Shrinking CSR to Philanthropy! – Loosing opportunity
The revolutionizing subject which takes by storm in the developed world and inspires innovation on daily basis is disdainfully practised in the conventional way in India by confining to philanthropy. India has taken a leap ahead by imposing the law but is still resistant to development.
The well drafted CSR Bill by Indian Institute of Corporate Affairs (IICA) and the lawmakers is evolving. The CSR Bill in India, was drafted taking into consideration the social sector requirements but elsewhere, the investors, consumers, shareholders played a key role. The concept of CSR is to give a boost to businesses and build stakeholders confidence. The investment decisions are based on specific criteria’s beyond profits that is where CSR Index comes into picture with indicators of prime importance to the investment community and other stakeholders. CSR Index is the basis of decision making for shareholders, Foreign Direct Investments, Local investors, conscious consumers, business peers, suppliers or manufacturers, Government functionaries, financial institutions and other stakeholders.
The emphasis of CSR Bill introduced in India has made companies proactive solely towards philanthropy and may evolve to address other concerns of the stakeholders.
This impetus given in our CSR Bill on philanthropy and social upliftment is reflected in our latest creation of CSR Platform. Bombay Stock Exchange (BSE) and Indian Institute of Corporate Affairs (IICA) has launched CSR platform called “SAMMAAN” which replicates “Give India”, or any other portal which lists NGOs/Corporates for philanthropic purposes. It is admirable to see the proactive step taken by these institutions where National Stock Exchange (NSE) is still due.
The transformation of CSR platform by BSE or creation of one by the apex body NSE, may take inferences from our contemporaries such as BRICS region. The progression of CSR platform or making of CSR Index may address the larger concerns of stakeholders. Below mentioned are inferences they may consider to embed in their models:
Johannesburg – South Africa:
The JSE, is the first stock exchange to form a Socially Responsible Investment Index (SRI Index) in 2004 in the emerging market. It announced on 3rd June, 2015 that it is partnering with FTSE Russell, the global index provider to develop sustainability index.
Shanghai Stock Exchange (SSE) – China:
In 2008, the SSE issued the Shanghai CSR Notice and the Shanghai Environmental Disclosure Guidelines on strengthening listed companies’ assumptions of social responsibility. Listed companies that promote CSR are offered incentives like priority election into the Shanghai Corporate Governance Sector, or simplified requirements for examination and verification of temporary announcements. The SSE has also developed the concept of social contribution value per share (SCVPS) to measure a company’s value creation. The Shanghai Environmental Disclosure Guidelines allow for the SSE to take “necessary punishment measures” against companies for violations of the disclosure rules.
In 2010, the CSR initiatives of the SSE were strengthened, when it launched its CSR Index, showcasing the top 100 companies in terms of social responsibility performance.
Efforts by the Government:
In 2008, The Ministry of Commerce (MOC) drafted voluntary guidelines on Corporate Social Responsibility Compliance by Foreign Invested Enterprises; a plan to encourage foreign companies to integrate best practice standards that advance China’s social fabric. According to the guidelines, a CSR- compliant company must consider its economic, social, and environmental impacts on Chinese society.
|Presently, Moscow Stock exchange doesn’t have the index based on CSR, but studies by Moscow School of Management SKOLKOVO gives a sense of direction. In 2011, Russian Trading System (RTS) and SKOLKOVO announced Russia’s first Sustainability Index.
The calculation of company’s sustainability index is based on the following:
Shares from Russian issuers that are traded on the organized stock market which are selected on the basis of analysis of the company’s regularly published social reporting.
Moscow Stock Exchange: Russia –
BM & FBOVespa: Brazil:
Índice de Sustentabilidade Empresarial (ISE) is a tool for comparative analysis of performance of the companies listed on BM&FBOVESPA. It was launched in 2005 with the support of International Finance Corporation (IFC).
The indicators used by investors, stock brokers, market to believe in the companies are as follows –
- Economic efficiency
- Environmental equilibrium
- Social justice
- Corporate governance
Responsible to enhance public understanding of companies and groups committed to sustainability, differentiating them in terms of quality, level of commitment to sustainable development, equity, transparency and accountability, and the nature of their products, as well as business performance in the economic, financial, social, environmental and climate change dimensions.
Methodology designed by: Sustainability Research Center (GVCes) at Fundação Getulio Vargas’s Business School (FGV-EAESP).
They utilize CSR Index on their stock market as follows:
On the other hand the developed nations such as USA, EU and UK have taken the following steps for CSR Index –
Euronext – EU:
Euronext is the first pan-European exchange, spanning Belgium, France, the Netherlands, Portugal and the UK. Created in 2000, it unites markets which date back to the start of the 17th century. It uses Vigeo formed in 2002, for the purposes of sustainability index.
London Stock Exchange – UK:
London Stock Exchange is one of the world’s oldest stock exchanges and can trace its history back more than 300 years. On 3rd January, 1984 Financial Times Stock Exchange (FTSE) 100 Index was launched, which is wholly owned by LSEG. This enables LSE to provide detailed ESG ratings and data to the investment community globally. These are presented at a variety of investor conferences globally and FTSE works with asset owners, asset managers and banks to develop tailor custom ESG services.
Dow Jones Sustainability Index (DJSI) – USA:
In 2003, The New York Stock Exchange (NYSE) adopted corporate governance rules requiring that listed companies “adopt and disclose a code of business conduct and ethics.” After a decade, in 2013, NYSE Euronext joined the United Nations’ Sustainable Stock Exchanges (SSE) Initiative. It is the only carbon neutral exchange group. NYSE-Listed companies make up 87% of both CDP’s S&P 500 Disclosure Leadership Index and the Dow Jones Sustainability Index (DJSI).
The developed nations utilize CSR index on their Stock Market as follows:
It is on the onus of the markets to recognize the potential economies and allow it the space to grow.
As we observe our contemporaries, Indian companies need to specify their own growth and sustainability model, thereby building indicators of success to be used on the index for stock market. The modifications in times to come in the CSR Bill should also consider concerns of investors and other stakeholders.
The consequence of the present CSR Bill is that, in the Board rooms of Indian companies, still emphasize on philanthropy. The identification of sustainability, social entrepreneurs, green revolution, compliances, clean supply chain et al as a part of CSR is yet to be recognized.
It is time, we use CSR as a tool for nation building and holistic India Inc. growth. It is time, we free India from the shackles of CSR been confined to philanthropy and graduate to surpass the peer nations. To sustain the “Make in India” campaign we need to develop sustainable businesses to attract foreign investors and address conundrum of other stakeholders align on the path for inclusive growth.