Companies can lead by example

By Rita & Umesh Anand

IT is a decade since the law on corporate social responsibility was passed in 2013. This is a good time perhaps for a reality check on what the law has achieved. Several questions can be asked.

Do the two percent of profits that must be spent on CSR have any significance at all in relation to India’s huge development requirements? Are managements now more sensitive to complex national problems of inequality and poverty than they were before? Have business practices and boardroom decision-making become more inclusive?

The answers to such questions are complicated as is only to be expected. The purpose of CSR is to give back to society and engage in nation-building. Companies that get involved in meeting the needs of communities in healthcare, nutrition, education, empowerment or water conservation make a difference by the very fact of their engagement with and money spent in these spheres.

Many non-profits, both big and small, depend on corporate support for the good work they do and the causes they espouse. Partnerships lead to learning on both sides and are even more important when they involve the government.

Those companies that undertake CSR projects with the passion and stamina needed for making a serious impact have the potential of being transformational. They bring in innovations and management systems that enhance standard forms of governance and deliver results that might not have been possible earlier.

Many last-mile solutions become available when companies become catalysts for new ideas and partnerships involving non-profits and government. Not all of these are known to endure, but a difference is certainly made and the delivery system of the government too benefits from the experience.

But is this enough? Perhaps not. A much more important purpose of CSR should be for companies to change from within. The private sector has a crucial role to play in generating jobs and taking hundreds of millions out of poverty. It is the most important driver of growth. It must therefore see itself as a catalyst for opportunity and empowerment and go much beyond its search for immediate profits.

Companies must embrace the role of being reformists in all that they do and build a modern and competitive economy based not just on legally delivered equality and access, but the less graspable values of integrity and fraternity as well. 

The real measure of CSR should be whether it has been able to transform the thinking within managements and change their attitudes to the consumer and the citizen. Has the formal engagement with development problems motivated decision-makers in companies, at the top and across management, to think afresh about how they do business? Do they care and share more than they did in the past? Are they giving their workers better terms of employment and addressing their aspirations?

We in this magazine see no evidence of a widespread change in orientation. Promoters with a conscience and a good heart set the bar high for themselves and the managers they employ. We know a few of them, but that is just what they are — a few. For the vast majority of managers in the corporate sector — IIT, IIM, foreign degree holders — there is at best lip service to social concerns. For them CSR is just one of those things they have to do in between a lot else and it doesn’t go beyond window dressing.

But it is a change in thinking that is truly needed. Where it is in evidence, it is wonderful to behold. Rajiv Khandelwal, a founder of the Aajeevika Bureau, has in an article in this special issue explained what the Social Compact is achieving in shopfloor reforms to treat workers with dignity and integrate them with business goals. The Social Compact is a partnership between NGOs and companies, but it is companies like Thermax and Forbes Marshall that have played leadership roles in helping it succeed. Here CSR is hugely successful and especially meaningful.

Sanjaya Baru in his article points out that Prime Minister Manmohan Singh’s Social Charter way back in 2007 spoke of giving better terms of employment to workers so that they feel secure. Dr Singh called for affirmative action to bring up weaker communities and for industry to show respect for the environment. He also emphasized the need for moderation in the renumeration given to the bosses in a company, in particular promoters.

CSR defined in this way has weight that matters. It is what companies can and should do to not only strengthen their own businesses but the private sector as a whole. The entire reforms agenda in India flounders on the issue of inequality. Corporations have a big responsibility for not just providing jobs but ensuring that employees feel secure enough to embrace reform. Inclusion is the key to greater efficiency and productivity — and the deepening of markets with greater levels of prosperity, healthcare, education and housing.

We have a comprehensive overview of CSR spending by Dr Madhukar Shukla, formerly of XLRI. He helps greatly in understanding how companies are spending their money. The collective CSR spending by the corporate sector is sizeable even if in relation to the development needs of the country it doesn’t account for much. But whatever it is, spending it purposefully is important.

The population-wide changes that India needs cry out for a scale of investment and implementation with equality of access that CSR cannot ever hope to realize for hundreds of millions of beneficiaries. It is and can only be achieved through equitable growth. It has to be the work of a reignited corporate sector on the one hand and government on the other, powered by political vision and a sense of mission.

Some degree of change happens on its own. A decade is a long time in an emerging economy where income levels are rising, social equations are being challenged and technologies are leading to empowerment. Companies are compelled to respond to new scenarios. Some of the transitions they make are reflected in CSR initiatives, but might well have taken place anyway out of a sense of survival — whether there was a law or not.

When we launched Civil Society 19 years ago, we chose a slogan that we felt defined our magazine and the kind of journalism we wanted to do. It was: ‘Everyone is someone’. We believe it is also the principle on which a forward-looking economy and fair markets should be based. Companies have a crucial role in making this happen.

We have several interesting and insightful articles in this anniversary issue on CSR. Arun Maira, our friend and contributor of many years, has taken the somewhat extreme and grim view that the non-profit sector shouldn’t settle for crumbs from the corporate world such as those dispensed under the two percent rule. Maira sees time running out and calls for systemic change.

Dr Ramesh Mashelkar, also a close friend and fellow traveller, calls for big change through innovation — more from less for more is what he recommends. He emphasizes that being good is as important as doing good. In other words, it won’t do to run a lousy company and hope to get away with it by doing some CSR on the side.

Dr Kiran Karnik makes the same point, saying how a company earns is as important as what it spends on. You can’t cut down forests and plant a few trees as compensation.

Santanu Mishra of the Smile Foundation emphasizes the need for partnerships of the kind he has shaped with leading companies over the years. Ratna Vishwanathan points out that the role of non-profits is invaluable in implementing CSR schemes and companies should learn to trust them more. Ratish Nanda would like to see conservation projects supported because of the spin-offs from them for cities.

A recurring concern among all our contributors is the putting of CSR funds into PM CARES and the political donations that companies make through electoral trusts. Jagdeep Chhokar’s is an important voice in this context, he being a founder of the Association of Democratic Reforms (ADR). A private sector held captive by politicians in power is in no one’s interests.

To get an inside view from a company, we have B. Muthuraman and Sourav Roy take us through the Tata Steel story where the Tata journey began as philanthropy more than 100 years ago and evolved with time. The purpose of this special issue is to critically analyze CSR for all to see the directions in which it seems to be headed. Companies with good PR and advertising and the influence they wield in general tend to have the last word. They rule the narrative. As India looks for answers to the problems of inequity and lack of access, a deeper understanding is needed.