Some positive steps have been taken but there is still a long way to go.
Corporate responsibility is not an alien concept for Indian corporates. In its earliest form, it was reflected in corporate philanthropy and the Gandhian trusteeship model. Companies made donations in cash or kind, community investment in trusts, and assisted in the provision of essential services such as schools and infirmaries. Many firms, largely the traditional, family-owned businesses, continue to promote philanthropy.
In “Political Economy of Corporate Responsibility in India”, a 2006 paper for the UN Research Institute for Social Development, Atul Sood and Bimal Arora, point out that “Philanthropy has been important in India since the middle of the 19th century, largely due to a strong heritage of community influence and paternalism among traders-turned-entrepreneurs.”
Shefali Chaturvedi, until recently head of Social Development Initiatives with the Confederation of Indian Industry (CII), believes that there are three types of Indian companies when it comes to CSR practices. There are the big companies which have a proper CSR structure in place, there are those which appreciate the value of CSR but do not have a CSR structure and then there are the small and medium sized companies which undertake CSR activities on a piecemeal basis.
Recent trends indicate that companies in India will, out of necessity sooner rather than later, have to implement a CSR agenda. Surveys indicate there is a growing awareness of corporate responsibility among the general population. A majority among the Indian public feel that companies should be held responsible for bridging the gap between the rich and poor, reducing human rights abuses, solving social problems, and increasing economic stability.
More and more Indians now feel that the business sector must play a wider and more expansive societal role. A majority say that companies should be held fully responsible for roles over which they have direct control. These include providing quality products and cheaper prices, ensuring that operations are environmentally friendly, treating employees fairly without discrimination based on gender, race, or religion, and applying labour standards globally.
Several surveys have indicated that companies in the Information technology (IT) and telecommunications industries have been rated as the most socially responsible. Global companies operating in India have, however, rated low in terms of trustworthiness. Only a very small number of multinational corporations (MNCs) are regarded as socially responsible. Those mentioned are possibly those that are the most visible. The perception is that MNCs are not giving their due to Indian society. Foreign companies are often accused of operating to lower ethical standards in India than they do elsewhere, amid a lenient compliance and enforcement regime.
The Indian perception about foreign companies is largely the result of the activities of international pharmaceutical companies like Novartis, Novo Nordisk, Pfizer and GlaxoSmithKline. These companies have conducted clinical trials in India which have been mired in controversies over unethical recruitment of patients, exaggeration of results and downplaying the risks associated with the drugs being tested. A major BBC World Service investigation found that global pharmaceutical companies are doing little to improve such perceptions, while Indian hospital ethics committees and the national legal framework have proved ineffective in tightening procedures.
If public demand continues to exert pressure on companies to adopt more responsible practices, companies will increasingly be judged not only on their economic performance but also on their environmental and social performance.
Corporate responsibility has still to become an integral part of business strategy in most Indian companies. A recent survey of major companies by Partners in Change revealed that a large number of respondents cited knowledge, management support and governance as the three main constraints within companies. 82% said that a lack of knowledge on CR issues was the single biggest constraint. Most of those responsible for Corporate Responsibility activities in the companies lacked professional training.
According to the study “Poor management support, comprising the lack of financial resources, extraneousness of Corporate Responsibility to Corporate vision, values and agenda, not to mention shortsightness [sic] of the management was cited as the second largest barrier area.The third most important reason was an inability to establish links between CR initiatives and tangible benefits.”
As perception about the need for corporate social responsibility grows among the public demands are audible for more government intervention in implementing and regulating CSR. According to Sachin Joshi a director at CII, the “Indian government has some serious work to do when it comes to the right policy frameworks for encouraging responsible business. Lots of businesses want to jump on to the bandwagon, but the government is lagging behind.” Joshi says “There is no single vision by the government on CSR. The approach is a scattergun one.” He sees a ray of hope in the Prime Minister’s statement that ” CSR is not charity, it is an investment in our collective future.”
Amita Joseph, of the Business and Community Foundation would like to see more legally mandated policies to further the cause of CSR. Joseph feels that corporate responsibility should now be legally mandated for all firms in India, imposing requirements such as a dedicated corporate responsibility department, fixed funding, and formal corporate responsibility policies and planning, with company size determining the requirements.
One area which requires urgent attention is transparency – through the production of social responsibility reports. At present only five companies comply with Global Reporting Initiative Guidelines. Most companies claim that they do not produce these reports because their stakeholders do not demand them. There are also companies who say that excessive transparency is dangerous for their business health.
Companies need to understand that greater transparency is essential if they want to maintain their credibility. Even though social responsibility reporting is mandatory for listed companies, few are complying with this requirement. Fortunately the Prime Minister, Finance Minister, the Securities and Exchange Board of India and the Reserve Bank are increasingly supportive of the CSR agenda. 2008 may well witness a significant leap forward for Indian CSR.
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Suresh Kr Pramar is a journalist and editor of CRBiz, India’s only print publication on Corporate Responsibility. He is the Managing Trustee of the Global Gandhian Trusteeship and Corporate Responsibility Foundation, a registered Trust. The Foundation publishes CRBiz and organises workshops on Corporate Responsibility in various cities in India. To organize these workshops the Foundation has set up the CRBiz Centre for Education, Research and Training in Responsible Business.
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