Leadership And Corporate Social Responsibility The Indian Way

Abstract

Indian society has come a long way. Ancient Culture of India is if full of spiritual and ethical values. In those times, Kings and rulers used to refer Upnishads and Vedas to take guidelines for ideal practices and decision making. Today such kingdoms have converted into business empires where business leaders make decisions that impact the business and the society as a whole. As Business organizations play a vital role in the management of demand and supply in the society at one side and provide employment opportunities on the other to allow the people to possess purchasing power, it is therefore, important for them to follow ethical codes and understand their true social responsibilities other than their financial obligations towards shareholders and financers.

With this view, this paper explores the changing phases of leadership and social responsibility from kings to current Indian business leaders. May be, it not a fresh thought on this topic but the authors have tried to showcase the current practices followed by various companies to discharge their social responsibilities towards the society.

Key Words: Spiritual Leadership; Corporate Social Responsibility; Indian Ethos, Values and Ethics;

Leaders in world business are the first true planetary citizens. They have worldwide capability and responsibility; their domains transcend national boundaries. Their decisions affect not just economies, but societies; and not just direct concerns of business, but world problems of poverty, environment, and security. World business will be a key actor in the ultimate resolution of the macro-problem. It crosses national boundaries with much more ease than do political institutions and the business corporation is far more flexible and adaptive organization than the bureaucratic structures of government. [1] 

Willis Harman, author of Global Mind Change

The Above statement reflects the growing importance and changing role of business leaders in the society. Business organizations are the essential components of the social system and therefore, with such an influential role there comes a sense of great responsibilities for these business leaders.

In the ancient Indian culture, ethics and moral responsibilities defined by the Vedas and scriptures were the guidelines for behavior of leaders and kings who had to play such roles in the management of social and economic systems.

Historical Background: From Raj Dharma to Corporate Social Responsibility

The ancient Indian folklore and sacred Hindu texts have embodied rules and regulations pertinent to preservation of environment and ecology. They have repeatedly espoused the notion of ‘Dharma’ (balancing act between own duties and others’ rights) and ‘Satkarma’ (good deeds) through various scriptures and texts. Be socially conscientious, don’t mischief the nature by your actions, attain the riches through fairer means and compassion for all creatures is the philosophy of the primordial books. Unlike the present day piecemeal and ad hoc approach towards the issue, ancient Indian environment consciousness was holistic in its approach and it sprang from the Upanishadic gospel ‘Vasudhaiva kutumbakam’ (all the beings of the whole universe belong to the same family).

This is echoed in several verses in the Vedas, especially in Upanishads. Some excerpts are-

One shall follow the path of righteousness. (Dharmam kara – Taittiriya Upanishad i-11)

One shall not sin against his neighbor or a foreigner. (Rig Veda Samhita v-85-7)

Wealth has to be won by deeds of glory. (Rig Veda Samhita vi-19-10)

One shall be led by the fair path to riches. (Vajasaneya Samhita v-36)

A man shall strive to win wealth by the righteous path. (Rig Veda Samhita x-31-2)

Help others to win wealth. (Rig Veda Samhita iv-50-9)

One shall not be selfish and consume all by itself. (Rig Veda Sam x-117-6)

Wealth accumulated through 100 hands should be distributed to 1000 hands. (Atharva Veda Samhita iii-24-5)

The leader is the distributor of wondrous wealth. (Vajasaneya Samhita xxx-4)

Let the rich satisfy the poor with a broader vision. (Rig Veda Samhita x-117-5)

One shall produce fair wealth for today and tomorrow. (Rig Veda Samhita vi-71-6)

Earth, atmosphere, sky, sun, moon, stars, waters, plants, trees, moving creatures, swimming creatures, creeping creatures all are hailed and offered oblations. (Taittiriya Samhita i-8-13)

One should protect the habitation. (Rig Veda Samhita vi-71-3)

Air is God (vayu devta) and it shold be free from pollution. (Atharva Veda)

Yajna should be performed by everyone to purify the air. (Atharva Veda)

One should not destroy the trees. (Rig Veda Samhita vi-48-17)

Plants are mothers and Goddesses. (Rig Veda Samhita x-97-4)

Trees are homes and mansions. (Rig Veda Samhita x-97-5)

Nature has to be protected from man’s exploitation (Rig Veda Samhita vii-75-8)

Plants and waters are treasures for generations. (Rig Veda Samhita vii-70-4)

Waters bear off all defilements and cleanse people. (Vajasaneya Samhita iv-2)

Whoever injures the forests and mountains is a robber who sinks both itself and its offspring into destruction. (Rig Veda Samhita vii-104-10)

Offerings should be dedicated to waters of wells, pools, clefts, holes, lakes, morasses, ponds, tanks, marshes, rains, rime, streams, rivers and ocean. (Taittiriya Samhita vii-4-13)

Waters and herbs should have no poison. (Rig Veda Samhita vi-39-5)

Waters are to be freed from defilement. (Atharva Veda Samhita x-5-24)

Besides Vedic Samhitas and Upanishadas; 18 Puranas, Shrimad Bhagwat Geeta, the Ramayana, the Mahabharata, Dharmasastras, Arthasastras etc. have also enchanted a lot not only about concern for environment but they have specifically emphasized on ‘Raj Dharma’ (duties of a king) which pertains to modern days’ Corporate Social Responsibility.

‘Corporate Social Responsibility is therefore defined as a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations.’

The notion of corporate social responsibility was untainted in terms of philanthropy or charity up till the 1990’s. Welfare programs or initiatives were introduced not as a duty or a responsibility but as a form of charity that was supposed to connote the virtues of the big organisations.

However the post-liberalization phase has seen a primary shift from this patronage-based model of corporate social responsibility to a stakeholder-participation based model. In the stakeholder model the community in which the corporation is present is seen as a stakeholder in the company and therefore, the company has certain obligation and duties towards it like it has towards its other stakeholders (customers, employees, shareholders). It is a recognition of the fact that companies have to perform in non-financial arenas too, such as human rights, business ethics, environmental policies, corporate contributions, community development, corporate governance, and workplace issues and company should be held accountable for its ‘triple bottom line’ that includes social and environmental facet and not just the financial performance.

The question that arises at this juncture is what the reasons for the shift are in the basic paradigm of corporate social responsibility.

Rationale for Corporate Social Responsibility

Successful corporations need a healthy society. This is widely divergent from the perspective of corporate social responsibility in Western economies as well. Reflected in the observation by Arthur Page, vice president of public relations at AT&T for around 20 years and former advisor to the US President:”… all business in a democratic country begins with public permission and exists by public approval …”

Priority of business is getting widened from 4 P to 7 Ps by inclusion of People and Planet with Profit. Short-term, charity-based welfare interventions are being replaced by long-term, empowerment-based Corporate Social Responsibility (CSR). Based on the realization, “Business cannot succeed in a society that fails”, CSR is being considered as an imperative for carrying on business in the society rather than as a charity. Broadly speaking, advocates of CSR have used four arguments to make their case: moral obligation, sustainability, license to operate, and reputation.

Business is the element of society, which is operating with the societal resources (land, labour, material) and is providing the output to the society. Therefore society is vital for survival of business enterprise.

CSR is an essential starting point in understanding why a new approach is needed to integrating social considerations more effectively into core business operations and strategy.

Recognition of the importance of ‘reputation capital’ for capturing and sustaining markets. Therefore corporate social responsibility is basically a new business strategy to reduce investment risks and maximize profits by taking all the key stakeholders into confidence.

The significance of ‘eco-social’ stability i.e. social and environmental stability and sustainability is necessary for the survival of an enterprise in the long run.

The importance being attached to accountability and transparency as the key aspects of corporate governance.

Education, health care, and equal opportunity are vital to a prolific workforce which is the very foundation of business unit.

Safe products and good working conditions lower the internal costs of accidents and increase the efficiency of employees.

Efficient utilization of land, water, energy, and other natural resources makes business more productive.

Good governance and property rights are indispensable for competence and innovation which is inevitable for extensive survival.

Strong regulatory standards protect both consumers and competitive companies from exploitation.

Healthy society creates expanding demand for business, as more human needs are met the aspirations grow.

It is used as a tool in building blocks between communities and companies.

Frugal financial management and good performance increases the shareholder value thereby increasing the dimensions for surplus funds.

Concern for customers increases the market share of the company leading to economies of scale and greater profitability.

CSR awards and positive CSR ratings amplify the popularity of company between media, public and state.

The mutual reliance of corporations and society denotes that both business decisions and social policies must follow the theory of shared value. That is, choices must benefit both sides. If either a business or a society pursues policies that benefit its interests at the expense of the other, it will find itself on a dangerous path. A temporary gain to one will undermine the long-term prosperity of both.

CSR interventions therefore- based on commitment, mobilization of employees-voluntarism, innovative approaches, appropriate technology and continuing partnership -can make lasting differences in the life of the disadvantaged. Further, synergy of corporate action with the government can make the CSR interventions more effective and facilitating the corporate carrying on business in the society.

Key Areas of Corporate Social Responsibility

From philanthropic concept, social welfare activities have taken the shape of a full-fledged discipline. Corporate governance has also become the part of corporate social responsibility in today’s times. Government is giving various awards to the socially responsible companies. In recent years business organisations are proving themselves as good corporate citizens in the following areas:

Shareholders and

Government

Customers and

Marketplace

Employees and

Workplace

Community and

Health

Environment and Ecology

Growth and appreciation of capital

Constant focus on innovation

Nurturing and developing human capital

Promoting local employment

Ecological diversity

Transparency in financial statements

Reasonable and affordable prices

Following labour laws

Infrastructural support (roads, electricity, telecom, water supply)

Biological habitat

Strong future prospects

After sales services

Ensuring employee health and welfare

Promoting education through schools, scholarships, sponsorship of education programmes

Plantation of trees in the locality

Consultancy to government in various policy matters and Use of lobbying

Avoid misleading through wrong publicity and advertisements

Consistency between work and remuneration

Maintaining ecological balance of the local community

Sustenance of natural resources

Constant efforts for value maximisation

Providing information with dangerous products

Better career prospects

Disease awareness programmes (AIDS, Hepatitis, Dengu, Cancer etc) and family planning

Recycling of waste and obsolete material

No such practices like insider trading

Avoiding unfair trade practices like high sales commission and heavy discounts

Job security, provident fund, group

insurance, pension, retirement benefits etc.

Protecting, supporting and respecting social values, local culture and human rights

Greenhouse gas emissions

Accountability towards all operations

Quality consciousness

Promoting conducive environment

Ethical research practices (e.g., animal testing, Genetically Modified Organisms)

Conservation of wildlife

Compliance with laws, regulations and conventions

Product and consumer safety

Good working conditions

Upliftment of weaker and backward sections of the community

Non pollution of rivers and water bodies to save water life and poisoning of water

Corporate governance

Regular supply of goods

Promoting safety from accidents

Modernisation and development

Packaging use and disposal

Payment of taxes to government

Under weighing and adulteration must be avoided

Housing, eating joints and transportation facilities

Rehabilitating the population displaced

Transportation impacts (congestion, logging roads)

Not to indulge in corruption

Dealing with customer grievances

Crèche facility for women employees

Relationships with universities

Energy & water usage

Thus business has to execute number of social tasks, as it is a part of the society. It should be bothered of those who are instrumental in securing its subsistence and survival. However, while doing so two things need to be distinguished to view it as social responsibility of business. First, any such activity is not charity. It means that if any business bestows some amount of money to any hospital or temple or school and college etc., it is not to be considered as discharge of social responsibility. Secondly, any such activity should not be that it is noble for some sections and dire for others. Social responsibility implies that a corporation should not do anything detrimental to the society in course of its business activities.

Therefore, the concept of corporate social responsibility dampens businessmen from adopting unfair means. Instead, it persuades them to make yield through judicious administration of the business, by providing healthier working and living conditions to its personnel, providing superior products, after sales-service, etc. to its customers and concurrently to control pollution and conserve natural resources.

Corporate Social Responsibility Initiatives by Indian Companies

Even much before the issue became a global concern, India was aware of corporate social responsibility, due to its deep religious roots and the efforts of organisations like the Tata and Birla Group. The corporations have moved away from the charity and are focussing on initiatives that are people-centric that would make a real difference in the target communities. Following are the niceties of CSR activities undertaken by topmost Indian companies.

Corporate Social Responsibility programmes at the Tata group of companies extend across a wide spectrum including rural development, community development and social welfare, family initiatives, tribal development and water management. About 7000 villages around Jamshedpur and Orissa benefit from development programmes run by the Tata Steel Rural Development Society (TSRDS). Programmes of TSRDS cover issues like education, irrigation, afforestation, adult literacy, vocational training, handicrafts and rehabilitation of the handicapped persons. The Community Development and Social Welfare Department (CDSW) at Tata steel carries out medical and health programmes, blood donation drives, mass screening of Tuberculosis patients immunization camps and drug de-addiction. In 1999, Tata Steel embarked on an AIDS awareness programme, which has now become an integral part of all training programmes. Tata Steel’s Centre for Family Initiatives (CFI) was successful in influencing 59 per cent of Jamshedpur’s eligible couples practicing family planning, compared to the national figure of 35 per cent. To build upon this heritage the Tata Council for Community Initiatives (TCCI) has created the Tata Guidelines on Community Development, an effort of over three years from the field evolved into a framework of best practices.

Infosys is actively involved in various community development programs. Infosys promoted, in 1996, the Infosys Foundation as a not-for-profit trust to which it contributes up to 1%PAT every year. Additionally, the Education and Research Department (E&R) at Infosys also works with employee volunteers on community development projects. They have taken initiatives to work in the areas of research and education, community service, rural reach programme, employment, welfare activities undertaken by the Infosys Foundation, healthcare for the poor, education and arts & culture. Their CSR team has been distributing books and stationery to underprivileged children across Karnataka since 2001. Infosys also manages a dedicated intranet portal to help employees support education of the children of our housekeeping and security staff. In 2009, 1,500 members contributed approximately Rs. 14, 00,000 to support more than 370 students. Also meritorious students were awarded for their performance.

The Birla group of companies is also among the pioneers in the field of corporate social responsibility in India. As part of the Aditya Vikram Birla Group’s Social Reach, the Birla group runs as many as 15 hospitals in India; includes adult education and schools conducting as many as 78 schools all over India; rehabilitates handicapped persons having touched more than 5000 physically challenged individuals. More than 1,00,000 patients have been examined under the Group’s medical programmes. Over 15,000 children along with 2000 pregnant women have been immunized, over 500 cataract patients operated, 2000 TB patients provided medical care, 100 leprosy-afflicted attended to, free of cost. It also provides Vocational Training, having provided training to over 3000 women and having distributed over 1400 tool kits in a variety of areas like electrical, auto repair, electronic equipment maintenance and repair and tailoring. It has adopted several villages under its Village Infrastructure Development programme and has provided extensive training to over 10,000 villagers in its Carpet Weaving Center.

Lupin India Ltd, India’s third largest manufacturer of pharmaceuticals has started a project for providing sustainable development in 154 villages across Rajasthan. The scheme instead of providing for piece-meal assistance that does not lead to effective alleviation of poverty or adequate development is designed as a holistic action plan that includes an Agricultural Income Generation Scheme, land cultivation and fruit plantation programs, fodder preservation schemes, sericulture and water-recycling programs, establishment of medical and educational centres, adult literacy programs and credit schemes.

ITC’s initiatives are not only praiseworthy but innovative in this regard. ITC partnered the Indian farmers for close to a century. It is now engaged in elevating this partnership to a new paradigm by leveraging information technology through its trailblazing ‘e-Choupal’ initiative. ITC is significantly widening its farmer partnerships to embrace a host of value-adding activities: creating livelihoods by helping poor tribals make their wastelands productive; investing in rainwater harvesting to bring much-needed irrigation to parched drylands; empowering rural women by helping them evolve into entrepreneurs; and providing infrastructural support to make schools exciting for village children. Through these rural partnerships, ITC touches the lives of nearly 3 million villagers across India.

Cipla, another Indian pharma major has found a novel approach to fulfil its corporate social responsibility obligations by offering to sell a cocktail of three anti-HIV drugs, Stavudine, Lamivudine and Nevirapine, to the Nobel Prize-winning voluntary agency Medicine Sans Frontieres (MSF) at a rate of $350, and at $600 per patient per year to other NGOs over the world. This offer has to lead to an significant decrease in the prices of these drugs worldwide increasing the accessibility of these drugs especially in the developing countries. Cipla also donates several million rupees every year to the Cipla Cancer and AIDS Foundation for the cancer and AIDS patients.

Mahindra and Mahindra dedicates 1% of its profit (after tax), on a continuous basis towards Corporate Social Responsibility. A unique kind of ESOPs – Employee Social Options was launched to enable Mahindra employees to involve themselves in socially responsible activities of their choice. The Group also announced a special gift: to provide free cochlear (hearing loss solutions) implants to 60 profoundly hearing-impaired, under-privileged children. In addition to giving impetus to the Nanhi Kali project for the girl child and the Mahindra All India Talent Scholarship for the economically disadvantaged, the Mahindra Group has also set up Mahindra Pride Schools. These schools are offering a variety of courses, with an emphasis on employability, including training for information technology, retail, automotive engineering etc. They are supposed to provide new skills and capabilities to the weaker sections of society, particularly the scheduled castes and scheduled tribe youth.

Similar commitment to CSR has been displayed by other corporates in India. The list, which at best can be far from complete, includes Arvind Mills, Escorts, Dabur, Bajaj, Godrej, Hero Honda, DCM Sriram, Ashok Leyland, Ballarpur Industries, Eicher, Kinetic Group, Kirloskar, Reliance, Ranbaxy, Wipro, each of these has been deeply committed to their communities engaging in programmes encompassing education, health, education, integrated rural development.

Beyond the private sector, corporate players in India’s public sector too have been actively involved in corporate social responsibility initiatives. The Indian public sector has had a long tradition of corporate social responsibility and the initiatives of corporations like the Oil and Natural Gas Corporation (ONGC), Steel Authority of India Ltd. (SAIL) and Gas Authority of India Ltd. (GAIL) have been remarkable in the development of several backward regions of the country. Indian Airlines and Bharat Heavy Electronics Ltd. (BHEL) have been widely acclaimed for their disaster management efforts. Most public sector units in the heavy engineering industry have not only set up townships around the plant, but also established schools, hospitals and several other civic facilities for their employees and those that live in that area. Several organizations have introduced benchmarking exercises for their CSR activities and industry bodies like Confederation of Indian Industries (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI) have introduced cross-sectoral programs in CSR related areas.

Future Outlook: Strategic Corporate Social Responsibility

The new economic era embarked the total renovation in CSR related practices in the country. The change was two fold: makeover of the conceptual understanding of corporate social responsibility and innovations at the implementation level. At the abstract level, there is a fundamental transformation from the charity-oriented approach to the stakeholder-oriented approach where stakeholders are seen as target group whose well-being is integral to the long term success of the corporation. The real revolution is experienced at the implementation stages where companies have started committing other resources in addition to financial ones so as to provide a host of services, programs and schemes catering to the needs of the intended community. The CSR initiatives have also seen greater participation and rigid accountability standards. The issue of norms for corporate social responsibility seems to have been adequately dealt with by industry practices like benchmarking, CSR ratings and certification by different agencies.

While the performance of the honchos seems satisfactory, there is fierce debate on the social role of the MNCs and small companies. The social concern in these companies is too little and whatever miniscule they are performing it is only for fulfilling obligation and keeping records. MNCs are rather found to be engaged in unethical and unfair business practices as well. Corporations escape from CSR by counting on the hurdles like:

Lack of interest of the local community in participating and contributing to CSR activities of companies.

No awareness and confidence in the local communities about CSR initiatives.

Dearth of trained and efficient organisations that can effectively contribute to the ongoing CSR activities initiated by companies.

Lack of transparency on the part of the local implementing agencies.

Non-availability of statutory CSR guidelines, the scale of CSR initiatives of companies should depend upon their business size and profile; bigger the company, larger its CSR programme.

Narrow outlook towards the CSR initiatives. CSR initiatives are viewed as donor-driven than local in approach

Strategic approach to Corporate Social Responsibility is the pathway to all these hurdles and lack of interest in CSR activities. Strategic CSR is all about integrating the societal issues into the core business strategies to gain competitive advantage. While practising Strategic CSR corporates have to identify the on-going social setbacks and have to invest in them so as to strengthen their competitiveness. The success of the company and the success of the community become mutually reinforcing therefore. Characteristically, the more closely tied a social issue is to the company’s business, the greater is opportunity to utilise the firm’s resources and capabilities, and benefit society.

For any company, strategy must go beyond best practices. It is about choosing a unique position-doing things differently from competitors in a way that lowers costs or better serves a particular set of customer needs. These principles apply to a company’s relationship to society as readily as to its relationship to its customers and rivals. Strategic CSR moves beyond good corporate citizenship and mitigating harmful value chain impacts to mount a small number of initiatives whose social and business benefits are large and distinctive. Strategic CSR involves both inside-out and outside-in dimensions working in tandem.

Many opportunities to pioneer innovations to benefit both society and a company’s own competitiveness can arise in the product offering. Citing the examples from west. Toyota’s early response to public concern about auto emissions gave rise to the offering Prius. Toyota’s Prius, the hybrid electric/gasoline vehicle, is the first in a series of innovative car models that have produced competitive advantage and environmental benefits. Hybrid engines emit as little as 10% of the harmful pollutants as compared to conventional vehicles. The Prius has not only significantly reduced pollutants; it has given Toyota an enviable front over rivals in hybrid technology. Toyota has created a unique position with customers and is well on its way to establishing its technology as the world standard.

Urbi, a Mexican construction company, has prospered by building housing for disadvantaged buyers using novel financing vehicles such as flexible mortgage payments made through payroll deductions. It engages in purchasing land, and designing, building, marketing, and selling housing developments for the low- and middle-income and residential markets in Mexico.

Crédit Agricole, France’s largest bank has differentiated itself by offering specialized financial products related to the environment, such as financing packages for energy-saving home improvements, energy-saving loans, support to organic farming, financing for renewable energy etc. conducting audits to quantify their carbon emissions  and to certify farms as organic. They also sponsor projects to restore and conserve the treasures of France’s regions, projects to renovate historic sites, buildings and religious edifices in France.

To penetrate Indian market, Nestle required establishing local supply of milk from a large, diversified base of small farmers. It obtained government permission to erect a dairy in Moga (Punjab). But there, farmers were impoverished, death rate in calves were high, and lack of refrigeration vetoed farmers from distributing milk and keeping it fresh. Nestle erected refrigerated dairies as milk assortment points and sent its trucks to the dairies to collect the milk. With the trucks went veterinarians, nutritionists, agronomists, and quality assurance experts. Farmers learned that milk quality centred on adequate feed crop irrigation. With financing and technical assistance from Nestle, farmers dug deep-bore wells. The ensuing improved irrigation reduced calves’ fatality rate 75%, amplified milk production 50-fold, and allowed Nestle to compensate higher prices to farmers than those set by the government. With steady revenues, farmers could now obtain credit. Moga’s standard of living improved with supply of electricity and telephones; primary, secondary, and high schools; and adequate medical facilities. Meanwhile, Nestle gained a stable supply of high quality commodities-without having to pay middlemen-and saw demand for its products increase in India.

Above are few illustrations to reckon but their approach and practices are commendable and well known. Hence, by identifying crossroads between own company and society, selecting social problems to address and endowing small number of initiatives can generate large and distinctive benefits for society and business unit. If approached strategically, CSR can be much more than just a cost, constraint, or charitable deed; it generates opportunity, innovation, and competitive lead for corporations-while solving serious social problems.

There is still immense potential in social sector and lot has to be done in India for the underprivileged, environment and people. When value chain practices and investments in competitive context are fully integrated, CSR becomes hard to distinguish from the day to- day business of the company.