The ministry of corporate affairs released a document, Corporate Social Responsibility Voluntary Guidelines 2009, sometime ago. In a nutshell, this document urges corporate India to voluntarily adopt CSR so that statutory regulations may not be imposed, something the present government seems reluctant to do. It also suggests that this stance could be revisited in a year's time to review the scenario based on the response received
rom various industries.
In essence, the document was a positive, forward-thinking move by the government as is evident from its view that CSR must not be seen as philanthropy and, in fact, needs to be stated in writing and merged with core business vision and goals. It further stated the need to set goals and metrics to measure performance in this area, set in place independent audits of the same, and to communicate CSR activities and spends to internal and external stakeholders.
The core elements of the paper are somewhat open-ended relating to stakeholder rights, human rights, ethical functioning, environment and social and inclusive development. On the other hand, the implementation mechanisms are more focused and structured. Partnerships with NGOs, knowledge sharing between firms and collaboration are the three main thrusts in terms of implementation of CSR-related activities.
Some important recommendations are that companies must commit and dedicate a certain percentage of profits to CSR and those that do not do so ought to communicate to their shareholders their reason for so abstaining. It is further suggested that companies should try to actively influence their supply chain in this matter. The document suggests that companies should network with peers, exchange information on CSR and collaborate amongst themselves and relevant civil society organisations where necessary.
These guidelines are explicitly voluntary. However, it is mentioned that unless the industry response and action are swift and positive, the government may consider making the same mandatory. Two aspects come immediately to mind when faced with such a scenario. One, since governments are influenced by the needs of the corporate community, new laws that constrain corporate behaviour are only likely to be established if they align with (or at least do not undermine) competitive opportunities for the major market players. A case in point is the reaction of industries to the talk of affirmative action.
Second, no matter how comprehensive rules and regulations are, they are ineffective unless regularly monitored to ensure compliance. For credible monitoring systems, there has to be transparency and independence, both of which must by their very nature be voluntary for the most part.
While the government must realise that its role should essentially remain that of a facilitator, the corporate sector must realise that organisations can successfully and profitably address all three elements of the 'triple bottom line' and, in doing so, become innovative. Management, innovation and sustainability research is increasingly demonstrating that sustainability can open doors to new business models and engage new markets. This has to be done by strengthening links with supply chains, and engaging with local communities, governments, NGOs and even competitors as laid down by the government document.
While India Inc has been progressive about CSR, not all companies have active engagements in this area and it is unlikely that all will, at least not voluntarily. However, the number of companies that have made public commitments to environmental protection, social justice and equity as well as economic development is increasingly on the rise and continues to grow. This trend will be reinforced if shareholders and other stakeholders support and reward companies that conduct their operations in the spirit of sustainability.
A question that comes to mind at this point is whether stakeholders such as customers and civil society have power and influence over corporate India in this matter. The answer is no. In India, customers do not judge companies based on CSR activities but on brand equity. As such, domestic consumer consciousness in relation to cleaner technologies, community development, diversity policies, etc, is non-existent.
Further, the role of civil society in this area as compared to its influence and lobby in the West is limited. While there have been instances of civil society organisations influencing industries, these have been few and far between. Also, these have had more to do with the negative consequences of a company or an industry's actions (such as pollution control or infant food) rather than a push to constructive work. With estimates of close to two million NGOs in the country, it is imperative that the sector organises itself to act as an independent auditor advising and informing corporate India about its performance and lags.
The emerging global reality for businesses is that CSR can no longer be viewed as an optional project, but has to be seen as an intrinsic part of business, a way of life. The CSR guidelines are more likely to succeed because they have a basis on industry consensus and dialogue, and this is something the government will do well to keep in mind.
