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My interview with Meena Raghunathan: “It is about how profits are made, rather than how they are spent”- the CSR paradox!

Dec 12, 2022

Meena Raghunathan has a rich experience of 35 years in the development sector. Much of it as a part of Centre for Environment Education, an NGO. She founded Corporate Social Responsibility (CSR) function for a major infrastructure group – with a focus on Education, Health, Skill Training, and Livelihoods. Meena serves on corporate and non-profit boards. She has considerable exposure and experience in corporate strategy and policy making.

Meena has several publications to her credit including the most recent book DOING GOOD: NAVIGATING THE CSR MAZE IN INDIA (Harper Collins). She teaches Ethics, Sustainability and Responsibility, and has played a quasi-academic role – developing textbooks for various levels, including the first textbook on Environment for the Undergraduate level. She has also contributed to key policy documents including India’s official submissions to the Earth Summit, Rio de Janeiro, 1992, and World Summit on Sustainable Development, Johannesburg, 2012.

Apart from her outstanding work in the development space, Meena is also highly regarded for institution building and setting up related systems & processes.

PG: May I ask what is the paradox of doing good and being good about?

MR: Let me talk about the situation in India. As you know that the law mandates that large companies, must spend an average of 2% of their net profits of the last 3 years on CSR. The menu of thrust areas of allowable CSR activities is also specified.

The CSR activities are usually done with good intent and also have good impacts – I have no doubt about that. What concerns me is that CSR, which is supposed to move business-thinking from profit towards purpose, from shareholder focus to stakeholder inclusion – that is completely ignored. So when a company spends its 2%, and spends it well so as to see some good changes, say in local schools, or in women incomes, it is as if it is socially responsible. This confuses the issue – as if social responsibility is about spending some part of the profit, rather than worrying about how the profit is made. So a company that is not very careful about the pollution it causes or the disruption to the local community that it creates, can still tick the CSR box by spending 2%.

This is the contradiction of the spirit of CSR – when companies spend the mandated 2% on one of the ‘allowed list’ of activities, the Law is satisfied and everyone starts believing that they are socially responsible. However, social responsibility manifests when businesses make their core business decisions, ensuring at the very least that they do no harm to their neighbours, to the environment, to society. But the CSR Law de-links this critical connection. So as far as core strategic and operational decisions are concerned, it is business as usual. And then, as a completely separate activity, 2% is spent on some social development activity.

The Law asks companies to pick any activities from the list of allowable activities. There is no stress on materiality. The CSR activity can be completely de-linked from the negative externality that the company causes. For example, a corporate may be depleting local groundwater resources or causing pollution. But it may be spending its CSR money on training rural athletes. Ironically, a vaccine manufacturer wishing to inoculate a target population would not entitle it as a CSR activity.

This to my mind is ‘doing good’, not ‘being good’. ‘Doing good’ as in ticking a box by spending a specified percentage of profits. But ‘being good’ is about a business introspecting and moving its world view from a profit focus to optimizing economic, social and environmental outcomes; moving from a shareholder perspective to a stakeholder perspective; making a shift towards business decisions with communities, society, and the environment as core considerations, rather than seeing them as externalities to be managed; a shift from management processes to governance standards.

It is about how profits are made, rather than how they are spent. To me, this is a critical issue, and one that the law and its implementation are confusing. Hope this changes soon.

‘CSR is a vague and intangible term which can mean anything to anyone, and is therefore effectively without meaning.’

PG: In your book you mention that there is no clear, unambiguous, and universally-accepted definition of Corporate Social Responsibility?

MR: Indeed! The term itself was coined in 1953 by American economist Howard Bowen in his book Social Responsibilities of the Businessman.   Since then, many academics, practitioners, policymakers, and institutions have given their own definitions, but not one of these is universally agreed upon or used. The understanding of CSR is contextual – it differs from country to country, from decade to decade, company to company, and stakeholder to stakeholder. I agree with Peter Frankental (2001) of Amnesty International who goes so far as to say, ‘CSR is a vague and intangible term which can mean anything to anyone, and is therefore effectively without meaning.’ I must refer to the work of an academic, Alexander Dahlsrud (2006) here. He decided to statistically examine thirty-seven widely-used definitions of CSR. He makes the point that ‘none of these definitions actually defines the social responsibility of business’! However, he does find five widely prevalent threads across these definitions: the Stakeholder, the Social, the Economic, the Voluntariness, and the Environmental dimensions.

PG: Does the law further complicate this situation?

MR: Indeed it does. It even misses some of the five dimensions mentioned in Dahlsrud’s analysis mentioned above.

The Law of course does not define CSR, but it implies that carrying out an activity related to Education, Health, Women Empowerment, et al is CSR. So if we come to more updated thinking on CSR, we can see it does not go by most definitions – e.g., one given by the academics Andriof et al. (2002) which defines CSR as the ‘recognition that day-to-day operating practices affect stakeholders and that is in those impacts where responsibility lies, not merely in efforts to do good’, or the UNIDO definition: ‘Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.’

I feel that the way forward is to have a serious multi-stakeholder review of the law, given not only these concerns but the changing business environment. ESG is gaining huge importance. How do we make CSR something that pushes businesses towards a more holistic stakeholder perspective? How do we put it at the centre of strategic decision making? How does CSR relate to ESG? We have the Business Responsibility and Sustainability Reporting requirement for the top 1000 companies. Right now, it is a completely disjointed piece of reporting – from my experience, there are 5 different departments filling different sections, without any effort to reflect holistically on what it all means. The law will complete 10 years in 2024. So this is the right time to carry out such an exercise of reflection. And worry how to move from ticking boxes on environmental, climate change and social issues, to really internalizing the spirit of responsibility with regard to these.

PG: We have had a tradition of philanthropy, there is also a wave of new gen philanthropists. Then there are do gooders ‘below the radar’ who will anyway continue doing good – CSR or no CSR?

MR: Yes, India has a rich tradition of philanthropy. For instance, I believe the Rig Veda has a chapter devoted to charity, dharma, karma, reverence for life, and recognition of the interconnectedness of life. All religions do in fact stress on giving. However, scholars like Pushpa Sundar lament that there is not adequate research on our philanthropic history. But some trends are clear. During the late nineteenth and early twentieth centuries Indian businesses grew significantly and newer ways of giving became dominant. Essentially led by very wealthy individuals who had made their money from business. In fact, some scholars say that in the early nineteenth century, apart from the Western world, the CSR concept was significantly developed only in Japan and India.

The British Government definitely did not appreciate any support to the Independence struggle. But many industrialists supported the movement, both overtly and covertly.

Those were the times of the Raj, and the British Government definitely did not appreciate any support to the Independence struggle. But many industrialists supported the movement, both overtly and covertly. I would like to quote my favorite example. When Gandhiji first came to Ahmedabad, he set up his ashram at Kochrab. He invited a Dalit couple – Dudabhai and Danibehn – to come and live at the ashram. This led to considerable agitation among the ashram’s neighbours as well as many funders, leading to a financial crisis which forced Gandhiji to think of shifting the ashram. And then one day, in Gandhiji’s words: A car drew up near our quarters and the horn was blown. The children came with the news. The sheth did not come in. I went out to see him. He placed in my hands currency notes to the value of Rs 13,000 and drove away. I had never expected this help, and what a novel way of rendering it! (Mehta, 2019) This gift saved the Ashram. It is well known that the ‘Sheth’ was Ambalal Sarabhai, one of the foremost industrialists of the time. However, neither he nor Gandhiji ever admitted this!

Jamnalal Bajaj was another example. He was considered Gandhiji’s fifth son and adopted all his values – from ahimsa (non-violence) to his dedication to the poor, to his commitment to locally made goods, and his patriotic spirit. Bajaj was an active member of the Congress party, and gave up the Rai Bahadur title conferred on him by the British and joined the non-cooperation movement. Importantly, Bajaj, in line with the trusteeship concept propounded by Gandhiji, felt that inherited wealth was a sacred trust to be used for the benefit of the people, and dedicated most of his wealth for the poor and underprivileged.

It was private philanthropy that led to the creation of institutions like the Indian Institute of Science (IISc) in Bengaluru and Tata Institute for Fundamental Research (TIFR), Mumbai. It is said that J.N. Tata mooted the idea of contributing to an institute like IISc as early as 1898, long before Carnegie’s endowment to set up a technical school (today’s Carnegie Mellon University).

Bain’s India Philanthropy Report, 2022 says it is ‘often an emotional and impulsive decision’.

No less is individual giving. A lot of it used to be to and through religious institutions, but now it is getting more and more secular. However, this is not very organized. Bain’s India Philanthropy Report, 2022 says it is ‘often an emotional and impulsive decision’. The reports says that since 2015, it has been growing 5% every year, and totaled to INR 28,000 Crore (1 crore = 10 million) in 2021. But the report forecasts that with the rapid growth of our middle class and the increase in the number of donors, this will soon start to grow at about 10% annually and contribute one-fourth of total private giving by FY 2026. I would think that it is more – we in India, don’t often talk about our giving. And also many people are giving more and more, which may not all be captured. For instance, many people support the children of their staff to get a good education; they help out during health emergencies; they help them build houses. So I think there is much more than we can account for.

We have Azim Premji, the Nilekenis and Kiran Mazumdar Shaw who have signed the Giving Pledge, but so many other high net worth individuals, who are contributing to some facet of development or the other. But in India, we have a middle-class equivalent of the same – the ‘Living My Promise’ is a pledge many are taking to ‘give back at least 50% of my wealth to charitable causes of my choice while I am alive or in my will’.

Another interesting facet is giving by ‘old’ business families, and the newgen entrepreneurs. Mark Sidel (2000) refers to a phenomenon he calls ‘Bengaluru philanthropy’ (because Bengaluru-based IT companies have typically led the phenomenon). This is the philanthropy of the new-economy companies. It is led by individual first-generation entrepreneurs who have created their wealth themselves and therefore are not shackled by family pressures on how much they may give to social causes, nor are they bound by family traditions on what to support and how.

The journey of achieving compliance to CSR law has not been too difficult. Most companies are today spending what they are supposed to, and are ticking all the boxes. But that does not mean the spirit of CSR has taken root.

PG: ESG is not too well embedded here – does that make the task of CSR more onerous?

MR: ESG is the buzz word, and companies are rushing to show their credentials! Whether it is the optics or the spirit, it is difficult to say.

But I would say that ESG and CSR are not two journeys. There is only one journey – to becoming a more responsible business; of moving away from a sole focus on profits, to one towards purpose; of not putting shareholders at the top of the heap, but paying due respect and attention to all stakeholders, including the environment; of embedding good governance.

The journey of achieving compliance to CSR law has not been too difficult. Most companies today spend what they are supposed to, and are ticking all the boxes. But that does not mean the spirit of CSR has taken root.

At one level, I think, on all these issues, compliance and ticking of boxes will happen over the next few years. But about the spirit, it is a much more difficult journey, which will need a very serious change of mindsets.

Are children staying in school? And even when they are, are they learning? Results on these fronts are worrying, says Meena.

PG: Your work with children’s education – one of the most vulnerable segments of our society – what is working and what is not? How could CSR help?

MR: The issue of getting children’s education right is really crucial for our country. Some things have worked – we are able to show pretty close to 100% enrollment. But what happens after that is the big, big question. Are children staying in school? And even when they are, are they learning? Results on these fronts are worrying.

A huge chunk of CSR spending goes to education – in the first 6 years after the law was mandated, 30% of the total CSR spend went towards this cause. Some of it goes towards physical infrastructure of schools around a business; some towards improving quality of teaching-learning through training of teachers, deployment of extra teachers, or learning aids, kits; sometimes towards computers and e-learning. Sometimes it is in the domain outside the school – e.g. providing after-school tuitions. Or it may be target individual students, eg., towards providing scholarships for meritorious students. Or actually adopting or taking over or building new schools. Sometimes these are large scale – with corporates taking up whole districts. Sometimes it is just a few schools. They are working at one level and not working at another. So if I work with 5 schools, they may actually show good results. But are those results sustainable once the company withdraws? Are they scalable, replicable, adaptable? And is there the willingness in the system to do this?

There are many ways CSR can make a difference – does the company want to innovate and create new models? Does it want to work intensively and make a difference here and now in a small number of schools? Does it want to bring change at systemic level?

I think that every company must set their objectives thoughtfully, with clearly stated impacts that they wish to achieve. And put in place best processes and systems and implementation mechanisms. But we must recognize and respect that different companies have different resources, different ambitions, different challenges. I think even if a company works with 2 schools and improves learning of 100 children, that is great. If another sets out to work with 10,000 schools and is able to improve their performance, that is great too. They are both making a difference.

I also think that there needs to be special attention to the pre-school age, ie, under 6 years. Currently, the anganwaadi system is more of a child-minding and feeding approach. The focus has to shift to proactive educational inputs – education that is not only the 3Rs, but lays the foundation for holistic development of the child, intellectually, socially, psychologically, physically, every which way.

PG: Grateful for all these wonderful first hand insights, Meena! My best wishes for all your ongoing endeavours.

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