A FEW UNCONVENTIONAL THOUGHTS ON CSR

Giving back to society is the vague sense in which many people, including in corporate board rooms, understand CSR, but to make sense of what constitutes CSR in India it is important to take into account India's political and economic context

TK Arun

Corporate Social Responsibility, CSR for short, has begun to have a dominant presence, on the catwalk of corporate fashion, if not quite on the inner realms of corporate conscience. It is useful to have some clarity on not just the usual distinction between philanthropy and CSR but also on the uniquely Indian opportunities for CSR.

Giving back to society is the vague sense in which many people, including in corporate board rooms, understand CSR. This is one view. Another view is that the term CSR should grace only such actions which while benefiting society also improve the returns to shareholders. Thus, giving money from net profits to fund primary education is charity, not CSR. But for an FMCG company to spend money on teaching rural Indians to wash their hands with soap before and after the passage of food through the human body would be CSR: it improves public hygiene and public health, and increases the sale of soap, improving the company's bottom line.

This is the conventional sense on CSR. However, sense depends on the context. India's overall political and economic context has to be factored in, to make sense of what constitutes CSR in India.

Would building schools and hospitals in the neighbourhood be charity or CSR? In India's predominantly rural landscape, a large enterprise often has to build the urban environment in which alone it can operate, often taking over rural land and displacing its occupants. Thanks to India's competitive polity, and the Narmada Bachao Andolan's signal contribution of making project displacement a central political issue, such town-building can prove unsustainable, due to popular opposition, as happened in Singur. In such a situation, building schools and hospitals and training youth drawn from the displaced local populace to become workers in the enterprise all cease to be charity, but integral to the working of the project. Actions that are conventionally classified as charity become CSR in India.

I have something more unconventional to suggest. Encouraging workers to form democratic unions would be an ideal form of CSR in India. The typical reaction would be that this is a prescription for hara-kiri, not CSR. But that's not quite how it works out. Consider the fact that Indian democracy, of which we are all proud, is financed, in the main, by money taken off the books of our companies. This practice, a direct consequence of India not having an institutional form of political funding, is the root cause of corruption, delays and dysfunctional governance. Politicians have to build a war chest for themselves and for their party. They sell patronage, extort money from the public or steal from the exchequer for this purpose. Such activities cannot be carried out without the collusion of the bureaucracy. The necessity of mobilising financing for politics thus translates into generalised loot of the public and subversion of governance. Enterprise and commerce are victims of this corruption of democracy and debasement of governance.

How do we get out of this rut? Take the help of the unions.

Democracy is not just about ideas and enlightenment. It's also about changing the structure of social power. Those who gain from the status quo would resist any change. That is why you need organised action by the people at large to bring in democracy. Europe and the United States secured democracy through revolutions. Democracy was thrust upon India by the historical circumstance in which India got freedom from colonial rule, without the bulk of Indian society being galvanised into change the way European societies were, when they transformed into democracies. So Indian democracy is more form than content. For it to change, including changing the way political funding takes place, there has to be organised action by the people - politicians and the bureaucracy will fight change tooth and nail. Without unions, such organised action is impossible.

Don't think this represents, for business, a trade-off between democracy and profits. Quite the contrary. Functional democracy and governance would do away with the rents that eat into profits, and boost productivity. But that's not all. Unions would bridge the gap between the enterprise level rationality of keeping wages low to boost profits and the macro level rationality of enlarging domestic demand for industry's produce by increasing the purchasing power of its citizenry. The mass market has been the biggest driver of corporate growth and profits in human history, and the mass market is a product of better incomes for the workers, who would get that better income only as a result of unionised collective bargaining.

Society would gain, and so would shareholders, as union activity deepens democracy and creates a mass market. Formation of unions fits the bill for CSR quite well.

Salman Khurshid, Union Minister for Corporate Affairs (third from left), with Christian Schlaga and H Chaturvedi (left), Arun Maira, Anupam Varma and TK Arun (right) at the two days international CSR summit