Essays

We live in an age in which companies equivalent in wealth to countries call the shots and control much of the earth's

resources. Because corporates intervene in so many areas of social life, they must be responsible towards society and the environment. In India, as in the rest of the world, there is a growing realization that capital markets and corporations are, after all, created by society and must therefore serve it, not merely profit from it. And those consumers and citizens' campaigns can make all the difference.

In the age of globalization, corporations and business enterprises are no longer confined to the traditional boundaries of the nation-state. One of the key characteristics of globalization is the spread of the market and the change in the mode of production. The centralized mode of production has given way to a highly decentralized mode of production spread across the world.

In the last 20 years, multinational corporations have played a key role in defining markets and influencing the behaviour of a large number of consumers. The rules of corporate governance have changed too. And there has been a range of reactions to this change. On the one hand globalization and liberalization have provided a great opportunity for corporations to be globally competitive by expanding their production-base and market share. On the other hand, the same situation poses a great challenge to the sustainability and viability of such mega-businesses, particularly in the context of the emerging discontent against multinational corporations in different parts of the world. Labourers, marginalized consumers, environmental activists and social activists have protested against the unprecedented predominance of multinational corporations.

The ongoing revolution in communication technology and the effectiveness of knowledge-based economies has created a new model of business and corporate governance. A growing awareness about the need for ecological sustainability and the New Economy framework, with an unprecedented stress on communication and image merchandising, have paved the way for a new generation of business leaders concerned about the responses of the community and the sustainability of the environment. It is in this context that we need to understand the new trends

in corporate social responsibility.

One, a business perspective that recognizes the importance of 'reputation capital' for capturing and sustaining markets. Seen thus, corporate social responsibility is basically a new business strategy to reduce investment risks and maximize profits by taking all the key stakeholders into confidence. The proponents of this perspective often include corporate social responsibility in their advertising and social marketing initiatives.

The second is an eco-social perspective. The proponents of this perspective are the new generation of corporations and the new-economy entrepreneurs who created a tremendous amount of wealth in a relatively short span of time. They recognize the fact that social and environmental stability and sustainability are two important prerequisites for the sustainability of the market in the long run. They also recognize the fact that increasing poverty can lead to social and political instability Such socio-political instability can, in turn, be detrimental to business, which operates from a variety of socio-political and cultural backgrounds.

Seen from the eco-social perspective, corporate social responsibility is both a value and a strategy to ensuring the sustainability of business. It is a value because it stresses the fact that business and markets are essentially aimed at the well being of society. It is a strategy because it helps to reduce social tensions and facilitate markets. For the new generation of corporate leaders, optimization of profits is the key, rather than the maximization of profit. Hence there is a shift from accountability to shareholders to accountability to stakeholders (including employees, consumers and affected communities). There is a growing realization that long-term business success can only be achieved by companies that recognize that the economy is an 'open subsystem of the earth's ecosystem, which is finite, non-growing and materially closed'.

There is a third and growing perspective that shapes the new principles and practice of corporate social responsibility. This is a rights-based perspective on corporate responsibility. This perspective stresses that consumers, employees, affected communities and shareholders have a right to know about corporations and their business. Corporations are private initiatives, true, but increasingly they are becoming public institutions whose survival depends on the consumers, who buy their products and shareholders who invest in their stocks. This perspective stresses accountability, transparency and social and environmental investment as the key aspects of corporate social responsibility.

The primary drive for ethical business and corporate social responsibility came from the USA and Europe in the '80s and '90s, from campaigns run by pressure groups such as Green peace and Friends of the Earth. The earlier mantra of 'maximizing the medium-term earnings per share' has come under pressure from a wide range of stakeholders- employees, customers and general public affected in any way by the company's functioning. Since the corporate sector now controls so much of the earth's resources and because it intervenes in so many areas of social life, corporate entities must balance their right to grow with their responsibilities to society and to the environment. Because the financial capital market and business corporations are created by society and must, therefore, serve it, not merely profit from it.

Corporate social responsibility is qualitatively different from the traditional concept of corporate philanthropy. It acknowledges the debt that the corporation owes to the community within which it operates, as a stakeholder in corporate activity. It also defines the business corporation's partnership with social action groups in providing financial and other resources to support development plans, especially among disadvantaged communities.

The emerging perspective on corporate social responsibility focuses on responsibility towards stakeholders (shareholders, employees, management, consumers and community) rather than on maximization of profit for shareholders. There is also more stress on long-term sustainability of business and environment and the distribution of well-being.

The relevance of social action and campaign interventions stems from the very growth of global corporations and major paradigm shifts in the polity. In a liberal democratic policy, citizens are supposed to define the boundaries of the State and the State in turn defined the boundaries of the market. A reverse pattern has now evolved: the market

is increasingly defining the boundaries of the State's operations. From being a mediator of multiple societal interests, the State has been minimized into an arbitrator of risk and interest, primarily driven by market forces.

These new attitudes have been induced jointly by campaigns, which publicized the need for supportive social action, and the media, which inspired these positions and generated consumer awareness. Thus, campaigning, the media and consumers formed a partnership that led to the introduction of environmental protection as part of the factors that determine company success. More recently, other corporate elements of social responsibility, such as labour practices — and, more specifically, child labour — underwent similar processes.

The major MNCs have, in part, reacted positively to the new attitudes that have redefined the paradigms of social values and have thus redefined the norms of business. They had to take cognizance of the new forces in the consumer market, where the consumer-citizen is metamorphosing (albeit gradually in countries like India) into a citizen- consumer.

The major corporations have also realized that cause marketing, development partnerships and environmental concerns make good business sense — particularly in terms of recycling materials, employee satisfaction and morale, building up reputational capital and as a distinctive brand marketing tool. The emergence and ascent of tin- r-

economy post-1995, with an information-based technology with very little impact on the environment and projecting,  a white-collar workforce and neo-entrepreneurship, brought forth a new corporate leadership with a vision of its own, originating in many instances in morally-influenced middle class backgrounds.

The leading companies have discovered that working together with non-profit and government organizations, to solve social problems, can give them new insights and approaches to creating business opportunities as well. Solving community needs creates opportunities 'to develop ideas and demonstrate business technologies, to find and serve new markets, and to solve longstanding business problems.'

As we begin the 21st century, it has been pointed out that 'the integration of social issues and business practices was not a passing fad of the 1990s, but rather the beginning of a fundamental shift in how the world's leading companies will use cause associations to position their organizations and brands for the future.

There is a need to develop, a more coherent and ethically driven discourse on corporate social responsibility. CSR is

still sometimes seen as 'green wash' to clean the sins of pollution, or 'white wash' to provide a facelift to the company's public image. It is often seen as old wine in a new bottle — just another trendy name for good old philanthropic initiatives by companies. There is need to move beyond such transitory illusions about corporate social responsibility.