Background paper 1

National Workshop onPromoting Corporate Citizenship in India:

Challenges and Opportunities

8-9 April 2002New Delhi

BACKGROUND PAPER

Contents

Preface v

I Corporate Citizenship, Corporate Social Responsibility andSustainable Development 1–2

II Business Community Relations and Importance of CSR 3–6

III Corporate Social Responsibility – An International Perspective 6–7- Western and Eastern Approaches to Corporate Social Responsibility:

A brief comparison- CSR Scenario: First World Report on Corporate Social Responsibility:

Internet consultation of Stakeholders

IV Corporate Social Responsibility: India 7–16- Economic Scenario and the Developmental Challenges for India- Addressing the Challenges and the Opportunities Ahead: CSR Agenda- Historical Background of CSR in India- Current Scenario of CSR in India- Business Community Relations in India- UN Initiatives – The Global Compact, UNV-NAB Project on Enhancing

Business Community Relations- Corporate/Business and Employee Volunteering in India- Initiatives on Sustainable Development in India and Corporate

Responsibility: TERI Example

V The Future of CSR 16

References 17

Preface

“The central challenge we face today is to ensure that globalization becomes a positiveforce for all the world’s people, instead of leaving billions of them behind in squalor.Inclusive globalization must be built on the great enabling force of the market, and mar-ket forces alone will not achieve it. It requires a broader effort to create a shared future,based upon our common humanity in all its diversity.”

– UN Secretary General’s Report to the Millennium Assembly, April 2000

Promoting good corporate citizenship lies at the heart of UN Secretary General’sAppeal to Global Business to honour their social responsibility, moral duty anduse the power of markets to make globalization a positive force for all.

In order to have a more sustainable world, issues concerning globalization, povertyeradication, health, energy, managing ecosystems and biodiversity, access to water,international governance for sustainable development, are paramount and theseare also the suggestions of an action plan to move the sustainable agenda forwardat the second World Summit for Sustainable Development, to be held inJohannesburg this year. Today’s world needs the exercise of responsible behaviourfrom a range of different actors in development. Corporate citizenship in thiscontext is a vital instrumental force capable of making a turnaround for prosperity,well being of human kind and a key to sustainable development. Promoting corpo-rate citizenship therefore forms an essence for national development sincecorporates are the prime drivers and powerful engines for a nation’s growth.Synergy between business, government and civil society can help make the systemwork for overall development.

About this paper, the UNV- NAB Project and the National Workshop:The present paper while focussing on the Indian scenario, the challenges andopportunities in corporate citizenship, dwells briefly on the concept, significanceand issues in Corporate Social Responsibility and Business Community Relations.The first three sections of the paper provide conceptual information and outlinethe importance of corporate citizenship, corporate social responsibility, sustainabledevelopment, business-community relations and the international perspective. Thefourth section elaborates on the theme of the national workshop – the CSR inIndia, the historical background, the current scenario, challenges, opportunities,business community relations, corporate / employee volunteering, the UN initia-tives and TERI initiatives in Sustainable Development. The concluding part of thepaper throws some light on CSR in the future.

The United Nations Volunteers(UNV) and New Academy of Business, U.K. arejointly implementing an action research project entitled “ Enhancing BusinessCommunity Relations: Role of Volunteers in Promoting Global Corporate Citizen-ship”, in seven developing countries – Brazil, Ghana, India, Lebanon, Nigeria,

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Philippines and South Africa. The objective of the project, started in late 2001 - isto promote global corporate citizenship, forge partnerships and explore jointprojects with wider UN system. The project is divided into two phases — the firstphase, which started in January 2002, is devoted to the research study with regardto business community relations scenario in the project countries. The secondphase focuses on building partnerships for joint projects. Based on the findingsand research analysis of the study of project participating countries, countryreports shall be prepared and jointly compiled in the form of a publication tobe disseminated worldwide by New Academy of Business and United NationsVolunteers.

As a part of the ongoing project, the present Workshop is being organised. Theobjective is to share good practices in corporate social responsibility, to brain-storm, dialogue and collect expert views from eminent and leading developmentpractitioners in the country on the issue. By bringing together corporates, NGOs,academics and others, we expect some convergence of thoughts so that partnershipinitiatives might be further explored.

vi

I Corporate Citizenship, Corporate Social Responsibility and SustainableDevelopment

Corporate Citizenship simply relates to the changing relationship between busi-ness and society. It holds the same meaning of good citizen applied to businessesas when applied to ordinary people – a respect for social, cultural and politicalcontexts in which they operate.

Corporate Citizenship is an idea that has both practical and ethical dimensionsincluding risk avoidance, reinforcing relationships between individuals and com-munities, managing in a global economy, setting standards for products and sup-pliers, and developing business competence. One of the implications of globaliza-tion is the complex challenges to organizations, for protecting their reputations,defending themselves from attacks, social responsibility to be a competitive asset,and the need to improve the bottom line. Two important factors for practisingresponsible corporate citizenship relate to: First, there is a more transparent world,where it is difficult to escape scrutiny. Second, is the accountability to a widerange of stakeholders. Both these issues require company(ies) to monitor theirentire supply chain to see if their partners, contractors, suppliers and the clientsconform to basic standards on a range of corporate citizenship issues.1

Responsible corporate citizenship may be perceived to be an ethical issue, but it ismore of an economic imperative, an enlightened interest of the corporates, a goodbusiness proposition as well to be socially responsible. A healthy and educatedmanpower is an abiding source of high productivity in business. Responsible cor-porate activity is more of a fundamental issue and a critical factor in the opera-tions of the business. The theory by Milton Friedman, that the business of busi-ness is business and maximizing profits for shareholders, has outlived its relevance.Today, business is under pressure from both stakeholders and wider community toadopt responsible business practices. Demand for Corporate Social Responsi-bility (CSR) has increased and the fact is that business around the world can nolonger disregard its social and environmental responsibilities, for it is under grow-ing pressure to help build a fairer society.

A few decades back, corporate social responsibility was viewed as a fringe issue,marginal and radical. The entire focus of a company was on enhancing shareholdervalue, but now a company’s focus has been widened so that it considers the needto engage stakeholders for long term value creation. Previously Corporate SocialResponsibility, was viewed as profitability, coupled with compliance and philan-

This paper has been prepared by Ms. Aparna Mahajan, UNDP/UNV Business Community Relations Specialist(India). Views expressed are of the author only and do not necessarily reflect the opinion of the organizations whichthe author belongs to and the organizers of the Workshop. Suggestions for this paper by Dr David F Murphy,Programme Director, New Academy of Business, U.K., have been thankfully acknowledged.

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thropy. Today, responsible corporate citizenship means companies being moreaware of and understanding the societies, communities, in which they operate.Business leaders, corporate managers and executives need to be equipped with anability to tackle a wide range of issues including greater transparency and account-ability, sustainability strategies, corporate governance codes, workplace ethics,human rights issues, stakeholder consultation and management.

Social responsibility implies the acceptance of a moral imperative to recognizeduties and obligations arising from a company/organisation’s relationship withcustomers, suppliers, employees, shareholders, society at large, beyond the consid-erations of profit.

Business for Social Responsibility (BSR) mentions that Corporate Social Respon-sibility (CSR) generally refers to business decision making linked to ethical values,compliance with legal requirements, and respect for people, communities andenvironment. According to studies by Business for Social Responsibility, CSR hasa positive impact on business economic performance and is not harmful to share-holder value. Some of the benefits are – improved financial performance, reducedoperating costs, enhanced brand image and reputation, increased sales and cus-tomer loyalty, increased productivity and quality, increased ability to attract andretain employees, reduced regulatory oversight and access to capital. Companieshave been encouraged to adopt or expand CSR efforts owing to pressures fromcustomers, suppliers, employees, communities, activist organizations and otherstakeholders.

The Prince of Wales International Business Leaders Forum defines CSR on basisof crucial issues of Corporate Governance which includes - reputation, transpar-ency and accountability, corruption; Safety and Environment which includesproduct safety, worker health safety, local environmental quality; Access /develop-ment which includes education, Health/HIV AIDS, digital divide, enterprise devel-opment; Human Rights which comprises labour standards, security forces, indig-enous people.

Simply put, CSR would mean the conduct of company operations in a mannerwhich would have positive impact on all the stakeholders and would be more thanmere compliance with the law. It would further relate to the operational mecha-nisms by which profits are made by the company.

Some of the critical issues of corporate citizenship recognized in the developedeconomies relate to – corporate governance, environment, human rights andworkplace, fair trade, ethical investment, arms trade, tobacco, animal welfare andprotection, education. Some areas of activities which business can proactivelypursue keeping in view the national needs, particularly in developing countries,can be with regard to: Education, Employment and Training, Ecological Issues,

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Pollution Abatement, Environmental Protection, Consumer Issues, Civil Rights,Morality, Ethics, Equal Opportunity, Medical/ Healthcare Services, Urban Re-newal and Development, Quality of Worklife – Worker Issues, Conservation andRecreation, Culture, Sports, Arts.

Good corporate citizenship is closely associated with the idea of sustainability.Sustainable Development (SD) is one objective, for which corporate socialresponsibility activity has been targeted. One way in which sustainable develop-ment has been defined is as the means of meeting the needs of present generationswithout compromising the ability of future generations to meet their own needs.Some people have interpreted this to indicate that there are three spheres in whichsustainable human development needs to be considered: environmental, social andeconomic. Many international companies –BP, BT, DuPont, Ford, Novartis, Shelland Unilever acknowledge the need to address this triple bottom line of SD. Com-panies like Shell are developing associated internal management systems for man-aging and understanding the challenges of creating sustainable developmentthrough business, in their case a Sustainable Development Management Frame-work. Many financial markets are also waking up and are increasingly interestednot only in eco-efficiency, but in business ethics, corporate social responsibility,human rights, which all are potentially part of the SD Agenda. The centre of grav-ity of the sustainable business debate is shifting from public relations to competi-tive advantage and corporate governance and in this process, from factory fence tothe boardroom. The environment, ethics, human rights are key issues at play. Theability of business leaders and corporate boards to pick up and amplify “weaksignals’ in their business environment will be an increasingly crucial factor deter-mining which corporations are and can remain globally competitive. Examples ofcompany activity to this end include:n recruiting staff from the SD community including ex-campaigners, as Shell has

donen holding stakeholder engagement events, an area in which BP has been strongn including SD professionals in board advisory committees, as Anglian Water and

others have done andn switching to renewable energy, as Interface UK is doing.2

II Business Community Relations and Importance of CSR

Corporates have a great role to play as an important part of the society. Business isnot separate from society; companies are not only engines of economic growth butalso pivotal agents of social and political integration.3 The role of business insociety is an ever changing one. One of the key questions is: What is the rightbalance between societal demands and the role of business in fulfilling the needs ofthe society? The costs of social problems and costs to business are an importantchallenge. Also, the division of labor and responsibility between the government

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and business is important because business can operate within the rules of thegame as prescribed by society. Sir Adrian Cadbury, ethics prize winner and author ofthe UK’s 1992 Cadbury Report on Corporate Governance, remarks: “ Society sets theethical framework within which those who run companies have to work out their owncodes of conduct. Responsibility for decisions, therefore, runs both ways. Business has totake into account of its responsibilities to society in coming to decisions, but society has toaccept its responsibilities for setting the standards against which those decisions aremade.”

Whether a company is a good community citizen is ultimately demonstrated by theway it supports community activities, encourages employees to participate incommunity activities, handles the health and safety aspects of its operations, ac-cepts responsibility for overcoming environmental pollution, relates to regulatorybodies and employee unions, and exhibits high ethical standards.4

It is important that balance is striked preserving private enterprise and ensuringthat business acts responsibly for betterment of all concerned. Most importantobligations aren maintaining and improving good community relations,n environmental obligations,n obligation to consumers, which includes ethical conduct and product/service

safety,n obligation to the employees, upgrading the quality of human resources through

improved labour practices and training.

Peter Drucker, in one of his works offers a business imperative, that a corporatecan discharge its social responsibilities if it converts them into self interest i.e.business opportunities. The proper social responsibility of a business is to turn asocial problem into economic opportunity, economic benefit, into productivecapacity, into human competence, into well paid jobs and into wealth. Two majorissues that are being felt to be the foundations for future global CSR are povertyand education. It is felt that the vicious circle – poverty, generator of illquality oflife, depriver of education, generator of poverty – must be somehow broken ifpeople are ever to hope for a better way of life for all.

The solutions to the world’s most urgent problems will require the private sector toembrace, support and enact a set of core values in the areas of human rights, labourstandards and environmental practices, as proposed by UN Secretary General.

On the fallouts of globalization, Mr. Kofi Annan, UN Secretary General observes: Theunequal distribution of benefits and the imbalances in global rule-making which charac-terizes globalization today, inevitably will produce backlash and protectionism.” Onincreased importance of private sector role towards society Mr. Annan (1999) observes:“At present, more and more businesses acknowledge and respond to social and political

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responsibilities than just reap economic benefits in the open global market and productionsystems.”

A Millennium Poll on Corporate Social Responsibility, September1999, was con-ducted by Environics International Ltd. in association with Prince of Wales Busi-ness Leaders Forum and The Conference Board. The poll of 25,000 citizens in 23countries covering U.S., U.K., Europe, Japan, Africa, Asia including India andChina, suggested that “Two in three citizens want companies to go beyond theirhistorical role of making profit, paying taxes, employing people and obeying alllaws; they want companies to contribute to broader societal goals.”

CSR has a strong international dimension. One reason being that many companieshave supply chains which are increasing global. A growing number of firms areadopting codes of conduct covering working conditions, human rights and envi-ronmental aspects, especially in their dealings with subcontractors and suppliers.It is done by them not only to practice corporate social responsibility but also toimprove their corporate image and reduce the risk of adverse consumer reaction.

In recessionary times following the cataclysmic events of recent history withprofits falling, CSR, forms a crucial subject of importance. When conducted asmore than just philanthropy, CSR can help businesses by making them conducttheir activities in a socially responsible manner through counselling, retraining,transparency of operations through socially responsible reporting of activities,systematic management of company’s stakeholders. In this vein, CSR practiceswould encompass governance, accountability, safety, security, ethics, among otherissues. The UK Financial Times recently posed a question, “The Front Line: Whybusiness leaders must be good citizens too?” The newspaper suggested that ratherthan playing the role of social workers, senior executives should concentrate onturning a profit without lying, cheating or defrauding anyone. (Financial Times,U.K. – Feb. 9, 2002). In the light of such a suggestion, one could argue that thecollapsed American energy company Enron may well have been in better shapetoday if it behaved in a socially responsible manner rather than as philanthropicdonor.5 Enron’s philanthropic ventures, donations and supports to local hospitals,universities, churches, arts groups were very well but the irresponsible businesspractices, gross misconduct, negligent governance paved way to its collapse.

The leaders of 36 big companies, including Coca Cola, Mc Donald’s, Siemens,issued a joint statement recently on “corporate citizenship”, and promised to actin a more socially responsible fashion. Corporate Social Responsibility is firmly onthe social and political agendas of Western world – European Union countries,U.K., U.S. The U.K. government has a Minister with a portfolio for corporatesocial responsibility. The potential benefits of a partnership between government,business and civil society to address social and environmental issues are beinglargely felt.

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Meanwhile, according to a few surveys, it is realized that consumer behaviour –the decision of which product to buy - is no longer influenced by price alone. Onerecent survey showed that 70% of European consumers say that a company’scommitment to social responsibility is important when buying a product or aservice. (The Financial Express, India, Nov.21,2001)

III Corporate Social Responsibility � An International Perspective

Western and Eastern Approaches to Corporate Social Responsibility: A brief comparison

In U.S.A., corporate citizenship is a notion denoting a subset of broader conceptof corporate social responsibility, which is generally discretionary, altruistic, nonbusiness relationship between business organization and diverse communitystakeholders. In U.K. this would be referred as corporate social or communityinvestment6. In U.K. and Europe, the concept of corporate citizenship is stillcompeting with the more established ideologies of corporate social responsibility7

but is emerging as a broader and more holistic concept that focuses on basic busi-ness processes in relation to stakeholders8.

The evidence from Japan reflects that corporate citizenship in Japan is exemplifiedby businesses, communities and governments working together to solve the prob-lems of community.9

This shows participation by business and a holistic approach

CSR Scenario: First World Report on Corporate Social Responsibility:Internet consultation of Stakeholders

Michael Hopkins (MHC International Ltd., Monthly feature,September2001) reports of recent evidence on what is happening worldwide in the areaof CSR. The First World Report covers results from replies to CRITICS(Corporate Responsibility Index Through Internet Consultation ofstakeholders) which is a questionnaire that allows people inside or outside,corporations or institutions to rapidly self assess the CSR of these corpora-tions or institutions. This online questionnaire attracts about 10,000 hits permonth. Responses from around a dozen countries were obtained. CRITICSlead to the production of the current world report for the period 2000 to date.(Details of full report are available on www.mhcinternational.com/world.htm)Some of the findings from this survey have been thatn CSR is still viewed as philanthropy.n Companies that had code of ethics did better on CSR than those without it.n The highest CSR score was found among the telecommunications companies.n The lowest CSR scores were from service sectors.

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well beyond charity or philanthropy. It also appears to be consistent with an Indianapproach of being holistic and intrinsic. The corporate citizenship practices inIndia can be seen as a context specific behaviour of business. Reasons of varyingpractices and differing attitudes towards corporate citizenship in developed anddeveloping nations are due to social and economic systems in which the compa-nies are operating, differences in legal and regulatory frameworks, cultural normsand public and societal expectations. While CSR practices in West would relatemore on business ethics, accountability, governance, environmental issues; indeveloping nations like India, CSR also extends to nation building like education,healthcare, rural development, community welfare – a social renewal of India.

IV Corporate Social Responsibility: India

The past trends in social obligations by business, present scenario, the initiativesand opportunities in corporate social responsibility can be better perceived with acursory glance of the socio-economic scenario and the development issues facingthe country.

Economic Scenario and the Developmental Challenges for India

On an economic front, the year 2001 has been a difficult year for almost all econo-mies of the world. World economic growth slowed down as did trade growth. TheIndian economy, affected by the recent unfavourable external and internal devel-opments, including the severe shocks of natural disasters – Orissa Cyclone andGujarat Earthquake, has been passing through a difficult phase. The average an-nual growth rate during the Ninth Five year Plan (1997-2002) is now estimated at5.4% which is lower than the plan target of 6.5%. Despite new challenges whichthe economy faces for augmenting growth, the Indian growth record is one of thehighest among major economies of the world in recent years. The overall growth of5.4% in 2001-02 is supported by a growth rate of 5.7% in agriculture and alliedsectors,3.3% in industry and 6.5% in services. There has been deceleration in thegrowth rate of industry. However, the performance of services sector has improvedmoderately.10

With more than a decade of economic reforms that started in 1990s, the economyover the years has shown that it is capable of achieving high growth rates in re-sponse to implementation of appropriate economic reform policies. With furtherdeepening of economic reforms process and second generation reforms alreadyinitiated, economic growth can be expected to accelerate in future times. While thethrust of reforms in 1991 was fiscal stabilisation, initiation of major structuralreforms aimed at deregulation of the economy to induce accelerated investment,growth, employment, thereby reducing poverty, a good number of objectives havebeen are realised. The external sector is in balance with a comfortable balance of

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payments which is sustainable, debt service is brought to comfortable levels, Indiais regarded as “less indebted” country, poverty has fallen from 36% in 1993-94 to23 to 26 % in 1999-2000 according to alternative estimates and literacy has risensubstantially from 52% in1991 to 65% in 2001. Despite all these achievements,there are major challenges which the country faces and are stumbling blocks forthe country to achieve high growth rates.10

High unemployment with skewed distribution of wealth and opportunity, lowstandards of health, education, nutrition, sanitation, drinking water and the likeare crucial issues. Agriculture being one of key mainstay of the economy withnearly 70% population residing in rural areas, there is a need to focus on agricul-tural reforms, improvement of rural economy and quality of life of the rural peo-ple. On a macro level, development priorities include:n growth centric employment,n generation programmes,n poverty alleviation,n population moderation,n healthcare at all levels,

Table Sectoral real growth rates in GDP (at factor cost)

Percentage change over the previous year

Item 1999-2000 2000-2001 2001-2002 NFYP*

(P) (Q) (A)

I Agriculture and allied 1.3 -0.2 5.7 2.1

II Industry 4.9 6.3 3.3 4.5

1. Mining and quarrying 2.0 3.3 1.4 3.9

2. Manufacturing 4.2 6.7 3.3 3.7

3 Electricity, gas and water supply 6.1 6.2 5.2 6.5

4. Construction 8.1 6.8 2.9 6.8

III Services 9.5 4.8 6.5 7.8

5. Trade, hotels, transport and communications 7.7 5.3 6.3 6.9

6. Financial, real estate and business services 10.6 2.9 7.5 8.0

7. Community, social and personal services 11.6 6.0 6.0 9.1

IV Total GDP 6.1 4.0 5.4 5.4

A: Advance estimates; Q: Quick estimates; P: Provisional; *: NFYP: Ninth Five Year Plan (1997-2002)

annual average growth.

Source: Central Statistical Organisation.

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n education for all,n women’s empowerment and welfare,n housingn child welfaren water supply and sanitation,n rural integrated human development for upgrading people’s living standards.

At the micro level, there are issues related to operational processes of organisa-tions which they need to be responsible for – ecological balance/pollution control,environmental protection, consumer issues, ethics, quality services, product safety,quality of work life, labour standards/practices etc. There are several instanceswhere organisations are addressing basic issues like education, health care infra-structure, drinking water, social development, rural empowerment, apart fromregular services to their employees/ workforce i.e. extension of services to theirfamilies and surrounding neighbourhoods, where factories are located. There are alot of intrinsic factors which need to be looked into with focus on operations/manufacturing processes and CSR needs to be dealt from business perspective, asan integral part of business/corporate policy and not as charity or mere philan-thropy.

India, the second largest populated nation of the world, where population hascrossed 1 billion, there is an estimated number of about 300 million people wholive in absolute poverty, another 350 million middle class where the human prob-lem is more than just poverty.

In the UNDP Human Development Report-2001, India’s rank in Human Devel-opment Index (HDI) is 115. There has been improvement from last year by 13ranks, when the nation ranked 128. The per capita income has increased from$1735 to $2248. The life expectancy at birth has remained the same, at 62.9 years.The infant mortality rate continues to be high at 70 per 1000 live births; only 55%children are immunised for measles and 72% for tuberculosis. Twenty one percentof India’s population is malnourished and 53% of the children are underweight.About 35% of Indians live below poverty line. Around 31% of Indians are believedto have access to adequate sanitation facilities and 35% to essential drugs. Adultliteracy is around 57%, while the country is also emerging to have an IT super-power status. On the front of technological achievements, India ranks 63rd out of72 countries and has emerged as a dynamic adopter of technologies.11 The Reportdocuments India as a location for world class research into new technologies.India has been successful in the field of information and communications.

As these various figures seem to suggest, a huge paradox currently faces the nationas a large magnitude of inequalities regarding the basic needs and issues of peopleon one hand and the significant advancements and developments made in various

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fields on the other. A distinct feature is that levels of human development differlargely within the nation, e.g. certain states and districts report high levels ofhuman development similar to those of industrialised countries, while othersreport achievement levels that are even lower than average of poor countries. Withtremendous advancements happening along with critical issues of continued pov-erty, lack of education and inequality, the deficiencies just push back the achieve-ments, leading to a slow development.

Addressing the Challenges and the Opportunities Ahead: CSR Agenda

Given a lot of developmental challenges facing the nation, the CSR agenda forIndia is vast. Opportunities are immense to convert the poverty issues into busi-ness opportunities. Empowering poor people through employment generation,increasing their wealth and purchasing power can not only upgrade their livingstandards but may also mean that rural energies can be harnessed for businessadvantage. By focussing on the conditions and reasons for poverty, businesses cancreate wealth if a proper strategy is created and established for rural markets.Rural communities can be engaged optimally through skill development and pro-viding employment opportunities in their villages, thereby restricting urban migra-tion, preventing urban slum and reducing poverty conditions. Some noteworthyexamples of organizations contributing to rural rejuvenation by catering for ruralmarkets are — HLL, M S Swaminathan Research Foundation, Amul India, SEWA,and several other companies and organisations. Indeed the role of government toenable corporates and business take-up of such initiatives has to be facilitative.Therefore there is a need to develop synergy, partnerships of government, busi-ness, society, NGOs, for working together.

Besides developing markets for the poor, opportunities lie in education, training,skills provision, and in a nutshell an emphasis upon upgrading the quality of peo-ple. Imparting vocational training and multiple skills to the youth, synergy betweenacademics - universities, scientific and technical institutes, ITIs, and the business,corporates, industry, the demand and supply side is crucial for arresting growingunemployment and reducing mismatch of education and the required manpowerfor industry. Strategies to deploy usefully unemployed youth through skill orienta-tion, creation of opportunities, need to be thought of. The examples of Simputerand Internet wireless for rural communities in India have proved that technologycan be used to the advantage of deprived communities and society.

Education of future managers and business leaders on CSR is another area whichshould form an integral part of study by business management students. Realisingthe complexities being faced by business world over, there is a dire need to edu-cate future managers and business leaders to be competent in handling criticalissues. Training and orientation on CSR for management executives and others

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related to the business operations assumes significance. Focus on CSR practicesby Small and Medium Enterprises, is another important area and CSR educationand orientation to SMEs, therefore is a potential opportunity.

Another effective mechanism to implement CSR for benefit of the community andother target beneficiaries is the collaboration between corporates and NGOs.Sustainability of the societal programmes is important and efforts to ensure theseare equally vital.

Historical Background of CSR in India

India has a long rich history of close business involvement in social causes fornational development. Founders of many business houses in India were philan-thropic and more motivated towards the need to develop the country strong so-cially, economically, politically, as a voice against the colonial rule. The spiritfurther deepened with the trusteeship concept by the father of nation, MahatmaGandhi in free India, and the pace of nation building gained momentum withcompanies engaging in corporate philanthropy as a means to contribute to thesociety. As early as 1965, a seminar on Social Responsibilities of Business was heldin New Delhi, chaired by then Prime Minister, and attended by policy makers,business leaders, thinkers and trade union leaders. The Seminar declared that anenterprise is a corporate citizen. The Declaration of 1965 called for regularstakeholder dialogue, social accountability, openness and transparency, socialaudits and corporate governance. Employers were urged to contribute to housing,healthcare, education and family planning for employees and their families, andalso support these areas where their operations were located. Having grown fromphilanthropic ways of monetary donations, building schools, medical facilities,rural infrastructure, social welfare and development, and contributing to nation’sassets, CSR, in India, still largely continues to be seen as a corporate philanthropywhile there are many developments in line with global trends in CSR. There is aneed to supplement the corporate philanthropic efforts with activities in corporatesocial responsibility.

The researchers of the history of philanthropy note a transition from individual’scharity or philanthropy to corporate social responsibility and corporate citizenshipover the years. They point out that “philanthropy” in India is changing. It is notunusual to observe charity, philanthropy, corporate social responsibility and corpo-rate citizenship simultaneously in an organization.12

Current Scenario of CSR in India

The last decade of the 20th century witnessed a swing away from charity and tradi-tional philanthropy towards more direct engagement of business in mainstream

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development and concern for disadvantaged groups in the society. This has beendriven both internally by corporate will and externally by increased governmentaland public expectations.13

It is estimated that India has over 200,000 private sector trusts, a large number ofwhich are set up by Indian businesses, which have been contributing to socialcauses through their trusts, foundations or societies. Many among these wereestablished much before India became independent. A noticeable change in themove of the focus from charitable donations and philanthropy to the issues ofethics, ecology, support for small rural enterprises and consumer education be-came prominent in decades after independence. This was evident from a samplesurvey conducted in 1984 reporting that of the amount companies spent on socialdevelopment, the largest sum-47% was spent through company programmes, 39%was given to outside organizations as aid and 14% was spent through company trusts.14

With the challenges of globalization, liberalization and the emerging trend towardsa free market economy facing India, the role of CSR is paramount. Primarilybecause the foreign investment has increased in India, trade links of India anddeveloped countries grown and extended role of private companies, there has beenpowerful influence on CSR in India. Companies can benefit from adopting corpo-rate responsibility policies in response to globalization, through access of markets,cost and risk reduction, improved productivity, competitiveness and improvedpublic image. When combined with increased competition and commercial pres-sures, regulatory standards and consumer expectations, concepts of corporatecitizenship are becoming more influential within the business environment. If acompany is not a part of the visible supply chain of a larger company with a so-cially responsible credo, these standards have less influence. Lack of information,skills, technological and financial capacity can also limit the scope to respondeffectively, especially, in case of small and medium sized enterprises. A powerfulglobal civil society lobbying and protesting against poor corporate performancemeans that companies are under pressure to cooperate with communities andNGOs to tackle problems together. The formal processes of stakeholder consul-tancy are still in their infancy and yet to become popular.14

Despite the development of Indian CSR from its initial philanthropic focus, thereare still cultural influences to modern CSR. The underlying philosophy is thatCSR is responsibility of business to society at large. Societal expectations in Indiaare that businesses should be involved in wider issues of societal and nationalconcern while continuing to conduct their business responsibly. Both domesticand global forces encourage a broader understanding of corporate responsibility todevelop in India. While some of the impetus may stem from supply chain pressuresfrom international links through trade and investment, there have also been in-creased governmental and public expectations, as well as corporate will involved in

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post independence drive for socially responsible development. The historicalinfluence of colonialism, state planned economic development and vast disparitiesof income have created unique local conditions in India. There is no single, trans-ferable model of corporate social responsibility, considering these factors intoconsideration.14

According to a survey done by Partners in Change, which covered 600 companiesand 20 CEOs for judging Corporate Involvement in Social Development in India:85% agreed that companies need to be socially responsible;only 11% companieshad a written policy; over 60% of the companies were making monetary donations;health,education and infreastructure were most supported issues. A survey byCentre for Social Markets reported that the primary reason for changing attitudesto social and environmental responsibility issues was increasing awareness andprotecting reputations. Rising standards, domestically slightly more than interna-tionally were also strong influences along with commercial pressures and domesticregulation. Public and community group pressure figured lower on the scale.These companies identified customers as most important stakeholders. Employ-ees, shareholders and investors were given slightly less priority, followed by em-ployers, community, regulatory bodies and unions.

Social businesses based on models of micro credit, self-help and stakeholder-centred management have grown to become large and successful businesses pro-moting stakeholders interests. Examples include Amul Milk Cooperative, SewaIndia and Tilonia, which have illustrated decentralization of management to ensureempowerment and participation of the poor. Large number of corporate housesand companies in India are doing tremendous work in CSR, including corporatephilanthropy. Activities include in the area of education, healthcare services, ruralinfrastructure, development, community welfare, environment protection, reliefand emergency assistance, preserving art, heritage, culture, religious and a host ofother issues. Prominent examples are – Tata Group, Birla Group, Bajaj, Singhania,Modi, ITC, Mahindra and Mahindra, Shriram, Hero Honda, Godrej, Ranbaxy,Lupin, Dr. Reddy’s Foundation, Kanoria, Infosys, Satyam, NIIT, etc. Chambers ofCommerce and Industry Associations like Assocham, CII, FICCI, PHD Chamberof Commerce, regional chambers of commerce, are actively engaged in promotingand sensitizing their member companies to be socially responsive.

There are several business NGO partnerships where implementation of socialprojects have been undertaken by businesses, including the Chambers of Com-merce, Industry Associations etc. For instance, a response to the major Gujaratearthquake tragedy brought about a partnership of FICCI (Federation of IndianChambers of Commerce and Industry) and CARE India. Through the FICCISocio Economic Development Foundation, the task was to rebuild the devastatedregions of Gujarat, construct houses and economic empowerment to people.

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A recent study pointed that Indian companies are doing much better than multi-national companies, both in scope and content of work in CSR. According to thisstudy, by Business World Indica Research,1999, out of the top 25 companies thatwere performing CSR activities, 68% were Indian companies, 28% were MNCsand 4% were public sector companies.15

A recent study on Corporate Social Responsibility in South Asia, by TERI andNew Academy of Business, U.K., also points out that multinational companies inIndia are not as socially responsible as Indian companies. According to the snap-shot poll conducted by ORG MARG under this study, it was felt that more trust isplaced in press, media, NGOs than in business; workers and management havesharply diverging perceptions of working conditions, gender discrimination is anissue and there is a greater need for role by NGOs. It was felt that business NGOpartnerships are a potential concrete method for practice of CSR in India.16

Business Community Relations in India: Business relationships with NGOsand communities have traditionally and largely been non confrontational in India,although there are notable exceptions such as cases of the construction of largedams and other infrastructure projects or siting of extractive industries. ManyNGOs are historically supported or set up by business houses and have prominentbusiness leaders as their patrons and trustees to enable it to be perceived as acredible NGO. Public private partnerships with NGOs such as Aga Khan Founda-tion, Actionaid,Oxfam and other development agencies have all served to furtherinvolve businesses in rural development, improvement of urban infrastructure andcivil amenities.14

In the South Asian region where there are wide disparities between rich and poor,privileged and under privileged, the communities are not homogeneous as otherstakeholders of the company. Company interventions may have to be different toaddress the problems or meet the needs of different communities. According toActionAid, an international NGO working in many countries of the region, de-scribes disadvantaged in India like – rural landless labourers and marginal work-ers, rural artisans dependent on traditional crafts, home based workers, casualworkers and workers in unorganized sectors both in rural and urban areas, tribalsdependent on forests and subsistence agriculture, urban slum dwellers, traditionalfisherfolk, people living in areas prone to natural or manmade disasters etc. Otherway of looking at communities are the people who are displaced as a result ofcompany acquiring land for the factory and here a socially responsible companywould assist to achieve a better life standard of these people than before they weredisplaced; communities near the factory, where the impact of pollution may be feltmost by this group and a socially responsible company here will look at mitigatingthese impacts.17

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UN Initiatives � The Global Compact, UNV-NAB Project on Enhancing Business Commu-nity Relations

At the World Economic Forum, Davos, on 31 January,1999,UN Secretary GeneralKofi Annan requested the world business leaders to embrace and enact a GlobalCompact, both individual corporate practices and by supporting appropriatepublic policies on nine principles covering human rights, labour rights and envi-ronmental responsibility. The Global Compact brings together associations andbusiness to develop programmes in the areas of human rights, labour and environ-ment. Under the India Partnership Forum, CII and UNDP have developed asocial code for business to take up social initiatives.

Corporate/ Business and Employee Volunteering in India: Among severalinitiatives by Industry Associations, Confederation of Indian Industry (CII) pro-motes business volunteering through its volunteer arm – BYST (Bharatiya YuvaShakti Trust), motivates its industry members to take up social projects through itsCouncil for Community Initiatives. Several corporates and business entities inIndia have been actively pursuing employee volunteering. Among these, one oflargest moves is by Tata Group which is estimated to motivate more than 20,000employees through its 28 companies. Other companies doing employee volunteer-ing include movements by GE Elfun, Citibank’s India community support Pro-gram by Citibank volunteers, employee volunteers of Voltas, Samsung, Wipro,Hughes Software, Maruti Udyog, Eureka Forbes,Glaxo Smithkline, ICICI etc. Alook at various practices by corporate sector reveals initiatives – cause relatedmarketing by Procter and Gamble, Amway; payroll giving by Bank of America;employment and training, equipment to disabled by Coca Cola, Titan, HMT,Cybermedia, AV Birla Group, Bharat Petroleum, Johnson and Johnson, Atlascycles, Cummins India, Mc Donald’s; self help groups, relief and developmentprojects by Hindustan Lever, Pepsi, Cadbury, Glaxo Smithkline Beecham, KPMG,DSP Merrill Lynch, Ford India, Reuters, Sony, Nokia, Britannia, Sahara, JetAirways, etc.; skill sharing, secondments, time offs,sharing corporate resources byShriram Industrial Enterprises Ltd., Excel Industries, Compaq, Taj Group ofHotels, NIIT, United Phosphorous, Forbes Marshall, MAC Group, Infosys Tech-nologies, etc.18.

There are a lot of corporate houses and organizations which are doing a lot ofwork in CSR and in many cases these are philanthropic activities, including build-ing and running schools, dispensaries, medical facilities, rural infrastructure,women empowerment etc.

Initiatives on Sustainable Development in India and Corporate Responsibility:TERI Example

TERI, an influential Indian NGO, is a world class, front runner and a relevantplayer in the burgeoning movement of corporate social responsibility. It is commit-

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ted to make sustainable development a reality through its high tech research activi-ties, think tank having global vision with local focus and worldwide presence pro-viding innovative solutions both at home and abroad. A natural outcome of theglobal vision by TERI is the recent organizing of Delhi Sustainable DevelopmentSummit 2002 focussing on Ensuring Sustainable livelihoods: Challenges for Gov-ernment, Corporates and Civil Society at Rio + 10, held in February, 2002. Thesecond in series and an annual event held each year, the aim of DSDS 2002 was toemphasise upon global stakeholders the need to make a concerted endeavour torealize the vision of a safe and just world that fulfills the needs of this and futuregenerations. The efforts by TERI through DSDS were directed to develop andprovide inputs for the forthcoming United Nations World summit on SustainableDevelopment, to be held in Johannesburg later this year.

TERI has been providing a range of eco-friendly solutions to corporates wantingto go green and facilitating the adoption of eco friendly businesses processesthrough initiatives such as CoRE (Corporate Roundtable on Development ofStrategies for the Sustainable Development Environment).

V The Future of CSR

CSR clearly stresses the transparency of operations through socially responsiblereporting of activities. Seen as more than just philanthropy, CSR can be enacted asan overall strategy for the systematic management of all a company’s stakeholders.In an article on “How Corporate Law Inhibits Social Responsibility”, by RobertHinkley, Business Ethics, Jan.2002, the author suggests simply adding a phrase onCSR to corporate law to enhance CSR. He advocates that directors and officershave a duty to make money for shareholders, but not at the expense of the environ-ment, human rights, public safety, communities in which the corporation operates or thedignity of its employees. Such a change would help CSR to remain a priority even inrecessionary times.

CSR has a positive impact on intangible assets of a company including a powerfuleffect on developing intellectual capital. It has a long term affect on improving acompany’s bottom line and given several studies and belief that there is a positivelink between social and financial performance, there is an enhancement of reputa-tion and knowledge networks, all of which turn into a source of market value andcompetitive advantage. Social Responsibility is not just confined to corporates, it isalso important for institutions which have a major impact and are expected tobehave in a socially responsible manner. CSR in the future surely holds a key forsuccessful organizations – companies, institutions, whether in recession or instable times. If used and accessed prudently, it can guide business leaders throughrough times as well and provide a support for long term strategies which canprotect the organization against sudden downfalls and storms of crisis.

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References

1. McIntosh M, D. Leipziger, K.Jones and G.Coleman: Corporate Citizenship:Successful Strategies for Responsible Companies(London: Financial TimesManagement),1998.

2. John Elkington: What is sustainable development? (www.sustainability.com)3. Fombrun, C.J.: Three pillars of corporate citizenship: Ethics, social

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CSR Organisations

A few leading organizations in Corporate Social Responsibility (www.iblf.org) are:n Business for Social Responsibility,n Civicus,n Coalition for Environmentally Responsible Economies(CERES),n The Conference Boardn Corporate Citizenship Company,n CSR Europe,n Global Reporting Initiative,n Institute of Social and Ethical Accountability,n International Business Leaders Forum,n International Institute for Sustainable Development,n New Academy of Business,n Social Accountability International,n SustainAbility,n World Business Council for Sustainable Development.

Some of leading examples of business coalitions and associations promoting socialobjectives are:n Business in Community, U.K.,n Philippine Business for Social Progress,n Thai Business Initiative in Rural Development,n National Business Initiative, South Africa,n Business Leaders Forum in Poland.

Websites referred

iblf.org/csr;teriin.org;bsr.org;csrforum.org;sustainability.com;mhcinternational.com;indianngos.com;caringcompanies.com,business-ethics.com;euindia-csr.com;csrindia.org;unglobalcompact.com;rc-sdbp.org