The notion of giving back to society is deeply engrained in Indian corporate culture. So too is the ability to improvise and innovate in the face of challenging circumstances
The notion of giving back to society is deeply engrained in Indian corporate culture. So too is the ability to improvise and innovate in the face of challenging circumstancesWhen the 29-year-old Jamset Nusserwan Tata set up a small trading company in Mumbai in 1868, he set in motion one of India’s most remarkable business dynasties. Today, the Tata Group encompasses 28 listed companies across seven industry sectors. Collectively, they boast annual revenues of a cool £46.3bn.
Jamset Tata also set in train a way of doing business that would become characteristic of Indian corporate dynasties for much of the last century. Described as a “committed philanthropist” and “avowed nationalist”, he established an education endowment at the end of his life for Indian scholars.
His successors acted in similar manner, leaving a variety of charitable trusts and institutions in their wake. Today, two-thirds (65.8%) of the equity capital of Tata Sons – the promoter and majority shareholder of the main operating companies within Tata Group – is held by these trusts.
The corporate histories of the Birlas, Bajajs and other major business families that dominated India’s private sector for most of the last century all read alike.
“Historically, the way companies got into undertaking something social in nature was very much from a philanthropic viewpoint,” says Shankar Venkateswaran, India-based director of consultants SustainAbility.
Right up to the 1980s, business leaders would describe themselves as “industrialists” and “philanthropists” in the same voice.
The predominance of corporate philanthropy in India owes to two predominant factors. The first relates to religion. Hinduism calls on its adherents to “give to all, be they recluses and Brahmins [priests] or wretched, needy beggars”. India’s other major faiths make similar calls to replace resources and give back to society.
The second driver comes from sheer basic need. According to the most recent government estimates, 220 million of India’s 1.2 billion people live under the poverty level. The figure is conservative. Millions of others live close to it, if not actually below it.
The result of such immense developmental challenges presents a business case of sorts. “Companies cannot live on an island of affluence in a sea of poverty,” Venkateswaran points out.
Over time, India’s acute disparities have also placed an onus on business to provide certain basic public goods, such as infrastructure and telecommunications.
“Government sees the role of industry … to provide solutions and goods and services that a large part of the country needs and which the government cannot provide in an efficient manner,” explains Seema Arora, principal counsellor at the Confederation of Indian Industry’s centre of excellence for sustainable development.
Deregulation and foreign cash
After 1991, the business scenario in India changed radically. Government reforms led to deregulation in the domestic markets and increased opportunities for foreign investment.
The modern corporate sustainability agenda dates its origins back to this period. Greater participation in the global market has brought Indian companies increasingly into contact with contemporary management thinking on sustainability. Foreign investors such as Coca-Cola, Nokia and HSBC are also influencing debate locally.
Yet India is not merely copying the Anglo-Saxon model of corporate responsibility. There remains something distinctly unique about India’s approach.
This partly derives from general distinctions in Indian business culture. Indians “think in English and act in Indian” is how R Gopalakrishnan, executive director of Tata Sons, puts it.
A new book from Harvard Business Press – The Indian Way – builds its entire argument around the notion of a distinctive Indian approach to corporate management. This indigenous approach is characterised by holistic employee engagement, improvisation and the aforementioned adoption of a broad social mission.
The authors identify a fourth area that impinges directly on how corporate responsibility is practised: creative value proposition.
“One of the unique aspects of the India way has been the capacity of the nation’s business leaders to find a competitive advantage where no one else was looking,” the authors state.
The examples are legion: pre-paid mobile phones in districts without fixed-line telecommunication; shampoo and washing powders by the sachet; Tata’s Nano family car for 100,000 rupees (£1,470), and so on.
By devising simple, low-cost products and services for low-income consumers, Indian companies are accessing a huge untapped market. At the same time, they are delivering vital social benefits, be it better connectivity, higher living standards or improved health.
CK Prahalad, the renowned and recently deceased Indian management guru, famously described the approach as marketing to the “bottom of the pyramid”.
Inclusive business strategies modelled on the Indian example are now cropping up around the world. In many instances, these are packaged as corporate responsibility. That they are. But in India, they are imperatives of long-term business success first. Any other name tag comes second. In sustainability terms, that’s exactly the order it should be.
Socio-economic statistics obtained from recent publications by the IMF, the Indian government, the CIA Factbook and the Human Development Index.
Corporate responsibility statistics obtained from an April/May 2010 Ethical Corporation survey.
Guideline and standards statistics obtained during May 2010 from official website of each initiative.country briefing CSR India