The sense and essence of CSR

The new regime will now evolve by the depth of the discretion of companies in setting up their tasks

adve-srinivasa-bhat

Adve Srinivasa Bhat | June 19, 2014



India's big companies now have an extended responsibility on hand - of turning the 'do good' stipulation of the government - indeed 'good'. Because social responsibility is not demonstrated by choosing from a basket of ‘good deeds’. Neither can good deeds offset bad ones. The R in CSR (corporate social responsibility), in its true sense, refers to the application of sincere conscience on the part of companies in ensuring ‘no harm’ to society in their conduct and possibly manage their affairs in ways that can be useful to society. Only beyond that CSR does include ‘giving’ for causes that can help society ease its dark ills and evolve more equitably.

‘Responsibility’ loses the depth in its sense when made mandatory with riders. The government’s directive being tilted on the ‘giving’ runs the risk of pushing the companies override the primary commitment – of being conscientiously responsible – to the society in their operations. A company’s work on CSR essentially involves unbiased efforts to know the elements of irresponsibility in its operations and to strive to correct them in all earnestness. All sectors have their sinful practices that charge-up imbalances in the society and wily habits that hurt the interests of direct stakeholders.

Sinful practices are systemic, overt and cause huge negative social impact. Like; manufacturing (careless pollution), housing (deceitful practices), health (over pricing, unfair practices), education (trusts of mistrust), media (influenced/inept content), finance (favouritism, non-inclusive), illegal mining (deemed legal) etc.

That’s some crude sampling. Hard stuck as they are, companies hardly have the inclination or the feasibility to not follow the fundamentally irresponsible customs in the absence of strong ‘will’ on the part of the government to check them with policies.

Wily habits of companies are many but a tad less harming than the sinful practices. They are mostly covert and are concealed; in the products (deficient value), in the production (inefficient process/unjust practices) and in the selling (deceptive practices). Being indulged by all, they do harm the interests of vast sets of direct stakeholders. Maturing competition slowly kills old tricks but companies are inventive, particularly in the selling. And ironically, brands that are proving clever in playing with bad tricks are those that are big and perceived good and they do so right under the cover of their ‘good’ brand image. Insensitive irresponsibility invites law.

Recently the government had to bring in rules to curb the malpractice of duping by reducing quantity in the FMCG sector. In the health sector medicine makers, led by MNCs, are a bit too smart in turning money from the helplessness of buyers.

Elements of irresponsibility in businesses exist owing to lack of grasp of the true sense of CSR on the part of companies, competition compulsions and for the big money in the misuse of discretion. Deeper sense of ‘responsibility’ of businesses refers to concern and care companies are expected to apply in all earnestness particularly – in the absence of law. Ironically, the government has turned into law a concept whose essence is discretion. Worse, with the new rules the government may have just dug a loophole. Companies that inflict larger social cost will cleverly do two percent good elsewhere. That’s not an exaggeration. All the big companies in the news with charges of irresponsibility show impressive CSR deeds. That makes the new CSR rules sound a bit like a case of turning a malpractice legal.

Quite confusingly, the government’s offer of options of social issues for ‘doing good’ further obscures the real sense of CSR. A large company’s tasks on social responsibility can be listed by its business – by the associated social issues, challenges and opportunities. When ensuring sustainability on a critical factor is the calling, allowing a company an alternative for doing good only amounts to letting it shirk away from its own responsibilities. Worse, if the company is carelessly indulging in unsustainable practices. What better ‘good’ can the oil companies do than being effective in curbing wasteful consumption of oil? Are consumers sure of pure and precise quantity at the bunks? Isn’t structured afforestation their essential responsibility? Aren’t automobile companies equally responsible to act on these concerns? For banks isn’t taking risks with augmented lending (on feasible minor opportunities) to deprived sections a decision of responsibility, particularly when they lend without the care to some affluent businessmen despite knowing they will turn that bad? Can’t some thoughtful interest-free lending to socially critical services in smaller towns cause greater positive social impact than plain ‘giving’? Isn’t tackling non-inclusiveness in insurance a primary social responsibility of companies in the sector? Isn’t investing in research to know what and how to make positive social impact a primary social responsibility?

Thus, social responsibility, particularly of large companies, is always connected; by the resources they use, by their products, by their production processes and by their business practices. Responsibility is highly subjective and the logic varies for companies even if they are similar and from the same sector. Two percent of the profit of just a few top IT companies can easily cross '1,500 crore. To whom should they ‘give’? I believe they would do much greater social good should they invest in correcting surging salary levels caused by ‘non-employability’ by investing in innovative real work learning modules at the colleges as useful across sectors collectively – and trigger venture spin-offs using seasoned talent from within independently and as competitive business strategy. In IT with India’s competitive advantage from the staff cost efficiency thinning the need to regain it by resetting the supply has already turned dire. Infosys is fighting attrition with undue salary increments which in effect cuts its staff cost efficiency further and thus its competitiveness. While massive jobs IT created is a social boon the single sector spike in salaries do impact location-specific inflation, which is harsh on the other much larger populace.

Civil aviation in India is a classic example of ignored structural incongruities choking companies in the sector, and high staff cost is one among them. Don’t we have intrinsically competent persons who would be willing and happy to fly airplanes at least ten times the number of pilots on the rolls now, for much less pay? We sure have far more but it takes some doing to have them fit to fly the planes. Mismatching supply by numbers and skill-sets is the root cause for staff cost inefficiency in any sector.

That makes the task of managing directors of companies that are expected to demonstrate their responsibility very challenging. Globally, CSR is fast evolving as critical competition strategy factor with companies making thoughtful investments in making their businesses socially compliant – which shows its impact; in the efficiency in the consumption of resources, in the well being of the society, in the satisfactions of its stakeholders and as well in its sales and profits. Competitive CSR is about forcefully upgrading the business practices to greater maturity levels in the interest of the larger society and being able to draw cost and brand advantages from them.

In developing economies CSR tasks of big companies are rather cutout. The scope and potential for them to do good to the society resides well within their business zones which makes the ‘good’ they can do by ‘giving’ indeed insignificant – and ‘grossly irresponsible’ should they settle their real responsibilities by that. Big companies also have the inherent responsibility to aggressively inculcate socially justified practices across their supply and delivery chains and the opportunities to do competitive social good can be found in them because issues and challenges also reside in them.

CSR in India will now evolve by the depth of the discretion of companies in setting up their tasks. And that gives them the scope to create powerful competitive advantage as well.

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