April 17, 2005

There are several questionable claims which business firms and multinationals often make vocally, but violate regularly; all in the name of corporate social responsibility, which raises questions about the sincerity of their intentions. If practised properly, CSR may lead to a win-win situation for all

IS THE corporate conscience alive and kicking? If the constant chant of CSR, or corporate social responsibility, is to be believed, then it seems that organizations have started giving due importance to ethical behaviour and social responsibility in their missions and actions. However, the more we see organizations admitting to its importance, the more we see them erring in their attempt to practise what they preach.

Every company is in the race of getting public legitimacy and approval, and, in doing so, enhancing corporate image in the minds of those who matter; this of course is essential in today’s world for smooth and profitable running of their operations. It would be a challenge to find a recent annual report of any big international company that justifies the firm’s existence merely in terms of profit, rather than ‘service to the community’.

Such reports often talk proudly of efforts to improve society and safeguard the environment by restricting emissions of greenhouse gases from the staff kitchen (as is the case with the automobile industry), or recycling office stationery (as is the case with the computer industry) before turning hesitantly to less important matters, such as profits. Big firms nowadays are called upon to be good corporate citizens, and they all want to show that they are.

The signs of the victory are not just in the speeches of top executives or the diligent reporting of CSR efforts in their published accounts. Corporate social responsibility is now an industry in its own right, and a flourishing profession as well. Consultancies have sprung up to advise companies on how to do CSR, and how to let it be known that they are doing it. The big auditing and general-practice consulting firms offer clients CSR advice (while conspicuously striving to be exemplary corporate citizens themselves).

Most multinationals now have a senior executive, often with a staff at his disposal, explicitly charged with developing and coordinating the CSR function. These actions are serving dual purposes of serving the shareholders and the stakeholders. As some CEOs point out, this is not to say that there are no business benefits.

Some executives think of their charitable donations — especially gifts such as sponsoring high-profile sporting or artistic events — as a kind of advertising. Others may feel that their companies, or their industries (oil, tobacco, pharmaceuticals etc), have such a poor image with the public at large that generous charitable donations are needed to redress matters.

Just consider the recent obsession with conserving environment as the major theme of a recent advertising campaign of an oil company, and you realize how CSR is necessary to project a certain social posture for corporate respectability these days.

Whatever the reason, CSR has become a focus which companies may not relish, but have to enmesh with their other more financial objectives, either to appease their guilty conscience, or to hush up shrilly consumer protectionists.

Any publicized disaster becomes an opportunity for good companies to show their social inclinations. The tsunami disaster is a good case in point. Most companies came forward and offered either direct donations or sponsored events staged to raise funds for it. It is a healthy trend as it becomes a win-win situation for both the affectees of the cause as well as the corporate image of the company. However, there are certain questionable claims which the companies make vocally, but violate regularly, which raises questions on the authenticity of their claims, the sincerity of their intention, and the objectivity of their corporate behaviour.

Let us examine these borderline cases and see if corporations really can adhere to the true spirit of CSR, or, whether this area remains another disguised attempt to provide a social veneer for their materialistic desires.

EQUAL-OPPORTUNITY EMPLOYER: The most commonplace misstatement is when a company declares itself an equal-opportunity employer. This publicized claim is mentioned in most recruitment advertisements. Unfortunately, these very companies are renowned for discriminating on the basis of the origin of the degree, and on the basis of race and religion as well.

Overseas, corporate security fears post-9/11 have completely biased hiring and firing policies. Muslim applicants go through extra scrutiny; and the downsizing axe falls on those belonging to suspect countries like Pakistan and Saudi Arabia etc., especially if the applicant happens to support a beard as well.

In Pakistan most of the multinationals either have a covert or overt policy of hiring recruits from the top universities; thus making a mockery of their claims of being equal-opportunity employers. Many recruitment advertisements blatantly outline the name of preferred institutions and take pride in being choosy about their selection of candidates based on the fact whether their degree is imported or local.

Similarly, many organizations also specify that women are encouraged to apply, which itself, is a discriminatory statement. If they are stating preference for female employees, they are admitting to bias in their selection process; if they are saying it for the sake of fulfilling the gender ratio requirements, and doing the opposite in their selection process, they are once again committing the professional hypocrisy crime.

Another discriminatory point is the socio economic class you belong to. Family background, the brands you support and the accent in which you speak English all become biasing factors. Many local and foreign organizations despite their rigorous selection procedures choose people on the above basis. In many service industries, which work on public relations, for instance the banking industry, your connections with the big account holders nearly always assure you a place in the organization. Being the son of a bureaucrat or powerful political figure opens up doors of the most stringent of multinationals for you.

FROM SHAREHOLDERS TO STAKEHOLDERS: One of the CSR innovations has been the shift in the focus from being accountable to the owners to being accountable to the public who may not be the direct beneficiaries of the company actions, but may be affected by the larger operations of the organizations.

There is a lot of unnecessary confusion about ‘stakeholders’. Businesses certainly need to take account of other interested parties if they are to succeed as businesses: they must satisfy their customers, get on with their suppliers, motivate their workers, and so forth. In that sense, these different groups of stakeholders will have their say and exercise their influence. But ‘taking account of’ is not the same as ‘being held accountable to’. Accountability refers to a much more formal and direct set of rights and obligations.

Take the case of the tobacco industry banning sale of cigarettes to under-18. They have made media announcements and placed warning labels on their packaging, but has that been enough to discourage sale to youngsters? Absolutely not. It would be more appropriate and accountable on their part if they went to schools and educated teenagers in schools on the dangers of smoking; this may sound a ludicrous suggestion, but that is precisely what they have been forced to do by the pressure groups in America.

Of course it is always possible, as a matter of law, to create forms of managerial accountability to non-owners. Through the courts, you might say, managers are held accountable to society at large. Subjects like environment and pollution which affect the whole community have now become objects of corporate desire due to their ability to draw positive or negative attention of the multiple stakeholders.

Organizations try to absolve their corporate responsibility by warning the consumers about the hazardous effects of the product and expect the consumers to take heed of the warning labels. This may be enough in a developed and educated society where consumers go by the written word, but in an underdeveloped country the uneducated consumer would not be sophisticated enough to comprehend the dangers of the labelled warnings and thereby rarely follow the word of law.

Thus, organizations cannot follow an effective global CSR policy till they learn to adapt it to local stakeholder requirements. An example of the stakeholder impact was seen recently in India where consumer activist groups raised protests against some social violations of the foreign cola industry. Thousands of students and farmers surrounded cola factories in a ‘Quit India’ campaign, accusing the US giants of selling soft drinks laced with pesticides. They lined up shoulder-to-shoulder in a five-kilometre chain around a cola bottling plant at the central Indian township concerned.

The Research Foundation for Science, Technology and Ecology (RFSTE), which organized the protests, said nearly 100,000 people targeted more than 80 soft drink plants across India. Villagers and onlookers joined in at Mandideep as several thousand protesters carried banners demanding the closure of both companies in India.

“The factories must close down as they are not only guilty of uncertain standards in their drinks, but they are also depleting groundwater,” said protester Vinay Sagar. “We are very worried by the continuous degradation which the company has caused to the groundwater in the region,” said Sagar, saying the cola giant daily extracts 200,000 litres of groundwater from the parched region.

Mandideep is some 20 kilometres from the central Indian city of Bhopal, which 20 years ago was devastated by the world’s deadliest industrial disaster when toxic gas leaked from a Union Carbide pesticides plant, killing thousands.

Recently, the Supreme Court upheld a lower court judgment ordering cola sellers to print warnings on their bottles in India that the drinks may contain pesticide residues. The US firms deny their drinks pose health hazards. The cola rivals, which account for 99 per cent of India’s huge soft drinks market, have joined forces in the two-year legal battle that rumbles on. Their lawyers said use of pesticides in agriculture resulted in trace residues in sugar.

The US drinks manufacturers are not only under fire over pesticide residues, but also over allegations they are draining areas of groundwater. The courts decision on forcing cola sellers to print warnings is again a futile strategy for a population where the majority would probably not even be able to read the warning. Thus the organizations have to constantly guard themselves against making claims which are difficult to prove true and even more intricate to implement.

CONCLUSION: CSR is there to stay, and so it should. It is a concept which creates a win-win situation in the long run. For the organization in the form of building up goodwill, enhancing corporate image and building up corporate character which helps in spreading respect for its values through the written and spoken word. For the stakeholders it provides a sense of being listened to, taken care of and protected, thus building an interdependence which is crucial to promote a mutuality of interests. However, for CSR to really achieve the ideals, it must ensure the following:

• Not only account for, but be accountable. If CSR has to be effectively implemented it has to produce results in terms of social benefits and public good. This, of course, means that CSR has to differ from public to public and from society to society. In underdeveloped countries the corporate responsibility goes beyond warning labels. It means ensuring that if the public, due to their stage of development, is unable to take care of itself, the corporation must either adopt a different strategy to reach the public, or work with the government to form some strict legislative action to safeguard its interest.

• Working with, not against consumer protection initiatives. Organizations traditionally have been wary of consumer protection activist groups. They have a barely disguised dislike for them and consider them groups with an agenda to create loud noises to black-mail the corporations into submitting to their own selfish interests which have nothing to do with public good. With this suspicion in mind, they continue to have adverse relations with them with the result that they end up entangled in futile legal disputes, as is the case with the cola manufacturers in India.

If an organization claims to be the champion of CSR and the consumer activist groups are also aiming at the same target, then they should be working together rather than against each other; thus the need for a new relationship between these two groups to work on a common platform rather than wasting their energies on allegations and negations which are counter-productive for social welfare.

• Government support and media rapport. The role of the government to protect the consumer and ensure CSR in a developing country is crucial, as the consumer himself may not be capable of pushing for its demands. Legislations and active enforcement of laws is what sets the pace of developing a public oriented culture where the confidence of the public in making its voice heard develops to a level where the corporations become answerable to consumer demands. Due to lack of protection and lax law-enforcement the public also becomes indifferent towards corporate violations, which, in turn, encourage corporate misdemeanour and irresponsibility.

However, media by far remains the most effective influencing vehicle to pressurize the government into taking action, streamlining the vocal activities of the consumer activist groups and using the image building or breaking leverage it has over corporations to convert them from mere CSR-preachers to hardcore CSR practitioners.

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