CSR in a comparative perspective by Sarah Berman

The definition of corporate social responsibility in India is rather unique and follows an approach that combines philanthropy and business strategy. How is the Indian concept of CSR different from what is followed in other countries?

This is a part of a series written by students visiting from the U.S., on CSR practices in India. It was introduced by Nandini Deo in a piece in July titled ‘A brief history of Indian CSR’.

While guidelines regarding corporate social responsibility from international bodies such as the Global Reporting Initiative and the Institute of Social and Ethical Accountability provide broad direction, CSR practices vary from country to country and even from company to company. CSR targets a wide array of causes around the world, from religious groups to education programmes to research institutions.

In India, the definition of CSR is tapered and specifically directed toward helping the underprivileged. It’s a unique approach, combining both conventional philanthropy and careful strategy.

Globally, definitions and guidelines on CSR emphasise the need for synergy between a company’s core business and its philanthropic efforts. The United Nations Global Compact integrates the two in its definition: “Strategic philanthropy seeks to combine a corporation’s core competencies with its charitable efforts….” The European Commission, the European Union’s executive body, defines CSR as, “the responsibility of enterprises for their impacts on society.”

Such broad descriptions give countries and companies the wiggle room they need to do CSR in a manner that is aligned with their expertise. For example, Google arranges technology and innovation initiatives and Johnson & Johnson focuses on societal and environmental health. France, Denmark, South Africa, and China have all implemented various CSR reporting laws to aid companies in standardising the way they report CSR but not the way they practice it.

In addition to the definition, it is also important to note the context in which CSR is practiced around the world.

For instance, the U.S. government does not mandate corporate social responsibility, although there is a CSR team in the Bureau of Economic and Business Affairs to encourage corporate giving. Most CSR practices in the U.S. develop from the provision of tax breaks for philanthropy or by consumer pressure for ethical brands.

Despite varied American corporate approaches in both reporting and activities, many argue that CSR should be good for business itself. The Boston College Center for Corporate Citizenship notes the link between corporate citizenship and reaching strategic goals among companies in the U.S. Some of those goals include garnering new customers, boosting reputation, and securing a sustainable supply chain. In the Harvard Business Review, Michael Porter and Mark Kramer suggest that strategic CSR must be tapered toward individual companies, avoiding generic or broad CSR approaches, and be anchored in a business-society team, not a business-society head butting. Business competency rather than social need should define the CSR initiatives.

One particularly successful CSR approach is the ETHOS Institute, a Brazilian NGO that facilitates CSR for firms that account for 35% of the country’s GDP and employs over 2 million people. It recognises the potential of a convergence between society, the political system, and the private sector. ETHOS states that successful CSR lies in guided mobilisation.

An example of this is the Global Reporting Initiative’s Report or Explain Campaign, which advocates sustainability reporting and corporate disclosure. The ETHOS Institute supports this campaign since it parallels the principles of guiding companies toward transparency, especially when it comes to concepts such as sustainability and CSR.

In Africa too, internal and external initiatives account for the increasing institutionalisation of CSR according to Judy N. Muthur in a Nottingham University Business School study. For example, social responsibility agreements have been implemented in Ghana that make logging companies provide resources for forest communities.

The Indian CSR mix

 

The CSR definition and approach in India mixes traditional philanthropy and strategic projects, and CSR operates in the context of a pressing lack of resources—such as schools and toilets. In contrast, CSR in wealthier societies favours giving to cultural institutions or implementing green business practices. A community’s need is a major factor in the CSR landscape. Broadly, India places community need at the top of the CSR priority list whereas other countries more often approach CSR with the intrinsic skills of the business. Either way, the integration between CSR and existing enterprise provides bilateral benefits.

The 2013 Indian Companies Act provides a specific framework for India’s approach to CSR and a new context for companies to acclimatise. Schedule VII of the Act also outlines thematic areas in which to focus CSR efforts, such as addressing extreme hunger and poverty, promoting education, promoting gender equality and empowering women, and the Prime Minister’s National Relief Fund. CSR, within the context of the Act, is an approach tapered to helping those at the bottom of the societal totem pole.

Large corporates such as ITC and Hero MotoCorp use the “triple bottom line” approach to CSR, which targets environmental, social, and economic causes. They outline their own areas of focus that are more connected to their mission and objectives as a company, such as ITC’s stress upon sustainability and agriculture, in their CSR work.

Many well-established companies possess robust CSR practices dating back long before the Companies Act and already have an established approaches to CSR that do not focus on the reporting or the results highlighted by the Act. One member of ITC’s social investments team described this thought process: “Most look at the end result. We believe the process is more important.” CSR in India is framed in both the context of past practices as well as the Act’s recent requirements.

One characteristic of the Act that makes it quite distinct is the Ministry of Corporate Affairs’ separation of CSR and business activities. This approach overlooks the potential of CSR when tied to a company internally. Intertwining CSR with a corporate’s expertise is a viable approach because it allows companies to use pre-existing resources and build upon industry specific savvy rather than start CSR from scratch.

Utkarsh Majmudar, a CSR researcher and professor at the Indian Institute of Management, Udaipur, says: “There is great potential for CSR, and it should be a part of business activities. This differs from the government definition that is outside-driven. CSR should be more internal.” Majmudar’s definition aligns with CSR approaches in various countries, and India’s partition between CSR and business proficiencies is an anomaly that causes CSR in the Indian context to manifest as external programming addressing societal need rather than as internal social responsibility intertwined with a company’s entire operations.

The biggest differences between India’s CSR thrust and the approaches in other parts of the world are:

  1. The Indian government mandates spending
  2. CSR is understood as a way of mitigating the negative impact of business activities on local communities, and
  3. A clear distinction between the business and its CSR efforts is required.

 

This means that business success and social wellbeing are framed as antithetical. In most other places, from Brazil to the U.S. to the European Union, the two are seen as mutually beneficial. Using the core competencies and self-interest of business can lead to greater efficacy of CSR in India, because companies would have more of a stake in their CSR projects if interlaced with their own business practices.