Corporate Social Responsibility
By Dhurjati Mukherjee
Recently, Adani Group Chairman, Gautam Adani hit the headlines after he committed Rs 60,000 crore ($7.7 billion) to social causes on his 60th birthday. It is understood that the Adani’s corpus will be administered by Adani Foundation, making it one of the biggest transfers to a philanthropic trust in India. However, in fiscal 2021, Adani donated Rs 122 crore towards disaster relief, mainly for Covid-related work, ranking him eighth in the EdelGive Hurun India philanthropy list. Adani’s contribution in the past three years has been just Rs 302 crore, much below that of Azim Premji’s Rs 18,070 crore or that of Mukesh Ambani (Rs 1437 crore) or even K.M. Birla (Rs 732 crore).
But though some of the figures may appear impressive, the question arises whether the funds are going in the positive direction, i.e. to the right projects and the right people? Though India is globally the first country to make corporate social responsibility (CSR) mandatory, following an amendment to the Companies Act 2013 in April 2014, businesses can invest their profits in areas such as education, poverty, gender equality, and hunger as part of any CSR compliance. However, it is necessary to know whether the funds are not manipulated by the corporate houses and projects are funded after judicious and transparent decisions.
The United Nations Industrial Development Organisation (UNIDO) describes CSR as a management concept, whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives, while at the same time addressing expectations of shareholders and stakeholders. It is important to draw a distinction between CSR, which can be a strategic business management concept, and charity, sponsorships or philanthropy.
However, let us focus on how business and commercial establishments look into interests of society, specially donating to make available goods and services for the marginalised and impoverished sections through CSR. According to Jeremy Moon, Professor of CSR at Nottingham University: “Business social responsibility . . . . refers to the voluntary contribution of finance, goods or services to community or government causes. It excludes activities directly related to firms’ production and commerce”.
The concept of CSR has emerged as a major buzzword for the last several years, the world over, with members of the business community, academicians, politicians and prominently activist groups. In the western world, CSR was quite popular even a decade or two back but in countries such as India, the business community has been rather reluctant to contribute till only after the government came forward with the legislation.
The practice of CSR is subject to much debate and controversy. It is argued by the protagonists of CSR that there is a strong business case for this responsibility, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short term profits. On the other hand, the critics argue that CSR distracts from the fundamental economic role of business, while others argue that it is nothing more than superficial window dressing.
The question that arises at this juncture is whether the crores spent by corporates are in the right direction and benefit the section of population which has to struggle for a dignified existence. It has been found that most funds of corporate houses are channelised through trusts that are directly or indirectly known to them or to their associates. Thus, major funding is not necessarily geared for the appropriate projects that would have enhanced the process of development.
Reports indicate that if CSR funds provided during Covid-19 pandemic are not taken into account, funds in healthcare funds and sanitation during the last few years, are meagre. There are also reports that many companies show manipulated figures for CSR by window-dressing reports. Furthermore, many of the companies are not engaging in CSR activities even though it is mandated in law. Such companies use various excuses and loopholes to justify non-utilisation of funds in CSR activities. There are also companies that do not report on CSR activities altogether.
Furthermore, companies undertake such activities blindly which may not produce long-term benefits for the society. For example, they have no plan to enable the unemployed to earn a living. There have been suggestions that if the companies provide training for skilled work and identify areas where there is a need, they might be better off in the long run. It also needs to be mentioned here that in the fast-changing world, capacity building of the CSR workforce and re-skilling them are always relevant and key to CSR performance.
One of the reasons for the unsuccessfulness of the CSR legislation in terms of impact is the lack of knowledge of the officials of the company regarding social, economic and environmental issues. This leads to the company utilising CSR funds in an unsuccessful manner by typing up with non-professional NGOs or just throwing away the money at widely publicised social causes in an unregulated manner.
If the effective impact of the CSR legislation is examined, there may be many loopholes in the legislation due to which it is not producing the desired impact. For example, Section VII which states the activities in which CSR funds may be utilised is very broad. This allows the companies to only engage in such CSR activities that are directly or indirectly beneficial to the organisation. This leaves out many activities that are not beneficial to the impoverished sections, as a result of which CSR funds go to specific sectors.
Concerted action needs to be taken to ensure better utilisation of CSR policies. These include: One, there should be greater awareness amongst directors, who work for companies which have to comply with Section 135 regarding CSR activities. This can be done by ensuring that these activities are widely publicised as being helpful to society. Two, companies can tie-up with non-governmental organisations (NGOs) which align with the vision of the company or even otherwise. For example, there are many organisations raising funds through the CSR activities of the companies to help the environment and the underprivileged.
Three, companies should engage in such activities which they are familiar with. For example, a company which is dealing with online education can provide such education packages to underprivileged children for free or give scholarships. Organizations which are in the business of energy, can install power houses in rural areas where electricity is still not available and so on. Four, there is a need for active participation from the company to focus on not just immediate results but long term commitment towards social causes.
It is critical for corporations to create a fine balance between earning profits and providing value to society. This not only helps in making the society a better place, but also ensures a better brand image and provides competitive advantage to the company. While the CSR legislation was introduced with a positive motive of helping the society, it is a long road ahead to successfully implement the provisions pertaining to CSR, so that the impoverished sections of society can benefit. At the same time, it is necessary that corporates lend a helping hand with a larger kitty of funds. Given the population more can never be enough, but an honest endeavour must be the aim. — INFA