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Corporate Social Responsibility in India

corporate_social_responsibilityAs public sentiments focus more on the greater good, pressure on corporations to be responsible and giving citizens is increasing. Now, corporations practically need good corporate social responsibility (CSR) to generate positive press. More and more, companies are trying to integrate social or environmental concerns into their business plan. So far, companies while encouraged and pressured into investing in CSR, have not been forced to do so. India has recently become the first country to pass a law mandating companies to spend a prescribed amount on CSR.

India’s new Companies Act of 2013 requires public and private companies with a net worth of 83 million dollars or more, a net profit of 830,000 dollars or more, or a net turnover of 160 million dollars or more to contribute two percent of their average profits from three preceding years to CSR activities. This applies to all companies including foreign companies doing business in India. It is estimated that the law will apply to over 2,500 companies and generate 2 billion dollars of CSR spending.

One might think that this would be unequivocally a good thing, however it is highly controversial. This is partly due to the fact that the law also prescribes what activities count as CSR. This covers several public goals including eradicating extreme hunger and poverty, promoting education and gender equality, combating diseases or contributing to government programs. The ideology behind this could be positive in a number of ways. After all, the situation where companies spend on not clearly beneficial investments is undesirable. Furthermore, directing spending into concrete development goals will be more effective than diffuse investments.

However, some parties believe that this stipulation stifles social innovation and could lead to token philanthropy or corruption. Professor Aneel Karnani, of University of Michigan’s Ross School of Business, writing for the Stanford Social Innovation Review, roundly criticizes the law. He writes that the law goes against the voluntary nature of CSR, that mandatory CSR is basically an additional tax discouraging foreign investment, and that the stipulations and penalties for non-compliance are too vague.

As with any law, there will be loopholes for companies to slip through and opportunities for corruption. This does not mean it cannot have some impact. The CSR activities of major Indian companies are unique and broad, and with the new law more companies might be encouraged to join them. Tata Group, one of India’s largest conglomerates, spent more than Rs 660 crore (more than 100 million dollars) on CSR in 2014. India Times reports that in their view, meeting the two percent mandate will not be a problem.

ITC, another conglomerate, has received numerous accolades for their sustainability projects. The Nielson Corporate Image Monitor has marked ITC as the “Company most active in CSR” for three years in a row. ITC Hotels have been recognized as top in the world for sustainability at the Global Vision Awards by Travel and Leisure Magazine, U.S. The list of awards continues.

Using advertising for social reform is a new direction for CSR to evolve in. Tanishq Jewllers’ new advertisement incorporating the delicate social issue of re-marriage has gone viral. Havells, an electrical goods company, uses their advertising to teach respect for women. Employee Social Options, a program initiated by the Mahindra Group, has allowed for the donation of thousands of hours of collective employee time to projects related to education, health and environment. They also offer scholarships to the disadvantage and have set up five schools for vocational training. So far over 9,300 students have gained employable skills and all of them have been employed.

A lot has been achieved by CSR in India, yet the new law comes at a time when India is still grappling with several social and developmental issues. There are several opportunities to contribute and create. Now CSR is more than just philanthropy. The law might need to close some loopholes but this could be just what companies need to join the CSR movement.

– Mithila Rajagopal

Sources: The Guardian, India Times, ITC, Kordant Philanthropy Advisors, Lexology, Mahindra Group, Meta Corp, Stanford Social Innovation Review

Photo: EVYP

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Pro-Poor Tourism

pro-poor-tourism-development

The World Travel & Tourism Council predicts that travel and tourism will be one of the world’s fastest growing industries between 2013 and 2021, and the best part is – this will create about 66 million jobs.

According to the World Tourism Organiza­tion (UNWTO), international travel to developing countries is on the rise and the tourism boom is driving development, exports, and jobs. Tour­­ists are increasingly looking for cultural and natural attractions in rural areas, thereby exploring more developing countries. Overall, two-thirds of people living in extreme poverty live in rural areas, so these communities will benefit from this pro-poor tourism according to the Rural Poverty Report 2011 (International Fund for Agricultural Development).

Tourism requires local labor and thus presents more employment opportunities for even low-skilled people. According to the UN International Trade Center (ITC), “tourism offers superior poverty reduction opportunities.” And the UNWTO points out that women and young people, who are generally proportionally disadvantaged, have more opportunities to find jobs within tourism.

It is not all trouble-free, tourism is vulnerable to natural disasters and political instability, and poor communities do not automatically benefit as some companies prefer to import supplies and services. But the ITC is taking measures to promote “inclusive tourism” and elevate the priority of this industry with international organizations and corporations. In 2003 it launched a project in Brazil’s Coconut Coast to increase capacity building activities for  agriculture, arts and crafts, the hotel business, computer science, English, environmental education, design, and culture, all as part of the tourism industry. They even installed an organic waste processing plant, providing balanced fertilizer at subsidized rates to 300 farmers. Today, 70 percent of the 3,000 beneficiaries of the project have found employment (mostly in nine five-star partner hotels) and the monthly income of 390 local women artisans has risen from $40 US to $250 US. The portion of the population earning less than one minimum salary has also decreased from 40 percent to 28 percent. The success of this and other projects confirms the fact that tourism represents an important opportunity for developing countries in their fight against poverty.

– Mary Purcell

Source: UN ITC

Export Impact For Good

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The International Trade Center (ITC) is a joint agency of the World Trade Organization and the United Nations. Its mission is to build and promote businesses in developing countries, assist in becoming more competitive in global markets, speed economic development, and further the achievements of the UN’s Millennium Development Goals (MDGs). It now has more than 40 years of hands-on trade and business experience in the developing world, and a very focused approach to export-led poverty reduction. Their slogan, “Export Impact for Good.”

For ITC, the “true story of development” is the small, low-cost project that aims to give poor people “a hand to get started on the ladder of success.” After a modest level of support and funding, they are on their own path to self-sufficient living, and their success is exponential in impact for the immediate community. Three examples:
• Lifestyle products, derived from a local plant of the Eastern Cape in South Africa, are helping create jobs in one of that country’s poorer regions. Expert help from ITC, funding from an innovative public-private partnership and guaranteed commitments from overseas markets, will raise some 1,000 local people out of poverty.
• Brazilian tourist resort provides job opportunities to surrounding, impoverished areas: like a low-cost, organic waste recycling project – based on a local invention, and the sale of products made by local communities – leading to a significant rise in incomes.
• In India, rural populations are being lifted out of poverty through a program of selling locally produced spices and aromatic herbs on the international market. In just four years, exports grew seven fold and the average income increased five fold, benefiting well over 2,000 people.
The ITC article “New Jobs for Poor Communities Through Trade” gives the full story of the above projects.
– Mary Purcell

Source: ITC
Photo: Independent.co.uk