CSR, food security & economic democracy

On the face of it, the two new legislations passed by the Indian Parliament in the last fortnight – the Companies Bill and Food Security Bill – may have nothing in common. But the Corporate Social Responsibility component of the Companies Bill and the entire Food Bill are alike in that they pose challenges to building a market economy that is fair and in sync with our rising democratic aspirations.

Both legislations have noble goals. The Companies Bill mandates philanthropic spending by private companies. The Food Security Bill aims to ensure that no one goes hungry. Yet both laws are marked by a twist of irony.

At a time when corporate social responsibility (CSR) urgently needs to be defined in terms of heightened responsibility and accountability by business towards all stake holders, it has instead been reduced to post-profit giving. And when the self-reliance and sustainability of Indian agriculture is in peril for a complex combination of reasons, the new law equates food security with doles from the government. The most tragic manifestation of the India’s agrarian crisis is to be found in the data banks of the National Crime Records Bureau — since 1995 at least 270,940 Indian farmers have committed suicide. In 2011 suicide rates among Indian farmers were 47 per cent higher than the rest of the population.

Both the new laws are more likely to undermine economic democracy rather than strengthen it. ‘Economic democracy,’ in its most basic form, means fairness and a level playing field in the market place. At a more ambitious level, economic democracy is about rectifying structures that cause inequity and injustice – thus giving some people inordinate advantage in access to resources, means of productions and therefore an unfair edge in market transactions.

Let us review the two legislations in this context.

The Companies Bill, now awaiting assent from the President, makes it mandatory for all private companies with an annual net profit of Rs. 5 crore or more, to dedicate at least 2% of their average net profits to philanthropic causes. This legislation, which has been in the works since 2009, was drafted after an extensive process of consultations with business and industry, and some of its provisions are indeed expected to improve corporate governance.

Yet there has still been a furor about the CSR provision with some business leaders objecting to the government trying to legislate their conscience. There are also concerns that CSR by compulsion may become a way for government to shirk its own responsibility of providing basic infrastructure and services to the people. At a time when the economy is in a slump and businesses are looking for reforms that would renew growth, a veritable CSR tax of sorts is not going to elicit a positive response.

At the same time, arguments in favor of voluntary philanthropy are undermined by the fact that many Indian companies do not have a good track record of giving. The few examples of generous giving by Indian corporations have not created enough of a demonstration effect. But the counter-argument is equally true – that a law aimed at forced giving is likely to be circumvented by hook or crook.

However, this dispute over voluntary vs. mandated giving is a decoy. It distracts attention from two vital issues – the limits of philanthropy itself and how corporate social responsibility should be defined.

Global networks engaged with these issues are currently abuzz with a controversy triggered by Peter Buffett, the musician philanthropist son of Warren Buffett. In an article published in the New York Times on July 26^th, titled “The Charitable Industrial Complex”, Buffett Jr. questioned why inequality is on the rise across the world despite large scale philanthropic giving, particularly by the wealthy in developed countries.

“Inside any important philanthropy meeting, you witness heads of state meeting with investment managers and corporate leaders” wrote Buffett Jr. “All are searching for answers with their right hand to problems that others in the room have created with their left.”

He went on to add: “As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to ‘give back.’ It’s what I would call ‘conscience laundering’ — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity.”

Philanthropic spending will undoubtedly help some who are in need. But the urgent need of our times is to ensure that more and more businesses conform to higher social and environmental standards – for example, the UN Guiding Principles on Business and Human Rights, to which India is already is signatory. These guiding principles build on the Universal Declaration of Human Rights. They emphasize both the duty of governments to take action against companies that violate human rights, as well as the right to livelihood, and require due diligence by businesses to ensure that they do not infringe such rights.

The emergence of such global voluntary standards improves prospects for economic democracy because it fosters a climate in which people at the bottom of the economic ladder feel more empowered to hold businesses accountable for upholding human rights.

Instead, “CSR as defined in the [Indian] Companies Bill treats the poor as recipients of charity and not as citizens with rights” writes Mark Hogde, Executive Director of the Global Business Initiative on Human Rights, on the website of London-based Institute for Human Rights and Business. His own organization, the Global Business Initiative, is supported by the Swiss Government and led by a core group of 18 major corporations which work in collaboration with the UN Global Compact.

In 2011 India’s Ministry of Corporate Affairs did formulate National Voluntary Guidelines for Social, Environmental and Economic Responsibilities of Business.

These guidelines have been recognized by experts as providing one of the most coherent national frameworks among the emerging markets. They provide companies with the tools for assessing their own impacts in terms of transparency, employee well-being, stakeholder responsiveness, human rights, environment, inclusive development, among other things.

In his article, Hodge makes three concrete proposals for what government needs to do if it is serious about CSR:

· One, ensure effective implementation of existing Indian laws which protect human rights and ensure environmental safe-guards in relation to private companies.

·Two, ensure that those adversely affected by private sector projects, most notably displacement of livelihoods and habitats, are not harassed and instead provided judicial and non judicial means of redressal.

·Three, government procurement, natural resource concessions, legal licenses and public finance should be linked to the social and environmental impacts of businesses.

The Food Security Bill deals with a still more stark reality – too many Indians remain either hungry or malnourished and that is unacceptable. This law, which gives 75% of the rural and 50% of the urban population the entitlement to receive 5 kg of subsidized food grains every month, may help to reduce under-nourishment.

Advocates of this legislation, primarily the Right to Food Campaign – an informal network of Indian NGOs, see this entitlement as part of a larger strategy which includes agricultural reforms. But while the National Advisory Council (NAC), headed by Congress President Sonia Gandhi, has played a pivotal role in pushing this legislation, it has been quiet on desperately needed agricultural reforms.

This happened despite the fact that M.S. Swaminathan, who chaired the National Commission on Farmers, is a member of the NAC and presumably had a say in the drafting of this legislation. Between 2004 and 2006, this Commission submitted five reports on causes of famer distresses and the rise in farmer suicides. The Commission proposed a holistic approach to address the agrarian crisis. Recommendations include ensuring that farmers get assured access and control over basic resources – such as land, water, bio-resources, credit and insurance, technology and knowledge management, as well as market access.

The Commission also called for land reforms to address sharp inequality. In 1991-92, the bottom half of the rural households owned just 3% of arable land while the top 10% owned as much as 54%. In this context, a legislation aimed at food supply rather than food security is sadly off the mark.

Food security can only be ensured if there is Kisan Swaraj, according to the Alliance for Sustainable and Holistic Agriculture (ASHA), a network of farmers groups and other activists. Since 2010 ASHA has been lobbying for far-reaching reforms that would ensure economic democracy for farmers.

ASHA lobbied to include many aspects of their agenda in the Food Security Bill – but to no avail. Their definition of Kisan Swaraj is as follows: a sustainable and viable production process with producers having equitable access and control over their productive resources. This in turn means ensuring livelihood and income security for the agricultural producer community, particularly small and marginal farmers as well as agricultural labourers.

Activists of ASHA now fear that since the government is will be required to procure a large volume of food grains in order to fulfill the entitlements created by the new law, it is even more likely to opt for contract farming on a giant scale and may approve the use of genetically modified foods. ASHA’s objections to genetically modified foods are based both on concerns about its safety and the fact that companies that supply GMO seeds tend to practice a command and control business model – the very anti-thesis of swaraj or self-reliance.

By contrast a ‘Kisan Swaraj Neeti’ or Farmers Self-rule Policy, which ASHA advocates, would aim to ensure the following: income security for farmers; ecological sustainability of agriculture; people’s control over agricultural resources like land, water and seed; and access to safe, healthy, sufficient food for all.

Of course the future of agricultural technology and land ownership patterns is a complex and multi-dimensional puzzle. But it is now clear that food security and the social responsibility of corporations are intrinsically linked. If the policy framework continues to empower technologies and business models that undermine economic democracy, a large majority of Indians will remain dependent on highly subsidized food from the government. No amount of CSR-as-philanthropy, voluntary or forced, will undo this anomaly.

Swaraj, as defined by Mahatma Gandhi, was never just about transfer of power to Indians. Intrinsically swaraj, in the political and economic sphere, is an ongoing process of creating structures that enable every last person to be creative and self-reliant. This might be a better litmus test of both food security and CSR than either calories or charitable funds handed out as acts of benevolence.

Rajni Bakshi is the Gandhi Peace Fellow at Gateway House: Indian Council on Global Relations.

This article was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

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