CSR in South Asia

CSR in South Asia: A short issues paper and research ideas for engaging the private sector in development




Corporate Social Responsibility (CSR) in South Asia

Accounts and surveys of CSR in South Asia suggest that this is not a new phenomenon in the region. CSR or variants of it have existed for some time, differing in the nature of the actions and the agenda, and responding to different drivers at different points in time. Drivers of CSR in South Asia have ranged from religious traditions, notions of trusteeship, family philanthropy, role models within the country, to more recently, company responses to regulation, NGO and civil society pressure, and requirements of national and international business partners in a more global world. The most common form of CSR has been the setting up of family foundations and Trusts. In South Asia, among the more famous and the oldest being those of the Tata Group.

The nature of CSR in South Asia varies greatly. There have been companies that are far more advanced in this agenda as compared to others. The Tata Group, for example, has always been in the forefront of CSR in India, and have always interpreted social responsibility in a larger sense of the word. This is evident in this quote:

“ I do believe that we in the group have held a view and held a sense of purpose that our
companies are not in existence just to run our business and to make profit and that we are
responsible and good corporate citizens over and above our normal operations. By that, I mean,
that we play a part in the community and we shoulder community responsibility as part of social
responsibility of our nation. And these responsibilities are not to be confused with employee
welfare, but they go beyond our own employees and in fact concentrate on the contribution to
the community and to the nation”
Ratan N Tata (1996)

There is a growing body of evidence of experiments with tri sector partnerships in a number of developing countries. The use of multi-stakeholder partnerships arrangements in India and other countries of south Asia to deal with issues that involve multiple interests and sensitivities and the need for lasting solutions is also growing. Examples of experiments in the Indian context are those of ITC Ltd., and EID Parry in the agricultural sector, Joint Forest Management in various states, and those in the minerals sector supported by DFID, of the Sarshatali coal mine project in West Bengal and in the Goa iron ore mine project.

Despite the existence of various forms and levels of advancement of CSR, conferences and surveys on stakeholder expectations in the region suggest that South Asian societies feel that business is still tinkering at the edges and they want much more from it. Stakeholder expectations of CSR in South Asia move beyond traditional notions of CSR to an expectation that business will be more engaged with addressing conditions typical in South Asian Societies, such as low levels of human development, lack of social safety nets, skewed power structures, slow legal systems, poverty, weak infrastructures, etc.) Different stakeholder groups want business to ``add value to society``. A poll of perceptions on Corporate Social Responsibility in India in 2001 indicated that people expect that business should be actively engaged in societal matters and social change, but are willing to give it time to get there. Expectations of CSR are related to bridging the gap between the rich and the poor, reducing human rights abuses, solving societal problems and increasing economic stability.

Market focus seems to be an important influence in the form and agenda of CSR in the region. Thus, in export oriented firms, the CSR agenda is defined and oriented to addressing international standards and certification. In more domestically oriented firms, it tends to be more attentive to local environmental and social problems and to NGO and civil society pressure. Thus the CSR agenda is linked to the market rather than to just what is internationally fashionable. This linkage of the CSR agenda to the market focus of companies provides a good entry point to making the private sector a responsible development agent. If the private sector can be made to see a market opportunity in the ``bottom of the pyramid``, (Prahlad, 2005) then this provides a good bridge to link stakeholder expectations about business having a responsibility to address societal conditions in South Asia and developing a CSR agenda linked to this market focus, but tweaking it to address a more broad based development agenda.



Investment in `intangibles`

Many companies in South Asia do pay considerable attention to what we term here as `tangibles’ of good business practice: Quality products & services, Innovation, Quality management and Market leadership. Investment in these tangibles has in many ways increased and improved financial performance. Less understood in terms of its relevance to future earnings is the potential for another tangible, `environmental stewardship’ which can also increase profits through reducing costs. Even less clear to business is the potential for `intangibles’ to enhance corporate value through enhancing reputation, which refers to the perceptions that the public has of an organization’s CSR, and is fast becoming an important determinant of how a company is judged by society. Active engagement of the private sector in addressing societal problems in developing countries would be one such intangible which could enhance corporate reputation and, therefore, value. But the first point of entry would be the need for the private sector to invest in the preconditions of such engagement, which are three fold: the building of trust with different segments of society, enhancing stakeholder relations, and transparency.

Trust is about developing an attitude, which factors in the interests of the other, not just for opportunistic, prudential or strategic reasons but also for reasons of promoting common well-being. Trust is about recognizing mutuality. The goal of a culture of trust is to move from `thin’ to `thick’ relationships, to generate multiple points of contact. The idea of `trust’ is increasingly being fore grounded as a consideration for good governance, both corporate and political. Investing in trust can be seen as an investment in the future, as part of the building and management of good reputation for the company.

An insufficiently recognized benefit to business is that which relates to transparency, and consequent savings in transaction costs. Transparency in the context of business can refer to the dissemination of information relating to a project, to the environmental and social programmes planned, to the handling of stakeholders in an open, easily understood manner. On other hand, transactions costs relate to costs of doing business, and include negotiating, fulfilling and enforcing contracts, gathering information, managing agents engaged in transactions, and resolving disputes relating to the transaction. Transparency reduces the input of management in terms of time involved in conflict resolution and future disaffection. It is a key ingredient in the reputation of business, and is insufficiently understood as an important aspect of CSR.

Enhancing stakeholder relations is an essential ingredient of good business as it not only creates customer, supply chain and worker loyalty, but it also provides crucial knowledge and feedback at various points in the production and consumption process that the company can use to improve its functioning and its bottom line. Surveys of business leaders in the South Asia region suggest that they see employees as the most important stakeholder followed by the customer, investor, local community and the government. Surveys also suggest that customers are the best source of changing stakeholder expectations.

To engage with the poor will, however, require a much deeper engagement by business in unpacking stakeholder groups within society, and seeing them as more than homogenous groups of customers, employees, and local community, but go beyond to understand their diverse needs and capacities in order to engage effectively in the market and development process. This requires an understanding of the social, economic, political, and ecological context in which the poor live and carry out their livelihoods and in which business may hope to operate, both from the supply and the demand side. This context will vary across countries in the region, but in general will reflect the following:
On the supply side:
o No or little education and skills to provide a vibrant worker base
o High entrepreneurial spirit, but no formal training
o Lack of information and not knowing where to look for the information needed for engagement in industry, small or large
o Skewed power structures and ill defined rights to resources
o Strong traditional intermediaries who raise costs of doing business with the poor
o Inefficient and inequitable distribution of basic goods and services
o Poor local government accountability
o Poor environments and indifferent health
o Weak or non existent infrastructure


On the demand side:
o Low unit purchasing power, but large potential volumes
o Uncertain income streams
o Difficult access to credit
o Strong traditional intermediaries who create high cost economies
o High aspirations for improved living
o High willingness to consume
o Access to information about products, via TV, radio, etc.
o Inadequate access to and availability of the type of goods that are desired

This context suggests that the CSR agenda and the private sector engagement needs to focus on the creation and activation of a market among the poor through social inclusion created through training and skill building for entrepreneurial development on the supply side, and access to credit, to information, to low cost and quality products on the demand side.

Locating the Private sector in the development agenda

That the private sector has a role in development is not in question. The issue before us is how to engage them in a manner that is not just about developing profitable markets among the poor, but ensuring a more broad based, non corporate dominated development and discourse. A clear development role could be in the building of human capacity and skills of more disadvantaged groups. In the context of South Asia, this affirmative action by the private sector will greatly increase the skill base and therefore the options available for improved functioning and increased quality of life . In the Indian context, the private sector became attentive to this form of affirmative action in early 2004, when there was serious discussion and a national debate on the need for reservation of jobs in the private sector as a way of democratizing the distribution of opportunities to those from discriminated castes, as the government becomes a less important provider of jobs in the more liberalized Indian economy. The response from industry was that quotas were not acceptable, but they were open to investment in training and human skill upgradation. It is not entirely clear, if the signing of the pact by the Confederation of Indian Industry (CII) for example, in mid 2004, with the City and Guilds Institute for a massive skill upgradation program to provide vocational training to rural youth in various sectors like horticulture, handicraft and handloom was a direct response to this demand by Indian society for the private sector to be more involved in addressing societal needs or as a way of deflecting the attention from the reservations debate or both.

Another role for the private sector is in upgrading the markets in the agricultural sector. One example of this is in linking producers to consumers in organic food chains. While organic farming has become a buzz word among those wanting more sustainable production and consumption, it is evident that there is need to organize farmers to upscale their activities; to organize the delivery of products to markets; need for more information channels, internet kiosks and improved extension services to link producers to consumers. Some examples of this already exist, but they need to be strengthened and upscaled.

More recently, one can envisage a role for the private sector in the rebuilding process in Tsunami affected areas, going beyond philanthropy to community investment. The private sector can play a key role here to develop partnerships with local communities and other key local stakeholders to develop tourism, fisheries, salt tolerant agriculture, and alternative livelihoods in ways that counter the impacts and address the environmental, health and livelihood risks, current and futuristic, to anticipate, prevent and mitigate coastal vulnerability. An innovative and strategic approach to designing a role for the private sector in this rebuilding process should focus not so much just on opportunities to do business, but having an opportunity to invest in people and communities in ways that are good for people and for business.

The private sector has a special role to play in addressing urban renewal and poverty issues. As the number of urban poor rise due to migration from rural areas, or due to a falling into poverty of those already in urban areas either due to inability to secure employment or due to poor health arising from stressed urban living, a need arises for creative and innovative solutions that are inter-sectoral. This role can be defined, for example, around an engagement of the private sector in multi-sector partnerships to uplift quality of life in slums either through the creation of jobs or through meeting unserved environmental and social needs. The Ecohealth PI is taking this up as an important initiative in its new programming, working towards an engagement with the private sector in the development of informal sector activities to improve livelihoods of slum dwellers as part of larger initiatives for improved human health and well-being.

Small and medium enterprises (SMEs), including micro enterprises, are seen as agents of development in many Asian countries, but especially so in India and China because of their employment and income generating activities. However, SMEs, while addressing some of the social conditions, do have pollution and health risk implications to communities around them. Although their individual contribution to pollution and health impacts may be low, the combined pollution load of activity from them can be significant with consequent risks to occupational and community health and sustainable local development . Hence the need for encouraging socially responsible behaviour by SMEs, by addressing their economic and knowledge constraints.

Research ideas

In this section, three broad sets of instruments are suggested through which IDRC can help develop an enabling environment (in terms of evidence and information) for socially responsible private sector engagement in non traditional markets, while ensuring a more broad based, non corporate dominated development. This set comprises: (i) support for research on issues that require further enquiry and understanding in order to ensure that proposed interventions are context sensitive and nuanced, and also on case studies on good practice that are transferable to other regions (ii) support of networks in order to upscale actions and help build relations beyond just research projects and teams (iii) support special actions where need for interventions are already known and there is need for immediate implementation.
o Support research:
 On rights of marginal citizens and effective access to basic goods and services required to enable a greater engagement with the economy and a decent quality of life.
 On the role of intermediaries in labour supply and in the provisioning of goods in markets accessed by the poor.
 On local government initiatives elsewhere in the world to include non government actors in the provisioning of public goods
 On how economic and market power is wielded within supply chains that involve SMEs and the informal sector
 On industry rating systems which explicitly include recognition of initiatives to build capacity amongst disadvantaged people
 On the role that information technology plays in providing a level playing field and in reducing asymmetry of knowledge, choices and power
 On developing multi-sector partnerships, involving local community, business, civil society and local government to address issues relating to quality of lives in slums.
 On policy issues that reduce constraints to private sector engagement in development
 On changes needed to link financial markets more closely to the sustainable development agenda: Measurement and information; risk assessment/portfolio; Transparency/ Information?/Disclosure
 On ways to improve law and order situations in urban areas, through community policing, etc.
o Support networks
 To create platforms and provide opportunities for stakeholder engagement on issues of mutual interest
 Of SME associations, community groups, researchers to help the development of socially responsible SMEs
 To facilitate information and resources, identifying and publishing good practices
 Of learning on how cities, in the developed and developing world, have dealt with problems of modernizing cities while accommodating humanely the housing needs of the urban poor.
 Of students on CSR
o Support special actions
 Training programs on CSR for SMEs and the informal sector, building meaningful partnerships across sectors
 Education, training and skills for youth in local communities for effective engagement in the tourism industry
 On increasing the ability of the poor to carry out transactions and accessing the market, for example, through greater support of Self Help Groups and e governance initiatives to increase “ transparency, access, and speed of transactions for the BOP entrepreneurs, as well as others in the private sector….”
 Support the use of different planning, assessment monitoring and decision tools for rebuilding processes in Tsunami affected coastal South Asia

Ligia Noronha