CSR and Sustainability – The case of Posco in Orissa, India

The Mint reports that Posco, the South Korean steel giant is trying to implement a range of social and health programs “in the areas where it still needs to acquire land.”

Since the announcement of its $12 billion (Rs49,200 crore) proposed facility—which represents the single largest foreign investment in India—the company has tried to ramp up social initiatives in the areas where it still needs to acquire land. Though the walls haven’t been erected yet (the company has vowed to start construction in October), Posco has begun operating in the area—in activities unrelated to steel.

A mobile health van goes to some villages at least one day a week, young women have trained as beauticians, doctors have flown in from Korea to fix the cleft palates of local children, scholarships for study have been awarded and street lights have been erected.

On an international level, corporate social responsibility (CSR) has been a major focus for Posco, the only major steel company listed in the Dow Jones Sustainability Indexes, which track the performance of leading companies deemed to operate in a socially responsible manner. Its efforts in India coincide with increased attention to the subject.

“The idea behind doing all this CSR is to earn the goodwill of the community and grow along with them,” says Posco spokesman Shashanka Pattnaik.

“What companies really need to make sure they do is to engage the community. You need to make sure that you truly understand what the issues are,” said Jane Fiona Cumming, director of London-based corporate social responsibility consultancy. “If, however, you’ve come in to buy the community, that as a strategy doesn’t work.”

Posco says it has listened closely to the community in Orissa, developing a three-pronged strategy based around rural development, education and healthcare after canvassing the villages that lie in the path of its steel plant.

This is a very interesting case. Posco has started providing basic health services in areas where it needs to acquire land. It is providing these services to villages which need to be emptied in order to acquire land.

Engaging in the community for consultation is an important part of stakeholder management however, providing health services in areas where the company has not even started working? What does mean in terms of CSR? Is it CSR? Better still, what is CSR?

Corporate Social Responsibility (CSR) is becoming a big concept in the management of business. Personally, I am not aligned with the concept of corporate social responsibility. Before we go on, lets hear from Milton Friedman in his essay “The Social Responsibility of Business is to Increase its Profits” .

Of course, in practice the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.

To illustrate, it may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects.

…In each of these–and many similar–cases, there is a strong temptation to rationalize these actions as an exercise of “social responsibility.” In the present climate of opinion, with its wide spread aversion to “capitalism,” “profits,” the “soulless corporation” and so on, this is one way for a corporation to generate goodwill as a by-product of expenditures that are entirely justified in its own self-interest.

As Friedman suggests, is Posco cloaking its activities in Orissa as CSR? Is it doing these activities for its own self-interest?

CSR is not the same as Sustainability.

To understand this we need to understand the role of business and the role of government.

Atanu Dey has been writing a Fake Speech of the Prime Minister of India delivering an address to the captains of Industry in India. In his third installment he talks about “fair and just profit”.

…Why has profit become such a profane word in India? I believe that it is due to a failure to fully comprehend the nature of what humans do when they engage in economically productive activities and what results from that action...The government’s duty is to create a society that is free, fair, equitable, just and peaceful. Unfortunately, we are well aware that we have not achieved the ideal society and to a very large extent it is the failure of our government. Although it is fashionable in certain circles to lay the ills of our society on corporate doorsteps, I will not do so because it would be clearly hypocritical of me. Furthermore, it would be pointless to expect corporations to address those social ills which it has neither created nor has any particular expertise in addressing.

So what is the basic responsibility of corporations? Stated most simply it is this: To make a profit. Ours is a deep and ancient culture. Our cultural legacy not only includes profound spiritual values but also ethical business values expressed compactly in the dictum of “Shubh Labh” or “Fair and just Profit.” When you make a profit honestly supplying goods and services to society, it implies that society gains since the benefits (represented by the price paid) exceed the costs incurred to produce the good or service precisely by the amount of profit. Making that fair and just profit is your corporate social responsibility and nothing else.

Is erecting street lights, providing health services and fixing the cleft palates of local children the role of a steel giant? Should it fund this? Posco’s three-pronged strategy is based around rural development, education and healthcare.

Isn’t this the normal role of a government?

Because the government has failed to do its role in this case; there is an opportunity for a company like Posco to provide these services and gain community goodwill. Is this CSR? I do not think so.

Then, what is sustainability and can that be part of a corporations’ responsibility to make a fair and just profit.

Here are some excerpt’s from Gil Friend’s Declaration of Leadership for a Sustainable business.

-business activity has a profound impact on the ability of nature to sustainably provide those services,

– we are committed, as business and community leaders, to the well being of both economic and ecological systems, of both humans and other living things,

-meet human needs in the most efficient and economical means possible, in order to include the greatest percentage of humanity.

– consider the requirements of the earth’s living systems in all design and operating decisions

– work to eliminate “waste” of all kinds from our operations, and to find safe, productive uses for any “non-product” that we are not yet able to eliminate

– treat employees, customers, suppliers and stakeholders fairly, honestly and respectfully

– take responsibility for the safety of our products/services in their intended use

Meeting human needs is a big opportunity, and by being efficient and economical it is good for the shareholders. Considering the earth’s living system in design and operating decisions is being fair. To treat stakeholders with respect is just. To be committed to the well being of both economic and ecological systems is ethical business.

As the Dow Jones Sustainability Index defines it : Corporate Sustainability is a business approach to create long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.

Sustainability; from a business point of view; is all about “Shubh Labh” – to make a fair and just profit.

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One thought on “CSR and Sustainability – The case of Posco in Orissa, India

  1. Pingback: CSR is Insurance « World is Green

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