Is there a conflict between the profit motive and CSR?

CSR is, after all, yet another mandatory cost to the company which cannot be deducted as expense to avail a tax benefit. However, in a developing economy, your company may benefit tangibly from increased total CSR spend. Lack of adequate infrastructure, power, healthcare & education are the very factors that adversely affect profitability.

Here the public sector alone cannot or will not bridge the gap. So if we simply recall that your company exists within the community; that its customers, employees, suppliers make up that community, then it starts making sense for CSR to be a part of your business plan and long term vision.

In addition, personal philanthropy is potentially a much larger source of funds than what the entire 2% of net profits (CSR as per law) can generate. Some larger business groups in India have been engaged in giving much before this legislation. The question is whether we can achieve long term economic growth without increasing inequity.

Do we wait for the benefits of growth to trickle down from business owners to the working class? At what rate should this ‘trickle down” occur? If we are moving ahead on the path of economic growth, how does it really affect a company’s profitability if our national development parameters continue to be dismal? And should the business owner (Sethji) be concerned about sanitation & infrastructure in his town as much as running his company? The answer goes beyond pure philanthropy.

As a business owner he should be involved if he wants his business to grow faster and outlast him. Sethji will say that with the opening up of the economy, competition increased manifold. Sure you can only give when your enterprise is doing well. But ease of doing business itself depends on the legal, financial and physical infrastructure available (consider ASEAN countries rapid growth in the 80’s). The various players in a marketplace are all related and interdependent.

For example, Sethji will agree that skilled labour is tough to find. So skill development in the community will assist him as well as the prospective employees. Many companies now provide skills to the community at large without any bond. As a country, we aspire to be a destination of choice for foreign investment. Any businessman who goes overseas with a proposal is asked about the policies, law, infrastructure etc.

The investor will look up all the development indicators of the country and it does affect his decision. We may be among top recipients of ODA but we are certainly not there with respect to investment. Further, with the world’s highest percent of youth, we cannot ignore social problems that arise out of unemployment and widening income gaps.

What about strict implementation of labour laws- will it lead to more equity? Sethji will rightly argue that labour laws themselves need to be reformed, (especially with respect to trade unions); in consultation with industry and in line with international practices.

As long as there is the option of a cheaper alternative, the gaps will persist. India has the largest number of workers not covered by law in the world.

The challenge is how can we preempt disproportionate distribution of rising incomes. A common sight in many emerging markets is a modern apartment complex with all amenities in a sea of slums and garbage.

A limited concept of growth is not sustainable. There is an opportunity for us to learn from the experience of other countries and modify our development model to include the long term social and environmental impact.

A sense of ownership and involvement in welfare by the private sector can achieve a lot. Companies can contribute by funding research, advocacy, technology and recommending on use of public money.

In the long run overall development, with minimum environmental impact, will pay rich dividends in the form of a robust domestic market for goods & services, a better quality of life and improved profitability.

Priyanka Awasthy, is Co-Founder and Director of Altavis Consulting and Biz Divas Foundation. She is also Trustee of Sudeva Sports Foundation.

She has over fifteen years’ experience in banks and multinationals. As an avid campaigner of inclusive leadership and a firm advocate of women’s economic empowerment, she develops and facilitates programs that sensitize organisations to the needs of diverse groups.

Priyanka speaks at various forums on inclusive leadership and gender issues. She organises periodic round table discussions with industry leaders on key issues and best practices.

Priyanka is a Mentor with FICCI Flo for women entrepreneurs. She is an experienced qualitative researcher and CSR practitioner. Views of the author are personal and do not necessarily represent the website’s views.