Corporate social responsibility is all the rage. Occasionally there comes a report that shows that it is also mostly bunkum. When the Mumbai-based ngo Karmayog rated corporate houses for their social responsibility initiatives in January, almost half the top 500 companies in India got zero and only four could manage a rating of four on a scale of five. The report concludes that most companies make token gestures by giving donations to charitable trusts or ngos and sponsoring events--only 2 per cent are taking up corporate social responsibility (csr) activities in the vicinity of their units.
But what activities qualify as csr is debatable. What is good csr practice for, say, financial companies may not be appropriate or adequate for a highly polluting industry like pharmaceutical. In its rating, Karmayog does punish companies for environmental degradation but without taking into consideration the mitigation steps taken by them. So companies making products that extensively damage the environment like fertilizers, paints and plastic are not eligible for a rating of more than two. Similarly, those involved in environmentally damaging processes, like mining, thermal power generation, cement manufacturing, paper and forest-based products and steel manufacturing, also could not get more than two even if they are doing extensive csr work.
This has produced some ambiguous results. In the pulp and paper sector, of the six companies rated three got two point, and three got one. These companies fared better in the Green Rating by the Delhi-based public-interest organization Centre for Science and Environment (cse). While cse rating looked at parameters like sourcing of raw material, controlling pollution at sources and recycling of waste water besides occupation health and safety, Karmayog considered social initiatives like education, community development and healthcare.
Similarly, for cement industry the Karmayog rating was based on activities aimed at donations, community health, family welfare and education. On the other hand, cse's Green Rating used more than 150 indicators for rating cement industry and some of the companies fared well. "Some ratings may be incorrect but these are due to insufficient information available at the sources of research," said Tanya Mahajan, a member of Karmayog. The rating was based on information given on companies' websites or in their annual reports on csr programmes.
The rating did not go well with industrial groups, who have questioned the indicators used. The Confederation of Indian Industry (cii) contends that products and services that are the need of society cannot themselves be an indicator. The ngo has given zero to all companies making tobacco products and alcohol. It excludes companies like itc which are involved in extensive csr programmes, says Shefali Chaturvedi, director of Social Development Initiative with cii. Experts say these companies ultimately do leave footprints and keeping them out of the rating will discourage them from feeling responsible for the adverse impact of their activities.
The fact remains that most companies are not driven by concern for society or the environment, but the commercial benefit in raising their reputation with the public or with government. Most implement such programmes in an ad-hoc manner, unconnected with their business, says Mahajan. That's why corporate ratings have to step out of the confines of the narrow definition of csr. In the uk, the term "corporate responsibility" is used in place of csr, and this includes governance and environmental sustainability besides social or community issues.
The Karmayog rating serves the purpose of putting a spotlight on corporate irresponsibility, but with a more fine-tuned approach it can as well give helpful directions for improvement, at least for the few who care.
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