Business of the people, by the people, for the people?

Michal RatynskiUniversity of Cambridge

 

In a free enterprise, the community is not just another stakeholder in the business but in fact the very purpose of its existence. : Jamsetji Tata

Most of us have used to think of business as a machine to make profit which is – to put in Milton Friedman’s words - ‘one and only social responsibility of business’. While the notion of profit making is certainly not unimportant, I would argue that this very understanding of business is reductionist.

Leaders, such as the Tatas, would tell you that profit derives from the long-term, sustainable value creation that needs to include the voice of the community in the decision-making process. The word ‘sustainability’ is key here. Sustainable business is the one that strives to address, alongside with the government and the social sector, the existing social and environmental challenges such as but not limited to:

• creation of safe and fulfilling jobs in the era of robotisation and digitalisation;

• combatting the detrimental impact of fossil fuels and/or turning green in production (not only in the post-production phase);

• or fighting gender injustices by activating women’s potential at the labour market.

Most importantly, sustainable business does not limit itself to the open spaces of corporate shiny buildings or quarterly reviews. Instead it is the one that ‘reinvests’ its profits in the community – the ultimate stakeholder – not just within the span of our life but for many generations to come.

There is a lot criticism about corporate social responsibility (CSR) in the academia and in the public discourse. I have familiarised myself with both the theoretical underpinnings of CSR at my Masters’ course in Development Studies at Cambridge, and through the practice of CSR during my internship with Tata Communications in Pune, India. There might be cases of companies which have shabby practices and use CSR primarily to cover up their social and environmental degradation. However, I stay rather optimistic about the direction towards long-term value and relations building taken by many companies of today.

The Tata Group is an example of the corporate conglomerate which for decades has proven that it is very much feasible to industrialise the country and bring prosperity without compromising on the livelihoods of the working people. I am astonished at how much good reputation the company has in India. And I can barely compare the same level of respect given to corporations in the Western hemisphere. I think the reason behind the success of Tata does not only lie in numbers or in a relatively high productivity at the Indian market. The ‘Tata model’ of business is based on the close application of Jamsetji Tata’s principle (quoted above) of the society as an ultimate stakeholder as well as on the culture of trust.

Furthermore, Tata has understood well that mere compliance is not sufficient to incorporate ethics into business. For decades Tata Group had spent a considerable amount of their profit on CSR, even before India – as the very first country in the world – introduced the law stating that 2% of the company’s profit needs to be invested in the clearly defined by law CSR activities. As a result of this regulation, Tata has strengthened their mission in social and environmental areas. As for now Tata Trusts – the Group’s major foundation – spends more than 60% of its equity on social and environmental projects, which, one could agree, is quite an impressive contribution to the value creation and wider societal betterment.