Over 8,000 large companies complying to Corporate Social Responsibility (CSR) has been a remarkable policy adoption by the Indian Government. This move has put India in league with countries like Sweden, Mauritius and Norway who have robust policies on CSR for industries. But where India lags behind these countries is that the Companies Act does not successfully bring CSR into the mainstream.
India is a country of SMEs. Schumacher said, “Small is Beautiful”. We need to make the small beautiful in India too. It is imperative that India works towards making the smaller enterprises CSR compliant. Employing close to 40% of India's workforce and contributing 45% to India's manufacturing output, SMEs play a critical role in generating millions of jobs, especially at the low-skill level. The country's 1.3 million SMEs account for 40% of India's total exports. SMEs have a much wider spread, hence a wider reach across communities. We can extrapolate and comfortably say, that the geographical reach through SMEs is vastly higher than through the larger enterprises.
UNIDO on its website on CSR defines Corporate Social Responsibility as a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. The SMEs need to realise that CSR is not just about spending money. It is an ‘attitude’. The excuse of being small will only prevent the SME from becoming world class.
SMEs are equally responsible towards making living conditions better for their employees and their families. What SMEs do not realise is that CSR is the only way through which the company can achieve a balance of economic, environmental and social goals. As we move ahead in the 21st century – India can achieve its dreams, and turn its burgeoning young population into an asset only if each company big or small takes on responsibility for social, educational and environmental upliftment at large. This will go a long way in creating harmony between workers and the management, while at the same time addressing the expectations of all stakeholders in business.
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UNIDO continues to articulate very appropriately that “A properly implemented CSR concept can bring along a variety of competitive advantages, such as enhanced access to capital and markets, increased sales and profits, operational cost savings, improved productivity and quality, efficient human resource base, improved brand image and reputation, enhanced customer loyalty, better decision making and risk management processes”.
At a whopping approximately 48 million, India has the second largest number of SMEs in the world, after China. While SMEs are the predominant form of enterprise in India, it is essential that they also comply to CSR standards and are reportable to the government. The government should consider modifying the Companies Act to ensure at least a reporting by SMEs on what they have done. This will force them to begin to think on those lines.
Forcing, however, undemocratic it may sound, is often a tool to initiate and change thought processes. CSR could for beginning be within their organisation – More often than not, SMEs tend to ignore the environment within the company itself. They could even look at motivating and training employees on health, sanitation, skill development, environment - these would change the immediate environment and benefit their families which in turn benefits the company.
Compliance to CSR will ensure that the bulk of SMEs undertake the following to help produce quality products and derive customer satisfaction, thereby improving the overall environmental and social surrounding of each one of them (refer Figure 1).
Large corporations have significant impact on society and environment. They are concerned about their brand reputation too. Therefore, they invest in CSR. However, it is important to appreciate that social and environmental impacts are interconnected. The two are related and have to be treated as one by everyone, whether an individual, small enterprise or large enterprise. CSR has to evolve into ISR – Individual Social Responsibility - eventually for India to become developed. Hence, it is imperative that SMEs take on this responsibility. It is the government’s responsibility to enable such a revolution, by bringing in the SMEs into the CSR act in a careful and responsible manner. The rules have to be enablers and not irritants for the SMEs.
It is a no brainer that in India SMEs have frequently abdicated their environmental and societal responsibilities. This statement in no way implies that large organisations have become sustainable and are responsible. However, it will be fair to say that more and more large organisations have taken or are taking steps to reduce their environmental impact and in the process giving back to society, which is the very reason for their existence.
To create the sweeping change in education, environment and society that India needs, the returns from focussing on large organisations are diminishing with time. The focus has to shift to enabling SMEs to make an impact on the society and environment. The changes they can bring about, as they have done in manufacturing and contribution to the GDP, in turning India into a developed country through making an impact within their organisation and their immediate neighbourhood is enormous.
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This, in no way is to imply that large organisations have become ‘sustainable’, or cannot do much to reduce their environmental or societal impacts. However, it is fair to say that a number of large companies have progressively undertaken steps and measures to improve their social and environmental performance.
India along with other developing countries is known for unsustainable practices of suppliers of raw materials (eg in electronics manufacturing, electroplating, dyeing or polymer recycling) or the unethical labour practices of production which is outsourced (eg in retail and clothing). These companies do not garner the same scrutiny as their large customers.
The author is the Managing Director at Pluss Polymers, a chemical research and manufacturing company involved in the field of thermal energy storage and polymer processing aides
(The views expressed are personal. The author also thanks UNIDO for inputs on CSR for SMEs and developing countries)