CSR : Lot More Needs To Be Done

According to Mallen Baker, well known writer on Corporate Social Responsibility, a lot has happen in CSR during the year just departed. He, however, wonders whether the battle for CSR has been finally won or is there still a long way to go.

Most of the activities that took place in CSR, he says, “represents the continuation of a trend, with new faces and actors stepping into the fray. The list of heroes and zeroes may change, but the key themes of growing expectations in business conduct, and increasing success in bringing the debate to the boardroom table, is in line with where we have been over the last few years.”

Looking at the Indian CSR scenario one can safely say that some positive steps have been taken but there is still a long way to go. CSR following among corporates in the country has grown. But while there has been quantitative progress improvement in quality is still a long way away.

Corporate responsibility is not an alien concept for Indian corporates. In its earliest form, it was reflected in approaches similar to corporate philanthropy and the Gandhian trusteeship model. Corporates made donations in cash or kind, community investment in trusts, and provision of essential services such as schools, infirmaries, etc. Many firms, largely the ‘traditional businesses’ even now continue to promote philanthropy.

In their book “Political Economy of Corporate Responsibility in India”, a 2006 paper for the UN Research Institute for Social Development, Atul Sood and Bimal Arora, point out that “Philanthropy has been important in India since the middle of the 19th century, largely due to a strong heritage of community influence and paternalism among traders-turned-entrepreneurs.”

Shefali Chaturvedi, till recently with CII, says there are three types of Indian companies when it comes to CSR practices. There are the big companies that have a proper CSR structure in place, there are those which appreciate the value of CSR but do not have a CSR structure and then there are the small and medium-sized companies that undertake CSR activities on a piecemeal basis.

Recent trends indicate that companies in India will, out of necessity, sooner than later, have to implement a CSR agenda. Surveys indicate there is a growing awareness of corporate responsibility among the people.. A majority of the India public feels positive that companies should be held responsible for bridging the gap between the rich and the poor, reducing human rights abuses, solving social problems, and increasing economic stability.

More and more Indians now feel that the business sector must play a wider and more expansive societal role. A majority say that companies should be held fully responsible for roles over which they have direct control. These include providing quality products and cheaper prices, ensuring that operations are environmentally friendly, treating employees fairly without any discrimination based on gender, race, or religion, and applying labour standards globally. Incidentally several surveys have indicated that companies in Information technology (IT) and telecommunications industries have been rated as the most socially responsible.

Global companies operating in India have, however, rated low in terms of trustworthiness. Only a very small number of multinational corporations (MNCs) are regarded as socially responsible. Those mentioned are possibly those that are the most visible. The perception is that MNCs are not giving their due to Indian society. Foreign companies are often accused of operating to lower ethical standards in India than they do elsewhere, amid a lenient compliance and enforcement regime.

The Indian perception about foreign companies is largely the result of activities of international pharmaceutical corporates like Novartis, Novo Nordisk, Pfizer, and GlaxoSmithKline. These companies have conducted clinical trials, many of which are conducted in India, which have been mired in controversies over unethical recruitment of patients, exaggeration of results and the underplaying of risks associated with drugs being tested. A major BBC World Service investigation found global pharmaceutical companies doing little to improve such perceptions, while Indian hospital ethics committees and the national legal framework have proved ineffective in tightening procedures.

Several survey results are indicative of the fact that public expectations from the business sector are increasing. If public demands continue to exert pressure on companies to adopt more responsible practices companies will begin very soon to be judged not only on their economic performance but also on their environmental and social performance.

Corporate responsibility has still to become an integral part of business strategy in most Indian companies To become more ‘sustainable’ companies needs to adopt, demonstrate, and practice more holistic approaches to business, where financial drivers together with sustainable development performance (i.e. social equity, environmental protection, and economic growth) are incorporated into mainstream business strategy and embedded in organizational values.

As perception about the need for corporate social responsibility grows among the public demands are audible for more government intervention in implementing and regulating CSR. According to Sachin Joshi, the ”Indian government has some serious work to do when it comes to the right policy frameworks for encouraging responsible business. Lots of businesses want to jump on to the bandwagon, but the government is lagging behind.” Joshi says “There is no single vision by the government on CSR. The approach is a scattergun one.” He sees a ray of hope in the Prime Minister’s statement that “ CSR is not charity, it is an investment in our collective future.”

There are others like Amita Joseph, of the Business and Community Foundation who would like to see more legally mandated policies to further the cause of CSR . Amita Joseph feels that corporate responsibility should now be legally mandated for all firms in India, imposing requirements such as a dedicated corporate responsibility department, fixed funding, and formal corporate responsibility policies and planning, with company size determining the requirements.

One area which requires urgent attention relates to transparency through the production of social responsibility reports. There are at present only five companies that comply with the Global Reporting Initiative Guidelines. Most companies claim that they do not produce these reports because their stakeholders do not demand them. There are also companies who say that excessive transparency is dangerous for their business health.

There is a need for companies to understand that greater transparency is essential if they want to maintain their credibility. Unfortunately, even though such reporting is the mandatory corporate standard for listed companies few are complying with this requirement. Fortunately with both the Prime Minister and the Finance Minister as also SEBI and the Reserve Bank lending their voice for greater Corporate Social Responsibility 2008 might witness a strong leap forward in the area of CSR. (Editorial CRBiz January 2008)