Define social businesses to reduce trust deficit between people and corporates

For farmers and the people to start trusting corporations, businesses should be measured on a triple bottom line of people, profit and the planet

Updated: Jan 22, 2021 03:20:03 PM UTC
Farmers raise slogans during the ongoing protest against the new farm laws at Ghazipur (Delhi-UP border) on January 20, 2021 in Ghaziabad, India; Image: Sakib Ali/Hindustan Times via Getty Images

It's a Pongal day [in January]. Every year, I put out Pongal wishes as it is celebrated as a harvest festival in the South, especially in Tamil Nadu. The previous day is celebrated as “Bhogi”, where people discard old and derelict things and concentrate on new things causing change or transformation. On Pongal day, you thank the Sun by making Pongal with freshly harvested grain outside the house to offer to Sun. Following day is Maatu (cattle) Pongal – to thank the cattle that helped farmers in agriculture!

During my Bharat Darshan, visiting around 28 states/Union Territories, I've met many farmers that I used to thank for our food on this day. For some reason, this year I was not in a state of mind to put out that message, as I was feeling uncomfortable that a section of the farmers are braving the cold weather and don’t want something that the government feels is good for them. If it’s good, then why is there a reluctance, and over 50-days of struggle?

One of the underlying understandings is that, there seems to be a trust deficit among them. I always say to startups working in agriculture - farmers don't trust anyone and we need to earn the trust. The current situation is proving that point again. Trust deficit seems to be not only with the government, but more with the corporates.

This trust deficit with corporations seems to be trending across the world right now. Recent WhatsApp policy changes seem to have created a lot of questions in its users' minds, some seem to be opting for a non-profit and open-source alternative like Signal, moving away from a corporate.

Silicon Valley, over the last few years, has been blamed for many things where its business models have been questioned. Across the world, there seems to be an ongoing dialogue about corporate intentions, which is why the field ESG has come into action to measure corporates in terms of their impact on Environmental, Social and Governance (ESG). One of my earlier investments, the Bengaluru-based Solaron Sustainability Services, which does ESG research, monitored around 1,000 stocks listed on New York Stock Exchange (NYSE) and the London Stock Exchange (LSE) for their ESG impact.

An adverse report by Solaron on any of these mega companies regarding their ESG practices can bring down their value significantly. Many corporates have taken this very seriously and have implemented pretty well, as their stocks are measured not only by their quarterly results but also by the ESG score. This has increasingly become a good tool globally. However, in India we could do more on that.

Compared to the rest of the world, India is a pioneer in making the corporate social responsibility (CSR) a law, mandating corporations to spend 2 percent of their profits for the good. This has done good to the country, and according to India Data Insights, Rs71,909 crore was spent by 29,655 companies during the period 2014-19 in 10 sectors (education, health care, livelihood, rural  development projects and more) trying to get people out of poverty. Many corporates have solid CSR teams in place. Then why is there still a trust deficit among farmers with respect to corporates? I used to say that the 2 percent [kept aside for CSR] is like a holy dip in the Ganges. What about the other 98 percent where I can do anything?

In the 2017 article I had written for Forbes India, titled ‘Social businesses must receive risk capital from the government and CSR’, I've put forth a point about having the government to define social businesses so CSR funds could go to businesses that are doing good for people.

I focused on startups at the time, in the way of bringing more patient capital into helping those entrepreneurs solving serious problems. I suggested creating a section in the Indian Company Law for social businesses that would be measured on triple bottom line—people, planet and profit. Looking at profits alone would make companies lose focus on long-term impacts and they would live on a very myopic quarter-by-quarter basis. This way India can lead the way building an equitable country taking everyone along!

With the current scenario, I feel the time has come to define social businesses for the country so that many corporations follow those guidelines and reduce the trust deficit people have today with the corporates. This might even accelerate the Sustainable Development Goals (SDGs) the government has set out to achieve by 2021.

Corporates that farmers are afraid of can take the lead and announce their SDG goals and ESG standing today. If the Indian government comes up with its own definition of social businesses, including SDG and ESG, there could be one rating system to assess the corporates on.

Could publicly-listed big corporates do this? Yes. In 2018, I heard Emmanuel Faber (CEO of Danone) speak at the Yunus Social Business Day in Bengaluru. (Prof Muhammad Yunus defines Yunus Social Business as a company with “No loss, no dividend”).

That day, Faber depicted how a multinational can turn its path around and initiate change. The Grameen Danone social business example has not only helped thousands of undernourished children, but at the same time the relationship Danone has with its employees and themselves. Most of their employees have now invested in social businesses, demonstrating that social cause and business can act as one.

He was alluding to take the €25 billion company towards that vision, and today I see that Danone becomes the first listed company to adopt the “Entreprise à Mission” model created by French law in 2019.

An “Entreprise à Mission” is defined as a company where social and environmental objectives are aligned with its purpose, and set out in its Articles of Association. Unilever has been working on its sustainability living plan (USLP) since 2010, with a bold ambition to achieve change within the company, saying, “We believe that business growth should not be at the expense of people and the planet. That’s why we’re changing the way we do business, and why we want to change the way business is done.” Ben and Jerry's  says, “We believe it’s an important aspect of our business to share with you, both the highs and lows. As a part of our Social & Environmental Assessment Report (SEAR), we have a third-party review of our Company priorities for that year.” They’ve done SEAR for 31 years!

It is also heartening to see efforts of the Cultural Intellectual Property Rights Initiative® (CPRI) that I’ve joined as a board member, which was spawned from incidents of design plagiarism where fashion brands like Louis Vuitton, Nike or Max Mara had some of their designs replicating traditional designs of the Maasai tribe of Africa and Kenya,the Guna culture of Panama and Colombia, and the Oma ethnic group of Laos. The organisation is helping brands recognise and reward these tribes – because of their cultural IP!

Similarly, the World Fair Trade Organization (WFTO) is a global association of 401 organisations committed to improving the livelihoods of economically marginalised producers. WFTO has members in 76 countries and their members use commercial activity to achieve a social mission and have been referred to as 'Fair Trade Social Enterprises'. WFTO's stated mission is "to enable producers to improve their livelihoods and communities through fair trade". But these are on a volunteer basis or after an incident!

Prior to the 2017 Forbes India article, in 2016, in an exclusive interview with Forbes India headlined ‘Needed: Entrepreneurial models that work for ‘Bharat’’, I had recommended that the Securities and Exchange Board of India’s (SEBI) attempt at an alternative investment model through an online exchange may be one option that could mitigate the problem of jacking up valuations to some extent.

For instance, between Rs50 lakh to Rs100 crore, one could make it easy to raise money on this platform, so people who already have shares in a promising business can sell on this exchange and don’t need to wait for the valuation cycle of investment. What I recommended in 2016 for a startup social business to raise money, happened in 2020 where SEBI has come up with a paper on Social Stock Exchange. Similarly, recommendation in 2017 on the definition of social businesses has can come into fruition in 2021!

Now we have a golden opportunity to make this available for Indian corporates to adapt if the government sets the guidelines on social business measuring triple bottom line - People, Planet, Profit! So, everyone in the country feels good about opportunities to enjoy the growth that's available and be part of it!

Otherwise, India may end up facing the problems that the US is facing today about the 1 percent scenario that has created more disturbance in the world's oldest democracy - as the thoughts around Saving Capitalism: For the Many, Not the Few has been put forth! Where Robert Reich recalls similar issues that happened in 1880-1890, resulting in the antitrust legislation (apt name)!

This year also marks another significance as we enter the 100th year of Mahatma Gandhi changing his attire to a simple loincloth. He took the decision in September 1921, he interacted with the poor and the farmers at the Thenur-Cross, where his train had stopped at a signal. After that incident, when he appeared from his room in Madurai, he surprised everybody with this new attire since the poor couldn't afford full clothes. So we might even call India’s definition of social business as “Gandhian Business”, or G-Biz, as tribute to this incident and resolve to change farmers situation by 2030!

This pandemic also made many Gandhian thoughts resurface like – self-reliance, go local, decentralised manufacturing, rural livelihood after the reverse migration (I call them ‘City Returned’). Let’s make Mahatma Gandhi’s wish come true by 2030 – by when the UN hopes to achieve the SDGs!

By the way, during Maatu Pongal, there is a famous Jallikattu –a traditional event happens in Tamil Nadu where people have to stop a bull released on them and ride along to remove the flag on its horns! Traditionally it was to demonstrate a person’s strength to tame the bull. So let’s ensure that both the people (farmers) and the bull are ready, before releasing it!

The author has been featured by Forbes India as a social investor: How Nagaraja Prakasam is engineering social change. As an angel investor, he invests in social businesses. He also mentor-in-residence at NSRCEL, Indian Institute of Management Bangalore

The thoughts and opinions shared here are of the author.

Check out our end of season subscription discounts with a Moneycontrol pro subscription absolutely free. Use code EOSO2021. Click here for details.