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UNIT 1
MODULE I
LESSON
1*
CORPORATE SOCIAL RESPONSIBILITY: THE GLOBAL CONTEXT
CONTENTS 1.0 1.1 1.2 Aims and Objectives Introduction Globalization and its Impact 1.2.1 1.2.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 Economic Impacts Social Impacts
Sustainable Development Role of Business in Sustainable Development Millennium Development Goals India and the MDGS Let us Sum up Keywords Self Assessment Review Questions Suggested Readings
1.1
INTRODUCTION
Globalization has increased the volume of world trade and foreign investments. The revolution in technological development has transformed the global economic scenario by reducing the costs of communication, providing easier access to information, and facilitating movement of labour and capital across the globe (ILO, n.d.). The Carnegie Endowment for International Peace defines globalization as, A process of interaction and integration among the people, companies, and governments of different countries, a process driven by international trade and investment and aided by information technology. This process affects the environment, culture, political systems, economic development and prosperity, and physical human wellbeing in societies around the world. In the present context, Globalization on one hand is seen as an irresistible and benign force for delivering economic prosperity to people throughout the world and on the
other end, it is blamed as a source of all contemporary ills (ILO, n.d., p. 24). The impact of globalization has been varied across regions of the globe (Refer Table 1.1).
Table 1.1 Perceived Impact of Globalization
Regions of the World Africa Perceived Impact Badly hit by globalization because of unfair rules, foreign debts, HIV/AIDS, poverty & migration have aggravated due to poor governance and inability to attract foreign investments to tackle the problems. Overshadowed by war & continuing Arab-Israeli conflict. Dominated by oil exports & migration and the fears for the impact on cultural identity and local traditions. In India and China globalization resulted in poverty reduction, decrease in unemployment, spurred economic growth and industrial productivity. Although not for all more than one billion people (approximately) have seen no reward. In fact globalisation has undermined their traditional livelihoods, social security systems and resulted in increased rural-urban intra -regional inequalities. In Philippines much of the globalization impact was superficial. In fact, it resulted in increased conflict among communities due to liberalization of investments and the capital flows were badly affected by the Asian crises. Volatile global financial markets badly hit the middle class because of inadequate government policies and poor understanding of local conditions by the IMF and foreign banks. Legal and illegal migration also increased to a large extent .On a positive note, it brought about public awareness on issues such as gender inequality, human rights, sustainable development and acceptance of other universal values and ethics. In Russia, there were increased investment flows, expanded export markets and newer opportunities for higher growth. There was thus increased need for enforcement of labour legislations, greater employment generation, reform f the educational system and control of migration. Poland became a part of the European Union to reap the benefits of globalization, but there was large unemployment due to restructuring of industries and the farm sector. In Western Europe, liberalization increased trade, capital flows and international competition, but consequently it also increased income disparities. Due to export of jobs to lower-cost countries and higher international tax competition, it resulted in severe restraints on the finance of the welfare state. It also led to the formation of the European Union as a response to the pressures of globalization. In North America, the impact of globalization was more or less positive, except for new pressures on companies to be more competitive, which lead to squeezing wages and corporate mergers, and loss of low skilled jobs to other countries.
Asia
Russia , Poland
China; 23.7%; Brazil: 8.3%; Mexico: 8.1%; China, Hong Kong SAR: 7.5%; Singapore: 6.0%; Argentina: 5.6%; Malaysia: 4.0%; Bermuda: 2.7%; Chile: 2.7%; Thailand: 2.2%; Republic of Korea: 2.1%; Venezuela: 1.7%; Remaining 176 developing countries & territories: 25.3%
and has also brought changes in the nature of financial flows by integrating the financial markets2. Globalization has also brought a change in the governance structure of the global financial system with an increase in influence of private actors such as banks, hedge funds, equity funds and rating agencies3. Revolution in information and communications technology and declining transportation costs have resulted in multi country based production of goods and services, which are technically and economically feasible. Production processes are unbundled and located across the globe to exploit economic advantages arising from differences in costs, factor availabilities and the congeniality of the investment climate (ILO, n.d., p. 27). Approximately today there are 65,000 Multi National Corporations (MNCs) with around 8,50,000 foreign affiliates coordinating the global supply chains linking the decentralized production system outside the formal factory system4. The global production system is also pronounced in the service sector where technological advancement has made it possible for services such as software development, financial services and call centers accessible from different countries around the globe. Technology has not only enabled economic globalization but has also helped in increasing connectivity5 among civil societies, governments and individuals. The process of globalization has resulted not only in increased global competition and efficiency but also in building convenient sources of transportation, machinery to churn out goods faster, better communication facilities etc. The key economic characteristics of globalization clearly indicate that though development in global systems have got us closer together economically, the social impacts of globalization across the globe has varied negative impacts.
3 4 5
The integration of financial markets after the fall of Bretton Woods system lead to (i) unification of exchange rates, (ii) removal of controls over the allocation of credit in the domestic market, (iii) opening up of capital accounts, (iv) revolution in technology improving the speed of knowledge of foreign markets, (v) development of new financial transactions, and (vi) emergence of new financial instrument: derivatives. The integration of the financial markets resulted in private financial flows and investments from North to South in emerging markets. ibid, p. 34
ILO Report (n.d.), p. 33 Spread of internet, e-mail, low cost telephone services, mobile phones, electronic conferencing The UN Human Development Report 2006 estimated the Gini Index an indicator of income inequality for India to be 32.5 in 2000.
It is difficult to assess the impact of globalization on poverty. Though people living in poverty have decreased in China, it has increased in Sub-Saharan Africa, Europe and Central Asia (82 million), Latin America (14 million) and the Caribbean (8 million). Relative poverty7 has increased in majority of the countries as an effect of globalization. Due to this, migration (both in-migration & outmigration) has increased across the globe. Migrants from all regions particularly women are driven into an illegal economy in countries of destination leaving them vulnerable to exploitation and trafficking. There has been an increase in illicit cross-border activities like tax evasion, money laundering, sex and drug trades. The fall in transportation costs and growth of mass tourism has made smuggling of people and drugs difficult to detect and punish. The global natural environment has also been affected by globalization because of the following reasons: (i) increase in travel (ii) larger corporations with centralized distribution (iii) poor pollution control mechanisms of MNCs in foreign markets and (iv) extractive industries using natural resources nonjudiciously. The problem has further aggravated due to lack of regulations and implementation mechanisms at the national and global levels. Though the increased influence of private institutions has led to better financial resource allocation, it has also led to corporate scandals, manipulations, and over extension of credits to unstable local banks and firms resulting in financial crises of increasing frequency and severity. Private financial institutions are exerting power over emerging markets in designing their economic policies. Globalization has disrupted the ecological balance, thereby creating a (i) carbonconstrained and water-constrained world. This has further created issues relating to sustainable development and poverty, thus giving rise to unprecedented ecological challenges to the world in the 21st century.
7 8
Relative Poverty is defined in relation to the overall distribution of income or consumption in country. The Brundtland Commission, formally the World Commission on Environment and Development (WCED), known by the name of its Chair, Gro Harlem Brundtland, was convened by the United Nations in 1983. The commission was created to address growing concern "about the accelerating deterioration of the human environment and natural resources and the consequences of that deterioration for economic and social development." In establishing the commission, the UN General Assembly recognized that environmental problems were global in nature and determined that it was in the common interest of all nations to establish policies for sustainable development.
exceeded the amount of financial aid granted by governments9 (World Bank Institute, 2005). Looking from this macro perspective, the private sector has already contributed to the reduction of poverty at the global level during the past decade. However the challenges of sustainable development in the new millennium are a new imperative for governments, businesses, and society to collaborate and work to strengthen each sector and create a qualitatively better world to live in. As per the United Nations, the World Bank and other international organizations FDI investments by private companies should enhance a process of sustainable growth that minimizes the damaging effects on the environment. To quote Maurice Strong, Secretary General of the World Summit, We now face the ultimate management challenge, that of managing our own future as species (Lawrence et al., 2005, p. 212). Todays world is interdependent where problems of poverty, unemployment, inequality, environmental degradation and social integration are causes of concern because they have an impact on society thereby impacting businesses worldwide. If business has to develop, society needs to be developed. Business cannot flourish in any country if the environment required by business is not conducive. Social upheavals impact the entire society in general and business in particular because to a large extent business is dependent on society for its growth and prosperity. The Government alone cannot deal with the issues of sustainable development. Collaborative partnership amongst governments, businesses and civil societies is the call of the day. It is therefore essential to take the agenda of developing collaborations to address the issues of sustainable development and poverty in the new millennium. In September 2000, world leaders belonging to the government, businesses and NGOs in the gathering at the United Nations adopted eight specific, measurable, time-bound targets called the Millennium Development Goals (MDGs) to address issues of inadequate incomes, widespread hunger, gender inequality, environmental deterioration, lack of education, healthcare and clean water( UNDP, 2006).189 United Nations member states and at least 23 international organizations have agreed to achieve MDGs by the year 2015. The Millennium Declaration of MDGs emphasizes the efforts to be taken by developing countries, and the contribution that developed countries should make through trade, development assistance, debt relief, access to essential medicines and technology transfer. By signing the Millennium Declaration, companies are committing to take action through their core business in enhancing growth and help to meet the MDGs. Thus, based on these MDGs, companies CSR policies have been framed.
In 2004, nation states invested 50 billion dollars; business spent more than 100 billion on building factories, offices, shops and acquiring shares of foreign companies based in developing countries.
Target 4: Goal 4: Target 5: Goal 5: Target 6: oal 6: Target 7: Target 8: Goal 7: Target 9: Target 10: Target 11: Goal 8: Target 12:
Eliminate gender disparity in primary and secondary education preferably by 2005 and in all levels of education no later than 2015 Reduce child mortality Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate Improve maternal health Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio Combat HIV/AIDS, malaria, and other diseases Have halted by 2015 and begun to reverse the spread of HIV/AIDS. Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases. Ensure environmental sustainability Integrate the principles of sustainable development into country policies and program and reverse the loss of environmental resources. Halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation Have achieved, by 2020, a significant improvement in the lives of at least 100 million slum dwellers Develop a global partnership for development Develop further an open, rule-based, predictable, non-discriminatory trading and financial system (includes a commitment to good governance, development, and poverty reductionboth nationally and internationally). Some of the indicators listed below will be monitored separately for the least developed countries, Africa, landlocked countries, and small island developing states. Address the special needs of the least developed countries (includes tariff-and quotafree access for exports enhanced program of debt relief for HIPC and cancellation of official bilateral debt, and more generous ODA for countries committed to poverty reduction) Address the special needs of landlocked countries and small island developing states (through the Program of Action for the Sustainable Development of Small Island Developing States and 22nd General Assembly provisions) Deal comprehensively with the debt problems of developing countries through national and international measures in order to make debt sustainable in the long term.
Target 13:
Target 14:
Target 15:
Progress Signs
Source: UNDP in India : Moderately/almost nearly on track considering all indicators : Slow/almost off-track considering all indicators : On-track or fast considering all indicators
Poverty
India, compared to most nations in the Asia Pacific, has made very slow progress in eradicating poverty over the period of 10 years, according to the Asia - Pacific Regional MDG report 2011-12. Malnourishment is also an indicator of food insecurity. In 1990, when the MDGs were formulated 53.5 percent of all Indian children were malnourished. Since then, progress has been slow. In India, the proportion of underweight children below three years has declined by only one percent between 1998-99 and 2005-06 to 46 percent. It is estimated that malnourishment could decline to 40 percent by 2015. This would still be below the target of reducing malnourishment to 28.6 percent. In the present context, the well-being of the average citizen is a measure of development. According to the Human Development Report 2011, the human development index (HDI) positions India at 134 out of 187 countries and territories. Bangladesh and Pakistan are ranked at 146 and 145, respectively. On the Multidimensional Poverty Index (deprivations such as in health, education and living standards) 53.7 per cent Indians have been placed in the
bracket of multi-dimensionally poor (612 million), the largest concentration of such poor persons in the world. Education
India is on-track and ahead of targets that relate to universalizing primary education in India. Gross Enrolment Rates for both girls and boys in 2006-07 crossed 100 percent. Empowerment of Women
Government of India MDG Report 2009 notes, participation of women in employment and decision-making remains far less than that of men, and the disparity is not likely to be eliminated by 2015. The labour market openness to women in industry and services has only marginally increased from 13-18 percent between 1990-91 and 2004-05. Infant Mortality
Indias Under Five Mortality (U5MR) declined from 125 per 1,000 live births in 1990 to 74.6 per 1,000 live births in 2005-06. U5MR is expected to further decline to 70 per 1,000 live births by 2015. This means India would still fall short of the target of 42 per 1,000 live births by 2015. In view of these statistics, child survival in India needs sharper focus. This includes better managing neonatal and childhood illnesses and improving child survival, particularly among vulnerable communities. Maternal Mortality
From a Maternal Mortality Rate (MMR) of 437 per 100,000 live births in 1990-91, India is required to reduce MMR to 109 per 100,000 live births by 2015. Between 1990 and 2006, there has been some improvement in the Maternal Mortality Rate (MMR) which has declined to 254 per 100,000 live births as compared to 327 in 1990. However, despite this progress, India is expected to fall short of the 2015 target by 26 points. Safe motherhood depends on the delivery by trained personnel, particularly through institutional facilities. However, delivery in institutional facilities has risen slowly from 26 percent in 1992-93 to 47 percent in 2007-08. Consequently, deliveries by skilled personnel have increased at the same pace, from 33 percent to 52 percent in the same period. By 2015, it is expected that India will be able to ensure only 62 percent of births in institutional facilities with trained personnel. Thus, universal coverage remains to be achieved. HIV- AIDS
India has made significant strides in reducing the prevalence of HIV and AIDS across different types of high risk categories. Eighty-six percent of transmissions of HIV and AIDS in India are caused by sexual activity. Much of this decline can be attributed to greater awareness and increasing condom
use. Adult prevalence has come down from 0.34 percent in 2007 to 0.45 percent in 2002. Malaria
Malaria, both in terms of prevalence and death has declined. Malaria diagnosis has declined from 1.745 percent in 2005 to 1.52 percent in 2009. Further, malaria prone states such as the north- eastern states, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Rajasthan and West Bengal have recorded fewer malaria deaths since 2006. Tuberculosis
India accounts for one-fifth of the global incidence of tuberculosis (TB), but India has made progress in halting its prevalence. Treatment success rates have remained steady at 86-87 percent over the last five years and prevalence of TB has steadily declined. Environmental Sustainability
India has made some progress towards the Seventh Millennium Development Goal of ensuring environmental sustainability. Forest cover has increased to 21.02 percent and protected areas cover to about 4.83 percent of the countrys total land area. Reducing the energy intensity of GDP growth through higher energy efficiency will be the key to achieving energy security. India is on-track in achieving the MDG target for sustainable access to safe drinking water. The overall proportion of households having access to improved water sources increased from 68.2 percent in 1992-93 to 84.4 percent in 2007-08. However India, which is one of the most densely populated countries in the world, has not recorded similar progress in improving sanitation facilities over the last decade. The proportion of households without toilet facilities declined from 70 percent in 1992-93 to about 51 percent in 2007-08. At current progress, the country is unlikely to achieve the target of reducing the proportion of households having no access to sanitation to 38 percent by 2015. The rural urban gap in access and use of sanitation facility continues to be very high. Sixty-six percent of rural households do not have toilet facilities as against 19 percent of urban households in 2007-08. Goal 8 of the MDGs is unique in the sense that it essentially focuses on donor government commitments and achievements, towards developing the global partnership for development. Most of the objectives and targets under the goal are set for developed countries to achieve a global partnership for development by supporting fair trade, debt relief for developing nations, increasing aid and access to affordable essential medicines, and encouraging technology transfer.
The Twelfth Five-Year Plan (2012-2017) proposes specific targets to achieve MDGs. The Government has launched several large programmes with regard to the MDGs. The areas that require redoubled efforts include literacy, nutrition, maternal mortality and child mortality. In India, the work of the UN entities on the Millennium Development Goals takes place within the framework of the: 1. UN Development Assistance Framework the overarching policy document for UN country assistance to India. The UNDAF is implemented under a five-year cycle, in harmonization with the Government of Indias Five Year Plans the overarching policy document for development planning in the country. 2. National Development Goals articulated in the Government of Indias Five Year Plans (Refer Table 1.3) The new UNDAF (2013-2017) cycle and 12th Five Year Plan (2012-2017) implementation overlap fully with the remaining period left to achieve the MDGs.
1.8 KEYWORDS
Globalization: Integration and interaction between people, companies and governments of different countries Sustainable Development: Balancing the present needs and future needs Millennium Development Goals: Eight internal goals that members of UN and other organizations have agreed to achieve till 2015 Corporate Social Responsibility: A form of self regulation integrated into business
(d) The aim of sustainable development is to reduce relative poverty. (e) It is the government of the country who can lead sustainable development. 2. Choose the appropriate answer: (a) Globalization integrates: (i) (ii) (iii) (iv) (b) (i) (ii) (iii) (iv) (c) People Companies Governments All of the above Cultures Environment Political systems All of the above
Globalization impacts:
Which one of these is one of the economic impacts of globalization? (i) (ii) (iii) (iv) Increase in FDI Expansion of production facilities Increased global competition Decrease in local competition Resource depletion Environmental degradation Current demands Social instability
(d)
(e)
Which of these is not a MDG? (i) Promote education (ii) Reduce gender inequality (iii) (iv) Reduce child labour Reduce infant mortality
Answers: Self-Assessment
(e)