Andrew Carnegie, steel tycoon and one of the greatest philanthropists whose business ethos was to “do well in order to do good” was one of the early advocates and steward of CSR. Mahatma Gandhi’s theory of trusteeship intended to avoid the evils and combine the benefits of capitalism and communism, to socialise property without nationalising it, to influence private ownership with socialist content.
Gandhi derided the voracious greed for profits of the investors. Consider a man owning an industry. As a trustee, he was, first and foremost, expected to:
- Work just like any other employee
- Look upon his employees as members of his family who would be jointly responsible for management decisions
- To take no more than what he needed for a moderately comfortable life
- Provide healthy working conditions and welfare schemes for the workers and their families
- Aim to make a moderate profit, part of which would be devoted to the welfare of the community and the rest to the improvement of the industry
- Regard themselves as trustees of the consumers and take care not to produce shoddy goods or charge exorbitant prices. This applied to the employees as well.
- Pass on the industry to his children or whoever he liked only if they agreed to run it in the spirit of trusteeship.
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 push for legalisation came because voluntary CSR encouraged practices such as free-riding (companies taking advantage of benefits without actually spending), 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.
Despite all the hyperbole, the great economist Milton Friedman argued in 1970 that “the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.” 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. Sometimes, it is driven by a need to improve brand reputation and even worse, CSR could be a moral counterbalance for practices that have had direct negative impacts on the poor. Corporate social responsibility 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 programs.
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.”
Moin Qazi is an author, researcher and development professional who has spent four decades in the development sector. He worked for three decades with State Bank of India as a grassroots field officer, program manager, CSR head, policy maker and researcher in development finance. He has written for publications around the globe including Hindu Business Line, The Asian Age, The Statesman, The Indian Economist, Deccan Chronicle and The Pioneer. He has been actively associated with empowerment of women and education of girl children, child labour and affordable housing programmes for the rural poor.
Views of the author are personal and do not necessarily represent the website’s views.
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