Published on 31/07/2011
First Update 29/03/2017
Corporate Social Responsibility-Towards a sustainable India
The business sector has been extremely successful in generating wealth and value for its shareholders over the post independence years. It is commendable, but at the same time, triggered by an increasingly unmanageable population, we have been faced with an India, besieged with problems of poverty, malnutrition, illiteracy and unemployment. The U.N.D.P. Human Development Report places India 119th out of 169 countries with more than 55% of the population suffering from wide scale deprivation. Nearly 421 million live in ‘multidimensional poverty’ a term indicating acute deprivation in health, education and standards of living. With 17% of the world’s population, we have only 1% of global forest resources and 4% water. Half of the country’s arable lands are water stressed. Climate change projections indicate a further loss of agricultural productivity and woefully, India may still add 500 million people by 2050. The pressures of limited resources are likely to get more acute. The cost of environmental damage is critically eroding the GDP. The Government is undertaking ambitious development schemes but the magnitude of services required necessitates that all stakeholders join hands in achieving the development objectives of dream India. The business sector therefore needs to assist by taking up socially responsible business practices. Corporate Social Responsibility is how companies manage their business to produce an overall positive impact on society. It is a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment-a concept wherein companies integrate social and environmental concerns in their business operations and in their interactions with the stakeholders.
Most stakeholders are taking an increasing interest in the functioning of companies in terms of evaluating what the company has actually done, good or bad, in terms of its products and services and its impact on the environment and local communities. Social responsibility is just not a philanthropic exercise, but a means to create wealth also. Scientific evidence may be required to prove that corporate social responsibility initiatives result in greater profits but it is without doubt that it does provide intangible benefits through enhancing brand loyalties, stronger employee morale and greater investment confidence. It has a great potential to enhance the competitiveness of business because of a better social acceptance for the enterprise. It should therefore be planned accordingly. If it is regarded as a purely philanthropic exercise, it will be the first to succumb to resource crunches.
Corporate Social Responsibility is not a new concept to India. Corporates like the Tata’s, Birla’s, the I.O.C and others have been involved with serving communities since inception. Earlier efforts at corporate social responsibility were more centred on the internal aspects of corporate responsibility like the customer, ethical behaviour, staff welfare, corporate governance and transparency. External aspects like philanthropic giving and ethical investments on communities were low in priority. It is encouraging to note that many corporate houses are now partnering with communities in the areas of health, family welfare, education, environmental protection, potable water, sanitation and the empowerment of women and other marginal groups. Triple Bottom Line accounting practices now include social and environmental dimensions also. Performance may be assessed in terms of being “water positive”, “carbon positive”, “solid waste recycling positive” etc. It is also being increasingly felt that G.D.P. calculators must now account for the cost of environmental degradation as well as replenishment. This concept of “Green G.D.P.” is expected to reveal the true dimensions of economic growth. It will also provide policy makers and civil society a realistic assessment of priority issues.
Both in terms of functional initiatives and the geographical area of operation, it is the organisational mandate that has played a more decisive role. Current relevance of issues and demand from communities appears secondary. It would be more prudent to select priorities on the basis of community expectations .This would ease implementation by securing cooperation and participation by all stakeholders and also give the company adequate leverage in terms of competitiveness. Apart from partnering with communities in the areas of health, family welfare, education, environmental protection, potable water, sanitation and the empowerment of women and other marginal groups, a number of areas like creating awareness on personal hygiene, sanitation, education support to underprivileged bright students, strengthening the village level health and education facilities, wetland conservation, wasteland development, and the protection of heritage, art and culture, music and dance may also be of interest to local communities.
Corporate social responsibility benefits are beset with a number of challenges. In a developing India where food, shelter and clothing are still the primary requirements, garnering community participation on social issues is difficult. This may be coupled with a lack of awareness among communities and the perception of it being merely a donor driven exercise. Implementing agencies may not disclose information on audits, impact assessments of initiatives and the utilisation of funds. Local capacities are limited in assessing the needs of the community and also in working along with companies to successfully implement social responsibilities. Media sensitivities are low. Duplication of initiatives is not uncommon. Corporate perception reveals that the absence of an effective incentive and reward framework for sustainable business practices is today the largest barrier in harnessing the innovative capabilities of business.
In order to ensure that social initiatives are sustained and replicable, there is a need to increase awareness. This may help in confidence building amongst communities also. CSR needs to be in built in the existing and future strategies of all stakeholders. The small and medium enterprise has to be more actively associated with CSR. Corporates, Government and N.G.O’S could pool resources and draw up plans. In assessing priority initiatives, rural areas need to be taken up. A local alliance could be built up amongst all stakeholders to foresee planning and implementation. The Government could consider a scheme of rewards and incentives. Legislative support to making C.S.R. compulsory could be examined by the government and the monitoring mechanism for compliance strengthened. Presently the Environmental Impact assessment notification of 2006 enables the government to prescribe compulsory incorporation and implementation of C.S.R. initiatives. The N.O.C. issued by the Pollution Control Boards could have identical provisions in order to involve the small and medium enterprise also. A system of accrediting implementing agencies could also be initiated to ensure credibility. Media support, of course, is indispensable.
In terms of meeting their objectives on C.S.R., corporate houses should set aside a fixed percentage of their profits after tax towards C.S.R., prepare a plan well ahead of commencement of the financial year, highlighting objectives, quantifiable benefits, financial allocations and review mechanisms. Fund allocation could be done after consulting specialised agencies having experience in related fields and issues.
The Ministry of Corporate Affairs, Govt. Of India has come up with The National Voluntary Guidelines on Social, Environmental and Economic responsibilities of Business. These prescribe the basic principles, define self assessment indicators and provide a reporting framework for making disclosures to stakeholders. They also emphasise on the need of a well thought “Corporate Social Responsibility” policy. A policy that would include care for all stakeholders; be ethical, transparent and accountable; respect workers rights and welfare; have a respect for human rights and environment and provide for activities for social and inclusive development. Business houses, industry, civil society organisations, government bodies and research organisations have to be brought together in formulating the policy. Apart from the guidelines prescribed by the Ministry of Corporate Affairs as above, surveys have suggested that the policies should complement the efforts of the government in the nation building process; provide localised rural employment and livelihood opportunities; provide a commitment towards raising the quality of life and social well being of a community by contributing to the basic needs of life in harmony with nature. The policy should achieve to create business leadership ensuring social and environmental sustainability and provide upliftment of the deprived and a sustainable world in which N.G.O’S, Government and other stakeholders work together to achieve inclusive growth and quality.
For a good response to C.S.R. initiatives, corporate houses may need to demarcate commercial activities from C.S.R. and exclusively focus on it. It should have genuine social concerns for the community, be transparent in its initiatives, generate adequate funds and follow a system of internal and external financial and social audits. A good C.S.R. initiative will help in building a positive and long term relationship with communities by providing support where government support is inadequate. It will assist in overall prosperity of the region of operation and the creation of a healthy resource base for the corporate. Shareholder values will increase when customers exercise a preference in favour of businesses with a sound C.S.R. involvement.
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