Monday, 31 August 2009

Corporate Social Responsibility in the developing world

I’m posting a few pieces on Corporate Social Responsibility in the developing world. I had posted my views on what companies should NOT do here and what they could do here, a few months ago.

I’m picking up the theme in relation to the developing world, because the circumstances and the maturity of CSR are , I believe, different in the developing world.

In my book, the first role of a socially responsible organization is to follow the law. This is not so simple in the developing world as it might seem.

The first question is “what law ?”. The laws of the country you are operating in ? The laws of the country you are headquartered ? You say it should be the law of the country in which you are operating in. But what if the law is silent on something which is taken for granted in other parts of the world – say for eg pollution. If the standards are lax in the country , would you follow only those standards, or would you follow those in the developed world ? Is "pollution outsourcing", which the ship breaking industry or the leather industry does, acceptable ? What if its impossible to follow the standards of the developed world – this is what happened to the cola companies in India. The pesticide residue in their soft drinks was found to be higher than European norms. But the problem was not their doing – the pesticide residue in ground water was higher in the first place. Now what do they do ?

The second problem for companies come when the law in a country is in contradiction with both the law in their homeland and the values they believe in. When apartheid was official policy in South Africa, do you segregate races in your office ? Do you follow the laws relating to women in Saudi Arabia ? The easy answer is to say yes – you have to observe the laws of the country, but I am aware of companies which choose not to operate in a certain country because they cannot morally accept those laws.

The third problem comes when everybody is bending the law and it is accepted as common practice. Bribery (call it by whatever name) falls in this category. There are some parts of the world where it is not possible to operate without facilitation payments, commissions, “donations”, etc etc. What do companies do then ? They pontificate that they would never do these things, and yet, many very well respected global companies do this all the time (doing it through an agent does not absolve you of the responsibility).

The fourth problem is when its virtually impossible, or insane, to follow the law. I’m sure such a situation existed for most companies operating in Zimbabwe for the last 5 years, say in foreign exchange regulations. What do they do ? Pull out, or do what everybody else does – ignore the law ?

Not easy questions. I submit that an integral part of Corporate Social Responsibility is to decide a policy on these questions that a company can live with in its conscience. And one that will be seen by the communities they operate in as fair and ethical. In my earlier post, I had argued that this is a black and white case ; there are no shades of grey. I still think this is so for 90% of the cases But in 10% of the situation, I think grey is unavoidable.


Srivats said...

waah.. I thought CSR is just about some philonthropic activities :) I guess the main problem would be balancing on what is the right thing to do (ethical) towards what way would earn good profit (material)

Ravi Rajagopalan said...

The United States and the EU have realised that the only way to resolve some of these ambiguities is to make the officers criminally liable for specific acts of corruption. Hence the FCPA and equivalent EU laws but nothing is as specific as the FCPA. But that only solves the question of bribery. I am aware that even the most high-minded companies succumb to Saudi laws about different payscales for Saudis, FCNs, SCNs and TCNs - (thats First Country Nationals - like the US, Second Country Nationals - like Britain and France, and Third Country Nationals - like India and Pakistan). The bottom line is that companies will be corrupt if they can get away with it. Be it "agency commissions" or "selling agencies" or "charitable donations" - it needs very strong cultural bonds to ensure that companies do not succumb even where there is no legal bar to these types of activities. In my days in South Africa before the end of apartheid, I saw how Olivetti routinely facilitated any American company to work in South Africa busting sanctions. How do I know? Because I worked out of their offices in Braamfontein...

Ramesh said...

@srivats - No; CSR should not be about philanthrophic activities. Give the money to the shareholder and let him do philanthrophy if he likes. Its not a corporate's job to be generous with other people's money. CSR is, I think, much more.

And I suggest there is no balance. Doing the right thing comes first; no matter what. The problem often is that its not so apparent what the "right thing" is.

@Dada - Good observation Dada. There's a strange case going on in China. Under pressure from home, quite a few companies have admitted to bribery in China. Now the Chinese don't know what to do with that. They are claiming no bribery took place at all. There are articles as to why A merican companies are voluntarily admitting to things that didn't take place!

Anonymous said...

Very thought provoking post!! Always thought corporates get away with bending the law - but I guess it is not always the case. :-) Good one, Ramesh!

Ramesh said...

@thoughtful train - Thanks as always. No corporates aren't all evil. I wrote a post on it too (incorrigible blah blah i am). Click here.

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