This article on Public Private Partnership (PPP) and Corporate Social Responsibility (CSR) in India is written by Aman Agarwal.
The concept of corporate social responsibility (“CSR”) when emerged, was a utopian one. During the years, this concept has turned from an ideal activity to a mandatory activity. It is not just the responsibility of the government to take care of sustainable development, but it is also the responsibilities of the companies. Companies have the potential to have a great positive effect on sustainable development, with the sort of technical expertise and financial resources they possess.
CSR is no more a benevolent gesture but it has now become an active engagement with the community and the environment. It has now become a part of every business that is very essential and companies have made significant contributions in CSR through contributing in sectors like healthcare, education, infrastructure, water and sanitation livelihoods and rural and urban development.
One of the notable features of growth in CSR activities is the mushrooming of corporate foundations. These Corporate Foundations are usually not-for-profit bodies set up to conduct CSR activities. This structure enables them to partner with other organisations engaged in research and implementation activities. They also work with government departments to seek alignment with social, environmental, or economic development priorities. The government recognises the role of business in inclusive growth through sustainable development efforts.
While companies do carry out CSR work independently, many also work in collaboration with the government in Public Private Partnership (“PPP”) mode. PPP is an effective tool for bringing private sector efficiencies in the creation of economic and social infrastructure assets and for delivery of quality public services. The extent of private sector participation in the creation of infrastructure, especially through PPP, has shown a promising increase in the recent years. The broad sectors encouraged under the PPP framework are Highways, Railways, Ports, Airports, Power and Urban Infrastructure etc.
Corporate Social Responsibility in India
Corporate Social Responsibility in India, has matured from the concept of a philanthropic activity to a must-do-activity. With the exposure of Indian companies abroad and localization of many multinational companies in India, there is a need to strengthen India’s CSR regime. CSR is becoming an important and integral unit of every corporate entity in India and many business entities have made remarkable contributions towards the development of the society through various initiatives in areas such as healthcare, education, rural and urban development, water and sanitation, etc.
The government recognizes the role of business in inclusive growth through sustainable development efforts. The ministry of Corporate Affairs has shown great efforts to put in place a policy on Corporate Social Responsibility to provide the businesses an enabling environment to initiate CSR activities. The government has introduced policies that require the Indian businesses to become more responsible in conducting CSR activities for sustainable development. One of the major policies that were introduced was the National Voluntary Guidelines on Social, Environmental and Economic responsibilities, 2011(NVGs). Amendments to Companies Act were also made through the Companies Act, 2013.
National Voluntary Guidelines on Social, Environmental and Economic responsibilities, 2011(NVGs) – Key Highlights
Principle 8 of the NVGs is of inclusive growth and equitable development, it is addressed by Clause 135 of the Companies Act, 2013. It mandates companies with a certain net worth to spend 2% of their profits on CSR activities. Given the development challenges India faces, companies have a lot of opportunity areas to invest in and address these challenges.
Significant contributions have been made by corporate enterprises for the development of the society. Nevertheless, a substantial number of enterprises in India still need to move up the CSR curve.
Public Private Partnership in India
Public Private Partnerships is an effective tool for bringing private sector efficiencies in creation of economic and social infrastructure assets and for delivery of quality public services. The extent of private sector participation in creation of infrastructure, especially through PPP, has shown a promising increase in the recent years. The broad sectors encouraged under the PPP framework are Highways, Railways, Ports, Airports, Power and Urban Infrastructure etc.
The public sector actors take care of the policy making and target areas according to the societal and environmental needs whereas the private sector actors mainly engage in financing and executing CSR initiatives. Planning and reporting are jointly managed by the public and private sector actors of the partnership.
The development of the Corporate Social Responsibility focused, in its initial phase, in involving corporate management and employees towards identifying and pursuing socially acceptable behaviors compatible with business performance. As a consequence, a variety of CSR strategies and reporting systems have emerged focusing on the social and environmental dimensions of the firm. Nowadays Public and Not for profit sectors are entering in the debate and can contribute to strengthening socially responsible corporate initiatives through different forms of partnership.
In the classical analysis of PPPs public and private sectors have clear and distinct institutional aims. The capacity to deal with issues related to decisions and administrative behaviors in order to achieve the needs of long term economic equilibrium of the single units and the general equilibrium of the economic system, represents the institutional responsibility of the Public Sector and the functional responsibility of the public administrations.
As it concerns to private sector, the CSR concept has an approach that consists in developing and strengthening a culture in accordance to which companies, enterprises, corporations are considered institutions and not only “ systems of economic complex processes activated to produce economic value richness”. Their immediate goal is to increase economic value for a community but their ultimate goal remains, anyway, to contribute not only to the “Wealth of Nations” but to the “Wellbeing of people who live in Nations”.
While general economic, management and policy making theories in the past were based on the clear separation and often on the contraposition between market and state, between corporate objectives and the rationale of public choices, between issues of production and allocation of wealth, between criteria of efficiency and equity, the current theories are integrating and make the two elements more compatible. While it is Public Sector’s main responsibility to take and maintain control over the public interest through the definition and control of public social, environmental and economic development policies, we see an increasing “autonomous social role” of corporations providing forms of pension systems, protecting the environment, contributing at the local community development, etc.
It’s finally to be underlined how the development of different forms of public/private partnership has significantly evolved in the last decades. Whilst the last century has seen a prevailing contraposition between the private and public sector, the globalization and socio-political integration processes have seen a recent increase of forms of public/private partnerships. Partnerships developed both at national/supranational level as well as at regional and local levels.
A case study on Biocon Foundation – Biocon’s CSR arm
Biocon is India’s largest biotech company that aims to reduce therapy costs of chronic diseases like diabetes, cancer and autoimmune diseases by leveraging India’s cost advantage to deliver affordable healthcare solutions to patients, partners and healthcare systems. Today it is a biopharma enterprise, serving partners and customers in over 75 countries.
Biocon Foundation, Biocon’s CSR arm, has interventions in the areas of health, education and infrastructure. The Foundation claims that ‘by establishing primary healthcare centers (PHCs), actively creating awareness about disease prevention, public health and sanitation, infrastructure building and initiating programs in education, we aim to empower under-served communities towards self-help, improved health and in good time, a better standard of living. In 2009, responding to the disaster Karnataka was facing as a result of heavy rains and subsequent flooding, the Foundation built a village to rehabilitate and relocate those who had lost their homes.
The Government of Karnataka initiated a relocation and rehabilitation scheme called Aasare that would be implemented through public-private partnership. Villages located on the banks of the Malaprabha River were relocated to higher grounds. Biocon, along with other companies, was invited to help rebuild villages at new locations. The new village has been built about a kilometer away from the old one, so the community has not needed to relocate a great distance away. Biocon Foundation has built 411 houses, which were allotted in December 2012, with ownership given to the new residents.
The location allotted to Biocon was Mangalgudda, in Bagalkote district. Construction of the new homes began in 2009. The Foundation first built a model sustainable pre-fabricated house made of honeycomb. However, the community rejected it as they felt it compromised their safety. New plans were drawn up for the houses which were designed according to what and how the community wanted. The entire process was carried out in consultation with the villagers.
The case presented, relatively successful as far as today, present some issues relevant to the management of CSR public-private partnership. Public Sector has the primary task of maintaining control of the actual needs of its territorial geographical area. Public Administrations should mobilize their resources in order to create and regularly update a list of needs which would provide the foundation for jointly planning CSR interventions with the private sector where public sector is incapable to provide direct services of answering to social and environmental needs, or where the private sector can provide them more efficiently.
Effective partnership management derives also by the communication private and public sectors can establish. As such the constitution within the public authorities of organizational units dedicated to CSR can contribute private sector having a unique contact point. The few cases known in Italy include CSR units within the Departments of Industry, Production activities and Equal Opportunities. Personnel of such units should be able to map the existing CSR needs in the territory, jointly plan the CSR initiatives with private sector organizations and its association bodies and effectively report to citizens and the public the results achieved.
In spite of the shifting roles and responsibilities of business and governments towards societal problems, a need of increased governance of public/private relationships arises considering the different range of interests of the various actors emerging within a defined geographical area. Specific interests can be firstly converged in a coordinated and integrated way into policies, choices and solutions acceptable for the actors involved and at the same time sustainable on the economic, social and environmental dimensions. The actor responsible for the process of governance is represented, considering its institutional nature, the public administration.
The evaluation of policies resulting by networks of public and private actors is undertaken according to various categories of analysis; among these corporate social responsibility contributes to evaluating the social and environmental effects of policies in the society. The ability of a public administration to act within a governance frame requires the identification of specific objectives dealing with social responsibility and intervention policies deriving by public-private forms of relationships. Relationships which, besides commercial and financial forms of exchange, allow public administrations to regulate, promote, incentivize and control private firms in their characteristic function of producing goods and services. In this context, public administrations are called to effectively interact with the individual private and public actors in order to guarantee that each’s contribution would result in socially responsible policies improving overall welfare conditions within the society.
PPP is advantageous and works well because of what each partner brings to the table. While the government has the capacity to pump in considerable financial resources and provide scale, the private sector, aside from funds also provides expertise in management, delivery and technology, and is responsible for day-to-day management and running of the interventions. Private players are in a better position to do the ground work and can mobilise personnel easily. The government on the other side faces quite a few bureaucratic problems working on the ground and often finds it difficult to manage interventions. When rightly executed, such collaborations make any intervention very effective.
In PPP the community gets positively impacted, the nature and intensity of impact may, however, be different. But, PPP is not always successful as well, there is some scepticism that both partners have for each other. While there will be teething issues as the public and private start working together these can be overcome over time. Both the companies and the governments realize and acknowledge the financial and non-financial resources and capabilities of the other and also the potential of PPPs. They believe that working together in the development sector would achieve the best results and have the greatest impact. Therefore, it is suggested that all models of PPP, especially those delivering a public service, should be created.