When
businesses talk of giving back to society to environment, it is implicit that
they take away something from society and environment and most businesses do
give back something and call it Corporate Social Responsibility (CSR). However,
they do not seem to have done enough to compensate for the impact of their
activities on the stake holders like local communities, environmental groups
and other NGOs fighting for contemporary social issues like education, health
and overall development of the area. Had businesses been proactive in dealing
with these issues, we would not have noticed big ticket investments run into
rough weather. Be it Posco or Arcelor Mittal investing for giant steel plants, be
it Reliance vying for land for SEZ or be it mining activity in Karnataka, all
have a common thread of problems – local communities opposing land acquisition,
environmental activists protesting the unbridled exploitation of natural
resources, and local groups opposing use of resources on which they are
dependent for their livelihoods. But the fact that there have been high level cases
in which the courts have passed verdicts against some businesses proves the
point that they have more to do. This fact has also compelled the Government to
come up with more stringent regulations. The new Companies Act 2011 mandates
that companies earmark 2% of their profits for CSR activities. In addition, a new
regulation mandates that companies having lease for coal mining spend 26% of
their profits for assistance to the people affected by the project. These facts
clearly show that the case of the businesses lacks sheen and consequently, the
current form of CSR seems inadequate.
The concept
of CSR has a long history. Supporters of the concept that stakeholders are as
important as shareholders and the fundamental principles of business ethics all
gave rise to the CSR concept and initiatives. However, most businesses use CSR
as merely an effort for building their brand as socially responsible
organizations and use it as a license to carry on with their operations, or
rather, as a means to sustainability. It does not take a whole lot of analysis
to realize that such intentions behind the CSR initiatives may help the
business to sustain, but in the longer term, this might not be helpful. Let us
for moment consider the long term impact on the affected people. They would
have lost farm lands, undergone rehabilitation, lost the flora and fauna on
which they were dependent for their livelihoods, and lost water resources
because of contamination. In short they would have had to make changes to the
way they sustained and the very way they went on with their lives. Though
businesses promise a better future for the local communities through CSR, it
appears to have been used to camouflage the often irreversible negative changes
that are being brought about to the people, environment and to the delicate
ecological balance that has been existing for centuries. In other words,
businesses seem to be working with a perspective that the sustainability of the
stakeholders is not as important as that of the business itself.
On the one
hand the government shows its belief in industrial development being the engine
for growth, and on the other hand, it is tightening the regulatory framework
too. Awareness levels among stakeholders have gone up drastically due to the
involvement of NGOs and other social welfare groups. With the increasing number
of protests and legal cases, businesses would require more lawyers than
engineers and managers to keep staying afloat. It is high time businesses
brought about a change in their perception of CSR and sustainability. In my
opinion, a business should think of its own sustainability to be inextricably
connected to the sustainability of the stakeholders namely the affected people
and the environment. It encompasses much more than the traditionally conceived
CSR. Today, this view is seen to be opening the doors for an opportunity and a
source of building competitive advantage; and the sooner businesses understand
this paradigm, the better will be their future. While contributing to the
welfare of stakeholders was considered a cost, today it is seen as an
investment. Let us take a few examples. Investing in energy efficiency adds to
profits and reduces degradation of environment. Green energy production adds to
the corporate image as well as conserves forests. Efficient water management
not only conserves water but also enhances afforestation. Afforestation not only
increases green cover and contributes to mitigate global warming, but also helps
local communities carry on with their livelihood activities. Encouraging
employees to participate in local community initiatives like education and
health not only shows the locals the benefits of development but also boosts
the morale of employees and fosters employee engagement. A transparent supply
chain will always attract customers and mean more business. And the story goes
on…
A lot of such
initiatives are being seen today. Long ago when Tata Steel said “We also make
steel”, many of us intellectuals mocked at it saying that the Tatas are
marketing themselves as an organization that puts its core competency on the
back seat. But today, the company’s impeccable track record of engaging with
the local communities for development shows that it is almost having the last
laugh. It has shown that long term optimism wins over short term optimism. It
would only be an understatement to say that the importance of sustainability of
stakeholders cannot be questioned and an active engagement of stakeholders is
an unambiguous imperative for the sustainability of the business. All in all,
an approach by the businesses that is eclectic and inclusive brings an
overarching feeling of goodness and shows the way forward to a positive sum
game.
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