India’s Corporate Social Responsibility Revolution

Last year, India passed the Companies Act, a revision of outdated business practices that resulted in a stronger commitment to corporate social responsibility (CSR). The Act mandates companies worth more than $92.5 million, or with yearly profits exceeding $78 million to:

The Companies Act strives to eliminate corruption and increase public trust in the business community

• Spend at least 2% of their profits on CSR
• Establish a CSR committee overseen by a minimum of three directors
• Noncompliance with the mandate can result in government sanctions and jail time

The government heralds the law as a huge step forward for the Indian business community, with Sachin Pilot, the Minister of State for Corporate Affairs, proudly describing India as the “first country to mandate corporate social responsibility through statutory provisions.”

Supporters of the law are encouraged by the potential for business development, claiming it creates an opening for smaller businesses to grow. The Companies Act discourages one-time monetary donations as a form of CSR and encourages the formation of long-term projects and relationships between large corporations and social sector businesses. The law has created a niche for CSR consulting firms to help corporations develop long-term CSR projects. Consulting firms can increase business while also advertising the projects of small social enterprises. This business development is especially critical in light of India’s recent stagnating financial growth.

Increased corporate social responsibility also has the potential to transform India’s philanthropic culture. According to the World Giving Index, India ranked 134 out of 153 nations based on monetary donations, volunteerism, and willingness to help strangers.

World Giving Index 2010

But the Center for Global Prosperity showed in the Index of Global Philanthropy and Remittances that 80 percent of Indian citizens donated money annually. India does not lack generosity. What is missing is a long-term commitment to philanthropy at the corporate level. The government hopes to improve corporate involvement in philanthropy through this law.

Some argue the Companies Act does not prioritize sustainable development

Yet, the Companies Act has been met with more resistance than anticipated. Much of the criticism originates from the government mandating businesses participate in CSR. Mark Hodge, from the Institute for Human Rights and Business, argues that government involvement only reduces government accountability for providing social services. He believes increased CSR is the improper approach to sustainable development because it not only reduces government accountability but also counteract harmful business practices. He instead believes the government should direct its attention towards reforming business practices in a way that encourages sustainable development. This connects to Michael Porter and Mark Kramer’s concept of shared value, where the economic development of a company is strongly tied to the social development of its surrounding community. By eliminating harmful business practices, Indian companies could increase their profits while also improving the community’s quality of life

Other detractors criticize the mandated aspect of the law. Do governments have a right to mandate social responsibility from corporations? Pilot describes the goal of the Companies Act as “encouraging firms to undertake social welfare voluntarily.” But is it really voluntary when the consequences for not complying include sanctions and incarceration? According to Arun Maira, a member of the planning commission, the voluntary nature of CSR has the ability to earn companies public trust and loyalty, which is especially important in the Indian culture where general distrust of businesses is still high. Mandating CSR, however, might discredit the altruistic nature of public service and might create even more distrust of large corporations.

It remains to be seen whether the increase in CSR will promote business development and corporate philanthropy in India or whether it will create distrust and outsource the government’s social service responsibilities. If successful, would India’s corporate philanthropy translate into increased international philanthropy? If unsuccessful, however, this could be a set back for India’s future philanthropic development and general trust in the business community.

Post-2015 Debate: A “Neo-Geostrategic” Approach

“The Millennium Development Goals Work!” — says UN in the 2010 New York UN Summit.

In recent years, we have seen Africa’s economic growth, and the reduction of new HIV infections and AIDS-related deaths. The world starts to generate its post-2015 goals while celebrating the victory. Global scholars, activists and politicians hotly debate whether the international community should ascend its priority from eliminating extreme poverty to advanced objectives, such as tackling climate change and establishing healthy governance in each country.

So what is our post-2015 strategy? According to the Brookings Institution, four major typologies were launched in response to the post-2015 debate: “conservative” — persistent focus on extreme poverty; “upgrading” — poverty plus one or two global challenges, either social or environmental; “geostrategic” — concentration on emerging economies; “comprehensive” — resolve every country’s poverty and social problems simultaneously while confronting environmental issues together.

The Lassie of Development: Growing Pet Care Markets in Latin America

A new wave of globalization has hit Latin America: more pets are signaling rising incomes and as a result, growth in the pet care industry. The Economist featured an article that describes the changes in Latin American culture as a result of higher incomes. With more money for basic needs, consumers are looking at pets for their next big purchase.

But, who can really draw the line at food and shelter? The article notes that the industry is, in part, growing from pet-salons, pet grooming, pet accessories, you name it:

In the past five years spending on pet food and knick-knacks has risen by 44%, to $11 billion, according to Euromonitor, a market-research firm, which estimates that Chile has more pet dogs per person than any other country.

Part of the appeal of pets, more specifically the demand for dogs in Latin American countries, is their role as a status symbol. They represent a disposable income that previously did not exist, and so the amount of care for one’s dog translates to symbols of class and wealth. However, with the global economy in almost constant flux, there are two potential roles for the expanding pet care market in emerging countries. The first, and more positive, outcome would be that incomes continue to rise and allow for consistent spending and innovation within the pet care industry. The second result would cause the pet care industry to contract if incomes in the emerging economies decrease. If the latter occurs, the sustainability of the pet care industry might be in jeopardy, as the Pet Food Institute maintains that the cost of inputs for pet food are on the rise and susceptible to market fluctuations. 

Increasing Volunteerism without Harming Development

IBM Executive Service Corps in Vietnam

Most Americans have heard of the Peace Corps. “Ask not what your country can do for you — ask what you can do for your country”? The organization has been embedded in our minds as the perfect representation of American idealism. The chance to travel abroad to promote economic and social development, all the while not paying a penny, has influenced more than 200,000 U.S. citizens to serve. It is now the 50^th anniversary of the first Peace Corps mission to Ghana and the impact of the organization has been widely debated.

It’s difficult to empirically value how beneficial the Peace Corps has been because of the small-scale nature of its projects; however, it is widely agreed that it performs below its potential. U.S. leaders such as President George W. Bush and President Barack Obama have called for an increase in the number of Peace Corps volunteers in order to enhance its impact; however, based on its current structure this goal seems infeasible.

Who Needs Development If the World Ends First?

At a recent panel titled “Power Implications of the 21^st Century,” Carnegie scholar Uri Dadush offered a surprising observation about the consequences of globalization: climate change, he claimed, would be the world’s most challenging economic problem over the next fifty years.

Source: Chris Madden

Maybe this is old news for some (sorry, Al Gore), but in development, the large focus on economic growth often surpasses consideration for environmental issues.

Dadush’s remark came during an event promoting his and co-author William Shaw’s new book, Juggernaut: How Emerging Markets are Reshaping Globalization. Dadush and Shaw w forecast the rise of emerging economies like India, China, and Brazil and their potential to raise billions out of poverty. They call on developed nations to develop a “global conscience” and to help usher developing nations through globalization’s four largest growing pains: protectionism, financial crisis, geo-political breakdown, and climate change.

During the Q&A, audience members responded eagerly to the first three concerns, seizing on the need for governments to reduce corruption and income inequality. Consciously or not, the audience drifted to problems that involved policy makers rather than forces of nature. Climate change was never mentioned until the very end, when Dadush made the above observation.