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The growth of a global civil society in the last decades of the 20th century has created a new context, and a new opportunity to address the problem of corporate power. Corporate social responsibility (CSR) is the result of the emergence of a new corporate accountability movement. The movement clamoured for regulating corporate and business houses and to inculcate in them a sense of corporate ethics. It argued for redefining the culture, customs, systems and norms of the corporate. Corporate ethics judges, whether the goals and policies of business are laid down on ethical principles and whether the same are being implemented honestly. The corporate community should determine responsibility in business dealings, identify important business and social issues. In corporate social responsibility, the expression of a company’s purpose and values in all its relationships is looked at.
Production of material wealth and the service sector are fast developing; similarly the process of production are also changing. There is a paradigm shift in the production skills of the people, which occurred within a single generation. Commitment to society and commitment from society are becoming more and more elusive. It is getting more and more difficult to set parameters of responsibility on businesses and corporates. So the sense of responsibility should come from within.
Corporates have to manage issues that affect their business reputation and respond to the growing needs and concerns of a range of stakeholders. The business response to the tsunami disaster in Asia has swifted, substantially, and provoked a kind of soul-searching debate over the role of companies during extraordinary times. It takes a disaster to remind everyone that there is still a basic argument about putting something back.
Corporate social responsibility is about sustainable wealth creation. It is about companies creating the maximum positive impact on society through their core activities, and supporting them by wisely investing in people and communities. Although there is growing criticism of the very nature and impact of business, such behaviour is nothing more than clear-sighted leadership. Corporate houses cannot exist as little islands of prosperity amidst a sea of deprivation. Invesment in the health of communities is essential to long term success. But this is not the same as simply throwing away a certain amount of money on good causes, simply to be in the good books of society. Businesses are able to bring a number of aspects to community investments that reflect their strengths. Corporates are good at bringing new ideas; where they collaborate to produce solutions for social issues the results can often be powerful and sustainable. They can bring skills and products that can be important in the social realm, and build the capacity of civil society agents to be more effective. They are competent enough to design long-term strategies about, what support needs to be continued in the long term.
The companies select social issues, which strategically fit the core business of the company. Community investment is carried out in partnership with the people working in the voluntary sector (NGOs) or other actors. Corporates can better highlight social issues through their social marketing skills. But when a disaster like the tsunami or an earthquake comes along, companies cannot plead that this doesn’t fit their interests or its strategy.
C.K. Prahalad in his book ‘The Fortune at the Bottom of the Pyramid’ opines that the intelligent application of markets can create a real breakthrough in tackling global poverty. According to him for more than fifty years the World Bank, donor nations, aid agencies, governments and others have taken steps, but have failed to eradicate poverty. It remains the world’s most visible and daunting problem. So there has to be a better approach to alleviate poverty. The innate potential of the poor to innovate and create enterprise needs to be unleashed. Companies should actively provide products and services, which meet real needs affordably and profitably. But the thing to be kept in mind is that global poverty will not be solved by corporate philanthropy.
The momentum against companies, who are associated with the growing problem of obesity, increased with a second lawsuit against McDonald’s, where some of the overweight citizens of New York decided the company’s advertisements had misled them into believing its burgers were healthier than they really were. The case was thrown out, but the concept of corporate responsibility for obesity had been planted in the mind of the public, and generated a series of articles, comments and threatened legislation in different parts of the world.
Government Efforts
There are instances in which governments step in to bring corporate and business houses under the ambit of their society. The European Parliament brought a proposal that companies who pollute have to pay the full costs of any clean-up, and that all companies must take out environmental insurance to cover this eventuality. Meanwhile in the US, a court has cleared 45 handgun manufacturers and distributors of liability in the use of their products by criminals. The suit had alleged the firearms industry knew that corrupt dealers were supplying their weapons to criminals and did nothing to stop it. The industry argued that it was unfair and unlawful to hold manufacturers liable for the criminal use of a legal product.
It is the responsibility of the government to ensure that business houses adhere to the laws of the country and whether they comply with their promises in the contract. Governments should come to the aid in the larger interest of society to make sure that companies adhere to the laws governing pollution, waste disposal, etc.
“An employer can be subject to suit for breach of contract for failure to comply with any promise it made. Thus the gap between stated corporate culture and actual practice has significant legal, as well as ethical implications.” – Drake and Drake.
Frontiers of Corporate Philanthropy
The business community should be sensitive to the problems of the society. The following is a brief list of areas where corporates should show their responsibility.
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Social issues like education, poverty, disease control, etc.
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Natural calamities like earthquake, floods, etc.
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Protection of the atmosphere, flora and fauna
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Sustainable use of natural resources
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Recycling and proper disposal of wastes
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Energy conservation
In India more than 70 million children suffer from iodine deficiency. Hindustan Lever Limited (HLL) developed an innovative process for treating salt which meant that it would retain its added iodine content in spite of the harsh environmental conditions. It created an iodised salt. The venture has proven to be both beneficial to health, and profitable for the company. Nestle settled its claim against the Ethiopian government agreeing to take only US$1.5 million instead of the US$6 million and then immediately donated the sum to famine relief in the poverty-stricken country (Ethiopia’s then military government in 1975 nationalised a livestock firm that was owned by Germany’s Schweisfurth Group, a Nestle subsidiary. It resulted in a row with the Ethiopian Government over compensation. According to Oxfam, the Ethiopian Government have offered to pay Nestle about US$1.5 million, a figure based on the current exchange rate between the dollar and the Ethiopian birr. But Nestle pushed for a payment of US$6 million, a sum based on the exchange rate at the time of the nationalisation). Bill Gates in his November 2002 visit to India made a corpus of US$100 million for the Bill and Melinda Gates Foundation’s local arm for its efforts in fighting HIV/AIDS. Companies also stepped up to the challenge of HIV/AIDS in Africa, with those such as Gold Fields, Anglo-American and others extending their initial support in providing anti-retroviral drugs for their employees, to the families of those employees, and increasingly out into the local communities.
Tata Council for Community Initiatives (TCCI) in India is demonstrating the Group’s abiding concern for society. With the active contribution and participation of Tata Group companies, TCCI has helped communities to become strong and self-reliant. Specifically designed programmes such as vocational training, education and computer training are also made available to various sections of the community. TCCI undertakes projects in the fields of education, vocational training, community health and water management, etc.
Corporates should monitor the ways in which their funds are spent in society. There is no point in large-scale spending from the corporate exchequer without proper monitoring. Corporates and business houses should make maximum use of their human resources and community development departments to ensure the ways in which their community interventions are carried out. Corporate spending in the sake of public interest should not be considered as a tax-saving exercise or as a promotion campaign.
Challenges Ahead
The corporates should nourish a set of values beneficial to society and take an empathetic view of the problems of society. They should be open and become aware of the social issues and be responsible to their actions. Corporate houses should be proactive in its legal compliance, including international laws relating to international bodies. Companies should operate in places that are democratic and if democracy is not in place, they should work to develop it. Transparent lobbying is a responsible attribute of any company. Companies should not undermine workplace democracy measures, such as free trade unions and collective bargaining, attitude towards women, etc. They should be subject to binding complaint processes and dispute settlement systems, which are available to all for their perusal.
Corporate responsibility does not mean that corporate houses are responsible for each and every action that takes place in society. Responsibility of the corporate should be held within a fine balance. “In every era, society must strike the right balance between the freedom business needs to compete for a market share and to make profit, and the preservation of family and community values. If either is undermined the consequences will end up costing us all, more in long term, materially and otherwise than we can possibly gain in the short term” – Hillary Clinton.
The corporate world and business houses should come out of their image of social parasites. This is possible by venturing into social engineering of a different type. Corporate activism in society should be in a win-win approach. The guiding principle should be more social responsibility with more business. Corporates are not an entity apart from society. Society is an entity in itself, full-fledged with a very intricate network. Corporates should be responsive to the sensitivities and sensibilities of society. The benefits of globalisation cannot be realised so long as the poor have no access to them. It is the responsibility of the corporate world to come in to realise the dreams of the world’s disadvantaged so that they can share the fruits of development.
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