Whose Responsibility is it Anyway?

An appraisal of Indian Corporate Social Responsibility Trends for Sustainable Development

The Prime Minister in his keynote speech in February declared that India will contribute significantly to the ‘Fourth Industrial Revolution’ and surprise the world with the magnitude and extent of what it has to offer. And in April, in spite of industrial output taking a hit, the IMF maintained that India was the fastest growing economy. But, even in the face of such stirring growth, the nation could not elude the “medium” developed category (ranked 130th) in the Human Development Index (HDI) released last year.
Historically seen, industrialisation is what the globalised world was built on and it has been the reason developing nations are now converging fast enough to catch up with advanced economies. Contrary to the belief that industrialisation ubiquitously gives rise to wealth disparity, by allowing capital owners to keep accumulating excessive profits, in the last 25 years the world has seen a converging trend in equality. However the most populated countries, China and India, have seen a general rise in inequality.
India, in the past decades, has been increasingly propagated to be on a path of accelerated growth. However in spite of an aggregate rise in GDP and comparative financial stability, the Indian business’ growing exports and foreign investments are being been forged over widening internal imbalances. To this day, there remains an unabated lack of employment generation and development of physical and human resources; that form the very basis of inclusive growth.
Poorer nations are usually dependent on government policies and investments to crutch them with basic physical and social infrastructure. However with Indian industries’ accelerated growth, Corporate Social Responsibility (CSR) has become a potential instrument. If well regulated, it can reinforce straggling welfare schemes against rising fiscal deficit and leakages by generating capital that can give a boost to investment in human and physical capital.
The concept of Corporate Social Responsibility (CSR) was developed from an implicit presumption that with growing industrialisation, business owners and corporations, should act beyond basic profit motivations. As entities that build on resources from the society, they should in return assume an obligation to help it grow sustainably.
Business enterprises exercise considerable influence over conditions of employment and overall development and therefore taking the society’s well-being into account in all their decision-making sustains mutual dependence and growth. CSR when fulfilled on all 4 aspects of philanthropy, ethical use and treatment, legal adherence and economic optimisation; can be effective in bringing about equitable growth and sustainable use of resources that in turn help the corporations themselves grow and spur social welfare in developing and poorer nations.
In 2014, an amendment to The Companies Act 2013 made Corporate Social Responsibility mandatory in India, for companies with a net worth of USD 73 million or more, or an annual turnover of USD 146 million or more, or a net profit of USD 732.654 or more during a financial year, to contribute 2 percent of average net profits of 3 years towards CSR. The contributions had to be made for projects aimed at eradicating hunger, poverty and malnutrition, promoting healthcare and sanitation, education, gender equality, ensuring environmental sustainability, protection of national heritage and for the benefit of army veterans along with contribution to the PM’s relief fund, rural development etc.
The CSR spending in 2017-18 was assessed to be INR 7536.3 crore, up by 47 per cent in 3 years. Maharashtra, Orissa, Uttar Pradesh, Kerala and Karnataka had the highest number of projects at 461 and INR 474 crore spent in 2017-18 while Meghalaya, Mizoram, Nagaland, Pondicherry and Dadra and Nagar Haveli together had only 7 projects with just INR 1 crore. The former states incidentally are the fastest growing and industrialised states in India while the latter have been historically backward with the continual lack of infrastructure. Rajasthan, Gujarat, Maharashtra, Karnataka and Andhra Pradesh who together house 15 per cent of the most backward districts in India received 60 per cent of the national CSR contributions but the north-eastern states where 12 per cent of the such districts exist only 4 per cent was spent.
Sectorally, education has claimed the major portion of all CSR spending, the amount increasing by 75 percent in the last 4 years. Together with health it received more than 51 per cent of the aggregate. From 2014 to 2017, endowments to the PM’s Relief fund have increased from INR 2 crore to a whooping INR 71 crore. CSR projects for slum development however have had almost no funding in the last 4 years, though 7 crore people in India reside in these areas in the most impecunious conditions.
On the global development front, the Sustainable Development Goals (SDGs) were adopted in 2015 by 193 countries, including India, to end poverty, protect the planet and ensure prosperity in general with 169 targets to be achieved by 2030. As the broader set of aims set for nations, it might be the perfect scale to measure the CSR activity outcomes against and to set the direction for future actions. To this end, a study by Futurescape reported that of 218 India based companies assessed in 2017, 35 per cent reported that they do map their goals with SDGs, but only 30 per cent actually disclosed their mapping. Among the SDGs, quality education, decent work and gender equality occupied top positions while peace and justice and life below water were mapped by less than 45%. The main reason for deviation of CSR spending from other equally important SDG goals, has been relegated to poor understanding of the social needs of communities and inadequate implementation capability within organisations. But also it is natural for private enterprises to invest in areas where they base industrial activities or in whatever helps increase their goodwill and brand value amongst consumers.
To remedy that, usually the government is supposed to be an unbiased regulator, fairly channelizing resources to all regions and sectors. But if the Indian government’s 2019 interim budget is any indication, the authorities are shunning social welfare to some extent to provide for other sectors. The Swachh Bharat Mission responsible for improving sanitation in the country saw a 25 per cent cut while the budget for rural electrification program that promised 100 per cent household electrification by March 2019 was reduced by 38 per cent. In addition, the budget allocation for LPG connection to poor households fell from INR 3200 crore to INR 2724 crore this year.
The government’s perspective of growth and relevant sectors for growth, if followed by corporates too, might bring about further departure from the SDGs’ promise of equal access to resources and overall prosperity to each country.
To be able to appropriately set the country on its path to sustainable development, in line with the SDG goals, the government and private entities along with NGOs have to come together to cover a wider range of targets, well distributed between regions and communities to achieve internal convergence against inequality, breaking the regional bias and actually understanding immediate and necessary societal needs at the micro level. The corporations need to not only invest in research but also into customised project plans and long term monitoring and evaluation of the same. They also need to be incentivised, maybe by regional bodies, to partake in newer development plans in hereto disregarded areas that with help could have the potential to support enterprises in the future. The Small and Medium Scale Enterprises, since mostly located in rural or backward areas, can actually better understand the needs of the hour and could invest and run development projects by pooling resources with others in a region, insuring and ensuring sustained growth, against fluctuating revenues. The government at the least must actively encourage investment in other essential parameters of equitable growth than allow more eggs in the baskets of its choice.

Rhitabrita Mukherjee
+ posts

Rhitabrita Mukherjee works with Centre for research on Economics of Climate, Food, Energy and Environment (CECFEE), Economics and Planning Unit, Indian Statistical Institute. She has worked with Centre for WTO Studies, Indian Institute of Foreign Trade also.