Government incentive for CSR, or not

With the government's intervention, CSR debate in India has taken a perverse course.

Indian companies, and foreign companies operating in India, have by and large failed to demonstrate respect for responsible business practices. Their inaction, and often irresponsible behaviour, is a result of the fact that India lacks a robust stakeholder community. A good chunk of NGOs in India are only too happy to receive donations than to press them to adopt responsible business practices. No wonder, most companies get away with PR-ish charity in the name of CSR.

Multinational companies operating in India have also found it convenient to join the charity-CSR bandwagon rather than setting leadership examples. Many of them have respectable CR initiatives in their home country but in India their CR fails to rise above charity.

Industry's apathy prompted the government last year to introduce voluntary CSR guidelines for listed companies. Though the CSR guidelines are quite impressive in the sense that they include several key issues such as care for stakeholders, workers rights, human rights, environment and inclusive development, the industry does not seem to be obliging. The industry actually started lobbying for incentives such as tax breaks if it were to spend on CSR.

Government officials are divided. India's corporate affairs minister has been quoted saying that companies may be provided fiscal incentives for participating in CSR activities. But a senior official in his ministry recently said that companies should adopt CSR as a corporate culture rather than asking for incentives. He even indicated that if companies fail to adopt CSR, the government may even make CSR-spend mandatory.

Now the perverse piece here is that CSR is being interpreted as philanthropy. Unfortunately, India Inc needs to include larger issues that have become more pronounced with breakneck economic development. These issues include climate change/carbon emission, environmental protection, anti-pollution measures, working conditions, human rights, customer protection, privacy and bribery.

India is even pushing for a bill in parliament that would require companies to spend at least 2% of their profit on CSR activities.

Most likely, companies will have to deal with local politicians and legislators who would want companies to spend on their pet projects. The legislation will also give rise to potential accounting fraud where companies will falsely claim expenditure on CSR.

But this is what happens when the private sector does not take voluntary action. Legislative action then appears as the only alternative. But legislative CSR is compliance, not CSR. Did we not teach all these years that CSR is when companies go beyond compliance?

Philanthropy is CSR in India

It's official now. CSR for Indian companies means philanthropy.

A study by the Associated Chamber of Commerce and Industry in India, a top industry federation in the country, says that community welfare is the primary focus of CSR initiatives by Indian companies. Education for the underprivileged and rural development are the other CSR priorities listed by the surveyed companies.

FMCG companies are at the forefront of CSR (actually philanthropy) followed by chemicals companies and IT companies.

There is no mention of workers' rights, human rights, child labour, tribal rights, bribery and ethics, governance, responsible supply chain, fair wages, workplace health and safety, discrimination, carbon reduction, product safety, consumer rights, stakeholder engagement, protecting natural resources etc.

Though there is no talk of moving toward a low carbon economy or committing to voluntary reduction of carbon emission, the report indicates that making money through carbon credits is catching the attention of companies. "The big corporate houses are now going for the carbon credits which have been a good attempt to prevent the global warming," says the Assocham press release on the report.

In most companies, CSR is being driven by PR executives who see philanthropy as a good photo-op. Many of these companies go on to win CSR awards and get invited (ok, they buy these speaking slots by way of sponsorships) to CSR conferences to lecture on CSR.

Actually, Indian companies have no pressure to embrace corporate responsibility in their operations. An enlightened civil society is missing and media is equally illiterate about corporate responsibility.

Ironically, development NGOs love these companies which are proving to be their new source of funding for philanthropic projects and saving their own jobs.

See here for more on the Assocham report.