By Moin Qazi
Dr Moin Qazi is a PhD in English and Economics.
A business that makes nothing but money is a poor business.
-Henry Ford
The recent years have seen a growing realisation among societies that businesses should play an active role in changing the world for the better. Hence, a great deal of money has been flowing into the social sector. Like individual citizens who have moral and social responsibilities, businesses are being perceived as corporate citizens who need to commit a part of their time, talent and resources for the welfare of the society as they draw their sustenance from it. This idea has now been corporatised under the appellation, Corporate Social Responsibility or better known by its acronym, CSR. It is a business approach that aims at managing a business in a way that it contributes towards sustainable development by delivering social, economic and environmental benefits to all its stakeholders.
This phenomenon has given rise to a new crop of mega-donors who are upending long-established norms in the staid world of big philanthropy. Not only are they increasingly willing to take on hot-button social and political issues, they also have a problem-solving and impact-making mindset rather than one focussed on publicity.
The rubric of CSR
CSR is the umbrella term for how a business relates to the broader cultural, economic and political environment in which it operates. It is one of the biggest buzzes in a corporate business, signalling that a company cares; and that it allies profit with principle. It addresses many areas such as corporate governance, human rights, health & safety, the environment, work conditions and contributions towards economic development. The overarching goal of CSR is to drive a change towards sustainability.
Tracing the origins of CSR
The CSR movement began as a response to the prevailing opinion that businesses should play a role in ameliorating social problems due to their vast economic resources and overarching influence in the daily lives of people. The steel tycoon and one of the greatest philanthropists, Andrew Carnegie, whose business ethos was to do well in order to do good was one of the earliest advocates of the concept of CSR.
This, however, was not a new concept. Gandhis theory of the ‘trusteeship’ conceived this idea a long time ago. The theory of trusteeship intended to avoid the evils and combine the benefits of capitalism and communism, to socialise a property without nationalising it, to influence private ownership with the socialist content. Gandhi derided the voracious profit greeds of the investors.
Consider a man owning an industry. As a trustee, he was, first and foremost, expected to:
Work just like any other employee
Look upon his employees as the members of his family who would be jointly responsible for making management decisions.
To take no more than what he needed for a moderately comfortable life.
Provide healthy working conditions and welfare schemes for the workers and their families.
Make a moderate profit, a part of which would be devoted to the welfare of the community and the rest to the improvement of the industry.
Regard himself as a trustee of the consumers and ensure not to produce shoddy goods or charge exorbitant prices. This applied to the employees as well.
Pass on the industry to his children or whoever he liked, only if they agreed to run it in the spirit of the trusteeship.
CSR is rooted in the knowledge that businesses have a duty to enable all living beings to get a fair share of the planet’s resources. To use the words of Andrew Carnegie, Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community. Businesses are powerful social entities and the most respected among them feel the need to do much more than making money; they believe in using the power of a business for solving tough problems that plague the society. They are involved in a wide variety of causes, such as education, healthcare, skills training, entrepreneurship, women-empowerment, food security, livelihoods and supporting services for the differently-abled.
India’s take on the concept
India has a unique lawthe Companies Act, 2013 and the Corporate Social Responsibility (CSR) Ruleswhich came into effect on April 1, 2014. It is the first country to stipulate that the companies expend their resources on effective CSR programmes. However, there is a crucial difference between CSR as practised in the western countries and the way it is implemented in India. A generally accepted gold standard for CSR in the western world is that it must be closely integrated with a firms business strategy so that the programmes create a shared value for the companys shareholders and its stakeholders. In India, that linkage is explicitly prohibited for CSR, focusing solely on its role of contributing towards societal welfare.
CSR could, however, be more socially relevant when it is driven by altruistic motives rather than a mandated policy obligating charitable actions. It is very difficult to legislate moral obligations. Laws set the minimum standards, but they do not create an impetus or ambience for a philanthropic mentality.
The individual employees also have altruistic impulses which could be channelled by the employers. In the words of Michael Lerner, The quest for meaning is perhaps the central hunger in modern industrial society. And more often than not, that hunger expresses itself, not just in a quest for personal meaning, but for meaning in a context that is greater than ones self. It is probably this quest that is fuelling the enthusiasm for such volunteering.
CSR as a means of distorting reality
There are, unfortunately, marked aberrations in the CSR agenda which need a course correction. Many businesses harbour a variety of secondary aims and often use CSR for enhancing their social profile and boosting their business markets. Charity leaders have a geographic bias with corporations funding projects closer to their headquarters. Consequently, more remote regions where development aid is acutely needed are being bypassed by this new social revolution. Politics can also skew priorities, with companies looking to gain goodwill by backing the government-led projects rather than initiating more socially relevant initiatives.
Despite all the hyperbole, the great economist Milton Friedman argued in the year 1970 that the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions. There can be the subtle use of CSR to brush off a bad reputation as well as to camouflage any dark acts.
CSR has usually been peripheral in most organisations and it is not woven into the texture of the business. Even as annual CSR expenditure is on the rise, the impact on the ground remains a matter of debate. Further, it is not always necessarily transparent or mission oriented. Sometimes, it is driven by a need to improve the brand reputation and even worse, to act as a moral counter-balance for unethical practices.
Hinderance in a CSR programme implementation
However, a significant amount of any CSR expenditure comes with some strings attachedterms that dictate exactly where and how it must be used. While this may be appropriate in some cases, but fundamentally, it reflects a serious lack of trust in the non-profit entities and hinders their ability to operate effectively.
When donors insist that their money should go exclusively to the people served, there is not enough money left for the non-profit entities to focus on building their own organisations. They are, therefore, unable to invest in talent, technology, systems, or reporting. Reporting requirements are often an onerous administrative burden for voluntary organisations which have to devote their scarce skills to educated, English-speaking personnel for writing reports for the donors rather than running programmes.
A sincerely and honestly practised charity always delivers rich dividends in the long run. That is the lesson we learn from both philosophers and business leaders. It is wise to remind ourselves again of the advice of Henry Ford: “A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large.”
Featured Image Source: Geoff Livingston on VisualHunt.com /CC BY-NC-SA