Sustainable development challenges and CSR activities in India

Finnish Ambassador to India, Asko Numminen opened the conference with a call for more international cooperation on sustainable development and a move from rhetoric to global action. Sixteen years after the Rio Summit he pointed out that although the concept of sustainable development was widely accepted and formed the core of many development policies, there was still a need to change to more sustainable forms of production and consumption. Although sustainable development has been mainstreamed though policies, instruments, incentives and regulations we are still witnessing very unsustainable growth paths.

Numminen pointed to over 3000 bilateral and multilateral agreements on the environment but insufficient understanding of the concept amongst general populations and he emphasised a key role for education. Moreover, he pointed to the need for more research, showing the risks and dangers that lie ahead and in turn, raising the awareness of citizens and government alike.

Interestingly, although Numminen pointed to the difficultly in achieving the Millennium Development Goal (MDG) on environmental sustainability, he argued that the MDGs needed much more link to the achievement of sustainable production and consumption. Moreover, he stressed the urgency of doing this and the importance of better engaging countries such as India in plans for post 2012 commitments to greenhouse gas reductions.

A particular concern of the Finnish Ambassador related to the impacts of climate change on women. Rural women in developing countries are going to be the worst affected by climate change as it impacts on agriculture, he said. Rural women were said to be guardians of the natural environment and make purchasing decisions on behalf of their families. There is therefore a need to better engage women, empower them and strengthen their participation in climate change adaptation and mitigation.

Kirit Parikh, a member of the Planning Commission of the Government of India argued that sustainable development is needed, desirable and locally, environmentally beneficial. However, he raised considerable doubts about the global environment unless patterns of development change.

Much of the change that he envisages relates to engagement with issues of equity. In particular, he raises the issue relating to who is going to be damaged by climate change, who caused it and how the burden of abatement should be distributed.

The bottom line is that 75% of energy is consumed by 25% of the world’s population, leading to 70% of the carbon emissions. That same 25% consume 70% of the world’s minerals and 75% of its timber. One American child requires thirty times the resources of an Indian child, argues Parikh. That is hardly equitable.

Parikh asks how are we going to move to the global decarbonisation that is needed if we are to tackle climate change? His answer is to call for a shift in energy policy, technical solutions and changing consumption patterns. They key to all of this is a move towards per capita emissions targets he argues.

Industrialised countries need to reduce their greenhouse gas emissions by 80% to 90% by 2050, says Parikh. At that point the CO2 per capita in the industrialised world will be 2.5 tonnes. In India, at present growth rates, per capita emissions will not reach that level until 2030.

A key facet of equity relates to poverty. Parikh points out that climate change will impact disproportionately on the poor. Poor people are vulnerable to climate change whereas the rich are relatively resilient because they can spend more on hedging against climate change. Extreme events in the future will increase homelessness and poverty because people will lose their livelihoods, so often based around agriculture. We will also see large scale migration.

Parikh says that India’s right to development cannot be denied and to eliminate poverty requires a 9% economic growth rate per year. Any international agreements to climate change must allow India to eliminate poverty, he says.

Although not responsible for climate change, he says that India is nevertheless a responsible country and will ensure that its own per capita greenhouse gas effects will not exceed those of developed countries. The ball is in the court of developed countries, he says, but they are currently delaying action. Developed countries have been and continue to be free-riders on the developing world.

Parikh calls for an equal per capita emissions quota, not by 2050 but now! Moreover, he argues that since adaptation has been forced on developing countries, there should be compensation paid for damage to agriculture, sea levels rises, the costs of sustaining the Himalayan ecosystem and other damages. Adaptation is expensive and those imposing the costs on the developing world should pay. That is equitable, he says.

Given the challenges facing India laid out by the keynote speakers, I was keen to better understand how the Indian business sector is responding. I must admit to having a good understanding of the approach taken by many of the multinational players in India but I am a lot less clear about the responses of the domestic business sector.

There was a stream of papers at the conference on CSR in Asia, which, of course, I was particularly interested in. The stream started with a highly conceptual paper describing the characteristics of a sustainable enterprise. Nisha Pandey argued that there was a need to move from profitability management to sustainability management but was unable to provide any example of any company anywhere that operated its business according to her notion of sustainability.

To my mind this type of research is completely the wrong way around, especially in India. Preaching to businesses and telling them how to run their businesses is going to achieve nothing. We have been trying to do this for the last twenty years and have achieved very little. What is much more important is to examine the examples of good business practices that did exist and work out how we can transfer these practices more widely. In particular to learn the lessons from some of the successes we have seen in developed countries (and sometimes developing countries) and understand better how to translate sustainable business practices into the developing country setting.

Making profits is about “what you do” whereas CSR is about “what you are” according to Mandeep Singh, giving a presentation on the activities of Tata (although he is not from the company itself). There is a need to balance corporate power with social responsibility, recognising that the private sector has little experience in dealing with social issues, he said.

Tata invests in a range of CSR initiatives ranging from public health to work-life balance and from arts and culture to the environment.  His presentation was strong in highlighting the awards that various parts of Tata had been given.

Tata was said to be strong on environmentally responsible production with an emphasis on initiatives on reuse and recycling, energy saving. It was stressed that Tata had a policy of employing people with disabilities. It has initiatives on road safety. The Tata Trust provides grants to NGOs and to poor people for education and medical care. Loans are also provided for higher education. Tata was said to be giving a lot back!

There was no mention, however, about poverty, climate change and the challenges outlined by Numminen and Parikh. Tata are doing a lot more than the speaker outlined, but he clearly viewed CSR through a very traditional, philanthropy-linked discourse. In my mind he did Tata no favours and seemed not to fully understand CSR himself.

Luckily though on day two of the conference there was indeed a presentation form Tata Steel. This presented a rather different picture of the activities of the company. Rather interestingly, the presenter went to some length to describe Tata as a global company with operations in many countries outside India. I return to this important point below.

The presenter, G. H. Sharan saw the main drivers of CSR as firstly, poverty and inequality and secondly, as climate change. Key to their approach to CSR and sustainable development is stakeholder engagement and dialogue. Philanthropy is strong with between 5% and 13% of net profits being spent on CSR projects in a typical year.

The speaker said that community support is the very purpose for the existence of a company and that Tata Steel had sophisticated community based projects ranging from “adopting a village” in poor rural areas to protection of communities around the locations of plants. A particular emphasis is put on affirmative action, particularly in relation to ethnic minority communities and women. This includes projects to promote entrepreneurship and the promotion of income earning activities amongst women and minorities. There are also many projects across India promoting health, sanitation and AIDS awareness.

The Tata CSR strategy aims to increasingly move from paternalism towards partnership. Sharan was keen to stress that CSR is a pre-profit exercise and that even with a global downturn, CSR budgets would not be cut.

But CSR is nothing new in India, according to Vivek Srivastava, where there is a long history of social responsibility. Businesses do not exist in a vacuum and businesses realise their social responsibilities, he says. Different stakeholders are pushing businesses to be responsible and globalisation is forcing the adoption of the best business practices. Businesses need CSR to improve market share and recruit and retain employees. Well, he understands the rhetoric but could provide little evidence of this being the reality.

Nevertheless, we are seeing CSR as a move from philanthropy to business strategy, he says. Strategic CSR, as Srivastava calls it, is about adopting international CSR guidelines and standards to attain a competitive advantage and a sustainable profit.

A survey presented by Srivastava found that 75% of managers in India think that CSR is important. However, Western type guidelines might not always be appropriate in the developing country setting, it found, contradicting his view expressed in the previous paragraph. Human resource policies, company image, strategy formulation and sustainable development are the most important aspects of CSR according to the survey. It is not rocket science is it?

In a refreshing change to the positive rhetoric of many other papers, Ruchi Tewari still saw CSR in a very nascent stage in Indian companies and said that many businesses still struggle to work out what CSR really means. CSR was seen as highly fluid in the developing country context and this presentation argued that in the Indian context many aspects of CSR need to have a basis in the law if they are going to be effective.

Businesses in India are still facing difficulties in adopting CSR. There is a good deal of ‘greenwash’ amongst some companies and for many companies CSR is a mere paper exercise. CSR only happens where there is a penalty attached to not doing it, Tewari argues. There is a lack of awareness of CSR amongst managers and other stakeholders.

Most domestic businesses in India are SMEs and these companies struggle to complete with large foreign multinationals, she says. That highly competitive environment is seen as a reason not to adopt what is perceived as expensive CSR in the eyes of many managers of domestic Indian companies.

But even amongst bigger companies in India where we do see stated commitments to CSR and sustainable development and even CSR managers, budgets allocated to CSR tend to be extremely low. According to Som Sekhar Bhattacharya who examined large mining companies in India, CSR managers often had little or no background on CSR issues and typically came from production backgrounds. Few CSR managers had received relevant training. Moreover, he found that CSR managers received incomes of 20% to 30% lower than their peers. His findings were that senior management rarely engaged in discussions relating to CSR and tended not to interact with CSR managers. He found little leadership support for CSR, even in these large companies.

Bhattacharya‘s research finds that CSR is not seen as a shared perspective in these Indian companies. CSR rarely cuts across all departments and is rarely integrated into project management. Moreover, his findings pointed to a poor understanding amongst CSR managers of what was expected of them. As one interviewee remarked “CSR is like a small island off the continent of this organisation”.

The research also points to CSR projects that are sporadic, poorly funded, reliant on slack resources and not targeted at either community needs nor core business functions. Far from being strategic, CSR was an add-on, piecemeal and oriented around stories for the media.

Corporate philanthropy may be quite strong in many companies in India, but that is not CSR. Indian businesses are often said to treat their workers as members of their family, but that often does not always translate into socially responsible human resource policies. Few companies consider that they have any responsibility for what happens in their supply chains and few have codes of ethics or codes of conduct. Consumers are interested in the price of a product not in how it is made. Management is often not well educated on modern management techniques. There is a perception that CSR requires significant funds and not something that Indian companies can afford. These factors may explain why CSR is not so common in domestic Indian businesses.

Tata may understand and practice CSR but it positions itself as a global player rather than as a domestic Indian company. As such it is atypical and cannot be seen as representative of the state of CSR in India. The reality is that CSR in domestic Indian companies is actually very underdeveloped and still not well understood.

The challenges associated with sustainable development facing India seem to be huge. Based on the papers I heard at the conference, in the main the domestic business response in terms of CSR has generally been inadequate and inconsistent with those huge challenges. There are three main problems. Firstly, CSR is still largely misunderstood by Indian businesses and their stakeholders. Secondly, there is a view that businesses are already socially responsible, when they are clearly not. And thirdly, businesses lack the tools, knowledge, commitment and management skills to embed CSR in their organisations.

Despite the challenges, it seems that most Indian companies are failing to recognise the role they should be playing in delivering sustainable development in their country. The real challenges facing India now and impacting its development path in the future is going to require the engagement of Indian business. As yet, there is rather scant evidence that this is happening. ■