‘Currently, CSR funding is unequal to the task’

"I don’t think you can force a business to buy CSR credits. It’s not clear to me how funds generated by a CSR credit market will find their way to back to social causes. They should ideally go to the government and should be well spent.

Our experience is that there are numerous causes to work on and not enough funds flowing from companies.

There are companies that have say Rs 10 crore earmarked for CSR, but they can’t even spare Rs 1 lakh for us. They will say ‘we have our own set-up.’ We will be fully accountable for Rs 1 lakh or any other amount.

Many companies brand all NGOs as fraudsters, which is another blow to the effort to generate funds.

I have recently been to a village where lungs of the residents are getting damaged due to mining activities. What compensation can you give such people?

We work to set up schools in North-eastern states. There state governments are prescribing minimum standards for schools. In some cases, they are ordering that schools be shut down for not meeting the standards.

My point is the state governments won’t do anything to expand access to schools and at the same time find faults with the efforts of an NGO to set up schools."

Amita Pal is a consultant at the National Foundation of India.

'To earn CSR, a business must go beyond mere compliance with law’

"In the case of market for carbon credits, on which is modeled the concept of CSR credits, a business has to comply with all environmental norms and then go beyond that by adopting processes and technology that will reduce emissions.

Similarly, the concept of CSR credits implies that a business has to comply with all social and environmental norms and then do something extra to create social value.

In other words, a business has to go beyond regulations in order to create value for the society and earn credits.

It’s not possible for many small companies to earmark anything but very small amounts on CSR activities. A market for CSR credits will allow these companies to buy credits from the market and contribute their mite to the social good.

I understand that such a market will require defining and quantifying social good. There is large agreement on what needs to be done in the areas of education, health, livelihoods, and infrastructure improvement, but we still need some way of measuring the social good.

I am sure our economists can come out with some ingenious mathematical models to measure social good.

In the context of disputes over what creates social good, it’s important that all stakeholders – government, corporates, NGOs, and the local communities – meet openly, not behind closed doors, to decide how a project can help the community.

Lack of trust between these stakeholders will never allow us to determine what creates social good.

In conducting CSR activities, what we need is a regular engagement process with government and local community.

To my mind, CSR credits and their trading is a concept that needs be discussed more and fine-tuned."

Dinesh Agrawal is the general manager of CSR and NTPC Foundation at NTPC.

Up next - Amita Pal of National Foundation of India

‘Currently, most of CSR activities have a marketing, for-profit angle to it’

“If a business is inherently destructive and unwholesome, it should be outlawed by the State. Allowing such a business to continue is government’s way of abdicating its responsibility. It’s like government saying ‘we may not like the nature of your business but we won’t like to forgo the taxes that you pay by banning you’.

I think the ethos of the founders or promoters of businesses play a fundamental role in determining how a business will preserve and create value for the larger society.

I do believe, however, that most businesses are there to make profits; they don’t take a non-profit view of things.

Even CSR is a way to soften the blow for most companies– i.e. to offset the damage to their image that results from some negative effective of their operations, such as pollution. There is thus a strong marketing angle to CSR.

That’s why government will have to be ever vigilant and up-to-date to monitor corporate activities and determine whether a business is creating social value or destroying it.

The State is in the best position to take a non-profit view of things.

The current dysfunction of the State in providing public services and protecting public interest is a temporary phenomenon.

As the State is distancing itself from running industrial enterprises, it will be able to focus more on formulating public policy and making sure that private interests comply with that policy.

I think all companies should be required to publish their annual CSR reports. If need be there should be something like an RTI in the matter of CSR activities of private companies.

More information we have in public domain, more self-regulating corporate activities are likely to become.

Also important is to modernize our laws and judicial system so that the State is ever ready to protect public interest from private greed."

Anup Jain is the Marketing Director-Pizza Hut, Yum! Restaurants (India) Pvt. Ltd.

Up next - Dinesh Agrawal of NTPC

‘CSR must be interwoven in business vision and strategy’

“In building Tata Steel at Jamshedpur over 100 years ago, the founder of the company had told his son, ‘You are there because of the community. You are not just building a steel plant, you are building a city.’

Jamshedpur was then a forest area with tribals living it and there was as more resistance to land acquisition than what we see in today’s India.

The founders vision, was, however, to plant trees, to build houses, schools, hospitals, places of worship for all religions, and every other amenity that could be imagined at that time.

The result is that Tata Steel has not had a single hour of disruption or unrest in its long history. There has also been no disruption on account of Naxal activities.

To me, that vision of community being at the centre of business goes beyond CSR as performing some activities that are peripheral to the business operations.

This vision ensures that the business can be sustainable and long term, rather than unsustainable and short-term.

It’s notable that Tatas continue to provide all local services in their part of Jamshedpur city without the people there demanding that they should have a municipality.

In today’s scenario, most businesses don’t seem to take the view that CSR can be interwoven in their strategy.

So you can have triple bottom-line reporting, covering people, planet, and profits, but the question is how will you check a business’s compliance with public policy and verify its claims.

Chanakya Chaudhari is the chief resident executive of Tata Steel, posted in New Delhi. He was one of the speakers at our roundtable on corporate social responsibility (CSR) credits.

Up next - Anup Jain of Yum! Restaurants speaks on the issue.

Governance Now rountable on CSR credits

India’s high economic growth in recent years, the resultant worsening of economic disparities, and the struggle for scarce resources, such as land, forests, and water, have brought a new focus on Corporate Social Responsibility (CSR).

Industrial capital is now increasingly moving into socially and environmentally sensitive geographies, causing conflicts between business and local communities.

Common property resources are widely perceived to be in the danger of being bought over by businesses and turned into factors of production.

Even as disparities grow, the State is failing to play its role as the just arbiter, equalizer and provider of public services. The needy cannot count on efficient delivery of healthcare, education, water supply, sanitation, subsidized food, social security, agricultural extension, and other public services.

Even as the State is struggling in its role, corporations are being called upon to aid in the effort to address poverty, social exclusion and environmental degradation.

CSR is being seen as not only conducting business in a legally compliant and socially responsible manner, but also helping in the larger effort to make for inclusive growth.

Recently, Salman Khurshid, the minister for corporate affairs, mooted the idea of CSR credits, i.e. some companies earning tradable credits for the activities that create social value and companies that can’t or do not want to engage in CSR could buy those credits.

“If there is a business that is inherently destructive and unwholesome, a way has to be found to offset the negativity of that business,” the minister was reported to have said.

Should CSR activities be seen as a way to absolve corporations of their sins, or as the minister puts it, to “offset their negativity”. Or, should our laws encourage corporations towards better governance, social and environmental responsibility.

Is the ‘CSR exchange or market’ a way to do that?

If yes, can the outcome of CSR be quantified? And how?

Also, if a CSR exchange comes into being, how does it look from the point of view of marketing departments of the corporations, considering that endorsing a good cause a smart way to building brand and increasing brand recall.

Discussing these questions at a roundtable hosted by Governance Now were Chanakya Chaudhari, Chief Resident Executive, Delhi, Tata Steel, Dinesh Agrawal, General Manager, CSR & NTPC Foundation, Anup Jain, Marketing Director-Pizza Hut, Yum! Restaurants (India) Pvt. Ltd, Amita Pal, Consultant, National Foundation for India.

According to Chaudhari, building of Tata Steel and Jamshedpur city 100 years ago encapsulated the principle that a business existed because of community and not the other way round.

In choosing the site for building the plant and the township, the promoters of Tata Steel not only considered the economics, but also how their business would sustainably merge with the community and the environment by mitigating the adverse effects of their operations. They did it by planting trees and building social and physical infrastructure.

“This vision that business exists because of community and so it must not only try everything to mitigate the externalities but also create enduring value for the local community is what lies at the heart of corporate social responsibility.”

Jain believes that CSR must never be conceived as some way of allowing the corporates to get away with business that is unacceptably unwholesome.

“If a business is unacceptably damaging, the government has a responsibility to outlaw it and not to allow the business to camouflage its negativity by performing some peripheral CSR activity.”

Responding to the idea that “a way has to be found to offset the negativity of a business,” Amita Pal of National Foundation of India, which raises funds for social causes and makes grants to grassroots organizations, says one cannot force a company to do something in the nature of CSR, but it remains a concern that operations of some companies can be damaging to the health and well being of local communities.

“We know of a rural community where peoples’ lungs are getting damaged due to mining activities. What kind of compensation can you give to such people?”

Agrawal says it’s important to realize that CSR credits, which are modeled on the lines of carbon credits, will mean that businesses will not only have to comply with all laws and norms of social responsibility, but have to go beyond that by doing something to reduce the negative effects of their businesses.

“To me a CSR credit would mean that you have to do something extra to create social value while being fully compliant with prescribed social and environmental norms.”

The point is you can’t conceive CSR credit as a way to offset a negative effect of your business, but to recast your business in a way that you can obviate or minimize that negativity, adds Chaudhari.

Another important issue is how do we quantify the ‘social good’ coming out of a CSR activity and who defines the social good.

“There are areas like education, healthcare, livelihoods, infrastructure improvement where there is a lot of agreement on what needs to be done to contribute to social good. I am sure our economists can think of mathematical models to quantify social good,” says Agrawal.

Pal says her organization, National Foundation of India, has its own way to monitor and evaluate the efficacy of projects that are carried out by partner grassroots organizations.

“For example, one can go and check the schools that have been set up on and enrollment in those schools. But we do recognize the need to work with the government, especially Panchayats to plan, implement and evaluate the social good arising out of our projects,” she adds.

Chaudhari says public institutions that are democratically elected by the people should have the final say in defining social good and so businesses need to align their activities with public policy.

“Even the negativity of a business activity can only be handled by legislation, and not voluntary action,” he adds.

But, does that mean that promoters and managers of business will have to be taught public policy in order for them to understand social good and bring their activities in line with it?

Jain says defining social good cannot be left to the good senses of businesses, whose only aim is to make profits.

“Businesses usually conduct CSR activities to soften the blow…. to mitigate the damage to their reputations that might have arisen from some of their activities, such as pollution. So, there is a strong marketing angle to CSR activities.”

It’s the government’s responsibility to make sure that social well being is not damaged and to take corrective action if it does get damaged.

“Someone has got to take a non-profit view of things. It’s only the State that is in a position to take that view,” Jain adds.

Does the State currently look capable of protecting public interest, given the corruption and inefficiency that plague delivery of its own services and welfare schemes?

“In the North-eastern region where we work, states themselves are not able to provide adequate number of schools, but have many objections to our efforts to set up schools,” says Pal.

Chaudhari says government’s dysfunction in carrying out its own policies is the single biggest missing piece in the current scheme of things.

Jain, however, believes government dysfunction is a temporary phenomenon.

“The government has been doing the right thing in distancing itself from running industrial enterprises. That way, it will gradually be able to not only run its own programmes better, but also protect public interest from private greed,” says Jain.

Agrawal believes that local communities, such as Gram Sabhas, must also play an active role in defining what is good for them.

“All stakeholders -- the government, businesses, NGOs, and local community -- must be able to meet in an open meeting to discuss and evaluate a project. Building trust should be an important objective of such meetings,” says Agrawal.

In terms of concrete suggestions, Jain says it should be mandatory for all corporations to publish their annual CSR reports, say by March 31st.

“It should be like RTI in private sector. The more information about the CSR activities of corporations go into public domain, the more self-regulatory system it will become.”

Jain also suggests modernizing India’s legal and judicial system to protect the public from vested interests.

Chaudhari says the government needs to do a lot to strengthen its ability to monitor the activities of corporations and whether those activities fall in line with laws and policies.

“I would say implementation of public policy is currently bad. And each one of us has a social responsibility because at the end of the day all of us are citizens whether we work in public or private sector.”

Agrawal says CSR credits and their trading will need to be discussed more before it will become a feasibly implementable concept.

Sounds perfectly sensible, but our panelists have already made a good beginning.