I don’t think businesses should be involved in CSR


5:05 PM |

Those of you who have read my earlier post on CSR will remember that I had discussed as to where should CSR start. I had quite a different view on what CSR is all about. If you remember, I had stated that if every company rakes care of its immediate stakeholders like employees, customers, vendors then the need for CSR will almost disappear. This could have a Domino’s effect. Every employee, customer and vendor has a family. In addition, some of our customers and practically every vendor would have employees, vendors and customers. The chain reaction could encompass the whole society.

I recently came across an interesting article in Financial Times, New Delhi dated September 12, 2010 on CSR. Some thoughts expressed in the article were interesting and do need discussion and clarification.

According to Mudit Kapoor, assistant professor, economics and public policy, ISB stated that companies are artificial entities and such cannot have any social responsibility. He further stated that while individuals can involve themselves in CSR activities with their own funds, a manager in an organization cannot do so as he is using funds of others. He added that businesses were already performing their social responsibility by providing goods and services that the society needs. What more. Businesses are also providing gainful employment to their employees.

I agree with the above argument. A business is established to make profit by providing goods and services to its customers in the most efficient way. If it does this without infringing on the rights of any of its stakeholders then it has fulfilled its responsibility, irrespective of what name we give to it. It does not have the responsibility to feed the poor or open a school. If this is anyone’s responsibility, it is the responsibility of the government. To fulfill this responsibility, the government can collect various types of taxes from individuals and businesses.

If, as an individual wants to do social work or get involved in philanthropy, he is most welcome to do so. Its his time and money and he can use the same in any way he wants to.

Even if a particular business is making too much profit, it still does not have the responsibility to feed the poor or open schools. The competition will take care of businesses making too much profit. How? Simple. When others see that manufacturing of automobiles is very profitable, they will also get into the automobile business which will ultimately increase competition and bring down the profits as well as the prices for the consumer. Let them make money so long they are not infringing upon the rights of others.

Actually, we would like to argue that the CSR activities of businesses are harmful to the society. Businesses will be able to best serve the society if they concentrated on enhancing their core competence so as to provide cost effectively high quality products and services to fulfill the needs of the society. When you add a non core activity in the business, it will make the business inefficient and add unnecessary cost to the product or service. Ultimately, the society will suffer as it will have to buy the company’s products and services at a higher cost.

If you ask me, society does not need any charity from business organizations. The best way businesses can fulfill their obligation is to do what they are supposed to do, that is, make money by providing high quality goods and services at competitive prices that the society needs without infringing on the rights of others. However, the problem is that businesses remember to make profit but forget that they are not supposed to infringe upon the rights of others. It is here that the problem comes up. When businesses infringed upon the rights of customers, consumer laws came in. When businesses wanted to make money by polluting the environment, environmental laws were established. When businesses infringed upon the rights of employees, unions were established and labor laws enacted.

For instance, if Coca Cola India was not infringing upon the rights of others by depleting groundwater resources, dumping toxic and hazardous waste material near its bottling plants or discharging waste water into agricultural lands of farmers, it would not have to worry about making CSR an integral part of its corporate agenda. If today, Coca Cola is involved in activities such as rainwater harvesting and restoring groundwater resources, one cannot say that it is involved in CSR activities. It is not doing charitable work. It is not doing any favor to the society. It is just trying to fix what it has done wrong in the past. If right from the beginning Coca Cola would not have engaged in depleting groundwater resources and infringed on other people’s rights, it would not have to be involved in restoring ground water resources. Coca Cola’s current involvement is not actually a CSR activity but their duty.

What is surprising is that in spite of the various laws, businesses still engage in unethical practices just to make more money and later start feeding the poor and opening schools just because they feel guilty. This is what we feel is not logical. This is why we had proposed earlier that logically if businesses just took care of their stakeholders, there would be no need for CSR itself.


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