The rationale for Corporate Social Responsibility in India

Gandhiji was a person who in several respects was ahead of his time. His view of the ownership of capital was one of trusteeship, motivated by the belief that essentially society was providing capitalists with an opportunity to manage resources that should really be seen as a form of trusteeship on behalf of society in general. Today, we are perhaps coming round full circle in emphasizing this concept through an articulation of the principle of social responsibility of business and industry. While the interests of shareholders and the actions of managers of any business enterprise have to be governed by the laws of economics, requiring an adequate financial return on investments made, in reality the operations of an enterprise need to be driven by a much larger set of objectives that are today being defined under the term Corporate Social Responsibility (CSR). The broad rationale for a new set of ethics for corporate decision making, which clearly constructs and upholds a company's social responsibility arises from the fact that a business enterprise derives several benefits from society, which must, therefore, require the enterprise to provide returns to society as well. Of course, the system of taxation in most countries does ensure that basic services provided by government such as a system of law and order, provision of infrastructure that includes assets such as roads, transportation facilities, the benefits received from the apparatus of society for respecting and enforcing property rights, etc. are paid for through taxation on economic goods and services produced and consumed. But there are other aspects of services provided by society that have now become even more important than traditional relationship between government and business. These go far beyond what was the case a few decades ago. Why should companies whose major objective has been to maximize profits for the benefit of their shareholders worry at all about serving the interest of society at large? The answer is simple and yet somewhat circular in nature. A business cannot succeed in a society which fails. This, therefore, clearly establishes the stake of a business organization in the good health and well being of a society of which it is a part. More importantly, in this age of widespread communication and growing emphasis on transparency, customers of any product or service are unlikely to feel satisfied in buying from a company that is seen to violate the expectations of ethical and socially responsible behaviour. We find, therefore, that to a growing degree companies that pay genuine attention to the principles of socially responsible behaviour are also favoured by the public and preferred for their goods and services. The current concept of CSR covers a range of issues that could perhaps be covered under and be linked to the fabric of sustainable development. Protection of the environment and a country's natural re sources would certainly be a paramount element of this concept of sustainable development. But what would be equally important is the need to ensure that society does not suffer from disparities of income and provision of basic services like health care, education and literacy. To carry this list further, it could be argued that the United Nations' Millennium Development Goals (MDGs) and the WEHAB (Water, Energy, Health, Agriculture, and Biodiversity) agenda of the UN Secretary General are key essentials for bringing about a solution to the very basic problems facing society. Consequently, if corporate actions are to target the most fundamental problems facing a poor country like India, then the components of the MDGs, including water and sanitation, prevention of eradicable diseases and the items included in the WEHAB agenda in some sense become guideposts for corporate social strategy and action. It is often asked why a company should worry about anything other than the bottom line measured purely in financial terms. One response is of course to say what has been stated above, namely the cliche that business cannot succeed in a society that fails. Hence, in an indirect but powerful way the success of business even in narrow financial terms depends on the success of society as a whole. The progress and welfare of society is not merely the responsibility of governments alone. In an effective sense it involves appropriate actions by all stakeholders, of which the corporate sector is extremely important. Hence, actions to address some of these basic challenges also become important for leaders of business and industry. We have several bodies now emerging on the Indian scene that focus on issues of CSR. CoRE-BCSD India is a unique grouping of corporate organizations that, for instance, are trying collectively and individually to build in sustainable development concepts in their operations. CoRE-BCSD India includes some of the most innovative, some of the largest and also the most forward looking organizations in the country. The objectives of sustainable development rest within the principles of corporate social responsibility (CSR), because unless the needs of society, both presentand future, are served, sustainable development would remain only a myth. And the most significant step in pursuing CSR is to proactively protect the environment. Publications are also being brought out extensively on case studies dealing with corporate environmental excellence. The range of operations and subjects covered in recent publications is vast and diverse. They can set an example of corporate social responsibility, which other units throughout the country can follow by emulating them. The material presented in recent publications rises to a level of practicality generally unseen in textbooks on the subject. There is no doubt that the inspiration provided by the record of successful environmental responsibility would be much more compelling than any advocacy on the basis of ethical or moral principles or for that matter even on the basis of legal or regulatory requirements. It would also be found from a perusal of such case studies that while improving the environment, the corporates whose experience has been documented have also served their business interests and actually made money from their actions. Perhaps this is an important conclusion for other corporate organizations to keep in mind and for those involved in advocacy for responsible corporate behaviour to use as an argument in favour of enlightened and responsible corporate decisions. Let us turn to the international scene as it has emerged in recent years. One major feature of the World Summit on Sustainable Development (WSSD) held in Johannesburg in September 2002 was the large presence of CEOs of corporate organizations from all over the world. In fact, it was striking that there were more leaders of business and industry present in Johannesburg than leaders of government. From the preparations prior to and discussions that took place in the WSSD emerged a new form of partnership defined by Type 2 initiatives and projects. These were distinct from typical government and NGO dominated development activities, in that they involved various coalitions of businesses, governments, multilateral organizations, NGOs, research and academia coming together to work on projects and activities that promote sustainable development by engaging some component of society at large. It must, however, be stated that the intent and resolve exhibited in Johannesburg has not been matched by actions that have taken place subsequently. But both before and after Johannesburg there has been a growing interest on the part of most business organizations of repute defining clear-cut CSR policies. Some of these have in fact been quite radical and ambitious. An example can be seen from the recent statements and writings of Lord John Browne, CEO of BP, where a company that has built its entire business around provision and use of hydrocarbons has actually issued a call for reducing emissions of carbon dioxide and greenhouse gases for stabilizing the world's climate system. Many would see this as totally opposed to the business interests of BP. But in actual fact BP has read the writing on the wall and has identified its future as an era beyond petroleum as the company's advertisements proclaimed loudly a few years ago. This, therefore, is an example of a company altering its long-term business plans to suit what it anticipates society would want in the future. This example, therefore, highlights the fact that corporate social behaviour could also be good business. If society is going to demand a particular set of products in the future, driven essentially by what it would want, then a company can alter its business plans in a matching direction. Expenditure, therefore, on projects related to CSR, if properly designed, can actually help the business of a company positively in a financial sense. It is estimated that by the year 2020 advertising expenditure of various kinds round the world would total about $ 2 trillion annually. The figure currently is about one-quarter of this estimate. This means that companies are spending substantial amounts in advertising to promote their business interests. Expenditures on CSR could be far more effective even in a business sense, and yet to go far beyond the purpose of advertising by receiving the trust of society if these expenditures meet the very basic needs of society in general. Hence, such actions would clearly subscribe to Gandhiji's wish of trusteeship requiring a new ethical code in the actions of the owners of business. But even more importantly, CSR though driven by other considerations, can actually help business in strictly financial terms as well.