T N Ninan: Going ethical

WEEKEND RUMINATIONS

In the week that Anita Roddick (of Body Shop fame) has died, is it time to ask whether our companies need to address their social responsibility in a broader context? Ms Roddick was in India two years ago, speaking on the subject "" and I had argued in this column at the time that it is more important for businesses in India to use their capital efficiently, to make products cheaper for customers "" in other words, to deliver their core functions in a way that added to the efficiency of the system so that we could get rid of poverty faster. It was a Milton-Friedmanesque line, but the happy truth is that many if not most Indian businesses have done precisely that in the last four years "" look at the range of products and services that have become cheaper and better, and the businesses that are able to compete internationally as a result. So is it time now to ask the broader questions? Perhaps yes.

The issue gains urgency because of the (admittedly sporadic) reporting which suggests that mining companies are destroying their immediate environment even as many new leases are being given out; that Vapi is among the 10 most polluted places on the planet; that large numbers of people are being thrown off their land to make way for big projects that may not really need that much land, and certainly not on the terms at which they are getting it; that companies use water wastefully and thereby deny it to the surrounding villages (by one account, it takes 24 litres of water to make one litre of a soft drink); and so on. If it is true that most companies have a negative impact on the environment or on society because of their operations, then that is not a sustainable state of affairs. Quite apart from the objective reality, the political and social environment will create its own pressures.

Many companies have realised the need to talk of, and do something about, corporate social responsibility (CSR), but in many cases this is merely CPR: corporate public relations. Indeed, as with Azim Premji, NR Narayana Murthy, Nandan Nilekani and others, the correct thing for businessmen to do is use their personal wealth to help the disadvantaged, while their companies focus on wealth creation. Even here, though, the available numbers suggest that India's super-rich businessmen are less generous than their counterparts in other countries, but this may be because many of them have come into their wealth only recently, unlike the Rockefellers and even the Gates of the world.

The issue therefore is not CSR but something intrinsic to the nature of a business, and its impact on people and the environment. Anita Roddick defined it as a series of ethical issues (no testing of products on animals, for instance). Among the large Indian firms, ITC has shown the way through its 'triple bottom line' focus, on economic, environmental and social performance. The company says it is already water-positive and carbon-positive in all its operations, and is targeting zero solid waste (it has already achieved 90 per cent recycling levels). On the social front, its e-choupal scheme now covers nearly 40,000 villages and reaches out to over 3 million farmers.

How might other businesses seek to go ethical? One would be to avoid using harmful substances (like the chemicals in Chinese toys that have necessitated repeated product recalls by Mattel). Another would be to insist on suppliers being tax-compliant, paying the stipulated minimum wages and observing environmental laws. A third would be to minimise the negative impact of your business "" if the new retail chains are indeed putting mom-and-pop stores out of business, will developing a cash-and-carry stream help small retailers to become extensions of your business? A fourth would be to build a climate in which customers seek out the products of ethical companies "" market pressure works in the absence of effective laws, and someone could devise a rating or audit system. Industry lobby groups should look at making this a focal point of activity, in the way that the Confederation of Indian Industry has done with its quality movement.