Tuesday, June 17, 2008


Indians lagging behind in corporate social responsibility

From The Statesman

ND Batra
Last week BBC World News carried a report on how in the midst of plenty hundreds of thousands of children in India are dying of malnourishment. The dinnertime videos of wasting children in Madhya Pradesh were heart-wrenching. The same day, The New York Times published a report about high-towered, gated communities in Gurgaon and other places in India rising amidst sprawling shantytowns. You wonder where the 9 per cent annual growth has been going.

With food and oil prices going up every day and the spectre of starvation rising in many poor developing countries, the governments cannot talk about gross domestic product (GDP) without assuring the public that it is being distributed equitably. Nor can global corporations keep themselves aloof from the sufferings of the people. They cannot afford to look after only shareholders’ interests. Some global corporations have begun to realise that their social responsibility goes beyond profit-making.

Addressing a shareholders’ meeting last week, Mr H Lee Scott Jr, the chief executive of Wal-Mart Stores, said, “People’s expectations of us ~ and of corporations in general ~ changed…. It is clear that today people look at Wal-Mart as a solution. And we want to be seen that way. We want to act that way.” Society will hold Mr Scott’s feet to the fire on his promises.

The global retailer ~ which generates sales of $374.5 billion ~ buys cheap and sells at low prices. It was perceived a few years ago as a damned sinner, one of the worst global exploiters. But today with its avowed mission of protecting the environment and with a $4 prescription healthcare drug plan its image has improved along with its profits.

That’s how Reliance and the Tatas should be judged, not only because they grab MTN or bring Jaguar/Land Rover to India and fulfil the fantasy of the elite about India becoming a superpower.

“Regardless of who wins the election in November ~ and what party they are from ~ we stand ready to work with the new President and the next Congress,” Mr Scott told shareholders. Have you ever heard Indian corporate executives talk with such confidence about their companies’ social responsibilities? Corporate social responsibility is a form of business to people ~ diplomacy, an effort to win the hearts and minds of the people, which is essential in an open society.

A corporation’s report about its social responsibility, which can stand public scrutiny, should be the goal. Some corporations use their social responsibility activities as a means of building social capital and goodwill. If a company has a code of ethics, it should be known to the public how the company is following the code. Of course, every corporation should have a code of ethics.

The European Union (EU) might seem a loosey-goosey congeries of states, but when it comes to dealing with US global corporations like GE, Microsoft, Apple, for example, or an export juggernaut like China, EU takes a united stand. One should not underestimate the growing power of Brussels in spite of the recent setback when Ireland voters refused to ratify the proposed governing treaty. Instead of getting help from Washington, US global corporations have been developing their corporate outreach programmes to be seen as people-friendly.

All major corporations, Boeing, Microsoft, Google, for example, have their own corporate diplomats who use the same tools and talents as political diplomats do in dealing with international crises. Many of them are retired ambassadors, state department officials and military officers; and they know how to communicate with global stakeholders. In The United States of Europe: The New Superpower and the End of American Supremacy, Mr TR Reid wrote, “The Europeans were concerned with bigness itself ~ the fear that a company with an overwhelming presence in certain markets would use its sheer size to drive out competitors, and then drive up prices for consumers.”Since some crisis or the other is likely to hit a global corporation, what kind of corporate policy will work?

Instead of pulling out in a huff it is better to lie low and wait for the situation to improve. Even in Venezuela, the fifth largest oil-producing country, some oil companies have decided to stick around, hoping that the situation will get better. In some countries, for example, KFC and McDonald’s outlets have been set on fire, demolished or boycotted by anti-global activists; nonetheless, business operations on the whole have continued. Instead of quitting altogether, holding back further direct investment or even curtailment may have a salutary effect. At the same time a global company should do what Wal-Mart has been trying to do in these economic distressful times ~ become part of the solution.The home government’s backing is important but help should be sought only when all other avenues have been explored.

Global companies should develop their own diplomatic resources, including relations with the local news media and coalition-building with local interest groups. Europeans, like Indians, are very sensitive to US government interference on behalf of its global companies.

Although an early awareness system could help predict many problems before they turn into crises, not every catastrophic event can be predicted. No one thought the long simmering Tibet problem would suddenly erupt when China was getting ready to shine on the world stage as an upcoming superpower; nor that an earthquake would devastate an entire province. Such events fall into the category of what Mr Nassim Nicholas Taleb calls the “Black Swan”, nevertheless, if a corporation has built enough social capital, people are likely to support it in a crisis.

Sustainable growth, affordable healthcare and poverty-reduction are the chief concerns of society, which corporate leadership cannot ignore. Perhaps there is money to be made in reaching out to people at the bottom of the pyramid, in slums and shantytowns, as Mr CK Prahalad and other management gurus have been saying.

(ND Batra is professor of communications at Norwich University)

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