CSR in India: A Background Note
The Indian economic scenario has been in an upward trend over a decade and so has the corporate sector performance. Overseas investments and operations of various MNCs are also booming in India. The role of state becomes more of a facilitator than that of a direct service provider. The concept of CSR is also growing slowly and the trend is shifted towards strategic cooperation from a more traditional philanthropic approach. One of the primary drivers of CSR is the need for companies to protect and build their reputation and to manage risk across different countries, cultures and socio-political situations.
Big corporations and MNCs recognize that being socially responsible means not only complying with legal obligations, but also going beyond compliance and investing into human capital, environment and the stakeholders. They have also recognized the opportunities for good social and environmental performance to be converted into good financial performance.
Small and medium-size enterprises (SMEs) in India constitute more than ninety percent of the total economy and are still in a phase of transition. The cumulative social and environmental impacts of SMEs are highly significant, even though their individual impacts are small. CSR principles and practices are accepted by the SME sector in a limited way, most of them are yet to consider CSR as a tool for business enhancement. The business case for adopting CSR practices has not been communicated effectively to the SME sector as a whole. Short term economic survival is more pressing, SMEs are often forced to prioritise short-term survival over longer-term strategic measures, and they often have few managerial and financial resources to invest in such measures.
In the case of SMEs in developing a country like India, upgrading the quality of their technology, management, and marketing are equally pressing concerns, which need to be addressed in parallel with social and environmental concerns. Business benefits like operational cost savings through environmental efficiency measures; enhanced reputation through positive responses to stakeholder concerns; increased ability to recruit and retain staff; sharper anticipation and management of risk; and improved capacity to learn and innovate need to be demonstrated to the SME sector to focus and adopt an CSR agenda, and integrate it into their core business activities. There is significant potential to introduce insights from the CSR agenda into the enterprise development field and ensure the economic success of a business by including social and environmental considerations into its operations.
The tools, frameworks and justifications for responsible business activity tend to cater for large companies, which can reap benefit from investing in measures that reduce reputation risk, but in reality those instruments are equally valid for the SME sector. Whether big or small, the companies have to improve their own impacts and address wider social and environmental problems for securing long-term success. Profit making is an important criterion for business to run operations, but it is also important to understand how the profit is being used. Good working conditions, employee retention and participatory management practices usually induce positive business growth as well as contribute to long-term financial success.
CSR should not be seen as a substitute for regulation or legislation and CSR practices are most likely to be successful through a combination of market-driven and regulatory interventions. Ultimately, the long-term success of CSR will be based on its ability to be positioned within the core of business strategy and development.