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W e have been hearing a lot in recent times regarding Corporate Social Responsibility (CSR). In essence, it is a transfer payment from the corporate sector to the other sectors, which means that there are no returns preferably reaching the poor and the marginalised. But why do we need CSR? Is it purely philanthropic or can it have some economic logic beside philanthropy? We will look at this question basing our analysis on two thematic areas: socially deprived sections (lower castes/dalits, religious minorities), and women. In the next sections we will briefly review the Government of India’s (GoI) stand on CSR through the Voluntary CSR Guidelines of GoI, and conclude with some observations regarding the corporate sector of India on its CSR activities.Social & Economic Need for CSR First of all, it is necessary to realise that CSR is not a philanthropic activity. It has a clear goal of socio-economic equality, productive capacity building with a broader base and certainly to achieve a sort of social and moral acceptability of what otherwise is a purely profit driven business. CSR has two components: first - the precautionary steps taken by the company to reduce the negative effects caused by its products and processes and the second is the positive steps it takes for the benefit of society, economy and ecology. Socially Deprived Sections: In the case of the deprived sections like the lower castes or minorities a separate sensitive attitude outside the open market system is required to prevent their steady exclusion from the system. The CSR principles call for adhering to human rights and labour rights, especially in the context of socio-economic exclusion based on caste and religion. The separate sensitive attitude is justifiable because such exclusion is ingrained within the very system, which calls for the necessity to work in regions where social exclusion is very high. The business houses in India, thus, should aim, through its activities based on CSR, to transcend the caste system. This transcendence is justifiable from pure economic efficiency ground as well. Caste system suppresses individuality in work preference, prefers traditional efficiency over modern skill training instead of a scientific combination of the two and prevents labour mobility (even the idea of it) across sectors. Hence it acts as an obstruction to labour efficiency. Again, if we accept the above logic that essentially formation of a skilled labour force is obstructed, which in turn entails an obstruction to improvement of living standard of the workers through better wages, such social evils also keeps demand low which prevents good business. Hence, doubly, from economic ground, the business houses and corporates should be undertaking CSR activities. Women: Almost everything that has been said about the socially deprived sections can be applied to the case of the women too. Additionally, there is the component of gender, which in our society has effects of other dimensions. In a household, women perform their stereotypical roles 1 like childcare, cooking etc. which have serious implications on the educational future of the young generation and physical health of a household. These make a case in favour of CSR for providing more opportunities to the women or take a positive step towards empowering them.The Role of the Government Realising this importance, the Government of India has formulated voluntary guideline for CSR. In line with the argument of this article, the document notes that "CSR is not philanthropy". It lists the following core elements which CSR activities could cover: 1. Care for all Stakeholders 2. Ethical functioning 3. Respect for Workers’ Rights and Welfare 4. Respect for Human Rights 5. Respect for Environment 6. Activities for Social and Inclusive Development The document lays out four basic guidelines (voluntary), suggesting how CSR activity should be implemented. First of all, there should be a coherent CSR policy; secondly, there should be specific amount allocated in a company’s budget for CSR activity; thirdly, companies should tie-up their CSR activities with organisations that have considerable reputation in this field; and fourthly, full information on the company’s CSR policy should be made public. However, as a matter of fact, India’s performance in CSR is quite poor. Even in the Public Sector Undertakings (PSUs) of the Government of India, there is severe under-utilisation of funds allocated for CSR activities - for example, that of Oil India Limited at 62% un-utilised funds in 2007-08 2. Given the important social role that the PSUs have been mandated to play, it is not a positive sign. It also sends a wrong signal for the private companies in terms of adhering to the principles of CSR.There are also other loop-holes in the CSR structure in India. It is felt that there is too little incentive for the companies to undertake CSR activities. There is need for a body that certifies CSR performance. Based on that certification, the government can provide positive ‘discrimination’ to companies with good CSR performance. This is not advocacy for further tax concessions or other pure economic benefits, but for preferential treatment towards them 3. The incentive, for example, can be that a company with better CSR ‘rank’ will be preferred over other company with lesser ‘rank’ while signing up a contract for Public-Private-Partnership project. This should be clearly spelt in the government’s guidelines.Hence, merely keeping everything as "voluntary" is not going to work. The economic benefits leave alone the social benefits, of a CSR activity cannot be estimated by a micro-entity i.e. a company. That macro vision is perhaps only understood by a government 4. Based on such overall understanding, the government has to formulate, if not some sort of binding mechanism, but at least some incentive-driven framework which will entice the corporate sector to undertake socially responsible stance for their society.India Inc The CSR performance of the corporate sector in India is also not satisfactory. India, ranks 4 th in Forbes list of number of billionaires in the world over. However, this sector does not show that comparable amount of social responsibility. Compared to that of the developed countries, like the United States of America or the European countries, the Indian corporate sector spends much less on CSR.There are many cases of donations being given to several educational institutions by Indian business houses across the globe. This practice may be promoted more so that the cash-strapped premiere educational institutes of our country with bright minded students could benefit from such generous patronage of our business leaders. Learning from this trend, the proposed ‘incentive framework’ in the above section should give primacy to activities that are directed towards the neglected sectors and regions. q(Footnotes) 1
Sourindra Mohan Ghosh Rizwan Uz Zaman
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