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Occupy, Economic Inequality and Business Initiatives: Insights from India

Occupy movements highlighting economic inequality have quickly spread around the world. But they have also excluded several countries. One interesting example of the latter is India. How have businesses in India coped with the dual pressures of enhancing shareholder wealth leading to economic growth and operating in a society with a high level of inequality? Can businesses in the developed world learn from Indian enterprises that have attempted to balance their respective corporate good with the

Published: Apr 2, 2012 06:16:07 AM IST
Updated: Mar 14, 2012 12:25:58 PM IST

With a theme of 99 percent vs. one percent, Occupy Wall Street (OWS) targeted the richest one percent of people in the United States who were perceived as [unfair] beneficiaries of a system of capitalism that was forestalling the future of the vast majority. Among the one percent are major businesses, which are increasingly being targeted by OWS. For example, Occupy protesters have called for the shutting down of ports operated by SSA Marine, a transportation services company owned by Goldman Sachs, the U.S. bank that was at the centre of the global financial crisis in 2007-08. The Occupy movement has since spread to over 100 cities in the U.S. and it has found an echo in over 1,500 cities globally, including parts of Europe.

Since April 2011, India has been witness to the rise a popular movement called “India against Corruption.”  Led by Anna Hazare, a homegrown social activist, the national uprising is aimed principally at the top echelons of politics (known to demand payment from businesses for major licenses and other deals) and the lower echelons of bureaucracy (known to demand payment from ordinary citizens for simply providing basic government services). Together they symbolize all that is ugly in the country’s socio-economic system.

Wealth inequality in India, per se, is similar to wealth inequality in the U.S. and Canada. Gini coefficients for household wealth for the U.S., Canada, and India are 0.801, 0.688 and 0.669, respectively. {The Gini household wealth coefficient ranges from 0, which indicates complete equality (every household in society has the same wealth) to 1, which represents complete inequality (one household has all wealth, whereas rest have none)}. Higher values of the Gini, therefore, signify more inequality. It should be noted that the numerical difference in Gini values between countries might appear to be smaller. But even small differences can signify large differences in their ranking on inequality indices. For example, with a value of 0.801, the U.S. ranks at 146, while Canada ranks at 59 out of 150 countries. Despite high wealth inequality, an Occupy-type movement of the kind that pits the ultra-rich against the not so rich has not gained traction in India. Nor is it, one can safely say, likely.

The reason is that Indian businesses have a long history of operating in an environment where inequality was rampant. For decades after independence, India purportedly pursued a socialist model of economic growth, commonly known as the license raj, in which the conduct of business was regulated by both federal and provincial governments. Business enterprises had to deal with a political climate that was anti-business, made even more difficult by endemic corruption in political institutions and the bureaucracy. It was only after 1991, with the launch of economic reforms, that India witnessed a pace of economic growth that remains unmatched by even the developed world today. But old ghosts continue to haunt, and the mindset of the license raj continues to prevail. A recent example is the manner in which foreign direct investment in multi-brand retail is being stalled by the Indian parliament. The issue has become a political ball game, without a proper evaluation of the pros and cons for business and other stakeholders in society.

Given this political climate, how have businesses in India coped with the dual pressures of contributing to economic growth and operating in a society with high inequality? The short answer is quite well, and there are valuable lessons that businesses in the developed world can learn from Indian businesses that have managed this contradiction. As this article will describe, there are lessons that can lead to new business opportunities and enable the firm to contribute to society.

Managing growth, reducing inequality
Some large Indian companies have found a way to conduct their business profitably while making investments aimed at providing greater opportunities for the underprivileged. Their approach can be examined under four categories: (i) community development, (ii) education, (iii) partnerships, and (iv) developing low-cost products.

Community development
Community development has been one of the key drivers for the success of several large corporations in India. They regard it as a way of giving back to the community that has sustained them. In turn, it has improved their relations with the community and enhanced their reputation.

•   Wipro Cares is an initiative launched by Wipro Ltd., a global software company based in Bangalore, to improve the lives of marginalized communities in the neighborhoods of cities where its offices are located in India. The venture is funded by donations from company employees that are matched by Wipro, creating a culture of community development across the entire company. It is focused on three specific objectives: offering healthcare to under-privileged families living close by; providing rehabilitation to survivors of natural calamities in different parts of India; and enhancing the learning abilities of children from poor families in its neighborhoods. The initiative coordinates voluntary employee efforts in nation-wide projects in each area of focus.

Wipro Cares has set up health clinics in each of the 25 villages located around three of the company’s manufacturing plants. They cater to the medical requirements of about 25,000 outpatients annually. It has adopted Pushpavanam, a village in the tsunami-ravaged belt of the state of Tamil Nadu, part of its attempt to rebuild the village and restore the lives of its inhabitants. Wipro Cares has also been involved in community efforts like restoring a lake in the city of Hyderabad, building a drainage system in parts of the city of Bangalore and engaging in forestation activities near the city of Chennai. Wipro Cares volunteers – who include not only employees but also their families and friends – have constructed toilet blocks at schools in Bangalore. This step follows in the wake of research that has shown that lack of toilets facilities in schools is the main reason for the high levels of dropout rates among girl students.

•   The Tata Council for Community Initiatives is a centralized program that drives the engagement of various companies of the Tata Group  — a Mumbai-based conglomerate — with the communities in which they function. It is headed by a member of the Tata Group Corporate Centre (TCCI), which is indicative of the company’s top-level commitment. TCCI reinforces what is widely known in India as the “Tata Way” of doing business – honest, transparent and above board.

TCCI tracks the social impact of its group companies through a metric called Tata’s Index for Sustainable Human Development, a first of its kind in India. The index measures and monitors the involvement of Tata Group companies, numbering 96, in their respective communities every year. It is an internal score that not only records outcomes of individual companies and ranks them group-wide, but also enables them to refocus their processes in tune with changing priorities.

The outcomes are measured and monitored at three levels for each company – (deployment of) systems, (performance of) people and (implementation of) programs. Systems have a weightage of 275, people 175 and programs 550, in a cumulative score of 1,000. Each is further broken down into pathways that are trailed monthly. Tata Motors has been the best performer in the group, with a total score exceeding 650. TCCI has begun to extend the reach of its index to its immediate ecosystem of raw materials vendors and other suppliers of various group companies. Even their competitors have begun to examine the model seriously. Some have made it part of their own charter, and by so doing they are creating a ripple effect.

Education and Human Development
Several Indian enterprises have incorporated education as a key element of their corporate social responsibility. Some of them have built educational districts around their principal geographies of operations.

•   Birla Education Trust is a pioneer in the field of education. It is part of the Birla Group, one of India’s leading family enterprises with a wide portfolio of businesses. Birla Education Trust has set up several institutions at Pilani, in the province of Rajasthan, where the Birla group has its family roots. Its educational services cover the full spectrum, from primary education to higher education. Admission is not restricted to either the community of Marwaris that Birlas are part of or to the local population, but it is competitive in its own right on a pan-Indian basis. Its most recent addition is the Birla International School, which incorporates both Indian and international curricula for students from India and abroad.

Alumni of Birla educational institutions have occupied leadership positions in various professional streams like law, medicine, public service, defense, business and academics, and not only in India but worldwide. There are many instances of successive generations of alumni enrolling in the Birla School, which was set up in 1901. Birla Education Trust is fully funded by the Birla family, and offers annual scholarships to students for overseas education.

•   Infosys Technologies, a global software company based in Bangalore, has set up Campus Connect. IT companies in India are known to be grappling with a two-fold challenge: shortage of software engineers and shortage of skills among university graduates to make them industry ready.  Campus Connect goes beyond meeting the internal requirements of Infosys and takes a broader view of the resource crunch with its goal of “architecting the education experience,” as the company calls it. Architecting’s goal to increase India’s competitiveness in the knowledge economy.  The program has a dedicated team that is involved in designing the curriculum of engineering colleges in the country, thus helping to align it with the needs of the Indian IT industry. This alignment is achieved through a number of programs that supplement academic content with industry content through case studies and industry visits. Programs under Campus Connect are also aimed at developing soft skills among the students, so that they become stronger team players. Additionally, faculty members in engineering disciplines can take sabbaticals to pursue their research interests at Infosys for 2-3 months and gain real-life, customer-project experience.

Campus Connect does not have lofty goals such as adding to the number of engineering colleges or increasing the number of engineering graduates in the country. It is estimated that, by 2040, India will have the single largest pool of working professionals among all countries of the world, and Campus Connect aims to make the engineering graduates employable as soon as they leave colleges. Its objective is to ensure that recruits to Indian industry in general, and not just to the IT sector, hit the ground running rather than go through elaborate training on the job.  Campus Connect has been involved with over 300 engineering colleges in towns and cities in India and is getting involved with more every year.

Social initiatives through partnerships

Some Indian companies are using the partnerships route to improve the quality of life of people in India. They are collaborating with peers, non-governmental organizations and public agencies to deliver new services to the under-privileged segments of population.

•   Britannia Industries Ltd, a leader in the Indian biscuits industry with 50 per cent market share and based in Bangalore, has set up Britannia Nutrition Foundation to address child malnutrition, a critical issue, in partnership with the UN World Food Program. India has 100 million children under the age of five, and of these, 47 per cent are malnourished. The largest single deficiency is iron, which is known to be a crucial input in the making of hemoglobin. Studies have shown that iron has a direct linkage with IQ development, energy level, learning ability and the academic performance of school children. Sixty percent of all school-age children in India are estimated to suffer from anemia.

To address malnutrition, Britannia has partnered with the Global Alliance for Improved Nutrition (GAIN), based in Geneva, and developed biscuits that are fortified with several micronutrients, including iron. Britannia is the only biscuit manufacturer in the country to add iron, which is stripped out in the grain-milling process, through a separate method. Even though India’s existing regulations do not make it mandatory, the company goes a step further by making its biscuits free of harmful transfats. Britannia Industries distributes 10 million packs of fortified biscuits to children as part of the noontime meal plans, which are sponsored by various provincial governments. It has partnered with Naandi, an Indian NGO, to distribute them to schoolchildren in India, as part of their mid-day meal. It has also recently partnered with Clinton Global Foundation to take the fortification initiative to schoolchildren beyond India.

•   Reliance Industries Ltd., a Mumbai-based petrochemicals enterprise, has partnered with local NGOs (Lok Samarpan and Lok Vikas Samstha) in the province of Gujarat. where it has set up a refinery plant at Hazira, an industrial town. The company has a modern medical facility at Hazira, which provides free medical facilities to its inhabitants on the lines recommended by the World Health Organization.  Its HIV and AIDS program is unique among private-sector initiatives in India in the sense that it not only promotes awareness but also provides treatment. The initiative took off when an official survey showed that12 percent of the local population had a sexually transmitted disease. Hazira has a large migrant workforce employed in several local industries, which also attract a floating population of truckers in the region. Concerned about the risk of infectious diseases in the local population, the management of Reliance Industries Ltd. partnered with the two NGOs to devise both preventive and curative strategies.

The program has already reached nearly 300,000 people. A majority of them are contract workers and members of the local community outside of the company’s workforce. Reliance has also been training doctors, nurses and para-medical staff of other local hospitals to increase their own awareness of and responsiveness to HIV-positive patients. The company is now in the process of replicating the program at its other manufacturing sites at Naroda, Jamngar (both in the province of Gujarat) and Patalganga (in the province of Maharashtra).

Increasing access through low-cost products
Several Indian companies are designing low-cost products offering a better price-value equation. The focus is on delivering products that have basic, functional attributes, without any frills, to allow more people to buy the products.

•   Godrej & Boyce, an engineering manufacturing company based in Mumbai, has launched “Chotukool,” a low- cost refrigerator. Chotukool (a local lingo which translates into “mini-cooler”) is designed to meet the needs of rural consumers who buy groceries on a day-to-day basis unlike their urban counterparts. Their requirement is for a simple cooler that preserves milk, vegetables and leftovers for not more than a day or two. Chotukool is priced at 3,500 in a market where the refrigerator prices range from 7,000 to 70,000 (1 USD =  50 approx.).

The company saw an opportunity in rural India where the market penetration rate for refrigerators was a low two per cent. It set up teams which spread out into the interior and spent hours in huts witnessing, first hand, the lifestyle patterns of villagers and talking to them about their needs. A no-frills refrigerator costing about  2,500 seemed to be a good, affordable retail price. Customers also wanted it to be battery-run, since power surges and voltage flucuations were common in villages. Rather than reengineering its existing models, the company started with a clean slate using innovative techniques, like thermoelectric cooling, on the way to designing a working device. Chotukool has only 20 parts, as opposed to 200 in a typical refrigerator. Godrej & Boyce is extending the concept to other home appliances. Coming up is Chotu-wash, a low-cost washing machine that will eliminate more daily drudgery among rural households.

•   First Energy Private Ltd., a startup based in Pune in western India, has launched Oorja (an Indian term for energy), a low-cost cooking solution that provides economic and environmental benefits to Indian households.  Oorja is at the cutting edge of social transformation that starts where it matters most – in the kitchen. The flame it provides is of a consistent quality and carries no smoke. A clean flame is an advantage for consumers since smoke from indoor stoves is known to make millions of women and children, in villages in particular, ill with lung and eye infection. The company also uses agricultural waste as raw material to manufacture biomass pellets at its plant, which it sells through nation-wide distributors as fuel for Oorja.

At 6 per kilo, the fuel provides a price advantage over liquefied petroleum gas (LPG). LPG is used largely by urban households and, to a lesser degree, by rural households. The price advantage will become compelling when the federal government eliminates the subsidy it currently provides to households on the purchase of LPG cylinders. One kilo of LPG will retail, in an un-subsidized situation, at 46. In terms of cooking output, one kilo of LPG is equivalent to 2.5 kilos of fuel pellets supplied by First Energy. Consumers will be able to save 31 per kilo of fuel. Rural consumers,  who use wood and charcoal, will also safeguard their health and thus preempt the health and social costs associated with kitchen smoke.

Indian companies continue to function in a tough environment. They face many challenges and have a long way to go in terms of improving their managerial practices. It is worth noting that they still operate in a highly unequal society and under a government that wrestles with continuous choices between easing controls and holding on to them. There is an opportunity here for companies in the developed world, which have only recently woken up to the challenge of economic inequality, to draw some lessons from Indian businesses. As the examples above show, some companies in India create products and services for the wealthier strata of society, yet still make investments aimed at generating opportunities for the underprivileged. By doing so, they portray businesses as partners in mobilizing solutions for the problems plaguing India, rather than appearing as perpetuators of inequality in the society in which they operate.

Reprint from Ivey Business Journal
[© Reprinted and used by permission of the Ivey Business School]

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