SEZs were the Silver Bullets of the 20th Century. Are CSR Hubs the Solution for the 21st?
Integrating CSR with our local governance systems is a potential answer to balancing the rights and responsibilities of businesses and society. In the times we live in, the idea of CSR Hubs stand out as an attractive proposition.
(Protests in London against the Transatlantic Trade and Investment Partnership Agreement, Glyn Thomas/ World Development Mo, 2014)
Discontent, Distrust, and Precarity
The Coronavirus pandemic has slapped a vexatious reminder upon us, that disruption has been the norm rather than the exception in human history. Societies have been struggling to adapt to radical change and innovation since the dawn of time, solving and creating problems as the cycle of progress churns our lives. World over, the issues of sluggish economic growth, skyrocketing inequality, and an incipient jobs crisis have been breathing down our necks. Skills and educational qualifications are becoming fleetingly redundant in the face of a brutally short and uncertain economic transition.
This transition is marked by automation and Artificial Intelligence (AI) pressurising specifically the lower and middle rung of the workforce in the skills pyramid towards a life of perennial precarity and uncertainty. Our networked societies are being moulded by a progressively pervasive and often unethical intrusion of technology giants within our lives. This is upending our value systems, robbing us of agency, as well as distorting all aspects of our economic lives. Foment is readily translating into a bellicose, burning tilt towards populist demagoguery across nations, with seething resentment against the economic order becoming increasingly apparent. Demands for greater taxation, the imposition of stricter labour and financial regulation, and control over content standards on social media are symptoms of a deteriorating relationship between business and the people. Fundamentally, the phenomenon is both a backlash against the ascendant power of technologically supercharged business in today’s world, as also a sign of a yawning trust deficit.
Shining Cities on Hills
In this regard, businesses would need to step up, else be swallowed by the roaring forces of this age of discontent. Corporate Social Responsibility (CSR), is one important prong that can arrest the distrust bellowing between honest business and an increasingly embittered populace. More than the concept, it’s the execution that matters. Doing that requires creative reimagination; a strategic shift is warranted in the way CSR is done.
Right now, businesses and governments are reacting rather than acting, pasting band-aids on gaping gulfs through piecemeal initiatives. Such a narrow view stems from a very limited reading of the tectonic swings we are facing, and failing to understand that every system on which our society depends has to be recalibrated simultaneously to adjust to this nascent, brave new world. In such circumstances, it’s wiser to think of our world as an ecosystem – where hundreds of small components simultaneously churn as cogs in a machine. We are all bound by value chains and networks spanning continents, enmeshed in webs of relationships ultimately reaching our doorsteps. Thus, to affect institutional change across the ecosystem, we require novel centres or experimental bridgeheads to evolve new models which span multiple critical subsystems. In these shining cities on hills, businesses prove that they can come together with society for the better, as respectful partners in progress. This approach is nothing new and has existed in different forms with different goals in mind. Whether it was Special Economic Zones (SEZs) and Business Parks of the past or today’s Regulatory Sandboxes, the fundamental idea remains the same; centres where ideas can be tested, synergies built, and innovations fostered to figure out models which can be scaled up and replicated. CSR Hubs are only a natural progression along these lines- a place where companies are incentivised to develop closer relationships to ascertain the expectations of placating a distrustful society.
Ideas, Institutions, and Progress
In the broadest of senses, an economy rests on four interacting factors- land, labour, capital and ideas. They are substitutable, but only partially, and changes in one radically transform the usage of others. The connections between land, labour, and capital are governed by ideas; unless I don’t know how to build a car, I can’t set up a car factory with all the machinery, labour, and land. Similarly, our relationship with products and the three factors is governed by a particularly robust form of ideas, which we call institutions. These institutions set for us the benchmark of acceptability- just as how it is only normal now to expect provisions for working from home in our workplaces. It is ideas and institutions which truly enable us to move forward, and redefine how things are done. A quick example of how profoundly ideas change human history is the evolution of colonialism. European kingdoms, starved of land because of internecine warfare, invested in maritime technologies to secure trade and land beyond a fragmented and hostile continent. The results were ships that could outsail others. Naturally, a flotilla with such ships were expensive affairs, and could originally be financed only by royal houses with deep pockets. After this technological idea came a financial one, which would open the doors to bigger and more consistent expeditions. This revolutionary idea was that of the joint-stock corporation, i.e., companies with tradable stocks. This enabled merchants to pool money and share risk amongst each other. It opened up access to a then novel source of incredible wealth to merchants who were till then excluded from this trade. Essentially, two centuries of colonialism were enabled by ideas more than anything else. These ideas found their match in the ideas of self-determination, and the saga continues. With ideas come solutions, as well as problems, which wait for new ideas to continue the cycle.
A Starting Point
The Indian city of Jamshedpur, the largest city in the mineral-rich State of Jharkhand, is a good starting point for understanding what a CSR Hub could look like. The Tata Group set this city up more than a century ago, built it brick by brick, and continues to provide most public goods in the city. It is the cleanest medium sized city in India, has a quality of life second only to Chandigarh, and is a multicultural, economically thriving outpost in a region marked by relative underdevelopment. While the surrender of civic governance to a single business is neither palatable nor desirable in today’s day and age, the inclusion of the business community along with community representatives in a decentralised system based on India’s landmark Rural (also known as Panchayati Raj) and Urban Local Government Laws could be a real game-changer. India has a long tradition of bringing businesses into the fold of broader conceptions of governance, with guilds known as Shrenis existing since at least the Mauryan times. Businesses must learn to appreciate their responsibilities, learn about their limits, and strike a harmonious bargain with the people. However, it is also a fascinating opportunity to understand popular expectations and build brand equity. Indeed, a loyal populace that is convinced that your business is a force for good, allows for a trusting relationship. It is not just a marketing coup; It is an insurance policy against the waves of regulatory or popular angst which characterise our times.
E Pluribus Unum
CSR Hubs are essentially just an idea, waiting to be institutionalised. It responds to the challenge of how can we balance rights and responsibilities between the three pillars of our society- markets, communities, and governments. Across the world, one can see monopolies or oligopolies arise in key sectors- which empower these businesses but threaten to weaken the other two pillars. Resentment seeps in, and businesses face the ire of accusations that outline perceived misuse of this newfound power. While in no way is this process zero-sum, but perceptions can drive suspicion, even disdain. Is it possible that the three pillars indeed come together, respect each other’s boundaries, and in transparency try to ameliorate the problems of the society? Perhaps, but one must start small. Let there be towns where new ideas of governance are evolved, with the government bringing business and community into decision making. Let businesses and the people develop relationships greater than give and take, and let both of them feel invested in each other. With a handful of such CSR Hubs, where lessons are learnt and experience is distilled into knowledge, exciting new vistas for State or National Policy could be calling us into a very different future.
The takeaway here is that CSR Hubs as an idea holds the potential to become institutions that can drive wide-ranging transformations in society. It offers an adaptive, interactive and intersectional platform where industry learns and helps in setting agendas in consonance with society’s broader goals. The bulk of the friction in the popular economic discourse has its roots in the market and state leaving communities behind. It is through CSR hubs that we can achieve a new, equitable equilibrium where all stakeholders can make mutually beneficial decisions with ripple effects across our economy. It is becoming painfully obvious that existing structures governing relations between business and the larger community are unable to provide a decent deal to either. In its most glaring of failures is the fact that firms complain about the lack of requisite skills, even as talented youth suffer an unemployment rate creeping upwards. We have indeed reached the limits of a system that requires a burial. Now the question becomes- how can CSR Hubs be conceptualised?
While Local Governments receive greater powers and funding as India continues its process of democratic decentralisation, they must be given flexibility as to their relationship with businesses. By allowing for non-voting representation of businesses within Local Government, a community-led, business-backed, technologically powered development process can be ushered in.
In the broader social sector of the locality, businesses must be allowed and asked to contribute primarily through products or services already offered or closely related to what they offer, instead of monetary contributions. Simultaneously, they need to be incentivised to join hands with other businesses to develop systemic solutions.
Small businesses, suppliers, and household industries should receive a definite minimum representation along with bigger firms, with CSR as a concept cognizant of the value of local involvement in supply chains. Economic and social alienation from globally distributed supply chains is a risk in and of themselves, and local small business is an important pillar in many communities. Not only representation, but incentives must be structured to include local businesses in supply chains and CSR activities of bigger firms. For example, if a big firm is setting up a school, let the furniture, fixtures, and teachers etc be local.
The role of Local Self Governance subsumes the essential role of planning, which is starved of planning professionals at that particular level. An important shift in mindset is required, where talent can be brought in, consensus evolved, and such plans actually executed. Such needs could be definitely helped by communities and businesses coming together, where lateral entries by domain experts from the corporate world for specific projects could give shape to the wishes of the community. Simultaneously, companies would have to directly face limitations, opposition, and would need to adjust to the cultural shock of a direct interface with the public. The aim of this is to have a sensitive, connected, and thoughtful corporate sector which respects the sociocultural values of their constituency.
Upskilling and technological help to local businesses, professionals, and students should be an important cornerstone for CSR. While firms would be able to get ready talent which our education system is lacking in, such upskilling can enable many citizens and children to have better earnings over their lives. Thus, optional courses at the local school level onwards are another nudge at building a choice-based, industry ready education environment.
The Economy- Inclusive Growth is Fast Growth
As established above, the double whammy of slower and unequal growth has had a particularly pernicious disintegration of trust amongst stakeholders in this society. Trust is a value upon which the edifice of sustainable growth is constructed, a thought which India’s former Chief Economic Advisor has echoed as well. Building trust is a time-consuming affair, and requires constant efforts whereby inclusive economic and political institutions allow for niftier, smoother governance. More than that, they rope in a greater number of people into the mainstream economy, boosting employment and growth. CSR Hubs could be an interesting model which can boost trust and provide for an institutional setup for faster, more inclusive growth. Even today, swathes of India lack access to thorough involvement in growth-oriented sectors- a problem which direct involvement could solve. If one sees the evolution of India’s economic policy since Independence, a pattern emerges, where incentives were copiously utilised to bring growth to regions which were left behind. CSR Hubs are the next stepping stone to SEZs, whereby the next big stories of employment generation, economic growth and social-business compacts are scripted.
Finally, it is important to recognize that a more organic, humane, and accommodative connection between the factors of the economy is necessary for purposes of development, opportunity and equity. The business models of the future necessarily would have to be more ‘human’, in the sense that our ideas of the bottom-line would have to become much broader and in tune with the human condition itself. The growing clamour over inequality and business responsibility is symptomatic of deep distress, whereby our ideas of the economy have not kept pace with our state as communities. While the law embodies trade-offs a nation necessarily has to make, it is not fungible with the initiative of innovation which propels us into newer paradigms, to be managed later on when the law plays catch up.
CSR Hubs, thus, are an idea in a time when convention has played its hands. It is an evolving, bold, yet sound experiment which is attempting to adjust corporate citizenship and governance to the world of the 21st century. It is not a substitute to a modern police system, a robust judiciary, or other basic State services. CSR Hubs, instead, are a pragmatic attempt at commencing a new generation of governance, where the rights and responsibilities of the three pillars are rebalanced. The only question now is, would we, as a society, be brave enough to step into terra incognita.
(Deekhit Bhattacharya is a Research Associate at Global Order, and a Research Associate at Pooja Terwad and Associates, which is a Startup Oriented Law and Business Firm, where he is Specialising in Fintech, Cryptocurrency, and Blockchain. Views of the author do not necessarily represent those of his organisations, and are his alone. Reach him at firstname.lastname@example.org, or email@example.com ; connect with him at https://www.linkedin.com/in/deekhit-bhattacharya/ )