India, a country marked by its rich cultural heritage and economic growth, faces a multitude of social challenges. Despite the prevalence of these social risks, there is a concerning lack of engagement with listed companies on these critical issues. This article delves into the intricate social landscape of India, shedding light on the hesitance to […]
India, a country marked by its rich cultural heritage and economic growth, faces a multitude of social challenges. Despite the prevalence of these social risks, there is a concerning lack of engagement with listed companies on these critical issues. This article delves into the intricate social landscape of India, shedding light on the hesitance to address these social challenges and questioning whether Corporate Social Responsibility (CSR) initiatives adequately tackle the underlying issues.
The Multifaceted Social Challenges Facing India
India grapples with multifaceted social challenges: poverty, under-employment, income inequality, gender inequality (including a concerning decline in female labour force participation), and ethnic discrimination. Our recent report ‘Moving the Needle-Stewardship in India’ reveals disconcertingly low engagement on India’s social challenges with listed companies. We found that the complex nature of these social challenges, deeply rooted in cultural norms, poses significant obstacles to addressing social ESG risks, as religious, ethnic, and caste disparities are intricately woven into the fabric of Indian society.
CSR: A Superficial Solution?
Corporate Social Responsibility (CSR) has gained prominence as a means for companies to demonstrate their commitment to society and the environment. In India, the government has mandated a minimum CSR spend of 2% of net profits over three years for certain companies under the 2013 Companies Act. However, some managers deflect discussions on social engagement by highlighting their company’s CSR initiatives. This perspective obscures the reality that CSR activities may serve as mere superficial band-aids, failing to genuinely address the underlying social challenges facing India.
Emerging Concerns: Human Rights and Data Privacy
While asset managers are reluctant to address broader social issues, specific social risks have gained traction due to their potential negative impact on businesses. Supply chain audits and consumer attitudes, particularly in developed markets, have heightened concerns about human rights violations. Unethical practices that come to light can lead to consumer boycotts, significantly impacting a company’s revenue. Consequently, managers increasingly recognise the importance of researching and engaging corporations on human rights and supply chains.
Data privacy has emerged as a significant concern in India, given the country’s digital inclusion efforts and initiatives like the introduction of digital IDs through the India Stack. With millions of new users coming online, there is a growing demand for transparency and control over personal data. Managers expect Indian companies to adopt a proactive approach to data privacy, considering the risks associated with data breaches. Failure to address this issue may result in reputational damage and customer dissatisfaction. Furthermore, this is an issue that extends beyond India, with data privacy becoming increasingly relevant worldwide.
While CSR initiatives promote positive change, they should not be regarded as a substitute for authentic social ESG engagement. Despite low engagement on the myriad of social risks facing listed Indian companies, emerging concerns, including human rights violations, supply chain concerns and data privacy are gaining momentum.
About ‘Moving the Needle’
Following the success of our reports on stewardship in China and South Africa, this latest edition, “Moving the Needle – Stewardship in India” focuses on stewardship practices among asset managers in India and their impact on the country’s capital markets. The report delves into the attitudes and practices providing valuable insights into asset managers’ commitment to responsible investing and incorporating environmental, social, and governance (ESG) factors into their investment decision making. It examines the progress and challenges faced in India’s stewardship landscape, presenting key findings and recommendations. The report is an essential resource for investors, asset managers, and industry professionals seeking to understand and navigate India’s evolving stewardship practices.