The Ministry of Corporate Affairs released the National Voluntary Guidelines (NVGs) in 2011, as a collaborative effort between civil society, corporates and Government to guide corporate citizenship in India. NVGs are voluntary guidelines, with nine elements ranging from consumer value, environmental protection, ethics and transparency to sustainability, advocacy and lobbying. The NVGs are progressive vis-à-vis international guidelines of the same kind not only in content, but also in the manner in which it was collaboration between different groups. It is significant to note that NVGs provide an Indian narrative to corporate citizenship and the meaning of responsible business practices in our context. Companies have accepted the core values and principles of the NVGs at large; in fact, SEBI issued a circular outlining how listed companies who access public funds have a responsibility to be transparent and accountable to the public. How the values of the NVGs are adopted remains to be seen. This is where the IRBI proves to be useful.

4. How did you collect data for the Index?

A: Data has been collected for the Index from the pubic domain – which includes company websites, Annual Reports, Business Responsibility Reports, Corporate Social Responsibility Reports, Sustainability Reports and other reports as available on the company website of the year under review. Our idea of “public domain” is information disclosed by company on its website. The IRBI Question Framework has 116 questions divided across five elements. Information from the company website is marked against the question and the responses are graded in the policy sheet as ‘not available’, ‘mentions only’, ‘mentions and mechanism’, etc. Data is filled in as reported in the performance sheet. The individual responses are then given scores, which are aggregated into element-level scores. Data was collected by a 12-member team and has been validated by a five-member team.

5. What are the five elements that you looked at?

A: The Index has five elements. The idea behind this has been to clearly differentiate between the varied aspects of running a business.

• Community Development: which is conventional understanding of Corporate Social Responsibility (CSR), also mandated by law for certain companies as a spend of 2% of profits on what they deem as social good. The IRBI also looks at the extent to which companies have identified vulnerable groups and backward regions for implementation of their CSR programmes.
• Employee Dignity and Human Rights: The focus has been on understanding the extent to which companies are adhering to, or providing entitlements and benefits to their employees. For example, we look at how companies understand fair living wages, safe working environment, enabling environment for disabled employees etc. Another important factor looked at is Employees’ Right to Association, because this points to the company’s commitment to human rights and labour rights.
• Non-discrimination at workplace: This element measures companies’ commitment to non discrimination within its workforce, and inclusion of varied identities; also having scope for affirmative action for those groups that are not able to access certain positions or entitlements. It looks at recruitment and career advancement, with a specific focus on marginalised identities and assessment systems of companies to understand if theses identities are being represented. The Index also factors in inclusion at Board level; to see if companies have commitment to marginalised identities being brought in management or leadership roles.
• Community as Business Stakeholder: This aspect focuses on communities living in vicinity of business operations, who are positively or negatively impacted by the business operations. Here, the focus is on understanding if there is an Impact Assessment System, in essence looking at if companies own responsibility for the impacts emerging from core business operations in the area?
• Inclusive Supply Chain: This element focuses on if companies are taking responsibility to capacitate and build on the potential in their supply chain, keeping in mind the principle of inclusion. This element also gives an idea of how companies see human rights operating within their own supply chains and if they are proactive in upholding them.

6. Did you involve companies in the process of populating the index?

A: Company response to IRBI 2015 was very positive. We had followed up with companies on IRBI 2015 with revised datasheets in December. This year, after initial gathering of data, response sheets were sent to companies for them to give feedback. Calls were made to 80 companies and of them, 33 companies referred to our data. Three companies responded with sources and feedback.

7. Which companies are included in this Index?

A: This year, the Index analysed top 100 listed companies on Bombay Stock Exchange (BSE) by market capitalisation as on 31^st March 2016.

8. How is this Index useful?

A: This Index is useful to understand policy strength and extent of shared knowledge on the part of companies; it gives a sense of openness of companies to the public.

The Index can be used at multiple levels – at the level of the company, to analyse its own performance and fill gaps in knowledge; at the level of civil society, where even sectoral analysis to enable better work with companies. For example, the banking sector says that the element of supply chain does not apply to them. However, it is quite clear to see that banking sector does have a very complex albeit different supply chain. IRBI makes such sectoral analyses possible, so that sectoral gaps can then be filled. The Index provides an understanding of how companies view their own business impact.

 

 

Workplace woes: Raising the red gender flag

• Participation of women workers in factories and manufacturing process is around 10%
• Women earn 56% of what male colleagues earn for performing same work
• Less than six percent women are present in unions across businesses in India

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The issue of gender inclusion and diversity at the workplace has been a matter of curiosity, ever since many of us embarked on the journey of assessing disclosure reports made by companies for several months now. Various indicators on the status of women place an onus on companies to report how they are creating a facilitating and enabling environment for women. From aspects such as representation of women on trade unions, wage disparity, sexual harassment and exploitation at workplace to board composition several spheres of businesses mirror the reality of gender inclusiveness across the value chain. Discrimination and exploitation of women with disabilities and women within marginalised Dalit/ SC/ ST groups gets even more compounded, when the general population is by virtue marginalised and face rampant discrimination

Female labour force participation in India is lower than many other emerging market economies, and has been declining since the mid-2000s. This has been aggravated by the large gap in the labour force participation rates of men and women in India. According to studies, the daily wage for women in formal jobs is over four times as high as for women in informal jobs. Notably, there is a gender wage gap in both the formal and informal sectors, with male workers earning a higher wage on average in both sectors. However, the situation is not dismal as studies show. While, the overall participation of women workers in factories and the manufacturing process may not have gone beyond 10% overall, the FMCG sector is acting as a leader in improving the gender ratio and increase the number of women in workforce. Very few companies promote diversity in their supply chain by promoting women vendors. In terms of earnings, women earn 56% of what their male colleagues earn for performing the same work. The more educated a woman is, the wider the gender pay gap. The gender pay gap increases as women advance in their careers.

Interestingly, India has made significant improvement in broadening female representation on the board of top 100 companies listed on the Bombay Stock Exchange. The female board representation increased was 5.8 percent in 2012 and is estimated at 12 percent for 2015. Frameworks such as the Business Responsibility Reports (BRRs) throw light on details related to board composition, number of women in the workforce and number of sexual harassment cases reported.

On analysis, we observe that most of the top 100 companies report that they have anti-sexual harassment systems in place, by way of a mandatory legal compliance. However, a further probe into the actual functioning of the system based on data gleaned would be a good beginning to unpack the layers between compliance and the systems actually benefiting women employees. Inadequate as it maybe understanding the efforts made by the business not to discriminate against, exclude, marginalise and deny the participation of women in the workforce is imperative. Most of the atrocities committed against women on the shopfloor/ in manufacturing units (not just the headquarters and registered offices) go unreported. According to a 2014 study on Tamil Nadu’s textile industry, workers were often subjected to low wages, excessive and sometimes forced overtime, lack of freedom of movement as well as verbal and sexual abuse.

When it comes to trade union representation, less than six percent women are present in unions across businesses in India. Of late, the significant absence of women in negotiations is leading to emergence of all women unions – a union in the garment sector in Tamil Nadu is challenging forms of exploitation such as debt bondage, long hours and sexual abuse in the garment and textile industry. Last year a marginalised community of Dalit women workers, shocked the state of Kerala by breaking free from the constraints of the male-dominated unions; thus, focusing public attention on the growing inequalities and gender-related disparities. Victories of women are also amplified in narratives that highlight women’s participation. In the recent months, women factory workers in Bengaluru protested pension fund withdrawal norms. Faced with violent opposition, the government put on hold the new rules. Women’s representation in unions is somewhat encouraging, given that women are beginning to push for spaces that enable a woman employee to negotiate with the management and bargain as a collective, just like her male counterpart.

In the light of gender equality at the workplace and all tiers of operation, corporate and businesses are behind in operationalising organisational policies and strategies. While these are increasingly recognised as being critical to the achievement of gender equality in the workplace often companies have not communicated their policies adequately to employees. The biases and stereotypes perpetuate a culture in most organisations that remains gender unequal. However, it must be said the situation seems to be changing slowly. Advancing gender equality within organisations in India is increasingly being recognised. Yet, there still is a long way in understanding why women find it difficult to work in organisations.

Shireen Kurian – CRW

The Importance of Being Responsible

In an age where the country’s economy is developing at unprecedented rates, it is people who are affected by such developments who can judge whether we are moving forward or taking leaps backwards. The debate over developmental growth versus welfare backed development has caused our political realities and economic senses to demand different things of the country. Taking cognisance of the growing dissonance between what the civil society envisions as a future for the country and where businesses are taking them, the Ministry of Corporate Affairs released the National Voluntary Guidelines (NVGs) on Social, Environmental and Economic Responsibilities of Businesses in July 2011 which facilitated many discussions on Business Responsibility.

Business Responsibility recognises the extent of the role of businesses in improving the quality of life on the one hand and the significant and long lasting impacts of these businesses on people, our planet and our ability to sustain the levels of holistic development.

The primary objective of the BRRs was to encourage adoption of sustainability reporting and mainstream disclosure on environmental, social and governance metrics. These guidelines provide businesses a framework which enables them to move towards responsible decision making and adopt the triple bottom line approach. The triple bottom line approach is an accounting method that looks at the three pillars of sustainability- people, planet and profits. Such an approach towards businesses encourages inclusive growth and sustainable development.

The NVGs focus on the three areas of sustainability in economic, social and governance issues. The guidelines encourage businesses to go beyond compliance to embrace sustainability ethos.

Corporate Responsibility Watch, through an analysis of Business Responsibility Reports filed by the Top 100 Indian companies as listed on the Bombay Stock Exchange and the National Stock Exchange highlights how effective voluntary disclosures made by companies are. Business responsibility is wider in scope and meaning than Corporate Social Responsibility, and through a discussion on the business responsibility of companies CRW hopes to bring all stakeholders closer to the functioning of companies and make them central to any change in process or participation in corporate citizenship.

National Voluntary Guidelines

The National Voluntary Guidelines were brought out by the Ministry of Corporate Affairs in 2011. The aim of these guidelines was to facilitate positive action from corporates on issues of sustainability. Understanding that businesses today are involved with the larger environment in a complex way, the NVGs recognised the effect that they can have on society- for the betterment of people and the planet. These principles were formulated with to create a positive framework to advance the role of business in economic growth which is socially and environmentally sustainable.

The NVGs focus on three core areas of sustainability- Environment, Social and Governance. The Guidelines are a set of nine principles that cover these three areas. The guidelines encourage and enable businesses to go beyond compliance and embrace sustainability as part of their business ethos.

Environment sustainability has become a pertinent issue for in today’s world. The focus on efficient resource utilisation, alternative energy and innovation for minimal environmental harm prove that sustainability now has to be the answer for questions of the legacy of this generation in terms of what we leave behind for future inheritors of the Earth. Principles on environmental sustainability in the NVGs guide businesses to respect, protect and restore the environment. Indicators for such principles include questions on clean energy, resource procurement and waste disposal.

The NVGs were formed as a part of a forward looking solution to society’s problems. It rejected the philanthropic charity based approach of companies that have been the norm for some years now to shift to a view that looks at responsibility towards society as a part of corporate responsibility. In fulfilling their duties to society, businesses should proactively engage with disadvantaged and marginalised sections of society that are core to their operations. Principles under social responsibility also include guidelines for businesses to uphold and protect human rights and conduct business operations conscientiously.

On issues related to governance, the NVGs reinforce the position of the Labour Laws. It directs businesses to provide employees with fair working conditions, protect them against human rights violations and enable them to perform their duties well all the while maintaining work life balance.

Social sustainability as a part of Business Responsibility goes beyond Corporate Philanthropy; which is essentially giving away money for various causes and Corporate Social Responsibility, which is included in the area of social sustainability by helping communities build platforms for the betterment of conditions where the business directly or indirectly affects them. A duty to society, the NVGs see businesses as responsible entities effective in upholding human rights and values.

Can CSR work? By Amita V Joseph

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.

References
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

About

Corporate Watch is a thought leadership space and think tank on corporate responsibility and responsible business practices in India. At the onset, the focus being CSR. Within a human rights framework the role and objective of the core group is to think through home grown-solutions and monitoring mechanisms for the CSR space, in the context that voluntary codes will not work unless there is a good regulation. While the core team/ group will operate and act as a think tank for the CSR sector, pooling resources and sharing domain knowledge among the NGOs and industry and other stakeholders would be necessary and vital in institutionalising and legitimising the mechanisms developed to monitor CSR work and the impact on communities.

Corporate Watch intends to

• Build a coalition and bring together likeminded individuals who will discuss and articulate opinion on this subject
• To articulate checks and balances and issues and risks that NGOs need to be aware in the scramble for CSR funds and the implementation of CSR Act, 2013
• Develop theoretical and policy-based content on these subjects
• Advocate and serve as a watchdog mechanism to ensure companies are legally bound to uphold their social and environmental responsibilities with a special emphasis on reporting, disclosure
• Identifying good and bad practices