CSR emergence in India

August 04, 2008

Malini Mehra: CSR emergence in India

Malini Mehra believes that CSR in India is on the up.

A few weeks ago, an event occurred that marked just how far some in India plc have come on the CSR and sustainability agenda. In an oak-paneled chamber in the House of Commons, at a business and climate change event organized by CSM and Tomorrow’s Company, two quintessentially Indian companies – the Tata Group and the Mahindra Group – spoke of how integral CSR was to their businesses. The two British officials representing Tata companies Corus and TCS – itself an inverse of the usual situation – spoke with pride of the long-held values underpinning the 96-member Tata Group where “community was not a stakeholder; community was the reason for business”. This different corporate ethos is also reflected in the ownership structure of Tata Sons, the holding company of the Tata group, 66% of which was owned by a trust. Illustrating their commitment to CSR through an impressive list of initiatives, the Mahindra Group explained just how deeply the realization had gone, that “concern for sustainability was good for business – lack of concern will destroy us.”

A mark of modernity

Admittedly, these two groups are among the top ten in India and not reflective of the rump of Indian business which continues to be at the far smaller and more challenging end of the spectrum. It is now de rigeur however for corporate communications to invoke the language of CSR; indeed it is seen as a mark of modernity and alignment with the global ideal of a more caring, sharing form of enterprise. But just how far the changed corporate body language actually reflects changed corporate practice remains the 60 million Rupee question. Critics point towards issues such as land acquisition where a number of Indian companies have been wrong-footed, including Tata, and rogue practices on the part of mining companies such as Vedanta, which has allegedly flouted LSE listings requirements, as more representative of corporate India than the glossy images in company reports and PR magazines.

There is some truth to this. There is little doubt that in today’s India, where getting ahead is seen as more important than doing well, the conjunction of ‘getting ahead, by doing well’ is still seen as idealistic beyond belief and unfit for the cut-and-thrust of competitive business. The lived reality of most people in India’s everyday marketplace is that where corners can be taken, they will be taken. Most people expect as much. It is only when they begin expecting and demanding more from business, from themselves as consumers and citizens, and from authorities, that things will begin to change more fundamentally.

Things are moving though and 2008 is quite different to 1998 when CSR was a barely understood acronym. A number of recent trends and initiatives show efforts towards a real professionalization of the field. In the area of reporting and standards, while many globally-oriented Indian companies are beginning to issue GRI-compliant sustainability reports and 48 are signatories to the UN Global Compact, they are still in the minority. In an effort to bring some standardization, the Institute of Chartered Accountants of India (ICAI), the statutory body setting accounting and auditing standards for the corporate sector, has begun work on a new set of CSR rules, which will make reporting on social, environmental and economic initiatives mandatory for Indian companies.

An allied move is the initiative by several corporate foundations to formulate a common strategy to communicate, report on and evaluate progress in their social and community development operations. These include companies such as Multi Commodity Exchange of India Ltd, Anil Dhirubhai Ambani Group, and media company Bennett, Coleman and Co. Ltd. Given that an estimated 100 corporate foundations and 25 foreign firms are involved in CSR activities in India – such efforts show a maturing of the sector at a time when greater social engagement is emerging. According to the Times Foundation, corporate social expenditure rose from Rs 17,500 crore (USD 4.1 billion) in 2006 to Rs 30,000 crore (USD 7 billion) in 2007 – of which companies drew exemptions of Rs 5,500 crore (approx USD 1.3 billion) under income-tax laws. Those behind this network and lobby initiatives readily admit that it has one eye towards the bottom line. Sudhir Kumar Sinha, group vice-president of Anil Dhirubhai Ambani Group says, “CSR could prove to be a valuable asset in an age of mergers and acquisitions, especially as it helps companies spread their brand name”.

Embedding CSR

Educational institutes are also seeking to bring a needed degree of harmonization and ‘embedding’ to the field. The Indian Institute of Management Bangalore (IIMB) has recently launched a website dedicated to the teaching of CSR. Initiatives to educate, embed, improve reporting, monitoring and evaluation will help install mainstream CSR and sustainability as core values and operational expectations in business in India. Unlike in the early years of CSR in India, when the drivers for improved corporate governance and conduct were largely external, be they foreign institutional investors or campaigning organisations, the drivers now are largely internal. Whether it’s corporate leaders seeking market differentiation and an edge in the fight for talent, or employees seeking value in their workplace, or internal change agents seeking corporate improvement, the motivations and actors within Indian business are now diffuse and multiple.

If change is to be meaningful and lasting, this is precisely what is needed. Particularly, if CSR is to be embedded across sectoral bandwidths and the whole length of corporate supply chains. As recent research by the India Committee of the Netherlands (ICN) shows, this continues to be an area of concern, with lack of awareness and substance on CSR in supplier relations plaguing efforts at broader improvement.

The ICN’s report found that many Dutch companies working in India were unable to fully implement and monitor CSR or environment, health and safety (EHS) systems adequately in their Indian sub-contractors. In areas such as human rights or caste discrimination, the companies were either loathe to speak out or their systems under-developed.

One can find this situation repeated across supply chains regardless of the country of origin of the company. In India, a country where the culture of regulatory compliance is poor, and the government has had a light touch on CSR policy, success will only partly come through improved laws and tougher sanctions. More likely, and more substantively, it will result when the entire ecosystem of CSR relationships – involving business, consumers, suppliers, employees and policymakers – is recognized as such and the different parts start to come together in an organized and determined fashion. The good news is that the journey has not only begun, it is well underway.

Malini Mehra is founder and CEO of the Centre for Social Markets, an India and UK-based non-profit that has pioneered work on CSR and sustainability since 2000. CSM’s primary constituencies are domestic industry and stakeholders in developing countries, and diaspora communities such as overseas Indians in industrialised countries.