When Warren Buffet visited India a few months ago, not only the media but also the entire corporate world fawned over him like a movie star. The same happened when Bill Gates came a-visiting. While Buffet was frank in his approach towards emphasising on the need to invest more in social work in India, Gates remained more focused and subdued. Gates’ foundation was focused on toilets and sanitation, and his celebrity presence and ambitions fortunately gave more coverage to the cause of better sanitation needs. Together, as senior and respected visionaries of the corporate world, they commanded a lot of attention, and fortunately the subject of the corporate world committing itself to social needs came into the limelight.
Corporate and social: the link
Unhindered growth of the corporate sector is essential. But, at the same time, the ministry and the government have a responsibility towards investors and the general public. Both corporate governance and corporate social responsibility (CSR) are important cogs in the wheel of a nation’s progress and well being. While the corporate world basically aims to develop business, it can never be removed from its social responsibilities as the ‘managers’, ‘creators’ and drivers of national wealth. In the same manner, the government, despite the necessity for it to maintain a discreet and proper distance from business matters, owes a lot to the country to ensure the best practices in every sphere of the corporate world.
Why CSR?
By its very definition, CSR must essentially be voluntary because the Ministry of Corporate Affairs can and should not make it an activity that is absolutely codified and a part of law.
An interesting comment on CSR appeared in a discussion in a paper on the subject of how Indian corporates view this concept. CSR can mean different things to different people – and in many cases, companies engage in a portfolio of ‘responsible’ activities. Mahatma Gandhi propounded the notion of trusteeship and leadership as playing the role of a responsible citizen for businesses both big and small. His assertion was that big businesses owe more to this than any small-time industry. The notion of leadership as a trustee, for instance, is very much part of the Indian social ethos and willy nilly; the same is expected from the corporate world, too.
The problem with CSR is the grey areas and lack of information and understanding as to what exactly it encompasses. At one time, the government tried to make it mandatory for companies to spend at least 2 per cent of their net profit on CSR but was met with strong opposition. The lack of a well-defined roadmap and strategy is also one of the reasons the idea did not find many takers. It is important for the government to spell out what constitutes CSR. This might have eased the doubts and cleared some haziness in what constitutes such an activity. Some companies even assume that providing lunch to employees is a major CSR activity; others have presented community outings for employees’ families as a part of CSR.
Company protocols
However, some sort of response or effort for environment and eco-friendly activity and awareness drives are quite evidently the common ways in which it is understood and implemented. Running a business and engaging in corporate responsibility involves defining the company philosophy. Healthy economic progress depends on the health of the social system. Since businesses work with and for society, deriving their sustenance from profits made from goods and services to society, an involvement in the well-being of that society is in the best interests of that organisation. In other words, CSR is also a business imperative.
CSR measures were actually part of a Companies Bill that was in the works for several years. While the Companies Bill contains many provisions that are of great importance to the industry, it's the CSR piece that has generated the most debate. Rohini Nilekani, a leading philanthropist hit the nail on the head by saying that it was, in other words, the outsourcing of governance and went on to say that if the government wants, it can tax the corporates and put the money into social programmes, but it can't dictate CSR.
The world over, very few countries have a CSR requirement with the possible exception of Saudi Arabia. Many European countries have specified that companies must include CSR information in their annual reports, but there are no directives to question what they have done.
Blurred boundaries
India has a tradition of corporate philanthropy, but the demarcation between philanthropy and CSR is getting blurred. It is reported that recently, the government also sought to include vocational training for employees as part of CSR. It is understandable because governments are best at legislating and washing their hands off the subject.
As India reels under swelling cities and sanitation that could be so much better, it is time to get clear ideas on what constitutes responsibility at the top of both the political and administrative authorities and the business world.
When Bill Gates and Warren Buffett came to popularise their Giving Pledge, which asks the wealthy to commit to giving the majority of their fortunes to philanthropy, they told Indian companies that the effort was not CSR but CSC -- corporate social compulsion. The difference between this compulsion coming from legal requirements or awareness of Gandhi’s social trusteeship idea is still being debated.