Date: 26/10/2022

Relevance: GS-3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Inclusive growth and issues arising from it.

Key Phrases: Good Corporate Citizens, Social Innovators, Do-Gooding, Green Washing, Equitable Distribution of Economic Wealth and Social Power, Earth For All: A Survival Guide For Humanity

Why in News?

• Corporations with large financial resources and access to cutting-edge technologies can be a big force for change.
• However, only a few corporations are good corporate citizens who show care for society and the environment through consistent actions and “CSR”.

Key Highlights:

• The business corporations are given the protection of limited liability in order to produce returns for their investors but these corporations consider people and the planet as only the resources for profits, and citizens as merely the customers or workers.
• They try to maximise their profit by the exploitation of consumers and workers, and the relentless extraction of resources of ‘commons’ that to at least cost to them.
• In this corporate culture, government regulations on wages and employment, and to protect natural resources, are considered impediments to ‘ease of doing business’.
• Corporations are not fully responsible citizens of society.
• They “give back” only small portions of their profits as CSR and philanthropy i.e., only small fractions of the resources they take, or borrow, from society and nature for producing trillions of dollars of revenues are invested for the common welfare.

Earth for All: A Survival Guide for Humanity- Systemic solutions for improving people, the planet, and profit:

• This guide produced collaboratively by economists, ecologists, and social scientists provide systemic solutions for improving people, the planet, and profit.
• Following the Club of Rome, it provides for a ‘whole system’ model which includes feedback loops between the economy, the natural environment, and social systems incorporating empirical data from diverse sources, and thus, this model of an economy is not a closed system.
• The model projects outcomes if the present pattern of solutions continues and compares them with an alternative approach to accelerate systemic change.
• It has given the concept of ‘Too Little Too Late’ and ‘Big Leap’ approaches followed by the economies around the world:

Too Little Too Late Approach:

• The present path is called “Too Little Too Late” wherein the businesses are making the world miserable for the next generation for present gains and thus it will ultimately lead to environmental and societal collapse later this century
• The approach includes lots of “do-gooding” and “green washing” with insufficient systemic change.
• It preserves the present inequitable distribution of wealth and power.
• The model forecasts that by 2050, on its present trajectory, India will be the most unequal society in the world).

Big Leap Approach:

• Big Leap evolves a more equitable distribution of economic wealth and social power and it avoids the need for disruptive political revolutions.
• It can prevent catastrophe and does not require new technology breakthroughs.

Solutions for reconnecting corporations as citizens of society:

1. Citizens Fund:
   • It is an innovative solution proposed in Earth for All where the citizens and the Corporations using the “commons” for private purposes must pay all other citizens rent for using their shared resources.
   • Although the Governments use taxes levied on corporations for the welfare schemes of citizens but on account of inefficiency in spending this money by the government, citizens resist tax increases.
   • Contrary to this, payments into the Citizens Fund will not go into the government’s account and thus, these will be paid as dividends directly and equally to all citizens to use as they will.
   • This is like universal basic income (UBI) which is expected to be paid out of government revenues.
   • Since wealthy citizens and corporations are reluctant to pay more taxes, UBI becomes unviable whereas payments into the Citizens Fund will be made only by those who use common resources which is easier to justify morally.
   • Different forms for implementing the concept of Citizens Fund:
     • One variation is to pay the “rent” for using community resources to self-governing community organisations, rather than to individual citizens.
     • That way, the funds can be used for community purposes and can go back into the nurturing of common resources. For instance, the funds can go to village panchayats.
2. Changes in the forms and accounting practices of corporations:
   • Corporations must become better citizens by becoming accountable to all stakeholders for the impacts of their operations and products.
   • Presently, they are legally required to account only to their shareholders and those who provide finance whereas corporate accounting to society for the use of society’s resources is voluntary.
   • Legally mandated changes are required for businesses to account for use of the commons.

Need for a social enterprise:

• The concept of “social enterprise” is gaining some traction and they are known as ‘social’as their products are “greener”.
• The “for profit” corporations also limit profit levels in their charters. However, the governance of these corporations remains largely controlled by investors.
• The purpose of a societal enterprise is to be a trustee of the commons and to serve the community.
• A truly “societal enterprise” will be governed by all its principal stakeholders and the design of its governance must ensure this.
• It must be accountable to all stakeholders in order to fulfill its duties as a responsible citizen.

Conclusion:

• Social enterprises act as influential drivers for the sustainability transition.
• However, other individuals and businesses should also consider playing their part and become recognized as contributors to a better world.
• The reach of many social enterprises is often limited by their lack of resources.
• Thus, the Corporations should therefore look for more opportunities for collaboration and partnerships and dedicating funds to strengthen influencing capacity.

Source: Hindu BL

Mains Question:

Q. Discuss the need for social enterprises as well as provide systemic solutions for reconnecting corporations as citizens of society. (250 words).