Though ‘voluntary’ the recently issued National Voluntary Guidelines on Social, Environmental & Economic Responsible Business are likely to place Corporate Social Responsibility in India on a firmer footing. The Nine Principles and Core Elements included in the Guidelines are old hat, well known to practitioners. The stress on implementation indicated in the Guidelines will force Business to revisit their present CSR practices.
Three important issues included in the Guidelines, if taken up with the seriousness they deserve, will make CSR in India more meaningful and wholesome. These have been embedded into the Guidelines prominently. However there is still strong doubt whether desired results can be achieved without mandatory provisions.
The Guidelines has said “all Principles are equally important and non-divisible.” They are to be adopted comprehensively. It lays down that Business aspiring to be responsible will “have to adopt each of the nine Principles in their entirety rather than pick and choose what might suit them.”
Reading through the Principles and the Core Elements it is clear that the Guidelines cover the whole gamut of CSR. They cover not only community service but also corporate governance, customer relationships, environment, supply chain management etc. Business will now have to look at all these aspects with greater seriousness to qualify to be called responsible business.
Most Corporates in India, even the much awarded and widely recognized ‘responsible’ units, have been concentrating on one or two aspects of CSR while ignoring other issues. Most popular among Corporates are Community Development Projects and Environment. This, because they offer the possibilities of PR and Brand Building.
Issues like supply chain management, customer relations, corporate governance have been largely ignored. There are companies in India, both in the private and public sector, which can be faulted in these areas of CSR. A glaring example is Satyam, which boasted of an excellent community service programme but fell because of its lack of above board corporate governance.
The lack of seriousness is evident in the recent survey which revealed that less than one-third of India’s top firms file reports on their corporate responsibilities and only 16 percent actually have a strategy on this. The survey also found that there is lack of clarity on how companies arrive at decisions to invest in these. Very few engage stakeholders, including suppliers, customers, regulators, employees and contractors in establishing their CSR initiatives.
The Guidelines have placed considerable emphasis on the issue of Supply Chain management. Repeatedly in all the Nine Principles and Core Elements Business has been advised to “promote these principles across the value chain.” Distortions along the supply chain have in the past spelt disaster to well known international bands like Nike.
In India the larger enterprises sourcing their supplies and even finished goods, from SMEs have paid little attention to the working conditions in these units. They have knowingly and unknowingly ignored the irresponsible production methods adopted by SMEs.
The larger units are in many ways responsible for the poor working conditions available in SMEs. In an effort to enhance their own profitability the larger units squeeze SMEs into providing goods and services at rock bottom prices which sometimes is well below the cost of production. This reduces the margins available to SMEs forcing them to further cut production costs. This cut is very often in the salaries and wages of the workers who are forced to work in sweat shop conditions.
The Guidelines have set out a separate chapter for SMEs in the Guidelines. It points out that SMEs “impact the environment and society in is own way, despite the small number of employees.”
It points out that globalization has exposed these units to global competition. “Global buyers are basing their sourcing decisions not only on traditional commercial consideration, such as price, quality and delivery schedules but also on compliance with social and environmental norms in the work place” Health and safety, social equity in employment and production and ecological compatibility of products and services have become strong considerations for foreign buyers.
“Even Indian buyers are incorporating these requirements into their purchasing decisions.”
Another issue of importance is the emphasis on Consumer Rights. The Guidelines have indicated that the responsible company will be responsible for the goods and services they produce from the designing to the final disposal of the product/service after use.
It points out that “all stages of the products life cycle, right from design to final disposal of the goods and services after use, have an impact on society and the environment.”
It exhorts business to extend their processes to cover the entire value chain, from the sourcing of raw materials or process inputs to distribution and disposal. It says that everyone connected with the product or services – designers, producers, value chain members, customers and recyclers- are aware of their responsibilities.
To protect the customers the Guidelines asks companies to raise consumer awareness of their rights through product labeling, helpful marketing communications and customer education. Business will have to promote safe usage and disposal of its products or services. They will also be responsible to promote sustainable consumption, including the recycling of resources.
While recognizing that the basic aim of a business entity is to provide goods and services to its customers in a manner that creates value for both it says no business can exist or survive in the absence of its customers.
“Enterprises will strive to make available goods that are safe, competitively priced, easy to use and safe to dispose off for the benefit of their customers. Businesses have an obligation to mitigating the long term adverse impacts that excessive consumption may have on the over all wellbeing of individuals, society and the planet.”
With Nine Do’s and several Core Elements attached to these Do’s expecting business to deliver on their CSR responsibility seems a pipe dream. Surveys have shown that Business has yet to take their responsibilities seriously. Even the Minister has said that the response from business on voluntary CSR has been well below the mark.
(Suresh Kr Pramar, is Managing Trustee, Global Gandhian Trusteeship & Corporate Responsibility Foundation and the Executive Director, Centre for Training & Research in Responsible Business. A veteran journalist he is presently actively involved in promoting CSR through his publication CRBiz and by conducting workshop on Corporate Social Responsibility. He can be reached at firstname.lastname@example.org)