Corporations have to integrate 'social responsibility' into their business agenda to protect

environmental, social and human rights of the vast majority

Sudhir K Sinha Delhi
Corporate Social Responsibility (CSR) is a highly misunderstood and misinterpreted term in
India. The core of CSR is what a company essentially does in terms of philanthropy or charity
in the community in which it operates. This understanding of 'India Inc.' has traditionally been
continued, practised and modelled vis--vis the evolving global understanding of CSR that
takes a larger view of business impacts and helps business achieve a balance or integration of
economic, environmental and social imperatives.
Some Indian companies believe that merely complying with laws and regulations fulfills their
need for social responsibility. This typical escapist response revolves around the argument that
the responsibility to look after society largely remains with governments as companies pay
taxes and duties.
Paradoxically, the emerging global perspective of CSR is essentially about behaviours that go
beyond basic legal compliances, even charity and philanthropy. CSR is about commitments of
organisations towards seamless integration of the marketplace, work-place, environment and
community concerns into business operations in conjunction with stakeholders. A responsible
corporate recognises that its activities have a wider impact on the society in which it operates.
Therefore, it takes account of the economic, social, environmental and human rights impact of
its activities on all stakeholders.
Historically, CSR has evolved worldwide as a response to market forces. The first ever known
evidence was the large-scale consumer boycott of sugar in England against the exploitation of
slave labourers in 1790. However, Cadbury's social initiatives, started in the later part of the
19th century, present early evidence of corporate philanthropy. In India, the Tatas, in the first
half of the 20th century, incorporated many responsible initiatives for employees into their
business strategies, such as limited working hours, leave, provident fund and others. The
Tatas initiated various labour welfare laws like the establishment of the welfare department
that was introduced in 1917 and enforced by law in 1948. Maternity benefits were introduced
in 1928 and enforced by law in 1946.
Recently, the boycott of milk products of Nestle in the early 1970s did fetch the attention of
corporations. However, the primary drive for the ethical business and corporate social
responsibility came from the US and Europe in the 1980s and 1990s, which witnessed
consumer boycotts, shareholder action, ethical shopping guides, ethical product labelling,
media campaigns and campaigns run by pressure groups, mainly civil society organisations.
Shell and Nike, in the mid-1990s, were compelled by 'ethical market forces' to re-orient their
business behaviour as their sales went down badly. The public agitated in Europe against Shell
on the dumping of Brent Spar oil in the North Sea and there was a campaign against child
labour and exploitation of workers in Nike's factories.
The nationalisation of banks and coal mining in the late 1960s and early 1970s in India was
done to control unethical business practices of private operators. India adopted many acts and
laws to regulate corporate behaviour in order to protect the basic rights, safety and interests
of stakeholder groups, mainly of employees, customers, community and environment.
Although India is seen as an emerging economy after China and is a favourable business
destination for western investors and multinationals, it is going to be tremendously
challenging for any business to remain competitive here in the long term. The surging nine per
cent plus growth is seen as India's booming economy a complacency that thrills us that
India is economically growing very strong and fast. Some economists argue that the
macroeconomy benefits only those who have access and control over resources. It will not
sustain if the microeconomy is not reciprocal with a positive response to macro economy. CK
Prahalad, in his book, Bottom of the Pyramid (BOP) has strongly advocated converting poor
people to potential consumers. Unless these people have equity in the growth of economy,
India can never achieve the title of a super economy.
Here comes the critical role of corporations. They have to integrate CSR into their business
agenda in a way that changes the conditions of society and markets and ensures the
participation of consumers in economic transactions. The e-choupal of ITC and the Shakti
project of HLL are translations of the above intent as these companies have understood the
dynamics of future markets.
If people from the bottom are not absorbed in mainstream economic development, there will
always be conflicts between capitalism and socialism. The growing conflicts between
companies and communities over the control of land and natural resources are widespread.
The Utkal Alumina and Vedanta Resources in Orissa, Tata in Singur and the proposed SEZ in
Nandigram in West Bengal are examples of land disputes and farmers' resistance. The
empowered group of ministers on SEZs were under tremendous pressure and forced to take a
policy decision that the government will not acquire land anymore for businesses. Companies
have to directly negotiate with communities for acquisition of land; this is the manifestation of
transfer of powers from the government to the community on social licenses to operate
business.
The other issues relating to hazards of industrial production, especially after the Bhopal gas
tragedy in 1984, are fast catching the attention of civil society organisations in India. Dumping
of wastes is going beyond the limits of social and environmental tolerance; civil society
organisations such as CorpWatch and Greenpeace are always keeping the business practices
of companies under scrutiny. The pesticide issue of cola companies has thrown up a new set of
challenges on questions of being environment-friendly and socially responsible.
The situation is complex and India is facing a compounded set of corporate responsibility
challenges. Yet, CSR is being placed in the context of traditional corporate philanthropy. Even
philanthropy is not strategic to businesses. For example: a mining company that is adversely
impacting environment should work on water and forest conservation, towards mitigating
environmental impacts. It should take account of the rehabilitation of tribals because it
displaces them from their settlements. Indeed, how does the construction of a cardiac hospital
in a city meet the responsibility of a mining company, which a large mining company
boastfully claims under CSR?
In the traditional paradigm, most corporate bodies view CSR as the extension of financial
inputs for a humanitarian cause. This is a perception barrier. Companies need to relate
corporate philanthropy to the impacts of their business and accordingly design philanthropic
works. Only then can it be strategic.
The main evolving global trend of CSR has shifted from traditional corporate philanthropy to
ethical business. It focuses more on how a business is conceptualised and operated. There is a
notion of fair profit. In an ethical business the essential thrust is on social values. Business is
conducted in consonance with broader social values and the stakeholders' long-term interests.
There is a wide spectrum of socially responsible practices vis--vis the varied and customised
understanding of CSR in India. This ranges from concepts of nation-building and trusteeship
that are demonstrated in the business practices of the Tatas and Birlas, and new generation
enterprises such as Infosys, Wipro, Dr. Reddy's and Ranbaxy, where less emphasis is on
minimising negative impacts and more on maximising the positive spill-over effects of
corporate development. There is another tradition of social obligations that remain an integral
part of business operations of mainly public sector companies like NTPC, GAIL and SAIL, while
companies like HLL, ITC and Maruti have integrated business standards of their international
partners.
It is clear that responsible practices are becoming more widespread, as organisations of all
types come under pressure from a range of constituencies. Some organisations have taken a
proactive line without external pressure in the belief that good citizenship is part of building
good business.
India will be joining China soon in becoming one of the super economies of the world. Hence,
it is crucial that India Inc. demonstrate high moral and ethical behaviour that protects the
rights and interests of their stakeholder groups.
The writer is vice president, Group CSR, Reliance ADA