The ideas of mandatory and voluntary CSR in India (Part 5)

Let’s look at this at two potential alternatives in front of us. Let’s understand this in ceteris paribus conditions of a corporate responsibility framework being created from scratch. This

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Mandatory CSR Spending (as it exists today in the form of a law)

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This definition of CSR in India is not be mixed with the UN definition of CSR, which means “where companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which the company achieves the triple-bottom-line of economic, social and environmental imperatives” (Waldron, 2022)

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For India, “CSR and Responsible Business Conduct may be seen as two different aspects India, whereas in almost rest of the world both are considered the same” (Dr.Garima Dadhich, 2022)

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Eva Saduon (Waldron, 2022) calls out how the CSR law in India tends to incentivize companies to carry out CSR unconnected to their value chain or their core business. Only once it is embedded within its business practices would something like this become more authentic and tangible for a corporation to drive, an exploration that happens later on in this policy brief.

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Since I could not access any reasoning or literature explaining why Sustainable/Responsible Business and Corporate Social Responsibility are not the same for a country like India, I present a practitioner's perspective on how this would be different and hence why CSR could be justified as needed, separate from the otherwise embedded sustainability expectations from a corporate (more on this concept of embedded sustainability in a later post).

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1) Extreme poverty in India results in the need for intervention from the private sector.

2) Need for technology and innovation-driven solutions in the traditionally lagging fields of education and health.

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3)?An integrated partnership with the government is needed to help develop the necessary youth into industry-ready skilled workers through apprentice programs.

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4)?Contribution to disaster relief efforts of the government.

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5)?Ensuring leadership on environmental sustainability, compensating for the negative externality of running manufacturing facilities, which doesn’t naturally resolve in the business working processes.

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6)?Ensuring financing and funding by financial and banking companies follow a defined moral code and ethics towards a climate change-mitigating future.

Concept of Trusteeship / Voluntary CSR (as envisioned by Mahatma Gandhi for a responsible corporate)

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To understand the nuances of how CSR is viewed in India today, it is important to walk back into the approach of “trusteeship” that Gandhi pioneered when he was the moral leader of the freedom movement. First, we must recognize that Gandhi’s “bania” background had a lot to do with his initial exposure and trust of trade and businesses. His later life was full of cases of the biggest of businessmen from Ambalal Sarabhai to Jamnalal Bajaj to Ghanshyam Das Birla; all being very close contacts of his.

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Gandhi’s view on trusteeship is similar to the Quaker approach to stewardship of business activities and wealth. Gandhi was all for property rights, but did not believe either individual should own all wealth or the state should take over control – he believe more in the concept of “trusteeship” – which advocated intensely for voluntary trusteeship by the wealthy (along with Gandhi also not being pro-inheritance, which he believed created laziness, intellectual loss and lack of innovation for further generations).

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Just like the terminology of “reputation building” which has been used extensively to get corporates to do more CSR and become inherently sustainable, Gandhi in the context of early to mid-20th century, called for the wealthy to voluntarily indulge in trusteeship commitments or be open to the risk of being swept aside in a class warfare (especially given the strong appeal of the socialist school of thought).

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For Gandhi, it was important not let the potential wealth-creators be either attracted to the fascist dictators who would protect their private property or through high wealth-taxes be shoved into external tax havens, leading to further erosion of wealth and innovation in the country. He highlights how the checks and balances of capital and labour possibly colluding together, can be averted by ensuring that they are answerable to the consumers for their actions (in today’s context of ESG & CSR, we may also add the environment into it). (Rao, 2021)

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Bibliography

Dr.Garima Dadhich, D. R. (2022). Chapter 1 - ESG & CSR eco-system in India. In D. R. Dr.Garima Dadhich, Benchmarking ESG & CSR” (pp. 1-9). New Delhi: Taxmann Publications (P) Ltd.

Rao, J. (2021). Chapter 11 - Gandhi's trusteeship: perspectives and approaches. In J. Rao, Economist Gandhi: The roots and relevance of the political economy of the Mahatma (pp. 153-168). Gurugram: Penguin Random House India.

Waldron, S. (2022). Corporate Social Responsibility is not Public Relations. Mumbai: Jaico Publishing House.

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