Enhanced CSR
By Moin Qazi
In a free enterprise, the community is not just another stakeholder, but is in fact the very purpose of its existence.
~ Jamshedji Tata ~
Corporate altruism in India has found a new purpose since the advent of the Covid-19 pandemic. With the nationwide lockdown hard-braking economic activity on the one hand and disrupting lives, especially of the poor, on the other, companies have not only opened purse-strings but also rolled up sleeves to respond proactively to the pandemic. Over the past few months, corporates have been using all or most of their Corporate Social Responsibility (CSR) kitty to combat the pandemic, be it through contribution to the PM CARES Fund, other relief funds, distribution of food, masks, personal protective equipment (PPE) kits or relief material to the needy.
The CSR agenda got a wider role in pandemic management with the government expanding the scope of CSR spending to include companies engaged in research and development (R&D) of new vaccines, drugs and medical devices. These amendments to the CSR rules permit such companies to categorise as CSR activity any Covid-related R&D activity even if undertaken as part of its normal course of business.
CSR is a concept whereby firms integrate social and environmental concerns into their business operations and is generally understood to be a tool for achieving a balance between economic, environmental and social imperatives, while addressing expectations of shareholders and stakeholders.
In the global economy, stakeholders include customers, suppliers, employees, communities, and financiers — shareholders, bondholders plus banks and other sources of capital — and they are all intertwined.
In fact, when we flip through the world’s business history, we find that all large mercantile communities were great patrons of the art of philanthropy. They regarded it a divine tradition. The world today is witnessing a growing realisation in enterprises of the importance of altruism. Hence, a great deal of money has been flowing into the social sector. Like individual citizens who have moral and social responsibilities, businesses are being perceived as corporate citizens who need to commit time, talent and resources for welfare of society as they draw their sustenance from it.
CSR aims at managing a business in a way that it contributes towards sustainable development by delivering social, economic and environmental benefits to all stakeholders. It addresses issues like human rights, corporate governance, health and safety, environmental effects, working conditions and contribution to economic development. Whatever the definition is, the purpose of CSR is to drive change towards sustainability.
We are seeing the emergence of a new crop of mega donors who are upending long-established norms in philanthropy. Not only are they increasingly willing to take on hot-button social and political issues, they also have a problem-solving and impact-making mindset. CSR is now being recognised as a critical component to an organisation’s values, its operating ethos, its business strategies and its purpose. Businesses are being measured on financial and social metrics.
Over the years there have been many voices within the business community who believe that companies must break out of conventional preoccupation with profit and do more to address the world’s pressing social needs. The chorus has been joined by leaders from civil society, governments, policy think tanks and world bodies on education, health and rehabilitation. Business leadership has acknowledged the demand for enlarged corporate responsibility in ways which can reflect a profound attitudinal change individually and collectively.
Beyond profits and share prices, companies are now standing up for their beliefs, their customers, and employees. They are integrating social missions into their business operations. In this new model of social and public impact, companies are using the power of their brands to speak out on major public policy issues.
CSR is rooted in the knowledge that businesses have a duty to enable all living beings to get a fair share of the planet’s resources. Businesses are powerful constituents of society and the most respected businesses feel oriented to do much more than making money; they exist to use the power of business to solve social and environmental problems. They are involved in a wide variety of community development projects related to education, health, skills training, entrepreneurship, women empowerment, food security, livelihoods and supporting services for the differently-abled.
India has a unique law—the Companies Act, 2013, and the Corporate Social Responsibility (CSR) Rules—which came into effect on April 1, 2014. India is the first country to require companies to expend resources on CSR programmes. The approved activities under Schedule VII of CSR include eradicating extreme hunger, poverty, and promotion of education, promoting gender equality and women’s empowerment as well as reducing the child mortality, improving maternal health and combating diseases. Ensuring environmental sustainability and prompting employment enhancing vocational skills are other activities approved under CSR.
The push for legislation came because voluntary CSR encouraged practices such as free-riding (companies taking advantage of benefits without actually spen-ding), greenwashing posing as CSR, and false disclosures. However, CSR could be more socially relevant when it is a voluntary exercise driven by altruistic motives rather than a mandated policy that prods businesses to use creative means to camouflage business promotion activities as socially driven programmes. It is very difficult to legislate moral obligations. Laws only set minimum standards, but do not create an impetus for charitable action.
There are marked aberrations in the CSR agenda and they need a course correction. Many businesses are using these opportunities for enhancing their social profile and in the process expanding their business markets. These CSR projects are now the fulcrum of aggressive brand building exercises and are being leveraged to their fullest mileage. Charity leaders have a geographic bias with corporations funding projects closer to their headquarters. Consequently, more remote regions where development aid is acutely needed are being bypassed and deprived of this new social revolution. Politics can skew priorities, with some companies looking to gain goodwill by backing government-led projects rather than initiating independent initiatives. A popular CSR activity is contributing to natural disaster relief funds, which is probably directed at scoring favourable points with the political party in power.
There can be a subtle use of CSR to brush off bad reputation as well as camouflaging of the dark acts in marketing. CSR has been peripheral in most organisations and is not woven into the fabric of the business. Even as annual CSR spend is on the rise, the impact on the ground and effective deployment of the funds remain a matter of debate. It is not necessarily always transparent and mission-oriented and there may be strings attached-terms that dictate exactly where and how it must be used.
CSR could be a moral counterbalance for practices that have had direct negative impacts on the poor. It often masks and smokescreens corporate irresponsibility aid conditionality and treaty commitments have significantly constrained policy making. Reporting requirements are onerous and often impose huge administrative burdens for organisations which must devote the scarce skills of educated, English-speaking personnel for writing reports for donors rather than running programmes.
It is wise to remind ourselves again of the advice of Henry Ford: “A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large.”— INFA