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Mainstream, VOL LI, No 13, March 16, 2013

Ravenshaw University, Odisha: Exploring the Essence of CSR

Wednesday 20 March 2013

#socialtags

by Sreekutty Mohandas

By diluting its major stake in many areas, Privatisation has become a charmed policy of the Indian state, the underlying assumption being that the pace of development cannot be accelerated without giving free hand to private players. A ‘liberal’ approach towards domestic players has given rise to neo-corporate entities in a span of a decade or more. There is no doubt that entrepreneurship needs moral support and legitimate encouragement. But that does not mean public resources should be thrown to the bucket of those who do not have any social concern.

Inequality weaves serious strains and tensions in the social fabric and this entailed the corporate world to moot the idea of Corporate Social Responsibility. The idea behind CSR has been to sensitise the corporate/business entities for their surroundings and make them organically invol-ved into uplifting the marginalised population. CSR, seen as a bridge between economics and ethics, has been made mandatory through a legislation in India.

The ongoing debate on this mandatory provision questions the very essence of Corporate Social Responsibility, which ought to be a voluntary contribution from the business to its various stakeholders. However, in view of the ethical displacement theory by Richard De George, which states that firms have a tendency to indulge in unethical behaviour in order to cut their cost and the socio-economic conditions of a developing nation, this man-datory provision of allocation of two per cent of net profits of the company has been a welcome move. The question here is: would social respon-sibility of the business terminate after allocating some meagre funds for social activities?

Social Responsibility of a business should be neither casted as just another function of business nor used as a façade to cover up the real business motive. What kind of responsibility can one expect from a company that manufac-tures cigarettes and allocates funds in the name of corporate social responsibility for improving the health of the citizenry? The irony is similar to a gas station that bans smoking but sells cigarettes! A.B. Caroll’s Corporate Social Respon-sibility Pyramid suggests the importance of an economic base to fulfil the other responsi-bilities —legal, ethical and philanthropic. However, if this economic base is strengthened with unethical source, would the company be called a good corporate citizen even if it contributes a substantial amount to CSR?

A similar instance can be quoted from the greed on the Wall Street that led to the financial crisis of 2008. The multinational banks targeted to exploit the poor black population and earn a profit on that account. Here, again, would it make any sense if the banks allocate CSR funds for poverty alleviation? It is a classic case of covering up corporate wrong-doings with a false veneer of CSR activities. In the act of robbing Peter to pay Paul, both Paul as well as Peter were deprived and Robin Hood became the real beneficiary after the financial downturn! The moral of the story is that means should never be neglected in the pursuance of the end. Unless the means are ethical, it would be difficult to justify the integrity of the objective.

Corporate Social Responsibility should be adopted as an essence of business and not as a tool for blowing its own trumpet. The social responsibility of business would attain a more meaningful status if it evolves simultaneously with the conception of the business idea. Research has to be done before an idea gets transformed into action, and if it is found to be detrimental to any of the stakeholders, it should be terminated at the inception itself.

In India, Gandhiji’s trusteeship theory made a strong influence on the industrialists of the pre-independence era. These industrialists contributed generously to the social causes of the national movement, in the building of schools, colleges and technical institutions by abiding with Gandhiji’s reforms of untouchability, women’s empowerment and rural development. They filled the lacunae, which the state could not due to paucity of resources and competency.

The New Economic Reforms liberalised manufacturing and trade norms enabling a robust growth of industries. Hence, many new industries mushroomed to manufacture and market goods while grossly violating their ethical obligations. The years from then on became a witness to a series of corporate scams like the Harshad Mehta-Ketan Parekh scam, Satyam scam, IPL scam etc. which exposed the individualistic and selfish motives of people behind the corporate veil.

During this time, many a multinational company entered to capture the vast Indian middle class market with pent-up demands. These MNCs are known to resist the environmental norms in India while they conform to the norms in the developed countries. A comparison of the responses of British Petroleum, responsible for the oil spill at the Gulf of Mexico, and Dow Chemicals, which acquired Union Carbide     (infamous for the Bhopal Gas Tragedy), would well substantiate the previous statement. Another example is that of the corporate hijacking of water resource by the Coca-Cola Company. The Coca-Cola Company, which was shown the door in 1977, was welcomed with open arms after the New Economic Policy of 1991. The Company’s bottling plants in Palchi-mada, Kerala and Medhiganj, Uttar Pradesh were accused of illegally extracting millions of litres of clean water, and thereby creating acute water shortages, and polluting groundwater and soil. The irony is that this same Company also markets its “bottled clean water” to the Indian public after polluting and depleting India’s water resources. Advocates of water democracy protested vehemently against water privatisation; however, the strong corporate lobbying resisted them all and is now thriving with new vigour.

Moreover, it is these huge companies which can be held responsible for infusing consume-rism by encouraging unnecessary mass consu-mption through their irresponsible ways of marketing. For example, the companies, through their advertisements, unabashedly make you aware of the environmental pollution and its after-effects on your skin and hair. Then, they market their product as a saviour to these problems. However, the irony is that they never disclose their own share of contribution to pollution and environmental degradation. In fact, these companies create problems in order to sell their solutions!

And while taking a glance at the Cosmetic Industry, which has taken a resolution to convert the brown Indians to fair, white and spotless Indians, one wonders whether it is trying to permeate the so-called ‘confidence’ into us or underscore the inferiority of our race and ethnicity. Such is the influence of marketing on society that it creates needs which do not exist and coerces people into unnecessary consumption thereby leading to a wastage of valuable resources.

Companies as corporate citizens should incorporate the philosophy of CSR at two stages—before initiating their business and while doing their business. CSR should never be seen as an approach to compensate for the damages the business has already inflicated. There is an imbalance of power structure especially in a developing and emerging economy like that of ours. It is a dualistic economy characterised by skyscrapers on one side and slums on the other. Companies have huge assets and resources because of which they have considerable power and influence in society. This power and influence should be used in the right direction so that the ethical dimension of Corporate Responsibility gets highlighted more than the economic one.

The pressing problems of inequality, poverty and hunger can be alleviated to a great extent if the corporate world does some simple gestures like paying the taxes and avoiding unethical corporate lobbying. The 2G spectrum scam, which caused a huge loss to the public exchequer, was the result of corporate lobbying. It could have been avoided if the corporate big-wigs focused on their ethical dimension rather than their economic motives.

The corporate philanthropic contribution in the form of big bucks to NGOs would help in getting tax exemption and publicity, but the company can never be justified as a corporate citizen until and unless the ethical dimension is fulfilled. Milton Friedman’s statement—“the business of business is to do business”—was the buzzword of a bygone era. It would not hold good in this age of sustainable development, environmental regard, human rights awareness and social consciousness. Survival of the fittest is the norm, and companies that would fit CSR sincerely in their day-to-day activities would well survive.

References

Caroll, A.B.:1997, ‘The Four Faces of Corporate Citizen-ship’, Business and Society Review.

Murphy, A. 1994, ‘The Seven (Almost) Deadly Sins of High Minded Entrepreneurs’, Inc, 16(7), 47,48,51.

Machan, T.R.: ‘Aristotle and the Moral Value of Business’, Journal of Value Inquiry 38.

Shiva, Vandana: 2002, Water Wars; Privatisation, Pollution, and Profit, South End Press, Cambridge Massachusetts www.mca.gov.in/Ministry/companies_act.htm

The author is an Assistant Professor Motilal Nehru College (Evening), University of Delhi.

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