THE
word ‘globalization’ defies a precise meaning primarily because it is
so enmeshed with ideological considerations – both of the left and right.
Enemies of globalization view it as a legitimizing of insatiable capitalist
appetite preying on the world’s poor and hungry vulnerable population,
while its proponents see it primarily as an agent of bringing prosperity
to all (including the hitherto dispossessed) through the agency of the
market. Quite apart from partisanship of this sort, it cannot be doubted
that globalization has acquired an intellectual presence which is much
larger than the politics of the left or the right. It is now a social
phenomenon, and not just an ideological label for populist banter.
What makes globalization rise above the din of political
wrangle is the fact that there has been a qualitative difference in the
way people are beginning to relate to one another. This transition has
occurred slowly, and even un-selfconsciously. Yet, what cannot be denied
is that the emphasis has shifted, more noticeably in developing countries,
from producerism to consumerism. Consumerism should not be understood
here in a negative fashion, as it usually is in most popular renditions
of the term. Instead, it should be seen as an expression of a demotic
sentiment that arises among consumers who demand higher standards at all
levels – from the commodity they buy, to the ways they are produced, right
down to the producer’s commitment towards being a corporate citizen.
It is in this context that industries today consider,
or should consider, the question of Corporate Social Responsibility. It
is not enough to be philanthropic and not think in terms of consumers
and other relevant stakeholders. It is not enough to be law abiding and
leave matters at that, for a business rival round the corner can raise
the stakes by introducing commodities and services, as well as conditions
of production that are much higher than those required by law. Consumers
today are alive to these changes and react to them in a fashion that tells
on the bottom line of a firm. Therefore, the fact of corporate social
responsibility (CSR) has to be carefully devised keeping in mind the specifics
of the organization and the kinds of demands that can be made upon it
as a corporate citizen by all its relevant stakeholders.
At the same time, no company can afford to let its profits
fall. In fact, if that were to happen then it would be letting down its
stockholders and employees, who are two of its very important stakeholders.
The question then is: how to devise a system of CSR that is related to
business so that both can be sustained in synergy.
Let
me begin with what may be called the ‘Friedman Dilemma’. In an influential
essay, ‘Social Responsibility of Business’, first published in 1970 in
the New York Times Magazine, Nobel laureate Milton Friedman said
that corporate executives could either strive for profits or go haring
about chasing social causes. The two were inimical to each other as ‘social
responsibility’ was nothing less than unadulterated socialism. Of course,
corporate philanthropy was allowed for, but only after profits were properly
secured.
It is true
that a firm must make profits in order to survive. It is also true that
without profit there is no firm and no corporate social activity. But
it is not true that corporate social responsibility is something that
comes after profits are made and money deposited with the stockholders.
Nor is it true that corporate social responsibility is only for the big
players, and smaller entrepreneurs have to first make the money.
For Milton
Friedman, corporate philanthropy is all right, but anything resembling
corporate social responsibility is letting the shareholders down. But
CSR is not the same as philanthropy,1
though most are not clear about the difference. There is no doubt that
in a country like India corporate philanthropy has a significant place,
but CSR has a different charter. CSR, at its best, is about the corporate
sector reaching out from within the company to the society outside in
order to benefit both business and the social and physical environment
in which it functions. CSR thus synergises social and business interests,
and it is this coupling that makes it different from philanthropy, as
we know it to be.
The rub,
however, lies in making it sustainable. CSR has attained a kind of unreal
and ethereal reputation largely because it is confused with projects that
are not driven by business interests but by whims and fancies of the top
executives. CSR is not about digging wells and setting up schools and
feeding babies. All too often CEOs are smitten by remorse and guilt and
want to do something ‘relevant’ in the world at large and they call that
CSR. In fact, such activities have little to do with CSR, and if anything
they resemble corporate philanthropy. Here again, in most cases, the commitment
is not long lasting as it is primarily driven by the CEO’s personal preferences
about which causes to support.
In
order to make CSR sustainable it is necessary to develop an ethical perspective
in corporate matters. Cliché like though this may sound, business ethics
is about stakeholders, yes every one of them, from the environment to
the stockholder. If looked at closely this clearly implies that when we
are talking Business Ethics we are talking about linking our concern with
those of others. The ‘other’ is a very important element in ethics and
it is important to appreciate that if we are to separate ethics from morals.
Morals can
be privatized and there is no intrinsic need for a person to convert others
to a certain point of view. In fact, it is possible to hold on to a moral
position alone in the face of stiff opposition from everybody else. It
often gives the moralist a sense of secondary satisfaction that he or
she is the sole moral being in a crowd of immoral people. When we come
to ethics, however, it is impossible to be ethical alone. Ethics involves
others as a basic and fundamental requirement; it is working with other
people, about transparency of norms, universality, and demonstrability.
As other
people are essential to drive ethics of whichever kind, it has to be demonstrable
in its effects in a clear and limpid fashion.
As morality
is often confused with ethics it is not surprising that the term ‘business
ethics’ should appear so distant and unattainable to many. In reality,
business ethics begins by knowing the company one works for, understanding
the diverse interests of its various stakeholders, and then charting out
programmes that satisfy them and indeed, raises their standards of expectation.
In other words, ethics always begins at home.
Keeping
this in mind, one can now take the next step and argue that corporate
social responsibility is best put in practice when it helps meet the expectations
of a firm’s stakeholders. This implies that CSR must have a business perspective
without being obsessed by profits. If one keeps ethics as top priority
the bottom line will swell, and swell in a sustainable way. It is true
that many got away by being sheer robber barons in the way they do business,
but let it be known that the life of such organizations is very short,
and sometimes even the biggest, like Enron, can have a mighty fall.
To make
CSR sustainable it is necessary to keep the business interest of the company
in mind. If this is not done then CSR programmes will run so long as the
top executive is personally involved in them and wither away when something
more gripping comes around and grabs the leader’s attention. CSR cannot
be left to personal whims and fancies, nor should it be seen as something
that is done as an after thought once profits have been made. CSR is an
aspect of everyday business and executives would do well to see it that
way.
All too
often one is told that CSR is about obeying the law. This is not correct.
Obeying the law is a necessary but not sufficient condition for practising
CSR. Jamsetji Tata made that clear decades ago when he said that if after
adherence to the law one does not feel quite correct, then it is necessary
to raise our standards even higher. CSR is an evolving concern and quite
in keeping with the way in which business is transforming itself on account
of a number of factors.
Customers
are now much more conscious of standards, stakeholders are aware of their
interests, and more than anything else, the co-workers of a company are
viewed quite differently from the way they were perceived till a few decades
ago. No longer is the boss made in the mould of the tycoon who towered
over everyone else with his authority and charisma. Now the top executive
is like the captain of a team who is out there to get the best performance
possible by energizing the potentialities in each of the players. In this
process the boss too strives to be that much better, that much more effective,
every day.
This
change in attitude towards co-workers and employees is because the levels
of technology are now so advanced that no single person, or department,
can corner it and hope to control it for the company as a whole. With
the social spread of technology at every level of expertise there has
to be a greater respect down the line if the firm is to function as a
cohesive unit. Second, in keeping with the changes in technology there
has been a general elevation of expectations regarding standards on the
part of consumers of goods and services. Both of these features can be
tracked down to the overall development of modernization where individual
merit and needs are recognized as intrinsically worthy of recognition.
These tectonic
changes in modern societies have flattened status considerations that
were so much a part of the pre-modern era. The ‘other’ now begins to figure
in the way one individuates oneself. This has become a structural condition
of modern societies and it has nothing to do with altruism or generosity.
While this trait is developed quite prominently in most western societies,
it is also making headway in countries like India, though there is still
a long distance to travel. But that is the general direction and it is,
therefore, advisable to recognize it and put our corporate practices in
line with it. This is why it is imperative now to think in terms of business
ethics where considerations of the ‘other’ are crucial for any entrepreneurial
venture that hopes to last the distance over the long haul.
Corporate
social responsibility must also be in tune with these imperatives and
that is why all initiatives on this score must be stakeholder oriented
and driven by business interests if they are to be sustainable. Accordingly
I propose three models of CSR: (i) competency driven; (ii)
community driven; and (iii) consumer driven. These three models
are not hermetically sealed units as there are frequent overlaps between
them. Nevertheless, it can be maintained that the area of emphasis is
different for each one of them and that is why it is important to separate
them analytically.
In
the competency driven model of CSR, the company reaches out to the society
by depending on its core competencies. In doing so, it helps create potential
stakeholders, and also adds to evolving higher efficiency standards. In
such instances of CSR, the company delves deep into the firm’s core competencies
in its corporate outreach. In doing so it finds new areas where its competencies
can be manifested and fresh circumstances that challenge its established
routine. Put them together and they add up to higher performance levels
within the organization as well, providing one is willing to learn.
Examples
of such competency driven CSR are many. When Lipton Company in Etah decided
to help set up veterinary hospitals in the region from where it got its
milk supplies, it helped the dairy farmers within its area of operation,
as well as itself. There was a greater awareness of how best to increase
milk supplies and of the best ways of improving the quality of milch cattle.
Excel, an agro-based enterprise took upon itself to recycle garbage in
Mumbai and thereby added a new dimension to its core competency besides
helping clean the city. Tata Hotels have used their knowledge in food,
beverage and room management to help poor people cook nutritious food
at lower costs and run rehabilitation homes. Several IT companies have
set up computer literacy programmes. Multinational drug companies, like
Pfizer, are interested in supporting hospices that challenge their existing
competency in drug manufacture.
In community
driven CSR, organizations invest in social welfare but again with a business
interest. For example, TELCO and Tata Chemicals have created recreational
facilities around artificial lakes that are filled with water purified
from industrial effluents. By committing themselves to enlarging public
facilities of this sort, several Tata companies are committed to subscribing
to a sustainable form of CSR. IKEA, the Swedish home furnishing multinational,
has set up bridge schools in carpet belt areas in east Uttar Pradesh as
it sources a lot of material from there. IKEA is committed to keeping
units it has business relations with free of child labour. By establishing
such schools it tries to create incentives for parents to keep their children
away from the job market.
At the same
time this pressures its suppliers to raises their performance standards.
Some IKEA suppliers have been so enthused by this project that they too
have set up schools, signalling thereby to their workers a commitment
to maintaining high standards of production. Such instances need not just
be limited to private companies. Sugar cooperatives in Kolhapur, Maharashtra
that have helped construct dams to improve irrigation for farmers supplying
cane to them, have in the process become more aware of production processes
and technologies. Some cooperatives have also set up schools and technical
institutions where the children of small shareholders can be trained and
later absorbed in the organization’s work force.
It
is now widely recognized that consumer pressure has made a great difference
in sensitizing companies to the needs of stakeholders. But what must be
acknowledged in addition is that CSR can also help in raising consumer
standards and expectations. In this process not only is the consumer benefited,
but the company too can hike up the competition in its own market sector.
For example, if a cloth producing company insists that it will purchase
cotton only when there is no child labour expended in fertilizing cotton
seeds, or when the cotton is produced in an environmentally friendly fashion
with the help of what is called ‘integrated pest management’, it immediately
puts other companies that are not thinking along these lines under tremendous
pressure. It has both an edge over them and the satisfaction of adding
to knowledge.
Likewise,
a firm can also insist that it will not buy parts from a producer that
does not meet with the highest standards of compliance regarding working
conditions, wages and benefits, and pollution standards. By being steadfast
in this matter it can also raise the expectations of its consumers who
will balk at the suggestion that some of what they consume has been produced
under unacceptable conditions. Or, an enterprise may decide to purchase
from cooperatives set up by marginal communities, or contract with service
providers that come from backward sectors of the society. This also adds
to the company’s profile with its consumers, but again in a manner that
affects the working of the organization in an intrinsic fashion.
These are
some of the ways by which a company can have a sustainable CSR, and not
be dependent on the mercurial dispositions of CEOs who themselves have
ephemeral biographies within an organization. The mantra to sustainable
CSR quite clearly is to relate it to principles of business ethics which
forces one to reach out in terms of business interests within. Sustainable
CSR is truly stakeholder oriented, and not just indiscriminate philanthropy.
Footnote:
1.
Indeed, 63% of the capital of Tata Sons Ltd. is held by trusts for philanthropic
purposes, and it is popular knowledge how effectively the funds of this
trust are employed for a variety of purposes, from health to education
to building infrastructural facilities
|