Corporate Social Responsibility and the Digital World

History of CSR in India

India is the first country in the world to make CSR mandatory through an amendment in the legislation – The Companies Act 2013. As per the requirements, corporates with a certain value of paid-up capital or more, with a certain amount of annual turnover or more, with a certain amount of PAT or more, will have to spend 2% of their profits (average profits of the last 3 years) towards social causes like education, poverty, gender equality, health etc. The companies are required to disclose the details of the CSR spend in the Annual Report for the benefit of the shareholders and other business partners.

How CSR fared so far

Large corporates in India have taken a keen interest in CSR implementation doing more than what the legislation required for compliance. CSR projects contributed immensely in image building for the company, also eventually creating a market for some of their products (as a result of upliftment in living standards of the beneficiaries). Some companies have benefitted on the sourcing front because of their contribution in formalizing the ‘mandi’ (mainly for agro products).

Typical CSR projects

Some of the typical CSR projects run by some of the large corporates in India includes:

Education for disadvantaged communities, Healthcare, Water conservation, Vocational training for the job-seeker, electronic market/ platform for sale of agricultural produce, farm forestry, microfinance for self-employment, building local infrastructure and environment, plantation, medical camps, AIDS awareness, water conservation, patronage to sports and cultural.

The Digital world

Business and Industry will not remain the same in the near future. With digitization picking up in astronomical speed replacing manual labour at every possible level, by the time the world gets a hang of Industry 4.0, 40% or more of the jobs will vanish. Artificial intelligence, Machine learning, Industrial internet of things, Blockchain, Big data analytics, 3D printing, Robotics will dispel the need of human at every level, even at decision making positions. Cars will be driver-less, Security will be guard-less, Operation will be Doctor-less and manufacture will be labour-less. All jobs – physical and/ or repetitive including middle management roles will be performed by AI and Robotics. This will not only ensure consistency in quality, enhanced output due to zero-fatigue, zero disruptions due to dissatisfaction around wage and working conditions. Only creative jobs like entertainment, advertisement, research and development, publishing etc. will survive along with the evergreen profession of politics (which is essentially a zero-GDP contributor profession). Even traders and shopkeepers will perish due to (non-digitization) factors of globalization and corporatization.

The consequences of reckless digitization

While technology is moving in rapid speed, the political leadership is caught napping. Employment data in India and globally is throwing up alarming numbers of opportunity shrinkage. It makes good politics to point at a government failure for the dwindling numbers, but the reality is harsh. Even a change in government cannot ease the pressure on the job market because the fundamentals lie elsewhere. The market will never return to a labour incentive scenario, no matter what the industry is. All jobs are likely to disappear or diminish, the unskilled or semi-skilled ones are expected to disappear faster than others. And this is the very area in which the unemployment pressure hurts the economy and the society. Some governments are looking at re-skilling to overcome technology and method obsolesce, but that is nothing more than a temporary solution to a permanent problem.

The consequence of rapid unemployment

Rapid unemployment is likely to cause rapid unrest in society unless the government decides to catch the bull by the horn. But how is that possible? Re-skilling is definitely not the answer because most job seekers in India are either unskilled or skilled in those areas where there will be no (or too steep) upskill option (ex. Like expecting a carpenter to get trained in 3D printing technology). Hence, the unemployment rate will keep climbing exponentially the more digitization takes over.

Industry’s responsibility towards employment generation

One of the major source of employment is industry – manufacturing and service (though that is not an expressed CSR item). All governments look up at heavy industries for large scale employment. There are factories in developed nations which use minimal labour and maximum automation, and this trend is spreading. The more cost of automation declines, more roles will die. Thus, in the future industries will generate wealth but not employment, which takes us to the most important question – who will provide the employment? Also, if more and more people will not have income, who will consume the products and services offered by the industry. The consumer market is bound to shrink, which will eventually lead to a recession situation, and the entire economic situation can collapse.

What is the solution?

There could be a few solutions to the impending problem. While we cannot stop science, or expect creation to stop, we can put in some safeguards.

1. The most important CSR action item should be made to be employment generation.

2. All countries which still shows population growth tendencies will have to device policy to curtail that (like China’s single child policy). This will reduce the future workforce size and employment needs.

3. There should be a Digitization tax imposed on corporates for every position that is lost to automation and mechanization. For this purpose, an industry benchmark of ‘Revenue-to-no. of employees’ should be calculated and higher this factor, higher tax should be imposed.

4. On the reverse side, tax concessions should be allowed to those corporates who will have employment generation as a CSR policy item.

5. From the tax collected by the government (Digitization tax), unemployment allowance can be paid out by the government to the employment seekers based on their competency level (though unemployable).

6. Government should allow GST rebates for products/ services which are handcrafted so that those become popular.

7. Consumers who use handcrafted products/ services should be awarded through tax reliefs and/ or social awards.

How the world will look in the Digitized era?

Population is bound to shrink sharply, and so will the consumer size. Thus, many factories will shut down and excess capacity will be released. The size of the global economy will become smaller by many times. As most work will be automated, people will have more time and energy to use for leisure or use for non-production purposes which could become a social risk (we know the problems with the idle mind). If this idle mind syndrome cannot be contained through force or incentives, it could call for massive destruction.

Then what is the optimum solution?

There is still time to discourage reckless automation and save the economy and society from changing forever irreversibly. Only that digitization should be encouraged which will not kill jobs. Ex. In a society which has more drivers than doctors, use of AI for medical treatment is recommended but driver-less cares should be not. Each government can frame their own laws of allowance and disallowance for their country based on practicalities of demand and supply on the ground. Else, a disaster for mankind is just around the corner.