Saturday, 18 January 2020

The Dark Face Of Corporate Social Responsibility

Updated: December 4, 2010 2:33 pm

From the last few years, figures reveal that corporate scams are zooming up and that too with high crime ratio. The famous names like Enron (the biggest security scam), Bank of Credit and Commerce International, UK (the largest financial scam), subprime mortgage (the largest mortgage fraud) and Satyam Computers (biggest financial farud by its founder, Ramalinga Raju) had done some of the big frauds, at the end of the day, which impacts only the common man—aam admi in terms of incomes and savings.

                KPMG’s recent survey indicates that ineffective-control systems and diminishing-ethical values are contributing to a growing prevalence of corporate fraud in India for the last two years. More than half of the 200 Indian companies have been founded making fraud in financial reporting. According to Rohit Mahajan and Deepankar Sanwalka of KPMG that volatile-economic conditions and increasing business and technological complexities have led to increased opportunities for fraud.

                Long before corporate social responsibility (CSR) became a popular phrase for the business and media environment in India, our traditional business houses like Tatas and Birlas promoted social good in their operations. Increasingly, the environmental issues have come under the ambit of CSR. Not only public companies but also private companies with international shareholding adopt the same practice.

                But the story of CSR does not end here. CSR in India has gone beyond merely uttering of a clearly-defined social philiosophy from the doctrine of welfare state or as a part of companies’ governance strategies. It is approached to use the loopholes of the laws in a more-organised fashion. It has become an integral part of companies’ strategy of malpractice and misusing the concession and subsidy of the government to reap profit.

                In March 2001, the high-profile Indian operation of Hindustan Unilever was found to have dumped over 300 mt of mercury outside its thermometer plant at Kodaikanal in South India, whose website states, “We are committed to conduct our operations with integrity and with respect for the interests of our stakeholders. We are also committed to make continuous improvements in the management of our environmental impacts and to work towards our longer-term goal of developing a sustainable business.” The Tamil Nadu Pollution Control Board (TNPCB) shut down the factory, when faced with this evidence and HUL’s admission of breach of law. Ten years on, however, there has been no clean-up initiated by the company and the surrounding area still continues to be contaminated. This is an example of unethical business practice in India, when CSR is used for brand-building.

                It is easy to blame multinational giants as it is often found that many of these companies have varying standards of corruption in their governance depending on the country of their operation. The CSR standards are jarringly inadequate, when it comes to the so-called ‘developing’ world. This has been seen in Shell’s Nigerian operations, Coca-Cola’s operations in India and many other instances.

                But, what about our own companies? Not big giants like Satyam or Enron but even the small and the medium industries of West Bengal, having serious pollution potential did not carry out certain corporate social responsibilities like community development programmes in the concerned areas as they were promised to do. Corporate Social Responsibility (CSR) is defined as ‘the ethical behaviour of a company towards society’ which manifests itself in the form of noble programmes initiated by for-profit organisations. These programmes could range from overall development of a community to supporting specific causes like education, environment, healthcare etc. Perhaps this philosophy seems to be irrelevant to the sponge iron units, cement plants, drug manufacturing units, lead smelting units, insulation and induction furnaces and coal-based power plants, situated in different parts of the state. The State Board has identified the number of such units to be 121 and therefore the State Environment Impact Assessment Authority (SEIAA) imposed certain corporate responsibilities to be complied by those industries. Not only private but also the public companies are on the list among which only five companies responded after SEIAA issued a notice to them.

                It is observed that compliance of such corporate responsibilities has almost become a mere documentary formality for these industries and at the ground level the implementation of such corporate responsibilities appears to be on paper only. Biswajit Mukherjee, Chief Law Officer, Department of Environment, Government of West Bengal and West Bengal Pollution Control Board said, “This trend is continuing unfortunately in every industry of the state.”

                Companies get facilities in the form of water cess at 25 per cent, concession on electricity price and other fringe benefits. These companies are not only taking unethical advantage of the government policies but also violating the CSR guidelines of the ministry of corporate governance. Companies should take measures to check and prevent pollution; recycle, manage and reduce waste, should manage natural resources in a sustainable manner and ensure optimal use of resources like land and water.

                Achieving higher levels of ethical conduct and achieving all optimal positions is a balancing act. “More than money, CSR is the commitment of the organisation to be responsible that really makes a difference,” said Kapil Rampal, CEo, Creative Crest, a leading PR company. Though according to R Bandyopadhyay, Secretary, Ministry of Corporate Affairs that in the short-term unethical business practice may sound nice, but in the long-term, one cannot survive without proper governance and transparency, day-by-day this is found to be missing in the corporate governance of many organisations in our country.

                The fact cannot be ignorable that in the long run, a business cannot survive without proper governance and transparency. Day-by-day this is found to be missing in many organisations across the globe. Then what is the future of the ethical business and CSR? According to Rampal, CSR has moved beyond the concept of being an exception or optional practice. Businesses have no choice but to be responsible as the resources that are available with the big multinational corporations exceed that of several nations. They also have a need to contribute towards making the world a better place. Customers are showing increasing preferences for caring corporations in the surveys done over the past two years. It is need of the hour. Companies who are not focused on CSR will either need to shape-up or ship-out!

By Samarpita Roy

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