By Manikckam Ramaswami
Corporate social responsibility or CSR, and ‘Giving’ are being discussed more today. There are reports that the Government is even considering making CSR compulsory.
We in India are enjoying a high rate of GDP growth for some time now and are producing more billionaires than most countries. Yet, ironically, there is a disconnect between GDP growth and rate of poverty removal. May be it is this realisation that is making us talk of CSR and giving more than ever before.
Liberalisation has certainly rapidly increased the divergence and rent-seeking corporates, and with it the levels of corruption. We, in the corporate sector, have to take our fair share of blame. CSR has to be viewed in this context, and not merely in terms of giving back.
Clearly, most corporates look at CSR as a post-profit activity. In order to get a better understanding of CSR, a few years ago CII Tamil Nadu had a discussion with three panellists: a senior Government official and economist; a senior executive of a very large professionally managed company; and a senior member of a very large family-owned business.
The views were expectedly different. The Government functionary said that CSR is complying with the legal, social and environmental rules and conducting business in a fair manner.
The professional was of the opinion that CSR should be strategic in nature and it should help in corporate image-building, and anything purely charitable in nature should be left to the individual shareholders.
The family manager said CSR is an extension of family values and a portion of profits should be spent on charitable projects.
In fact, the western model of CSR is similar to what the professional in the panel articulated. Mr Bill Gates and Mr Warren Buffet are contributing to charity from their personnel wealth. The CSR models followed by Mr Azim Premji and Mr Shiv Nadar are also similar.
Most family-managed companies have been traditionally giving from their personal wealth and from the companies they control.
More recently, Mr Mukesh Ambani referred to a CSR model based on our traditional values going far beyond the Western and the family-owned business models.
While in the licence regime it was the permits that gave the privileged few the opportunities to prosper, in liberalised India we have created two enablers to take the place of licences. These enablers have prevented the trickle-down effect from happening.
What are these enablers?
Tax rebates, duty exemptions, income-tax exemptions, land at deeply-discounted prices, power tariff subsidy, preferential allotment and scarce resources at lower prices , interest subsidies — all in the name of industrial development and, through it, creating greater social good than social costs.
Once a sector gets these benefits, even companies that do not wish to avail themselves of these ‘gifts’ will be forced to take them in order to remain competitive.
Several such gifts that are being sought and readily given; most of them have either outlived their utility or are uncalled for. Hardly 25 per cent of these gifts can be justified as creating a greater social good than their social costs.
Getting higher than required import duty levied to protect our pricing power including anti-dumping duties, resisting signing FTAs (even when we know that as a nation we will benefit a lot) if it is perceived to affect our pricing power, getting BIS protection to effectively prevent imports from taking place even if the product we make is not a critical one and getting a much higher DEPB rate than warranted to earn higher sales realisation on our exports.
Through these enablers we directly impact inclusive growth by overcharging our customers and actively taking taxpayers’ money and national wealth into our balance sheets.
These enablers, wherever they do not produce the necessary social good to justify their existence, helps us ‘capture wealth’ and not ‘create wealth’: large-scale corruption is directly linked to ‘wealth capture’.
Not seeking or using these enablers and voicing opinions against these enablers are the first step towards becoming responsible corporates. If we can avoid the two enablers and also actively participate in improving the system of delivering social good to the people at the bottom of the pyramid, then the need to give itself will come down drastically.
Even though giving is welcome , the recipients certainly will feel their dignity and self-respect hurt. Hence everything possible must be done to minimise the need to receive.
Coming now to what Mr Ambani was talking about: Consider ‘service to mankind as service to God’ at all levels, be it at corporate or at individual levels.
Appreciation of the statement is born out of deeper understanding of the ultimate truth according to our scriptures that the Creator is not different from the creation. The Creator is not only the intelligent cause behind the creation, but is also the material cause.
This profound understanding will also make us realise that the corollary of what Mr Ambani said is true.
‘Disservice to mankind is disservice to God’ and an understanding of this will prevent us from even articulating non-inclusive policies and prevent us from seeking benefits under Enabler 1 or 2 unless we are more than 100 per cent sure of delivering greater social good than social cost.
Every organisation needs to evolve in its CSR. The more economically and socially empowered the organisation becomes, the more it must vociferously campaign against the enablers and, at the earliest, stop taking advantage of them, even if they exist for the industry as a whole. Inclusive growth that will result out of not seeking these enablers will enlarge the market for us and lower taxes, for the industry and service as a whole.
The more efficient among us will grow; the entropy that is a consequence of supporting inefficiencies will be reduced.
The economy will grow much faster and in a harmonious fashion. If political corruption is the fire that is engulfing our nation, corporate greed is the fuel and apathy or endorsement by the society is the oxygen.
CSR in our context should be much more to do with the process of wealth creation even as individuals and families continue to make their own contributions to society, in their own ways, as they have done for generations. Elimination of the need to give even as we continue to give should be the bottom line.
(The author is Managing Director, Loyal Textiles Ltd.firstname.lastname@example.org)