State Governments Must Ensure Business Fulfills its Social Responsibility to the Community

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By Suresh Kr Pramar

Like many of his contemporaries the Chief Minister of Arunachal Pradesh has woken to the pitfalls of unabridged, uncontrolled industrialization and the failure of companies to fulfill the promises made at the time of starting the project. Chief Minister Nabam Tuki, in a meeting with NEEPCO Chief Managing Director (CMD) P C Pankaj lamented that the public sector power units in the state were deliberately violating in a ‘brazen manner’ their agreement with the government  regarding employment of locals.”

The Chief Minister pointed out that the terms and conditions of the MoU with NEEPCO in regard of assured employment to locals in the projects was very clear. All jobs in  the group C and D posts against each project was reserved for local affected people. He expressed grave doubt that the condition was being fulfilled in full by the undertakings. He said there was urgent need to recruit locals at least in the reserved categories as mentioned in the MoU.

“We have been cooperating with the NEEPCO since it began its first project on the Ranganadi at Yazali. As leaders we have given commitments to the people based on assurances from NEEPCO authorities. If these are not fulfilled, we will have to face the ire of the people,” Tuki cautioned.

Most state governments have been working hard to attract private investments to their states. Liberal sops in the form of attractive subsidies, and concessions in tax and power and water charges and also allotment of land at cheap prices are being offered. All this is being done in the belief that massive industrialization would mean increased employment for the people and a betterment in their economic condition.

This thinking has taken a massive beating in almost all the new industry promoting states. Business is making liberal use of the concessions and subsidies offered by the states on the assurance that it would provide employment to the local people. In none of these states has this promise been fulfill in any appreciable measure.

Where locals have been provide employment they have been offered menial jobs like gate keepers, messengers etc. The cream of employment has invariably gone to outsiders. The common excuse offered is that the locals do not have the required qualifications or skills.

This writer is a witness to the plight of the locals in states which are new entrants on the road to industrialisation. Touring one of these states with a team from the Planning Commission we heard countless stories from local people, mostly tribal, about how they had been deprived of their land and denied the promised jobs.

In one particular state tribal lands had been acquired by the state government and handed over to the investors. The tribals received payment at the prevailing rate. Not well versed in the money economy they soon became penniless and on the road to abject poverty. The irony of this was the fact that the investors were racking in crores of rupees by extracting the rich minerals from the land.

Even as the dawn of independence seemed visible in the horizon the father of the nation Mahatma Gandhi was seemed concerned about the birth of the new class of businessmen following independence and self rule. He drafted the concept of Trusteeship. He said while it was right that the businessman made money he or she should not forget his or her responsibility towards the people and society, particularly those who were economically deprived.

Gandhiji’s theory of Trusteeship laid down that businessmen after having met their requirements should set aside a part of their profits for the welfare of the people and the society. According to Gandhiji the businessman should hold the excess profits in Trust for the people. Gandhiji’s theory of Trusteeship has developed into what is today come to be known as Corporate Social Responsibility.

Corporate Social Responsibility  according to the World Business Council for Sustainable Development is “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the work force and their families as well as the local community and society at large.”

Business is now being  increasingly called upon to pay heed to the needs and aspirations of its many stakeholders. These include its employees, the community, suppliers, customers, the environment etc. Each of these stakeholders has an important role to play in the success or failure of any business enterprise.

For the state governments the two important stakeholders would without doubt be the employees of the company and the community in which the enterprise is located. It is now an established fact, worldwide, that locals have the first priority in the matter of employment, at least in the case of unskilled labour. In the case of semi skilled and skilled labour business is required to provide training facilities to eligible employees so that they can be absorbed in suitable positions on equal wages.

In his address to an Annual Session of the Confederation of Indian Industries in 2007  Prime Minister Manmohan Singh had asked industry to “invest in people and in their skills”. He had said “ Indian Industry must allocate sufficient funds for human resource development…industry must be proactive in offering employment to the less privileged at all levels of the ladder.”

In as far as the community is concerned business has added responsibilities. While government grants licences and permits for the establishment of industrial units it is the community and the society, on whose land the unit has been set up, that provides the licence for trouble free continued operations. No business can be sustainable if people in the community where it is located feel deprived or cheated.

It is now universally acknowledged that business is required to play a wider and more expansive societal role and that companies should be held fully responsible for their roles over which they have direct control. These include providing quality products at reasonable prices, ensuring that their operations are environmentally friendly, treating employees fairly without any discrimination based on gender, race, religion etc.

Businessmen owe it to the community and other stakeholders for the wealth they earn. There is some amount of sacrifice of the stakeholders involved in the creation of wealth by business houses. Governments, both centre and states,  offer  sops by way of tax concessions, subsidies etc, to businessmen to help them in the creation of wealth. The moneys being offered could well have gone for the welfare of the poor. Companies need to actively promote the well being of the community where they are located. In addition to providing employment to the local people they are required to create income generating activities to raise the economic standard of the people.

State governments need to become proactive in ensuring that business honors its commitments to its employees and the community. Across the country there is the feeling that the government needs to do more to make Corporates undertake really CSR and fulfil their obligations to the stakeholders. Surveys have indicated  that people feel that government needs to become more active to exert pressure and monitor company CSR  but that the choice of the welfare programmes should be left to the discretion of the companies.

Suresh Kr Pramar, Trainer, Writer, CSR Consultant and the Executive Director, Centre for Training & Research in Responsible Business is a veteran journalist presently actively involved in promoting CSR through his publication CRBiz and by conducting workshop on Corporate Social Responsibility. He can be reached at suresh.pramar@gmail.com 09213133042/9899305950)

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