It is a fact and a reality that long term survival of businesses across the globe depends on their ability to be perceived as responsible institutions. Investors and consumers have shelved companies and products when entities indulge in nefarious activities. Hence, CSR businesses are not merely organizations making profits, but are organizations that care for the good of the economy and good of the society at large. In fact they are perceived as social organizations, viable and sustainable, stoked to survive because of their identity with the masses. They become part of the community and harmonize with the surrounding environment along their growth path. Corporate Social Responsibility (CSR) will become meaningful only if business entities imbibe in them this philosophical approach. Anything done less or anything that is perceived because of a legal obligation will not ensure the desired impact and therefore it is less said the better.
Where then should one start to preach and practice CSR? As they say that charity begins at home, it is incumbent for the corporate and business enterprises to be sensitized in understanding their responsibilities at their home turfs or at their doorstep. It is more an attitude that will help business entities to discover what they can do for the communities at hand and what they can leave behind for future generations. It is beyond definitions, it is beyond legislations and beyond compliances. It is not just allocating resources, for allocations can go waste without total involvement. It can be emphatically proved that without having to allocate resources great amount of public good can be achieved. All that it requires is the right mindset and with resources added to it, one can practice the right kind of responsibility and respect for not just the communities but also for all living creatures in this world. It would not suffice to make CSR a legal obligation, where entities will obey the rule of law but in spirit they consider it to be an impediment and waste of resources. If one goes a step further, the culture within the organization should be consciously shaped to achieve this goal of being an enterprise with CSR values.
Baseline for CSR in India:
First and the foremost let us agree that we, as Indians, promise more and deliver less. We have the habit of making promises and not keeping up with them. Actions do not match with what we speak. We say one thing and do exactly the opposite. Very often we show integrity in our speeches but fail to live up to it. We lead lives without having concern for others. All these and many more are our poor attitudes and concern for others. With poverty in attitudes and with less concern for our fellow human beings, what kind of CSR will we preach and practice? It requires tremendous amount of sacrifices and a paradigm shift in our attitudes to be able achieve harmony in our lives and among our fellow human beings. Are we ready for it? False sense of insecurity in us, for ourselves and our immediate family members, lead us to accumulate beyond our needs, denying the resources for others. How then can human resources in the organization work towards being socially responsible. Can we change our attitudes and can we change attitudes of people around us? That is the challenge for CSR led environment, which organizations have to imbibe.
When can such a situation be created? Always! Always! And always! Let us look at the example of Jamsetji Tata, who had gone on a visit to America to look at the steel plant for its technology. He was quite amazed at the technology but was critical about the conditions of its workers. He wrote to his son and said, “Be sure to lay wide streets, planted with shady trees, every other of which is a quick growing variety. Be sure there is plenty of space for towns and gardens. Reserve large areas for football, hockey and parks. Earmark areas for Hindu temples, Mohammedan mosques and Christian churches.” A great visionary indeed! even when businesses were struggling for survival in India. Also, the fact remains that the concept was being visualized much before the steel plant was set up in Bihar. He went on to establish a research institution, a steel plant, a hotel of durable eminence and a hydro electric plant. He donated a fortune consisting of buildings and lands to establish Indian Institute of Science in Bangalore. What more can we seek as an example of CSR and philanthropy?
CSR is an activity for a tone at the top:
CSR has naturally to be a tone at the top. The board of directors, employees in top management and those at the helm of affairs in business entities has to shape the culture and ensure efficient management of the tone, to changing circumstances. Good leaders create aspirations among employees and also act as role models to be emulated for public at large. Good deeds done have the contagion effect and, in all probability, may set a trend for other entities to follow. JRD Tata has expressed that when it comes to fulfilling his duties he wanted to be known as an honest man. The tone set at the top has an everlasting effect on the subordinates and it is worth protecting the fiefdom, at whatever cost and efforts, to ensure societal good. This is when CSR, Corporate Governance and Corporate Ethics will all start working together in the best interest of the community at large.
We may take the example of individuals and bureaucrats who have drafted this piece of legislation for implementing CSR for business organizations. How many of them are competent to address this issue? We know for sure that we have created mess for ourselves. If good governance had existed from the sovereign of the state, where was the need to prompt this piece of legislation? Probably, it is asking the corporate to share a portion of its responsibilities. It should have been left to the corporate to decide for itself regarding its philanthropy or its societal obligations. It could have in fact supported and incentivized organizations entering into voluntary action. On the other hand, it has gone into an arm twisting mode for making companies in taking up roles that are duties and obligations of the government. We can without hesitation declare that the attitudes and underhand dealings of public servants have brought us to this stage, and wherefore are we crying for a legislated CSR. Corrupt officials and corrupt systems are a bane in this country. Instead of correcting them, we cry hoarse for corporate bounties and windfalls. The tone of the government is weak and the culture of this country has reached abysmally low levels that whatever done in good faith or with good intention remains unrecognized. We have to wait and see how CSR legislation supports our country’s social cause. As Mahatma Gandhi said, “Men of character will easily inspire confidence”, we need more of them both in government and business organizations to make CSR a credible effort.
Prerequisites for a CSR environment:
No doubt corporate business entities have financial responsibilities and have a great deal to offer to their investors. But to be able to do that and sustain for longer periods in a competitive environment and to minimize risks, they have to attend to several other obligations as well. No company in today’s environment can do away with opaque practices and transactions. They need to be transparent, comply with legal requirements, have ethical practices, and be respectful to communities, environment and vehemently work towards better order in the economy. We have seen examples how even established businesses stoop down to be hand in glove with poor governance practices. If this remains the fate at the top, what better practices or CSR endeavors can we expect at the bottom? We see speeches after speeches being hurled on various podiums, media and the like, to give an honest impression that we as Indians, as bureaucrats, as politicians, as businessmen are above board. But when a real life situation is encountered, the facts become different and explanations are offered to defend yawning gaps and deviations. Existing systems support deviations, as tendency to make immediate profits are plenty and long term sustainability issues are often ignored at the altar of quick gains. Ethics are swept under the carpet until there is one more speech to be made at a distinguished gathering.
It is to be remembered that the world is shrinking on account of globalization. Companies have to be efficient, effective and productive to be able to compete in the world market. Unless they are able to work with commitment and a cause, they may soon become socially irrelevant. Risk is an element that they cannot ignore and defining risk appetite for itself will again depend upon how its employees, consumers, stakeholders and community at large perceive them in the global environment. Even if CSR is a piece of legislation, business entities have to develop and practice ethical and social roles to gain acceptability and long term sustainability in their endeavors, beyond what is contained as directives under the Act. Responsible entities gearing to assume a robust CSR role require reconciling pulls and pressures on various fronts. Not just reconciling them but has also to convince the various interest groups of the values that can be derived from such actions. Reconciling and aligning the demands among employees, customers, suppliers, shareholders, communities, environment and society at large require robust accounting and communication practices that will go a long way in establishing a leadership role in business. Leaders have to believe and assimilate that CSR for them is different from other entities and therefore require innovation. It is also good to understand that CSR practices are dynamic and keep moving with the growth and development of an organization. Other than the basic philosophy of the need to have a CSR approach in business dynamics, the practice will have its own variants depending on the type of business and its growth dynamics.
Legislation or not is the moot question:
Since corporate entities are part of society it is often referred to as a ‘corporate citizen’ and therefore society expects rules of behavior. Although defined differently, it is a voluntary action by the corporate to integrate social and environmental concerns and justify economic, legal and ethical responsibilities expected of them, which is important from their long term sustainability view point. The moot question now is to find out whether CSR requires legislation and to what extent? Protagonists have the following views to argue for CSR legislation:
It brings in legislation to curb corruption and exploitation of workforce;
It brings in uniformity through regulation thereby a common ground is established for companies to behave;
By providing a level playing field and allowing corporate entities to go beyond the minimum, offers scope for growth, profit enhancements and reputation buildup;
Community and environmental benefits can be ensured by not allowing wayward companies to run;
Provides ground for improving standards through experience and learning;
Measurement and audit tools can be put into place if standards are described for implementation.
Antagonists too have their own voices meriting consideration and provide healthy ground for a constructive debate:
Corruption and additional official intolerance;
Costs for smaller and medium level organizations may go up resulting in greater efforts to compete;
CSR activities are accepted only with a brand building attitude rather than working towards long term goals;
Unethical methods of reporting to hoodwink the statute and public;
Establishing practices only to satisfy the law and not looking at real issues requiring attention.
Waste of resources in attempting to fulfill the law without the real agenda.
Both arguments have equal force, but left to it we have seen how corporate governance has behaved. Unless it is thrust upon and made to adhere, it is unlikely that all will work well, especially so in this corrupt world. A decent legislation, with a whole hearted mission will help evolve right rules for the game. A constant perseverance and establishing good measurement tools will set up parameters giving good indicators of what is purposeful for societies, which will evolve with the passage of time.
Milton Friedman and his philosophy:
Milton Friedman had said “The Social Responsibility of Business is to Increase Profits” (New York Times, Sept. 13, 1970). Times have changed since then and the pace of economic activity has also accelerated as never before. Hence, his argument that corporate executive is the agent of business owners and the action by this agent to spend money on social cause amounts to spending someone else’s money, is no longer tenable. But he did have a line to say that there are circumstances when the corporate executive could spend on long term interest of the owner, a tacit acceptance of maximizing wealth by creating a positive social impact.
Examples at large:
In fact, the author has an example in practice, whereby the promoters or the custodians of a small business have desisted in increasing their turnovers beyond a particular limit, even though they have created a brand potential for expanding turnover ten times the present. They have their own arguments and have consistently held to it, in spite of lucrative opportunities for the products and the brand. The community depends on rain water harvesting and ground water recharge and depends on the sun for the power supply. Obviously, they have no intentions of expanding beyond a limit under the available resource limitations.
Fair-Trade practice is another good example of how best practices can thrive. The author has had the opportunity of participating and supporting fair trade ventures that are slowly trying to emerge as socially relevant and recognizable entities. Fair-Trade Goods tend to be more costly than similar competitive goods in the market. But there are consumers across the world that is willing to support the cause at a higher consuming price. Fair Trade logo provides assurance that farmers are not exploited, there is no gender bias, that child labor has not been employed and banned insecticides and pesticides have not been put to use. Here consumers decide to do what is right. TransFair symbol certifies that purchasers are benefiting the producers and workers. The additional price paid on the products is given to the farmers, producers and workers through a well established mechanism. The trade mark is for the product and not the company that sells it. There are products like coffee, tea, rice, bananas, cocoa, sugar, honey and fruit juices that sell under Fair Trade.
Corporate-NGO partnership for innovation in CSR:
There are many NGOs who have rich experience in community work. Long sustainable relationships can be developed to look at various ills plaguing this country. Business entities also have been contributing towards social cause and philanthropy. But many of them are not strategic and have no intentions of long lasting social change in the livelihood of communities. The time is ripe for some constructive action by which systemic social change may be envisaged both by the corporate entities and NGOs through good partnership and strategic planning. Innovation in CSR is the need of the hour. Let us hope that government will remain receptive to innovative and constructive responses emerging from the field.