Indo-German Corporate Social Responsibility Initiative

Project description

Title: Indo-German Corporate Social Responsibility Initiative
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: India
Lead executing agency: Indian Institute of Corporate Affairs at the Ministry for Corporate Affairs
Overall term: 2008 to 2012

Context

After two decades of deregulation and liberalisation, the private sector has developed into the main driver of India's economic growth. The rapid pace of that growth has created many challenges to sustainable and equitable development in the country, and the private sector actors have become significant potential partners in meeting those challenges.

India's 11th Five Year Plan (2007-2012) aims to make the Indian economy more competitive internationally while promoting inclusive economic development internally. Social and environmental aspects of business operations are therefore increasingly important, and must now be addressed through corporate social responsibility (CSR) approaches. This idea is not new to India, but the efforts undertaken so far by a few larger companies and MSMEs have mainly been driven by philanthropy or the requirements of large international buyers.

Among businesses and policy makers, there is a lack of understanding about CSR and the role it plays in promoting sustainable economic development. It is important, therefore, to create the right conditions to encourage businesses, both large and small, to adopt environmentally and socially responsible practices. They should see this as vital to their long-term competitiveness. A pragmatic approach to CSR should therefore address development goals alongside business growth, and it must be recognised by stakeholder both inside and outside the country.

Objective

An Indian CSR concept has been developed, and among the stakeholders there is a greater understanding of its importance. The relevant guidelines and a framework for voluntary disclosure have been formulated, and these have been adopted by the stakeholders and promoted by meso-level institutions.

Approach

At the policy level, to develop and broaden consensus about CSR in the Indian context, the project is helping to establish a multi-stakeholder dialogue process at the Indian Institute of Corporate Affairs (IICA), which is a think-tank of the Ministry of Corporate Affairs. This involves a wide array of public, non-governmental and private-sector actors, and is being backed up by various studies and surveys.

Building on this common understanding, the project is helping a number of enterprises to carry out pilot schemes. It uses a cluster approach to instil responsible business behaviour in groups of MSMEs, by demonstrating how such practices are directly linked to the profitability of the firms and clusters. The project is currently working with three clusters consisting of business member organisations representing 100 energy-intensive steel foundries. It is helping them to integrate CSR into their core business practices. The firms have begun implementing a range of simple measures, such as energy efficiency and safe and hygienic working conditions. In collaboration with GIZ's MSME Umbrella Programme, the number of clusters is now set to rise to 18, involving 25 business member organisations.

The project feeds the lessons learned from the pilot schemes back into the policy process. At the same time, it supports the wider mainstreaming of CSR by providing training of trainers and helping to produce educational material, which are then used by expert institutions, chambers of commerce and business schools, including the IICA. Mainstreaming also involves liaising with other potential multipliers, such as financial institutions, which can promote alternative products, and responsible investment and lending.

Results achieved so far

The National Voluntary Guidelines on the Social, Environmental and Economic Responsibilities of Business has been released by the Ministry of Corporate Affairs. These Guidelines have been formulated by the Guidelines Drafting Committee, which was set up as part of the multi-stakeholder platform on CSR created by the project in 2008. The consultative formulation process involved many stakeholders across the country. The resulting guidelines therefore reflect a common understanding of CSR in India, and of the impacts of business activities.

Special training materials on CSR have been developed for MSMEs. These will be included in the curricula of three national institutes. Further strategic alliances are being used to deliver affordable training to companies and increase their social sustainability and their compliance with voluntary social and ecological standards. As many as 80 trainers of trainers will soon be active in companies, institutions and associations

Seven case studies of large and small companies have been documented and will now serve as teaching aids, thus filling a critical gap in the available learning material.

The country's first dialogue on mainstreaming environmental, social and corporate governance factors in financial markets has been held, involving relevant players in the sector, as well as the Global Reporting Initiative. This has led to further consultations with key stakeholders, and has increased transparency and trust.