SOCIAL RESPONSIBILITY OR CORPORATE FAD
CSR BALANCE SHEET
Most Indian companies have a confused approach to CSR,dubbing it as philanthropy and veiling the underlying motive
Lisa Mary Thomson & Neha Dewan NEW DELHI
ITS SOMETHING they cant do without anymore.Not when it could tarnish brand value,hurt chances of taking their business global or hit their image among potential overseas clients.With this spectre looming over them,it isnt surprising why Indian companies have begun relying on the one aspect that could bail them out: Being socially responsible.
Defining the term (corporate social responsibility or CSR) has perhaps been the trickiest part of this solution.As Gerard Hastings,professor of social marketing at the University of Stirling,puts it: The key word in the phrase corporate social responsibility is corporate because the aim is to benefit the standing and success of the corporate sponsor. If a cola major is working on conservation of water,its because they have been found using up our water resources.If a cigarette maker is worried about the poor mans health,he simply wants to be allowed to continue selling more cigarettes.
Most Indian companies,however,have a confused approach to CSR,interpreting it as philanthropy and veiling the underlying motives under the blanket of social good.Combined with ad-hocism,personal interests and the lack of professionals specialising in CSR and the waters get murkier.
Fundamentally,most observers feel companies see CSR as a way to create a safe and secure environment for themselves,to be able to sustain operations in their area of interest but dont want to admit it.Says Parul Soni,executive director,development advisory services at global consultancy Ernst & Young,It is more an attempt at saving themselves and doing risk management simultaneously instead of dealing ethically with the different stakeholders in their chain,which is one definition of CSR.
To a great extent,companies see CSR as an addon function,not core to the business and this impacts the scale and the nature of their operations.After all,how many people can you keep to fulfil a support role asks Mr Soni.Going by the common practice across large business houses in India,CSR has taken the form of a family activity with family members,often spouses of the businessmen themselves,taking charge of this responsibility.Adi Godrej,chairman of the Godrej group,for instance,says that his daughter Nisaba heads the board of professionals that looks after CSR activity in their company,so that the activities are clearly directed where the family would like them to be.
Experts however claim that having a family member in charge often leads to a situation where the initiatives are driven by their own areas of interest or the passion they have or feel for and hence short-term and not aligned with the business objectives of the company.Then there are also companies where CSR is handed over as an extra responsibility to an existing professional,generally the person responsible for environment health and safety or even the human resources head in some cases.Many contrast this with multinationals,where CSR is ingrained into the operations of the business and where dedicated professionals are recruited to execute the long-term strategy.Take the case of Hindustan Unilever where the chief executive officer and the management committee of the company lead corporate responsibility.The management committee governs the CR strategy with a view of key strategic approaches and seeking reports on impacts and efforts against clear targets.
At HUL,corporate responsibility is integrated into our business through brands,people and processes, says the companys corporate responsibility head,Meeta Singh.
Dr Peter Cappelli,professor of management and director of the centre for human resources at the Wharton School,University of Pennsylvania,has co-authored a book The India Way: How Indian Companies are Revolutionising Management.He says that that with a professional system in place,there is a greater likelihood of accountability,standards and measures of achievement in contrast to when a family member is in-charge and where the person may just be following his interests.
Some also see a distinctly cultural and historical angle to the approach to CSR in India largely associated with the fact that many of the founders of large Indian companies were known for their philanthropic activities.Hence,CSR,when it arrived in India,became for many merely an extension of this legacy and often took the form of charity.Professor Sushil Kumar,professor at IIM-Lucknow however points out the chinks in the system.There is a certain limit to the amount that you can donate as charity.Also,it creates a dependence syndrome amongst its recipients rather than developing the long-term capabilities of their target group.
Dhananjay Bansod,chief people officer at Deloitte Touche Tohmatsu India,says that the distribution mechanism of money devoted to CSR is amiss.
He says that how money gets utilised is an issue that needs to be checked at various levels.To him,the solution lies in having a sustainable relationship and take charging of the initiative as a company rather than relying on other mechanisms to achieve goals.
To a great extent,the approach to CSR in India has largely been parental,and generally chequebook oriented and directed at conventional areas like education and healthcare.But everything that is socially oriented doesnt need to be philanthropic.If it is treated as a business,then it can be taken to a scale unlike philanthropy, says Rita Soni,country head for responsible banking at YES Bank.
PEOPLE vs PROFIT
Are corporate houses in India truly grappling with the balancing act between profits and philanthropy or is CSR merely a fad,SundayET presents a ringside view
View
R Venugopal Professor (Strategy) Institute for Financial Management & Research Chennai
Separate wheat from chaff
HAS corporate social responsibility (CSR) in India delivered What has been its impact on society,the environment and the overall business system To address this question it would be necessary to make clear my understanding of what CSR is.To me,CSR,as far as business firms are concerned,is a paradoxthe paradox of having to address two conflicting requirements: the need to make profits for themselves and the need to benefit society.The need to make profit arises since that is the bais of any business firm.Firms cannot survive unless they create goods and services that are useful to somebody.. Profits are a measure of the usefulness of the goods or services that a firm offers.Profits indicate how successful a firm has been in taking inputs from its environment and converting them into goods and services whose value is more than the cost of the inputs.Profits are thus a measure of how successful a firm has been in value creationits primary,economic duty.The need to benefit society can arise due to pressures from society or the social values of a firms managers.Because it entails transfer of resources to society at less than market rates,the need to benefit society conflicts with the need to make profits.The interaction of these conflicting forces manifests itself in the form of various CSR initiatives of firms.
How do we sit on judgment over these initiatives Do we point to the immense problems that the country faces and dismiss them as just drops in the bucket Or do we off-set the good that some business firms are doing against the allegedly greater bad being perpetrated by others to arrive at a net negative balance In my opinion,neither would be the right thing to do.
The key to making judgments lies in recognising that we are living in times that call for joint efforts on the part of governmental,corporate and nongovernmental sectors to address the failures of the marketit is beyond each sector to act singly.While a myopic view may indicate that the immediate impact of the social good that exemplary firms are doing may not be substantial or sufficient,a farther-looking perspective may help one see the potential catalysing influence of these firms initiatives.They may well be contributing to the realisation of the critical mass that would tip the scales,resulting in what is now a localised phenomenon spreading rapidly through the whole of the business system.One may take a dim view of CSR in India today but history would judge differently.
Its window-dressing,largely
The best of what passes off as CSR is no more than corporate philanthropy,often carried out unimaginatively,uncritically and in an atmosphere of distrust what are they doing with our money! Philanthropy,if done creatively,can indeed be path-finding.However,one ought to also be mindful of the larger environment that breeds inequities and necessitates philanthropy,and what corporations can do to factor that in the course of making profits,the source of all corporate philanthropy.On that,I can do no better than quote Martin Luther King,Jr., Philanthropy is commendable,but it must not cause the philanthropist to overlook the circumstances of economic injustice which make philanthropy necessary.
A little rearrangement of words in the phrase CSR produces anotherSRC or Socially Responsible Corporation.Now that would be something to strive for,to be proud of! To be meaningful,the word responsibility needs to be incorporated in the way corporate affairs are carried out.Responsibility is much more than merely abiding by the letter of the law even as one compromises its spirit by searching for and making full use of the myriad loopholes that exist in any and every law! Responsibility stems from a view one has about oneself,an enlightened sensitivity of the context one is a part of.A SRC would conduct itself in ways that maximises the larger social good.It would factor concerns about the greater good,the well-being of society at large,present and future,in the way it conducts its business.It would not be focused solely on the single bottom line of profit,but would strive to incorporate,with equal vigour,other bottom lines,such as people and the planet.It would operate in the spirit of vasudhaiv kutumbakamthe whole universe is my family;the spirit of trusteeship that Gandhiji spoke about so eloquently.Such a corporation would not need to organise CSR as an addon.And it would surely not need to indulge in show and tell our world is quite discerning.
Is this Utopian Well,it is about as Utopian as a Jamshedji Tatas dream to set up engineering and metallurgical industries to modernise Indiasome 150 years ago! Surely,there must have been equally or more profitable and less riskyand less Utopianventures that he could have put his money and business savvy in.And having taken up such an improbableUtopian venture,Jamshedji spent all his creative energies in planning the township of Jamshedpur,which even today is considered an unique example in all of Asia.And the companies he built had employee welfare systems that later became the basis of our public laws on the theme.
The business groups which fared well on the CSR scorecard,according to Karmayog rating 2009
BALLARPUR INDUSTRIES
Livelihood creation,education,empowerment of women
HDFC LTD
Community welfare,children,healthcare
INFOSYS TECHNOLOGIES
Social rehabilitation & rural upliftment,learning & education,art & culture,healthcare
JUBILANT ORGANOSYS
Environment,community welfare,water
KANSAI NEROLAC PAINTS
Community welfare,healthcare,education
LARSEN AND TOUBRO
Health,education,vocational training
MOSER BAER (INDIA)
Livelihoods and training,education,environment
TATA CHEMICALS
Environment,energy,community welfare
TCS
Energy,community welfare,education
TATA STEEL
Environment,community welfare,rural development
TITAN INDUSTRIES
Education,physically challenged,women
TITAN INDUSTRIES
Environment,education,energy
YES BANK
Responsible banking,community welfare,environment
Incidentally,a study by non-government organisation,Partners in Change which works around creating CSR awareness shows that employee retention,brand reputation and realisation of company values were the top three drivers for companies engaging in CSR.
Some companies have engaged in CSR to be eligible to operate in certain countries.Textile manufacturers who export to Europe,for instance,are said to fulfill certain social regulations in terms of the work environment provided to their employees.Overseas investors,particularly pension funds,are also known to prefer investments in companies,which have strong CSR practices.It has been generally seen that CSR has direct connection to stock market returns and brand value.Its non-compliance can easily dent image of a company in the market.US has,in fact,become more aggressive in their pursuit of companies strictly adhering to the Foreign Corrupt Practices Act (FCPA), says James D Pajakowski,executive VP,global risk and advisory services,at consultancy Protiviti.Most public sector units,on the other hand,are under pressure to do CSR particularly those involved in high impact activities such as mining.Most of them do not have a professional focussed on this, says Professor Kumar of IIM-Lucknow.
The saving grace however is that many experts see lip service to CSR as a passing phase in its evolution.A spokesperson of GMR admits that both companies and the government are in the process of brainstorming on the role of CSR in the countrys development.With most companies slowly moving beyond philanthropy,the hope is that sustainability and business alignment will have to become a priority,sooner or later.Hopefully,for the right reasons.
(With inputs from Aman Dhall)