Is Corporate Social Responsibility Relevant Today?
The growth of a global civil society has created a new context and set a framework for debating corporate power. Corporate social responsibility (CSR) is the result of the emergence of a new corporate accountability movement. The movement clamoured for regulating corporate and business houses and to inculcate in them a sense of corporate ethics. It argued for redefining the culture, customs, systems and norms of social behaviour of corporate. In CSR, the expression of a company's purpose and values in all its relationships is what is looked at. The moot question now comes whether CSR is relevant today, especially in the context of the slump in global economy and when companies are downsizing to be competitive and also to remain in business.
The World Business Council for Sustainable Development (WBCSD) defines CSR as “The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”. The European Commission on the other hand has injected an element of ‘voluntarism’ in its definition of CSR. Thus it says CSR is "a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis".
Production of material wealth and the services sector are fast developing in such a way that the products and the way they are produced are also changing. There is a paradigmatic shift in the production skills of the people which changed within a single generation. Commitment to society and commitment from society are becoming more and more elusive. It is also getting increasingly difficult to set the parameters of responsibility on businesses and corporates. Hence, the sense of responsibility should come from within business houses. It is true that there are problems in shaking up the motto of “making business sense”, and to build an image of ‘socially responsible corporate’.
Corporate and business houses have to manage issues that affect their business reputation and to respond to the growing needs and concerns of a range of stakeholders. Many times it is not possible for companies to deliver a positive response to social needs and crisis. However, the tsunami in Asia showed the possibilities. The commitment and response shown by many business houses were remarkable. It took a disaster to remind everyone that there is still a basic and reasonable argument about putting something back for the society in which one operates. Companies and business houses select social issues, which have a strategic fit with their core business interest. However, when a disaster like the tsunami or an earthquake strikes, it does not make sense to say that the demand for its contributions and interventions doesn't fit the interests of the company nor its strategy. Community investment is carried out in partnership with the people working in the voluntary sector (NGOs) or other actors. Corporates can better highlight social issues through their social marketing skills.
CSR is about wealth creation of a different type. Although there is growing criticism of the very nature and impact of business, such behaviour is nothing more than clear-sighted leadership. Corporate houses cannot exist as little islands of prosperity amidst a sea of deprivation. Investing in the health of communities is essential for the long-term success of business as the community at large is the client base. But this is not the same as simply throwing away a certain amount of money for good causes simply to enter into the good books of society. Businesses are able to bring a number of aspects to community investments that reflect their strengths. Corporates are good at bringing new ideas, and where companies collaborate to produce solutions for social issues the results can often be fabulous, powerful and sustainable. They can bring skills and products that can be important in the social realm, to build the capacity of civil society agents to be more effective. They are competent enough to design long-term strategies about what support needs to continue into the long run.
C.K. Prahalad in his The Fortune at the Bottom of the Pyramid opined that the intelligent application of markets can create a real breakthrough in tackling global poverty. According to him for more than 50 years the World Bank, donor nations, aid agencies, governments and others have taken what steps they could, but have failed to eradicate poverty. It remains the world’s most visible and daunting problem. So there has to be a better approach to alleviate poverty. Companies and business houses have the potential to flare up the innate potential of the people to innovate and create enterprise. They should actively provide products and services which meet real needs affordably and profitably. But it needs to be kept in mind that global poverty will not be solved by corporate philanthropy alone.
Government Efforts
There are instances in which governments come out to bring corporate and business houses under the ambit of their society. The European Parliament brought a proposal that companies which pollute have to pay the full costs of any clean-up, and that all companies must take environmental insurance to cover this eventuality. Meanwhile in the US, a court has cleared 45 handgun manufacturers and distributors of liability in the use of their products by criminals. The suit had alleged that the firearms industry knew corrupt dealers were supplying their weapons to criminals and did nothing to stop it. The industry argued that it was unfair and unlawful to hold manufacturers liable for the criminal use of a legal product.
It is the responsibility of the government to ensure that business houses adhere to the laws of the country and whether they comply with their promises in the contract. Governments should come to the aid of the larger interest of society to make sure that companies adhere to the laws governing pollution, waste disposal, etc. However, in India what we generally see is a tendency wherein the government hesitates to frame and implement guidelines for the corporate sector while the later is more proactive in setting standards for itself.
Governments should check ‘unwanted’ migration by attending to infrastructural deficiency in rural and undeveloped areas. They should encourage companies to invest in skill development in such areas so that people become employable and remain in their domicile.
Market Returns
The returns to social initiatives of the corporate are a generally debated issue. It is important to recognise that CSR premium is ensured through the humane behaviour of corporate and business houses. CSR will help in brand building. People will always be willing to pay more for the products of socially responsible and “environment-conscious” companies. Hence, CSR should be viewed as a progressive business strategy with a long-term pay off. It is in no case an institutional risk-taking, even in times of recession. What companies can generally do is to focus on strategic and selective interventions in terms of CSR, especially during the downward spiral in economy.
Frontiers of Corporate Philanthropy
The business community should be sensitive to the problems of the society. The following are a brief list of areas where corporates should get involved:
Social issues like education, poverty, disease control, etc.
Natural calamities like earthquake, floods, etc.
Protection of the environment
Sustainable use of natural resources
Recycling and proper disposal of waste
Energy conservation and clean technology.
In India more than 70 million children suffer from iodine deficiency. Hindustan Lever (HLL) developed an innovative process for making iodised salt. The venture has proven to be both beneficial to health and profitable for the company. Nestle settled its claim against the Ethiopian Government agreeing to take only USD1.5 million instead of the USD6 million, and then immediately donated the sum to famine relief in the poverty stricken country (Ethiopia's then military government in 1975 nationalised a livestock firm that was owned by Germany's Schweisfurth Group, a Nestle subsidiary. Nestle, caught up in a row with the Ethiopian Government over compensation. According to Oxfam, the Ethiopian Government offered to pay Nestle about USD1.5 million, a figure based on the current exchange rate between the dollar and the Ethiopian birr. But Nestle pushed for a payment of USD6 million, a sum based on the exchange rate in force at the time of the nationalisation). Bill Gates in his November 2002 visit made a corpus of USD100 million for the Bill and Melinda Gates Foundation’s local arm to fight AIDS in India. Companies also stepped up to the challenge of HIV/AIDS in Africa, with those such as Gold Fields, Anglo-American and others extending their initial support in providing anti-retroviral (ARV) drugs for their employees, to the families of those employees, and increasingly out into the local communities.
With the active contribution and participation of Tata Group companies, Tata Council for Community Initiatives (TCCI) has helped communities to become strong and self-reliant. Specifically designed programmes such as vocational training, education and computer training are also made available to various sections of the community. TCCI undertakes projects in the fields of education, vocational training, community health, water management, etc. Apart from the Tatas and Birlas, there are a host of companies such as the Hero Honda, Hindustan Lever Ltd, ITC, Maruti Udyog, Bharat Heavy Electricals Ltd, Housing Development Finance Corporation (HDFC), National Thermal Power Corporation (NTPC), Oil and Natural Gas Corporation (ONGC), Dr Reddy’s, Infosys, Ranbaxy, Wipro, etc. that are leaders in CSR. Infosys Foundation spends more than USD1 million per quarter on education and healthcare. The standards of corporate governance at Infosys have won world-wide acclaim.
Corporates should monitor the ways in which their financial contributions are spend in society. There is no point in large-scale spending from the corporate exchequer without proper monitoring. Corporates and business houses should make maximum use of their human resources (HR) and community development departments to ensure the ways in which their community interventions are carried out. Corporate spending for the sake of public interest should not be considered as a tax-saving exercise or as a promotion campaign.
Companies should ensure that people are not forcibly removed from their homes and habitat, and their livelihoods are not endangered. There should be open and transparent negotiations for land acquisitions for establishing industries and production units. This is an important responsible behaviour especially in the context of several uprisings against land acquisition for Special Economic Zones (SEZs). The Singur episode is another case in point.
Way Forward
What needs to be done today for the corporate and the management is to develop and nourish a set of values beneficial to take an empathetic view of the problems of society, to be open and become aware of the issues and be responsible to their actions. Corporate houses should be proactive in their legal compliance---both domestic and international laws. Companies should operate in places that are democratic and if democracy is not in place, they should work to develop it. Transparent lobbying is a responsible attribute of any company. However, it needs to be seen to what extend companies can negotiate openly especially in a highly competitive environment and where product differentiations are relatively limited. Companies should not undermine workplace democracy measures, such as free trade unions and collective bargaining, sensitivity towards needs of women staff, etc.
Corporate responsibility and accountability do not mean that corporate houses are responsible for each and every action that takes place in society. Responsibility of the corporate should be held with in a fine balance. It is very evident from what Hillary Clinton once said “In every era, society must strike right balance between the freedom business needs to compete for a market share and to make profit, and the preservation of family and community values. If either is undermined the consequences will end up costing us all, more in long term, materially and otherwise than we can possibly gain in the short term”.
The corporate and business houses should come out of their image of social parasites. This is possible by venturing into social engineering of a different type. Corporate activism in society should be in a win-win approach. The guiding principle should be more social responsibility with more business. Corporates are not an entity apart from society. Society is an entity in itself, full-fledged with a very intricate network. Corporates should be responsive to the sensitivities and sensibilities of society. The benefits of globalisation cannot be realised so long as the poor have no access to them. It is the responsibility of the corporate world to step in to realise the dreams of the world’s disadvantaged so that they both can share the fruits of development. Global civil society should continue striving to keep alive the spirit of ‘corporate accountability movement’.
