Dear Mentors & Friends,

An excellent write up by Shri S L Rao in ET a few months ago. It gives good insight on CSR & a few best practices also.

- Do companies have a responsibility to society beyond that of being law-abiding citizens who run their companies in the most efficient manner? A conference of CEOs from some top companies in India at TERI showed different approaches. For some, any such activity must be directly relevant to the company’s business. 

- Sometimes government pressure might compel a company to take on an unrelated activity in the name of corporate social responsibility (CSR). Another approach is to take up socially relevant projects in which it feels it can make a difference. The approaches are indicative of the directions for CSR in India. 

- CSR must not be an excuse for corporate opacity. Transparency of company accounts, management and good governance practices and well articulated ethical and value systems are essential especially in a globalizing economy. Many of the IT companies have been an important influence on the speed with which ideas of CSR have spread. 

- Promoted mostly by white-collar entrepreneurs from the middle classes, many saw themselves as trustees of public assets that had made them rich. Most are good citizens and involved in the betterment of their local community and society. Narayana Murthy articulated their values by saying that no company should escape paying taxes, calling for self-regulation in salaries of top management and arguing for competence, not inheritance, for determining management succession. BATF (Bangalore Agenda Task Force) led by IT promoters has become a world-wide model for emulation in private-public partnership for urban renewal. 

- Many Indian companies do not recognize that other shareholders, however small, are also owners whose representatives must be consulted and approve major decisions. Fewer recognize their duty to the wider public community. Corporate social responsibility starts with good governance in the interest of all shareholders, ensuring that the company adds to wealth, following the laws and customs of the society, developing the capabilities of all in the enterprise and particularly of the disadvantaged, sensitivity to environmental and ecological effects of their actions, and taking some responsibility for improving the life of the community. No company can neglect to focus on its products and services. But involvement of the company in community issues helps to improve the acceptability and image of the company, exposes employees to the realities of the societies in which they live and will make them better managers and human beings. 

- Many examples were brought out at the TERI conference of how leading companies have engaged in wider social issues. ITC has revived private degraded lands by planting vegetation that augments the otherwise limited raw materials for their paper factory. Their success prompted the state government to ask them to repeat their work with public wastelands. Hindustan Lever’s food and hygiene products require good quality water for use by their consumers and for manufacture. It is engaged in improving water quality in many communities. Tata group policy is that irrespective of profits earned in any year a substantial amount (growing with inflation) is spent each year on well-defined and consistent community activities both related and unrelated to their business. These include greening of exhausted mines and other barren lands, family planning programmes, hospitals, etc. NTPC has a training and research institution for improving power efficiency. It also greens its slag dumps. Its employees are allowed time and funds to promote development NGOs that create opportunities for self-employment, promote public health ,etc. 

- There are other possibilities of CSR that is good for the business. For example automotive companies could get involved in improving urban traffic flows. It will make personal transportation enjoyable and help accelerate automotive market expansion. The plastics industry is a rare example of an industry that is spending money to control the manufacture and use of non-degradable plastic bags while preventing their litter. Seagram’s campaign for responsible drinking is a classic of product promotion with social responsibility. 

- Techniques must be devised to estimate the negative value of the social and environmental costs of a company’s operations. The positive contribution to society through CSR could also be valued. Like the valuation of intangibles such as brands and skills of employees, these could also be reported in annual reports. Society and shareholders can learn whether and the extent to which a company is a good citizen. Perhaps business schools in India could also teach that while it is permissible to want to grow corporate and personal wealth, it must be accompanied by a strong sense of social responsibility and community involvement.

S L RAO in Economic times - 2005