The title of the post itself is an oxymoron. Social responsibility is the last thing that comes to mind when one thinks of big corporations. The image that’s set in the minds of people about large corporations is that they’re mostly only money minded greedy people in their sharp business suits and ties. People think, what would these sly creatures know about social issues that plague, say, middle class women, or lower class daily labourers.
By definition, Corporate Social Responsibility means is a corporation’s initiatives to assess and take responsibility for the company’s effects on environmental and social well being. So why would a company need to have a CSR wing in the first place? By virtue of the size of corporations they’re very powerful entities backed by rich lobbyists and political parties. As such, they get away with lots of unethical stuff. Also, even a small mistake on their part can be hugely detrimental to the environment.
For example, if there is an oil spill in the ocean that wipes out the immediate ecosystem, the company contracted to dig/transport oil is responsible. Another glaring example of this would be the 1984 Bhopal Gas Tragedy where thousands of innocent people lost their lives because of a easily avoidable gas leak.
Another reason why people feel alienated from large corporations is because they don’t relate to them on a personal level. Even a lower management salaryman working in a large corporation would feel disconnected from a rich and powerful CEO.
In light of this dark legacy that corporations hold, some areas of corporate culture have begun to embrace a philosophy that balances the pursuit of profit with a commitment to ethical conduct. The same money and influence that enable large companies to inflict damage on people and the environment allows them to effect positive change. At its simplest, a corporation can give money to charity. This is especially true in case of India where the Companies Act of 2013 was passed requiring all corporations to donate 2% of their profits to charity.
While the concept of 2% donations is noble in theory, there are a lot of challenges that arise in practice. For one, the reported expenditure on CSR projects is not a good metric of societal welfare. These numbers overstate the effect of the law. It is not clear whether firms have really increased their CSR spending after the law compared to what they were spending voluntarily before the law, because CSR spending was not well reported historically. It is speculated that while firms that were initially spending less than 2% increased their CSR activity, but those that were initially spending more than 2% reduced so. Another possibility is that firms spent money on CSR activities that also lead to increasing firm profits, such as inculcating goodwill and good public relations. There is evidence indicating CSR spending leads to brand building and employee engagement. In that case, firms would have carried out these activities with or without the law.
Another factor that needs to be taken into consideration is that the company decides on what issues to spend their CSR money on. Of the nine different schedules prescribed by The Companies Act, two schedules: combating various diseases and promotion of education accounted for 44% of the total CSR expenditure, while reducing child mortality received no funding and eradicating extreme hunger and poverty received only 6% of the total CSR expenditure. Given that about 50% of children in India are malnourished due to pervasive poverty, it is unlikely that the above allocation of resources reflects the democratic will of the Indian people.
Yet another factor that shows that these gestures are not of goodwill but possess ulterior motives is the discrepancy in geographic equity. States where there aren’t many factories and offices of large corporations tend to get the least of CSR spending while the states with policies favourable to large scale investments see a lot of money flowing in. This is extremely contrary to the spirit of charity and only reinforces the notion that in corporations, everything is done for profits, be it monetary profit or goodwill profit.
In conclusion, while Corporate Social Responsibility does benefit the society in a miniscule way, the demerits far outweigh the merits. It is not entirely wrong either, as such firms never get into business for the purpose of social welfare but for the simple purpose of making profits. It isn’t illegal or unethical to work for profits, so we can’t really incriminate them for anything, however, these companies could do with a little bit of genuine compassion.
What are your thoughts on Corporate Social Responsibility? Have you ever taken part in community service on behalf of your company? Do let me know in the comments section below.