The business of business is business but do it responsibly

Milton Friedman famously said, “The business of business is business.” This statement by a renowned academic exponent of free-market economic policies has been repeatedly quoted by the anti-corporate social responsibility (anti-CSR) lobby in India.

To be clear, I am a believer in corporate social responsibility (CSR) and have spoken and written on it extensively, so the title of this piece may mislead some readers into thinking I have turned coat. But no, I still believe in CSR, but prefer to look at it in a broader perspective than it has come to be considered in recent times. Though it was not the legislative intention, Section 135 of the Companies Act of 2013, amended twice since, has placed the focus of business responsibility on the financial aspect of CSR to the almost-total exclusion of responsible and ethical governance of businesses and their business practices.

Now CSR is equated with meeting the legally-set target of spending 2% of a company’s average corporate profits over the past three years on socially beneficial activities, which are mentioned in Schedule 7 of the Act, and reporting compliance. It also requires a committee of the board to be set up to decide on what is to be done and how, and a dedicated person to be put in charge of CSR implementation.

While we cannot deny that the CSR mandate under the Act has sensitized the Indian business community to their need to contribute to realizing social goals—especially those on the list of United Nations-sponsored Sustainable Development Goals (SDGs) like the removal of poverty, empowerment of women and protection of the environment—it has taken attention away from what the real goal of business is, which is to create wealth for the country’s development, distribute it equitably and do so in a responsible and ethical manner so that it serves society.

Unfortunately, business often seems to give with one hand and take it back from society with the other, in the form of sharp business practices that frequently short-change consumers, cheat the government of its rightful dues and impact the environment adversely. I need to cite only a few examples to make this point.

Recently, my daughter had booked six air tickets to Goa on a leading airline through a flexi-pay plan, which entailed an advance payment of a part of the total bill, with the rest to be paid 15 days later. Suddenly, without any notice, the tickets were cancelled on the ground that the balance money was not paid. There had been no reminder a few days in advance, as is usually the case, to pay up the balance. What is more, a refund of the advance paid, which was quite substantial , was refused. No justification was given for this refusal.

In another instance, a report in The Times of India, dated 15 November 2022, recounted a tax evasion scam using CSR funds that involved corporate houses, politicians, a web of middlemen and non-government organizations across India. The scheme had cash kickbacks given to individuals or a company after they showed that bank transfers were made to a trust as a CSR donation. Since donations are tax exempt, the donating entity would save tax. The amount involved was reported to be ₹4.2 crore and counting.

A third example is of inferior products being sold even at the cost of human lives. In a recent case, a pharma company exported a dangerous cough syrup to an African country; it led to several children who had consumed it losing their lives.

The recent Morbi disaster in Gujarat is another instance. Shoddy work and mere cosmetic repairs by a private company that was given a contract for its upkeep may have lined the coffers of this business, but at the cost of human lives.

And who is not familiar with low-quality electric products and electrical appliances being sold which burn out or break down, requiring frequent replacement, and also pose electric-shock risks? Here again, safety and quality appear to take a backseat to profits.

Elsewhere, forests that Tribals depend on for sustenance are exploited by large businesses with mining operations, easily done since local residents seldom have documents proving land ownership. They are rarely ever given a fair price, nor any lon- term benefits or stakes in such companies. Further, seldom is any attention paid to the supply chains of companies, especially whether child labour was used for inputs.

In short , a business cannot be said to be socially responsible if it merely meets a CSR spending target. The company must truly function as a responsible member of society. It cannot shun moral values, nor can it ignore its commercial compulsions. Every business must be accountable to the community in which it operates.

An analysis of CSR spending shows that most budgets are spent on education, health, women’s empowerment, or on environment issues that are actually the government’s responsibility. That business has begun sharing some of this burden is laudable, but it should not be at the cost of responsible business practices.

CSR spends and responsible business practices should be considered investments and not business costs. Businesses that have practised genuine accountability have found that it led to innovations in operating practices, reductions in cost and greater goodwill for their brands. What we need today is a 360-degree responsible business community, sensitive to all its stakeholders.

Pushpa Sundar is the author of ‘Business and Community: The Story of Corporate Social Responsibility in India’.