Little islands of improvement
[ By Aditi Roy Ghatak ]
In a world where corporations adopt slogans that are, almost like mantras, chanted in and out of boardrooms until their flavour fades and yields ground to a new one, “corporate social responsibility” (CSR) is an exceptional phenomenon. It must not be confused with philanthropy, which is driven by altruism and, more often than not, a sense of vanity. The essence of philanthropy lies in its disconnect from profits. CSR, however, does not revolve around charitable intentions, it revolves around business interests.
CSR strategies serve several corporate purposes. For instance, they can improve a company’s public image, and accordingly boost sales. Moreover, they may help to motivate the staff by inspiring pride. On top of that, CSR contributes to building bridges with governments that are able to dole out favours through policies and projects. CSR is thus best understood as a branding strategy, which is not meant in a judgemental sense here. Indeed, healthy results are possible; after all, action is normally more enduring when driven by a sense of self-interest.
Industrial capitalism is shaping the world, so what companies do matters in other spheres than only economics. Corporate action has impacts on every aspect of human life, including politics, social welfare and even the global environment. Given that the world is not in a good shape, corporate leaders can no longer simply go about business as usual. Just consider global warming, the number of 1,2 billion people living in extreme poverty, the HIV/Aids pandemic or civil strife, which affects up to one billion people. By the way, this is not what some belated communist might be demanding – it is the stand of those who professionally thrive on CSR, including as John Elkington (“Triple Bottom Line”), the Global Reporting Initiative or Social Accountability International.
Today, corporate strategists have to consider more than only land, labour, capital and organisation. At least in rhetorical terms, CRS is about companies rising to the massive challenges humankind is facing, and some corporate leaders are probably really committed. Sadly, there is often reason to doubt commitment too. Even Enron, a recent corporate villain, published “responsibility” reports. One also wonders how, in view of climate change, airlines, oil companies or car manufacturers will live up to any sense environmental responsibility; or, for that matter, how tobacco manufacturers, whose core business constitutes a health hazard, can talk about CSR, no matter how well they pay their staff. More often than not, the standards set by western-based multinationals remain unconvincing.
Indian experience
India is a country emerging from the pits of underdevelopment and preparing to dislodge some of the powerful global economies. That our most influential business leaders are well versed in CSR matters today, does not mean they are mocking role-models from the West. Rather, they understand the signs of the time.
It is worthwhile recalling a statement by the late Dhirubhai Ambani, who founded the Reliance Group, perhaps the most important private-sector company in India today: “As an industrialist my job is to produce goods to satisfy the demand. Let us be clear about it. Everyone has to do his job. My commitment is to produce at the cheapest price and the best quality. If you dabble in everything then you make a mess of things. If we cannot take care of our shareholders and employees and start worrying about the world, then that is hypocrisy.” Nonetheless, Reliance is involved in CSR programmes today.
In quite a different league was JRD Tata, who was appointed chairman of Tata Sons in 1939. He took active interest in comprehensive socio-economic development in the host communities – which was, of course, linked to the thriving of the company. The Tata Group is since known for making important contributions to developing institutions of science and technology, medical research and care in India, without any strings attached long before the term CSR was even invented.
More recently, Narayana Muthy, the chairman of Bangalore-based software multinational Infosys, said: “Social responsibility is to create maximum shareholder value working under the circumstances where it is fair to all its stakeholders, workers, consumers, the community, government and the environment”. Y. M. Deosthalee, the chief financial officer at Larsen and Toubro, a Mumbai-based engineering giant, emphasises the relevance of “sustainable development”, arguing that “disaster relief and other forms of immediate help are important but the goal of CSR is to make productive inroads into areas of social activity where we can contribute towards continuous development.” Among other things, his company sends out experts to train teachers for awareness raising in various deprived communities.
There has been a flurry of activities under the CSR banner, along with much talk of – and some action on – reducing poverty and bridging India’s huge rich-poor divide. Jet Airways, a private airline company, is running an in-flight fund-raising programme in association with the NGO Save the Children India. HSBC’s Indian arm is also actively associated with children’s welfare. Many others, including Hindustan Lever and Tata Steel have joined the United Nations’ Global Compact – Reaffirmation of Commitment, the world’s largest corporate responsibility initiative.
Nonetheless, CSR in India has hardly made a difference. It is an issue for big, formally organised companies that only employ a tiny fraction – not even two percent – of India’s work force of almost 500 million. In uncounted small-scale industries as well as in commercial agriculture, labour standards, environmental protection and community welfare are not on the agenda.
India may be a rising giant but it also remains a troubled, fragmented society. Britain, as the colonial power, exploited the country, applying a policy of divide and rule. After 60 years of independence, India still cuts a rather sorry figure on the overall human-development index. After 1947, the pattern of inequitable development continued as before, creating enormous fortunes for the few, providing the civil service with some comfortable niches, and leaving the masses to suffer in poverty.
It is in this setting, that government officials and business leaders have become fond of harping on corporate social responsibility and public-private partnerships (PPP). In practice however, such talk is all too often only diverting attention from blatant governance failures. Consider a recent example from Kolkata. The Maidan is a vast park area in the city centre. The British cleared this space for military reasons, it enabled their cannons to better protect their colonial capital. Today, the Maidan is the lungs of an overcrowded metropolis. Much of it, however, is in a rather sorry, neglected state. One section even became a criminals’ den, without the police ever doing anything about it.
Under the banners of CSR and PPP, a private company recently made a deal with the authorities. The company has turned this particular Maidan section into a well-gardened park. Whoever wants to enter, however, must pay a fee. In return, the government granted the private corporation exclusive parking space for a substantial fee near its offices in the business district close to the Maidan – valuable space, which is no longer available to other motorists in the congested urban centre. This “PPP” is clearly a blessing for the company concerned, but having reduced Kolkata’s commons it is absurd to call it an exercise in CSR. While some may applaud the fact of a part of the Maidan has been “saved”, it is hardly mentioned anymore that it is normally a government’s duty to maintain public parks, provide open spaces for everyone and, most of all, fight crime. Unsurprisingly, the criminals that once occupied the plot mentioned are now active elsewhere, without being much harassed by the police.
Corporations have certain duties; but so do civic authorities and governments. Too often, CSR initiatives in India only compensate for governance failure. Civil society – of which corporate leaders are a part – should get the government machinery to work, but not take over tasks corrupt or lethargic governments refuse to shoulder.
If CSR is to make sense in India, it must contribute to fighting the causes of hunger, despair and destitution. Only once that notion prevails in the entire economy, including the small-scale and the informal sector, will it make a substantial difference. All summed up, CSR must be about making all investments adhere to social, environmental and ethical as well as economic standards. “Progress” as we know it, however, has so far only deepened the divide between the technologically endowed and the technologically dispossessed in India.
Conclusion
The observer without a vested interest in the CSR phenomenon should remember Milton Friedman’s proposition that the business of business is to maximise shareholder returns. From this perspective, it is possible to understand the relevance of CSR. Ultimately, it is still the shareholders who call the shots. In today’s globalised circumstances though, with multilocational presence of corporations, it may be in their interest to take account of the needs of various host communities – at least on paper or for appearance’s sake.
So are shareholder’s interests being made subservient to those of the host communities? Or are corporate interests camouflaged through CSR talk, making host communities believe that their interests coincide with those of corporations? Arguably, there are entities that actually believe that upholding stakeholder interest is the route to brighter bottom lines. But arguably there are also corporations that engage in ‘make belief’.
In India, where the essence of democracy lies in making government work, CSR must not result in authorities relinquishing their responsibilities. Accordingly, all private-public partnerships that are being contemplated have to be reviewed with concern. Government – whether at national, state or local level – must perform according to the constitutional duties and not be allowed to shed responsibilities.
At the global level, moreover, the challenges afflicting humankind are so daunting that CSR on its own will achieve at best little islands of improvement in oceans of crises. And one should probably be grateful whenever that is the case.