Prof. C P Joshi, Dean, K J SIMSR, Vidyavihar, Mumbai
1. Comments on mandatory 2% contribution to CSR
In India, many reputed companies like the Tata group of companies have already invested substantially for developing the communities in which their companies operate in several ways. Tata Steel established in 1907 in Jamshedpur built an entire township for its workers as well as officers. It also setup hospitals in Jamshedpur open to all the citizens there. Indian Hotels company Limited (IHCL) another company in the group has been donating a pre-committed portion of its profits to Tata Memorial Hospital dedicated to cancer research and treatment. The concept therefore of community development and CSR is not new even in India and many companies in India, in their own ways have been contributing substantially to the community development and inclusive growth. However mandatory contribution of 2 percent of average net profits of the company during a block of 3 years is a welcome step in the right direction. Section 135 and schedule 7 of the Companies act make this mandatory for companies with INR 50 million profit or INR 10 billion turnover or over INR 5 billion net worth. Clearly even the companies in India not covered by this mandatory provision should start taking initiatives for CSR in line with the communities’ need and priorities and also take into consideration the companies’ expertise and capabilities.
Like for Corporate social responsibility, companies in India have also taken initiatives on their own for improving the ecological environment of the area in which they compete.Companies like Tata Motors have been actively engaged in planting trees within their area and also taking initiatives for conservation of energy, using effluent water from manufacturing processes after treatment for not only horticulture but also for some of the manufacturing operations. Many companies have taken initiatives for heat recovery and co-generation. On a larger scale several companies have as a policy minimized the use of paper not only in their offices by going electronic but also in their other communications like to their share holder divisions by encouraging share holders to opt for e-processes. Several companies have designed eco friendly products for some of which the companies have to incur additional cost but the customers have responded by paying a premium for many of these green products.
Developed countries like the United States and European countries are far ahead of India in terms of green initiatives. However we in India can certainly accelerate our progress on ecological initiatives through not only company initiatives but educational institutions and NGOs leading the way in creating greater awareness in urban as well as in rural parts of India.
2. Sustainable Development the Concept and Practice: your comments please.
By definition sustainable development means meeting the needs of the present, without compromising the ability of future generations to meet their own needs. It balances different, and often competing, needs against an awareness of the environmental, social and economic constraints we face as a society.
One way to understand sustainability is to ensure that we meet our needs of all the non renewable energy sources and earth’s resources like water, air, land, oil reserves, minerals and forest wealth without jeopardizing the needs of future generations. Therefore, we as responsible citizens, company managers ,academicians and as members of institutions need to see ourselves as trustees who have the guardianship of the resources today at our disposal and take the accountability for judicious use of these resources for their conservation and enhancement through ecological initiatives.
For a company sustainable development is a necessity and not an initiative because a company needs the community for its operations as much as the community needs the company. Companies need the community for access to well trained human resources for their operations, infrastructure facilities like water and power, land and buildings for their factories, offices and warehouses, roads, educational institutions for the children of employees and law and order machinery to safeguard their property, operations and employees. A healthy and well developed community certainly enhances the long term sustainability of a company’s operations
Likewise, communities needs companies to provide jobs, reliable products and services for the consumers and industries and for the CSR initiatives companies take. Clearly, both communities and companies need each other and it is certainly in the interest of both to cooperate with each other. This would lead to a sustainable and inclusive development of the community and by the aggregation effect to inclusive development of the developing economies.
Several companies have taken initiatives for sustainable development beyond CSR and beyond purely ecological initiatives, building on the mutual inter dependence of companies and community some companies are now focusing on Corporate Social Integration (CSI) rather than corporate social responsibility per say. Companies and communities make strategic choices which benefit both; thereby creating shared value (SV). An example of a multinational creating shared value in India is Nestle which took certain CSI initiatives in the Moga district of Punjab when it started its operations there several decades ago. Realizing that reliable supply chain for milk of acceptable quality all round the year is one of the pre-requisites for its various products like chocolates and condensed milk, Nestle worked with individual farmers to improve the yield of milk through better fodder, veterinary care of the livestock, by providing chilling equipment for milk and milk distribution mechanism at a community level. Both the farmers, community and of course Nestle benefitted from the shared value therefore created. Nestle hence earned a substantial goodwill from the government and community in Moga through its CSR initiatives.
- Inequality will be a driving force for new thinking about greater commitment to ethics, morality in business decisions and capitalism itself”: Please comment on this.
The Millennium Development Goals established following the Millennium Summit of the United Nations in 2000 emphasize on eradication of poverty and hunger as one of the eight major goals. Poverty arises in the first place due to lack of access to education, lack of opportunities for a sustainable livelihood, rising population in the developing nations, and limited food and medical facilities
There are a lot of well intended programs to fight against the causes of poverty and inequality. In India for example, the government has launched programs like Pradhan Mantri Jan Dhan Yojna, Rajiv Gandhi Rozgar Yojna etc. These programs though steps in the right direction fail to meet their desired goals. This is because the money allotted to these programs often goes in the wrong hands and hence fails to reach the people for whom it was meant. These programs fail to benefit the citizens at the bottom of the pyramid due to the endemic corruption in the political system and sometimes due to lack of adequate infrastructures for the benefits to percolate down to the poverty stricken masses and people who live below the poverty line in far flung rural areas.
Apart from these factors, there sometimes emerge budgetary constraints due to the limited funding that these programs and initiatives get. It is here that the complementary role of companies assumes importance. Companies could partner with the Governments of countries at national level or at state level to support them in their endeavor to fight against inequality. One of the five parameters incorporated by the United Nations for measuring the Human Development Index (HDI) of a country is ‘the percentage of people below the poverty line’. Participation by companies who have the managerial capability, the infrastructure and the resources will surely go a long way in providing opportunities to developing countries for a greater impact in a short period of time.
Regarding the company’s decisions in this context the companies have already begun to think in terms of Corporate Social Integration (CSI) rather than Corporate Social Responsibility (CSR). Companies now focus only on issues regarding which they can make a difference to society based on their strengths and reach.
Inequality will surely be a driving force for capitalism too. Capitalism has helped us reduce global poverty and expand our access to health care and education but it has come to us at an enormous cost of unsustainable levels of public and private debt, excessive consumerism and in the process it has left too many people behind. Such trends point to the fact that capitalism needs to evolve. Increasing inequality will ensure capitalism evolves because any system that excludes large number of people from growth or prevents them from participating will ultimately be rejected. It is time we had leaders with qualities like transparency, the ability to focus on long the term and being purpose driven over and above the leadership skills of integrity, intelligence and hard work This would help reduce inequality and ensure greater commitment towards ethics and morality.
- The next generation of leaders will be more socially concerned and committed as employers, consumers and investors : Your comments please
Today we clearly see a trend that Gen Y is more socially aware and ecologically concerned. They are supportive of stricter environmental laws, are more likely to attribute global warming to human activity, and are more likely to favor environmentally friendly policies such as green energy development and tax incentives for hybrid vehicles and green products. They have sound opinions on corruption, inequality and poverty and participate actively in social and environmental awareness programs.
From an early age, Gen Y was taught the Malthusian Doctrine of conservation of non renewable resources through reducing, reusing and recycling. They celebrated Earth Day in school and were taught about global warming from early on. They learned about endangered species, overflowing landfills and a large plastic wasteland that’s floating in the middle of the Pacific—all which has helped shape an eco-friendly generation that is concerned not only about their wellbeing but equally about the planet.
This generation is considered to be “born green” because they grew up in a society where eco-consciousness was already becoming a norm. Today they have begun to show encouraging signs of leadership in their communities. As the first generation that was taught sustainability concepts in school, who came of age amid the climate crisis, and boasting a hefty dose of skepticism when it comes to trusting companies, they are considered a major potential goldmine for creating and encouraging sustainable products and green companies. They are increasingly likely to be more socially concerned and committed as employers, consumers and investors.
During my experience at SIMSR I have noticed proudly that my students are not only socially, ecologically and ethically aware about the world’s problems, they are also actively and effectively participating in various student driven initiatives for CSR. Some of them even work as volunteers for environmental causes outside SIMSR.
There is an increasing focus on Business Ethics, Ecological sustainability and Poverty elimination programs as subjects in Business Schools. Students today are hence able to channelize their thinking to become good corporate citizens of the world. This trend is reflected in the increased focus on green investing and in the fact that they are most likely to pay more for responsibly made products, their wish to work for companies that care about their impact on community and their choosing buses and motor-cycles over cars.
Generation Y is hence sure to shape the marketplace around its social and ecological commitments.
5. Principles of Responsible Investing: has a commitment of over 20 Trillion USD, will these affect Indian companies? And how?
Responsible investment explicitly acknowledges the relevance to the investor of environmental, social and governance (ESG) factors and long term health of world markets as a whole. It recognizes that the generation of long term sustainable returns depends on well established and well governed ESG systems.
Triple- Bottom -Line (TBL) Reporting initiated by United Nations Global Compact (also referred to as Sustainability Reporting) is already being practiced by several leading companies in India. The principles of Responsible Investing are also being adopted by some of the institutional investors operating in India’s Financial Markets. India’s progress towards being among the world’s leading economies depends not only the competitiveness of its products and services but equally on sustainability.
Responsible Investment has played a major role in ensuring that the capital reaches those who need it the most and have been denied access to it in the past. It has helped communities and individuals in reaching their goals of affordable housing, sustained jobs/livelihood, and access to good quality education and healthcare. Responsible Investors have also provided innovative social venture capital and micro enterprise lending in international markets; making micro financing available to women entrepreneurs in Africa, Asia and Latin America is one such example.
I therefore feel that with the increasing awareness about Responsible Investment among the Indian companies and the business community, the social, ecological and economic environment in India will improve significantly in the near future. This would of course reflect to some extent in an increase in India’s Human Development Index (HDI) for the next four to five years.
6. Sustainable development demands a change in processes, policies and products of a company: is this an opportunity or a threat for Indian corporate?
Although the change in processes, policies and products might seem as a threat for Indian companies, sustainable development is in fact an opportunity. There is a growing recognition that community development is the best way to find lasting, fair solutions and that a healthy natural environment improves the quality of life for all.
It is in the interest of businesses of all kinds to get involved with sustainable development. Making sustainability as a key agenda in corporate policy making can enhance profits as well as tackle challenges of climate change. Innovation and research can lead to development of technologies and products which can generate long term values for all the stakeholders.
In today’s scenario, customers are increasingly giving preference to firms practicing sustainable practices, like responsible procurement, respect for human and labor rights and protection of environment in doing business, and this trend is bound to rise. Thus modification of policies and processes to become sustainable should be treated as a long term investment which can lead to business development and growth.
Dabur, India has been undertaking a host of energy conservation measures. Successful implementation of various energy conservation projects have resulted in a 13.8% reduction in the Company’s energy bill in the 2008-09 fiscal alone. What was noteworthy was the fact that this reduction has come despite an 8-9% volume increase in manufacturing, and an average 11.7% increase in the cost of key input fuels.
Having said this, it’s important for government to come up with stringent regulations and enforce them strictly so that the companies following sustainable practices are incentivized. Otherwise ensuring business viability of such plans can be difficult. Instead of being mere money-generating machines, companies should combine commercial and social logic to build enduring success. An example is The Tata Group. The Tata family established one of India’s leading conglomerates and the steel city of Jamshedpur, Jharkhand. Tata Steel has since its inception in 1907 been practicing responsible HR policies like an 8-hour day, provident fund and retirement facilities for it workmen
7. What opportunities do you see for education institutes in the growing field of CSR and Sustainability
a. As in knowledge management, consulting and policy development
b. Developing new programs
In order to develop a healthy economic environment and to ensure social progress and inclusive development, it is important to realize the role of educational institutions. Education has earned international recognition as a driver of long‐term wellbeing of developing countries. Companies should hence play an active part in improving the educational opportunities for the under privileged and lifting poor countries out of illiteracy and an undereducated population. In this regard, some companies in India have established primary schools for not only their employees but also for the communities in rural areas of India. Clearly much more needs to be done by companies in this regard in improving the level of not only primary but also secondary education in India and other developing countries.
Likewise for education at the graduate level certain mandatory subjects on inclusive development, social responsibility and environmental education needs to be intensified. At the post graduate level, like for MBA programs sustainable development, social responsibility and governance should be introduced not just as subjects but as major and minor specializations. Business Schools could also undertake research projects sponsored by companies for enhancing the quality of life including education, healthcare and ecology of the company. The findings of this research can be made available to other companies for a fee for achieving multiplier effect for scale economies .
The aforesaid initiatives by educational institutions would help not only students but also the community and new schools and colleges being established to share the benefits of the contemporary research findings. Companies wishing to contribute to improving education may consider the needs that schools and educators face daily – time constraints, tight budgets, access to technology, and curriculum standards –to achieve the highest possible impact of the company’s contribution to education. By providing the resources and by building strong connections with educational institutions more and more institutions can meet educational goals and their own business goals as well to create shared value.
With the increasing acceptance of sustainable inclusive development and the need for responsible conduct by everyone including businesses, companies and citizens worldwide for saving the planet, educational institutions need to play a pivotal role in launching certain initiatives on the lines indicated:
- Encouraging the students to work in the communities and with companies to help them reduce their carbon footprint and achieve community development.
- While volunteering by students is important, integrating some of these initiatives as part of the program curriculum at various levels-undergraduate and postgraduate would help achieve faster progress and greater overall impact.
Educational institutions and CASI could work together to increase CASI’s reach to access the appropriate communities while simultaneously enabling the student volunteers the importance of these initiatives have a real life learning from their work in various communities
8. “Companies that create employee-driven CSR programs help workers feel a sense of greater purpose; helps attract and retain top talent; and provide strong platforms for employee leadership and development. In today’s world, employee volunteer programs are an essential component of a company’s CSR approach, one which unquestionably benefits employees, the community and the company.”
a. Do you agree to the statement?
b. What is your opinion on the same? Please give a descriptive answer
Yes, I entirely agree with the statement.
Employee volunteer programs allow companies to foster a personal link to the community by sharing its human resources with organizations that need them. With the slowing down of the world economy, nonprofit organizations might struggle to provide services on smaller budgets and hence volunteers become even more vital to the health of our nation’s communities. Companies in turn benefit with more productive and motivated employees, higher profitability and an improved standing in the community and goodwill of the government.
Contributing business skills or expertise to a nonprofit organization in a volunteer capacity can further develop an employee’s business skills .Volunteering can strengthen work teams and build employee skills as well as contribute to enhancing employee engagement.
Skills-based volunteerism can give employees learning and leadership opportunities that may not be immediately available in the workplace. Working for nonprofits with new teams – under new constraints and with limited resources – gives employees a fresh perspective and stimulates their creativity.
The fact that the Tata group has a rich volunteering tradition was brought to light when nearly 25,000 employees from Tata companies across the world signed up to be a part of Tata Engage, the group’s volunteering programme, which was launched on the occasion of the 175th birth anniversary of Jamshetji Tata, the Founder of the group.
The success of the week-long drive indicated that while volunteering was a first-time experience for many, by itself it is by no means a new experience for many of the Tata group companies. There are many companies within the Tata group that have a rich volunteering tradition. These include, among others, Tata Consultancy Services (TCS), Tata Chemicals and The Indian Hotels Company (IHCL). At Voltas, a 1,200 strong group of volunteers spare time during and after work hours. Voltas identifies institutions or non-government organizations (NGOs) close to their operations making it practical for employees to spare a few hours for community service activities.
U.S based IBM, one of the world’s leading and widely respected companies with operations in various countries has some special days in which all the employees around the world devote a day to brainstorming and evolving initiatives and programs for Sustainable Development. IBM has a well established process for choosing the appropriate initiatives through which it could create shared value for the community and for IBM’s continued success as well.
9. In your opinion,
a. What is the opportunity for CASI?
b. Being a Global Brand, CASI has a terrific reach, which strata of the society do you think we should reach out to further?
c. How do you think student community would benefit from CASI?
While I have not had the privilege of interacting with the directors and senior policy makers of CASI in US or in India as of now, based on the information on the CASI website and my impressions about the needs of the communities in the developing countries, I see the following opportunities for CASI today:
- While CASI has already in place well established objectives and a framework for its activities including certification programs, I feel CASI’s focus should now be on implementation of its programs rather than on policy and programs as at present. This would enable CASI and its partnering organizations and student volunteers to have experiential learning which in turn would improve the formulation of its future policies and programs.
- CASI needs to now venture beyond CSR and Sustainable Development to new but equally important areas like Governance. Many of the well conceived and intentioned programs of several governments of various countries and multilateral institutions like UN do not benefit the needy due to endemic corruption and inadequate infrastructure.
Good governance is a basic ingredient of a country’s Sustainable Development. It has the ability to influence social change. To be truly engaged as responsible citizens in their communities, people need to make their voices heard. This includes working as partners with relevant stakeholders and regulatory agencies and others in the community to make informed decisions that affect their lives. Organizations like CASI should hence strive to promote transparency and accountability in the public system. It should provide a platform to empower people with the required knowledge, skills, and tools that can enhance their capacity to demand this transparency and accountability on the key issues that pertain to the communities’ long term inclusive development.
Since improved governance is an increasing need in developing countries including India, CASI could play a significant role in implementation of governance related policies in partnership with government agencies and regulatory bodies. CASI needs to leverage its links with educational institutions, companies and non government organizations to evolve a common platform for improvement in governance related matters in the community.
- CASI has already reached the upper strata of the society through its policy development initiatives. However only implementation of some of these policies will enable CASI to reach the lower income strata of the society effectively and improve its overall visibility. CASI’s improved visibility over the years would in turn inspire some of the socially and environmentally conscious students from the lower income strata to join CASI as volunteers which would enhance the diversity of CASI’s membership/volunteer base.
- CASI’s initiatives could help in the overall development of students today and can provide them with the practical knowledge that they need as they enter the corporate world. With the right kind of training and exposure, a holistic development of the student community will be achieved and will pave the way for preparing them to be efficient, effective and socially committed managers and leaders of tomorrow.
10. CASI works with academicians in consulting assignments, please give your comments on how do we make this a continuous and improvised process
Presumably, CASI already has a process in place of identifying and working with experienced and eminent academicians for its consulting assignments, I would like to make the following suggestions:
- To ensure a wider selection of the faculty based on the topic of consultation, CASI could develop a database of faculty interested in consulting and their areas of expertise , including multi disciplinary areas.
- To increase its reach for consultancy assignments in companies, government organizations and other possible clients, CASI needs to have a process for market assessment of the emerging key areas of consulting and the potential clients.
- Since consultancy assignments are largely by invitation of clients, CASI needs to improve its visibility further and share its area of expertise with its potential client base.
- CASI also needs to have on a monthly basis an internal update of developments in the key areas of Social Responsibility, Sustainable Development and Governance to have a better understanding of the current and future consulting opportunities.
11. What is the business case for CSR? Is it the same in developed economies as in emerging markets? Would you please describe a specific environmental, social or governance issue from a business case for CSR perspective, comparing and contrasting the business case for CSR perspective of the specific issue in a developed economy and in an emerging market.
United Nations Industrial Development Organization (UNIDO) defines 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 (“Triple-Bottom-Line- Approach”), while at the same time addressing the expectations of shareholders and stakeholders.
When a company practices its corporate social responsibility it needs to set a budget well in advance. The services set apart for traditional CSR are an expense to the company but provides no direct benefit to the company except for an enhancement in its goodwill and positive image in the minds of the community as well as the government.
CSR has a business case when the company plans its CSR activities in alignment with its business model. When companies are able to practice CSR aligned to their operations and value chain, CSR becomes an investment rather than an expense
Also, such a practice ensures that a company continues to fulfil its social responsibility even in times of downturn. A company might reduce reluctantly the allocated budget for traditional CSR in an economic downturn. Hence, if companies practice corporate social integration instead of corporate social responsibility thereby creating shared value for themselves and the community then this activity becomes self sustaining rather than it being an expense.
An example is Microsoft. Through the Employee Volunteering and Giving programs, employees make personal financial contributions, volunteer their time, and donate other resources to NGOs and communities. In one such program Microsoft employees volunteer at local community colleges in large numbers and educate the students there about the industry needs of the present and future. They also inculcate in them the Microsoft culture which goes a long way in preparing the students to become efficient and effective employees of Microsoft in the future. Microsoft also donates their old equipment to these colleges. In this way, the community colleges benefit from the extensive and up-to-date training provided by the employees of Microsoft and Microsoft on the other hand saves on its training and recruiting costs and gets its potential employees that have already developed the technical know-how and the Microsoft culture. Microsoft hence creates a shared value for itself and for the community.
There is a growing trend towards CSR activities by companies in emerging economies. Many large corporations from emerging economies actually have improved environmental and social impact and Governance benchmarked with their developed economy peers. There are a number of international initiatives to support CSR within SMEs and other companies in emerging markets that are generally considered the growth drivers of emerging market economies.
In conclusion, the business case for CSR remains essentially creating shared value for the company and the community whether in a developed country or in developing economies. The difference is in the varying institutional context in terms of capital markets, labour markets, government regulations and contract enforcements among countries.