ABCDE of corporate social responsibility: Economic Times 31st March 2012

Antilla and Singur are two sides of the same capitalist coin that has been minted in the last two decades in India. Antilla is a manifestation of the achievements of free markets and capitalism when private enterprise works to create shareholder value. Singur is a grim reminder that India is still a poor country and that the trickle-down effects are nebulous enough to create a backlash. This has come in the way of three reforms in the country: land, environment and labour.

Free markets are all about the survival of the fittest but when growth is uneven, it creates wrinkles in our social fabric. There are established interest groups that have emerged to slow down its proliferation. While social activists may actually care, it also allows for leverage by political manifestos, besides germinating pseudo militant groups that subsequently become terrorist outfits.

While India has definitely made the headlines in producing a lot of wealthy people, the fact that between 20-40% of the population is poor and even worse over 40% of children are malnourished, should make us stop and think. Should there be a responsibility on industry to give something in return? While strictly speaking, the answer is no, given the tremors witnessed at times, we may have to change perceptions that growth has to be a 'joint' and not 'trickle-down' process.

Today, corporate social responsibility ( CSR) is a feeble attempt most of the time which aims to embellish annual reports, though admittedly some of the corporates have done a lot for their local communities. Given that the redistribution channels through government expenditure is afflicted with leakages there has to be a direct effort made by the private sector to create trust. This way, when there are expansion plans, there will be support from the local constituency.

A five-point approach is called for where companies actually bring about participative development.

The acronym, ABCDE approach can be used here. First, the company should Adopt a geography which really means that it should target a fixed perimeter and work towards developing this area. Having scattered programmes seldom works.

Second, the funds deployed should be used for Building structures that entails creating social requirements for the adopted geography so that the community is aware of what the company is doing. Building schools, health centers, community halls, setting up of bank branches are examples of the physical and financial infrastructure that has to be created.

Third, the focus should be on Creating competencies. Government programmes normally are constrained by funds and we have bizarre situations where schools exist but have no teachers or chairs or toilets. It is better to have a smaller set up where education is of national level so that the children actually grow to compete well in future.

The present education system is biased where education in an Indian language automatically puts the student at a permanent disadvantage.

In fact, the strength of demographic dividend is overstated in India because the large young population of the country does not have the necessary skill sets to enter the corporate world.

Fourth, Distribute the gains of profits in the form of tangible benefits such as subsidised health facilities, education, basic infrastructure, etc. The top 25 companies earned net profit of Rs 200,000 crore in FY11. Intuitively, one can see that if a certain fixed proportion of profit is ploughed back, it will go a long way in helping the community.

Currently, it is assumed that this sector pays the government taxes that should be providing these services. But things do not work that way which comes in the way of further reforms.

Lastly, Engage the local community in one's own work. Here, the idea is that the community is trained and deployed in their own activity that works well in terms of providing employment, imparting skills and earning trust.

There is evidently a need to bridge trust between the rural folks and corporate India to ensure smooth operations. Private delivery of services is a far more efficient vehicle, given that corporates who work for profit value their money more than governments that ideologically are not suited to run a business. A small step through allocating 1% share of the profit can go a long way in assuaging the poor and involving them.

To quote WH Auden:

About suffering they were never wrong, The Old Masters: how well they understood, Its human position; how it takes place While someone else is eating or opening a window or just walking dully along... We need to address this issue with a fresh mindset.