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| Does business care? |
| Why it Should |
| Profits will come
as much from what companies stand for as from what
they sell. But is Corporate India ready for that? |
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| D.N. Mukerjea |
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KAUYA ka Nagla is a tiny cluster of hutments inside
Bharatpur, a mid-sized town in Rajasthan famous
for its bird sanctuary. Kauya has little going for
it. Its inhabitants are from the scheduled castes
and tribes and lead a life below the poverty line
with headroom to spare. Most of them are unemployed
and those that have jobs are typically daily labourers;
the lucky few are government sweepers. Then, given
their caste, many of Kauya's people are ostracised.
Kauya's children, however, aren't aware of their
plight - they have seen nothing better and are,
after all, children. They are lively, noisy, dirty
- they are on the cover of this issue - and they
greet you with a loud "namaste" when you
enter their elementary school. It's a two-room affair
that's managed by pharmaceutical major Lupin. The
school is staffed by two teachers and has kids between
the ages of five and 12. This is Lupin's way of
giving back to society and it is one of the 45-odd
projects that Lupin does for the disenfranchised.
The company's chairman Desh Bandhu Gupta puts it
somewhat vividly: "This is my way of paying
my gratitude to society for helping me build Lupin;
I come from very humble beginnings."
This year, Lupin has come up tops at the Businessworld
FICCI-SEDF Corporate Social Responsibility (CSR)
Awards. BW and FICCI jointly instituted these awards
in 1999 to champion the cause of CSR and sustainable
development. Previous winners include Tisco (1999),
Telco (2001) and Hindalco (2002). The other companies
in this year's Top 6 are ITC, Wipro, Indal, Canara
Bank and Gujarat Ambuja Cements. And that's just
the ones that made it to the final round (See 'Methodology'
on page 49). Among those that applied were Infosys
Technologies, Standard Chartered Bank, British Gas
India, Novartis India, Grasim and Kinetic Engineering
(See 'The CSR Practitioners'). There are still no
estimates of how much Indian companies spend totally
on CSR, but the list of firms that applied and evidence
on the ground suggest that CSR is an idea whose
time has come, and is important at least for the
larger companies. "In the last decade or so,
the outlook has changed from 'Why should I do it?'
to 'How can I do it?'," says Viraf M. Mehta,
chief executive, Partners in Change, a CSR advocacy
NGO. (This body carried out the field audits for
the BW FICCI awards.)
Research corroborates this. Earlier this year, the
UK-based International Centre for Corporate Social
Responsibility (ICCSR) carried out a survey of CSR
activity in seven Asian countries - India, South
Korea, Thailand, Singapore, Malaysia, the Philippines
and Indonesia. The body trawled the websites of
50 large corporates in each of these countries to
see evidence of CSR reporting, which in turn indicated
levels of CSR activity. (China was left out because
its legacy of state-owned businesses meant CSR activity
would be low, while Japan wasn't considered because
its companies are well integrated into the Western
business model that has, for some time now, been
laying stress on CSR.) India ranked at the top of
the survey - 72% of the sample reported extensively
on the CSR work done by them. This percentage was
much higher compared to the others. South Korea
came second at 52%, followed by Thailand (42%),
Singapore (38%), Malaysia (32%), the Philippines
(30%) and Indonesia (24%). What also emerged in
the study is that Asian businesses are developing
their own models of CSR, different from the ones
practised in the West. Other studies also support
this.
There is, of course, no universally accepted definition
of CSR. Shankar Venkateswaran, executive director
(India) of the American India Foundation and the
ex-head of Partners in Change, says that at last
count, he knew of several hundred definitions floating
around. It all started with the idea of "giving
back". Towards the end of the 19th century,
as Europe and America started spawning industrial
giants, hundreds of trusts cropped up. These were
all about using part of the corporation's profits
to help the underprivileged and making the world
a better place. In India, the Tatas, the Birlas,
the Bajajs, the Sarabhais, and others, all set up
their own trusts, running schools, colleges, hospitals,
orphanages, and the like. In some ways, the trust
and its activities became a corollary to industrialisation.
Then, in the last two decades or so, as companies
grew mightier and globalisation allowed businesses
to touch and influence far more lives, the issue
of corporate accountability arose. The argument,
put a little simplistically, is as follows. Corporates
are accountable for their actions to a range of
stakeholders. The stakeholders include shareholders,
employees, suppliers, bankers, consumers, and, finally,
society at large, which is where the companies exist,
much like individuals do. However, companies don't
always engage in activities that result in greater
good for all its stakeholders. Thus an extractive
industry (oil, mining) may defile the environment,
large projects could displace people, working conditions
in companies could leave much to be desired, and
so on. Now while it's not possible to stop the march
of corporates (and, perhaps, not right either),
one way to approach this issue is to get companies
to partner its stakeholders and work in a manner
that benefits both. Thus the idea of corporate social
responsibility was born. Some even call this neo-capitalism
or capitalism with a heart.
Moreover, given that profits ultimately happen because
of stakeholders, CSR, in some ways, safeguards future
profit flows. The accent, therefore, changes from
how profits are spent (philanthropy), to how they
are made in the first place (CSR). So a company
with good CSR practices may get environmental clearances
faster, may win more customers for its better practices,
attract better quality talent (positive discrimination
as opposed to negative discrimination), and reduce
transaction costs, among other benefits. In other
words, profits depend as much, if not more, on what
companies stand for, as on what they sell. Hence,
goes the argument, CSR should become a discipline
inside all corporates, like, say, finance or marketing.
In India, most of the work done by companies is
still in the nature of philanthropy. Consider that
of the six short-listed companies for the BW FICCI
award, five (Lupin, Canara Bank, Indal, Gujarat
Ambuja and Wipro) are involved in community development
work. This means building roads, running schools
and hospitals, creating income-generating schemes,
and similar projects. Only ITC's CSR - its e-choupal
project and others - has direct linkages with its
business. That is understandable given that many
of the traditional development indicators - life
expectancy, infant and child mortality, sanitation
facilities and access to primary education - are
still abysmal for India.
In fact, even the government expects Corporate India
to participate in welfare programmes, even though
it's a tacit admission that the state has failed
to deliver even the most basic amenities. The state
government of Karnataka, for example, is only too
happy that an outfit like Canara Bank is involved
in a slew of social welfare projects. "The
government doesn't have all the money; plus there
are inefficiencies built into the system. So we
welcome private sector participation, as our chief
minister keeps saying," says G.S. Narayanaswamy,
deputy commissioner and district magistrate, Bangalore
district. He has been involved in some of Canara
Bank's projects from the government's side. Other
government officials argue that the private sector
is able to leverage and invest funds very efficiently
because of its innate for-profit nature.
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| Jury members
Attorney General of India Soli
Sorabjee, former Indian ambassador
to the US Abid Hussain and HSBC
Securities and Capital markets
managing director Naina Lal Kidwai
with BW editor Tony Joseph |
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But many, like Partners in
Change's Mehta, are beginning to argue that as India
gets integrated into the global economy, companies
should pick up projects that are business centric.
"The CSR initiatives should become a part of
the business process." Based on his
experience in Corporate India, he argues that because
of the accent on philanthropy and the lack of a
well-defined process, the implementers of CSR are
not accountable to their stakeholders, the objectives
are neither well-defined nor measurable, and, finally,
you don't get maximum impact for your investment.
(The extreme right wing view on this is that companies
are trustees of shareholder capital, and any investments
made -including CSR - should finally benefit shareholders.)
Not everyone is buying this line yet. After all,
anything that has to do with a profit motive, implicit
or explicit, is still viewed with suspicion here.
But there are some companies, typically MNCs, that
are adopting the Western CSR model. Along with St
John's Vocational & Technical Training Centre,
British Gas, for example, has recently started teaching
unemployed youngsters how to become mechanics for
compressed natural gas (CNG)-based auto-rickshaws
in Delhi. British Gas officials say that India is
one of their eight key markets globally and they
want to be seen as an outfit that believes in sustainable
development. "There is a lack of skilled mechanics
for CNG-run vehicles; we are helping some people
develop a vocational skill, and, finally, we are
in the same business," says Nicole McMahon,
director (policy & corporate affairs), British
Gas India. Similarly, Samsung has kicked off a 'Digital
Hope Programme' across Asia to bridge the digital
divide. In India, Samsung has partnered Development
Alternatives to set up 10 Information and Communication
Technology centres in 10 villages. These will be
run by local entrepreneurs who will teach villages
about computers, how to use the Internet, and similar
things. Remember, Samsung has positioned itself
as a global technology major and is betting heavily
on the digital platform. So, if being associated
with the film Matrix is one way of being allied
with all things digital, the Digital Hope Programme
is another.
In an era of no free lunches, the attraction that
the business-centric model of CSR holds is obvious.
But if more Indian companies are to adopt that,
some other things, too, need to change besides mindsets
and developmental needs. The links between good
CSR and good business have to be established clearly.
Sure, even overseas there is still no way that the
capital markets reward good CSR practices directly,
or are willing to overlook other flaws in lieu of
good CSR. But experience shows that substantial
benefits do flow in different ways.
For one, there is little negative discrimination.
The biggest area in CSR that MNCs are today focusing
on is cleaning up the supply chain. One of the most
celebrated cases in recent years was when customers
shunned Nike when they discovered that it employed
child labour in developing countries. In a world
where low-end manufacturing work is shifting to
the developing countries, activist consumers are
making sure that companies aren't exploitative in
nature. Adding edge to their activism is the seamless
flow of information globally in an increasingly
networked world, which is making it very difficult
to keep questionable practices secret.
This kind of consumer behaviour is still absent
here, though we have benefitted indirectly. Aqueel
Khan, director of Association for Stimulating Know
How (ASK) says that some of the largest names in
retailing globally - Conran, Ikea, Bodyshop, etc.
- who have at one time or the other sourced glassware,
brassware, and other goods from the Moradabad- Ferozabad
belt, have all worked with NGOs to improve the lives
of the children employed there. For example, ASK
runs an NGO called Sankalp that was started with
funding from Conran. Sankalp works with 200 children
who are a part of the local brassware industry on
issues like education, health and nutrition. Conran
used to source brassware from Moradabad and though
its levels of sourcing have fallen, it still supports
Sankalp.
Then, research in the West shows that investors
are increasingly questioning companies on corporate
social practices and are allying with those that
have high respect for CSR. In fact, there is a whole
ecosystem being built around this idea - with outfits
like Ethical Investment Research Service, a UK-based,
independent researcher of ethical, social and environmental
practices advising outfits like Goldman Sachs, JP
Morgan, Credit Suisse, Merrill Lynch and Standard
Life on CSR practices of companies.
Moreover, the likes of FTSE and Dow Jones are coming
up with indices such as the FTSE4Good and the Dow
Jones Sustainability World Index. The FTSE4Good
is an index comprising stocks of companies with
good CSR practices. To be a part of FTSE4Good family
of indices (FTSE4Good Global Index, FTSE4GoodUK
and FTSE4Good Europe, among others), you need apply
to the FTSE4Good applications committee, which,
on the basis of extremely stringent criteria, takes
you in or keeps you out. Numbers also show that
the FTSE4Good indices do outperform other broad-based
indices. Now while that is because the better (and
smarter) companies are on it, it does positively
reinforce the whole idea of CSR.
Finally, the CSR awareness levels are far higher
in the West among corporates - companies have vice-president
level people heading their CSR initiatives, while
power-houses like Carly Fiorina (chairman, Hewlett-Packard),
Michael Eskew (chairman, UPS) and Arthur Levitt
(ex-chairman, US Sec) address annual CSR conventions.
In the absence of all this, it's quite unlikely
that CSR in India will change from being more philanthropy-centric
to more business-centric in the near future. However,
some feel that there is one powerful force that
could push Indian companies towards the business-centric
CSR model. They say that as India becomes the world's
back office, it's not impossible that some organisation
will bring attention to the long hours that Indian
BPO workers have to maintain. (This argument may
also be used by those losing jobs abroad to draw
attention to their own plight.) Already, parents,
doctors and psychiatrists have begun raising concerns
over the harmful side-effects of BPO careers. Attrition
rates are high and the word 'tech-coolies' is commonly
used. Even if you argue that unlike coolies, tech-coolies
can still exercise choice, the concerns still remain.
So it's perhaps no coincidence that BPO firms, as
a class, offer the best working environment for
their staff - cafeterias, recreation centres, educational
tie-ups to help BPO staff get higher degrees, and
so on.
But, in a country like India, there is so much to
be done, it doesn't matter whether companies take
the business-centric view or the philanthropy-centric
view. Says Nanni Singh, executive director, Youthreach,
an NGO, pragmatically: "Companies can interpret
what is the right CSR for them as long as they are
willing to look beyond their noses." |
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