CSR and corporate Governance

Reports say that banks' corporate social responsibility (CSR) spending dropped by 38 per cent in July-December period of 2023 compared with that in the previous six months. For CSR purposes, 53 scheduled banks spent Tk 3.53 billion in July-December of 2023 against Tk 5.71 billion in January-June of 2023 and Tk 5.14 billion in July-December of 2022, according to Bangladesh Bank data.

Liquidity crisis coupled with high distress assets reportedly forced them to curtail their CSR spending. According to central bank data, the amount of excess liquidity in banks dropped to Tk 1.5 trillion in February from Tk 1.6 trillion in January.

Of the total CSR expenses in July-December of 2023, the highest Tk 729 million, was spent on education sector, followed by Tk 723 million on health sector. According to the BB report, CSR spending by banks declined massively on education, health and disaster management in July-December period compared to the previous six months.

No doubt, this is bad news for CSR activities in the country. It is the state-owned enterprises and commercial banks that are believed to be responsible for dishing out funds for CSR undertakings. There is thus the debate whether these organisations, banks particularly, are doing their job right in delivering what should have been the most unblemished of services to society at large.

Questions raised on banks' CSR spending are many, ranging from how and where the money is being spent, to the most pointed of the queries - why. However, if the money went in the right direction with sustainable impact on the fields it was spent, the disbursing banks should be felicitated. In order to examine the actual situation, there is the need to put the array of activities under scrutiny by the Bangladesh Bank. Reports say that the BB is currently at work on this. Most observers believe that a thorough scrutiny would reveal a good deal of irregularities, even gross malpractices.

It has been learnt that the central bank has formulated an indicative guideline for banks' CSR spending.  As per the guideline, banks and NBFIs will henceforth have to spend 2.5 per cent of their net profits on CSR activities. However, losing concerns would be exempted from the spending. The guideline, reportedly, has also specified areas for CSR expenditure and imposed a ceiling on sectoral allocations, with the highest share of 30 per cent going to education each year.

In order to render the guideline comprehensive, it is important that it incorporate other priority areas where activities under the CSR funding would be able to address a host of existing as well as emerging socio-economic issues in a sustainable manner. Needless to mention, a good deal of success of the activities will depend on how effectively these are monitored, and in so doing, taking the stakeholders on board would hopefully yield better results.

Although Bangladesh has been practising CSR for some time now, it is clear that its method and target are both narrowed down to financial allocations by state-owned enterprises and banks for socio-economic well-being of the masses in critically vulnerable situations. However, CSR activities can be best practised in the work culture of businesses that in other words means millions of employees are directly benefited under the broad facilitating ambit of corporate welfare. It is in this context that CSR is a self-regulating business model that helps a company to be socially accountable to itself, its stakeholders and the public. By practising corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society including economic, social, and environmental. To engage in CSR means that in the normal course of business, a company is operating in ways that benefit society and the environment. This means prohibiting unfair treatment and allowing a work culture based on recognising the needs of the workers, the clientele community and society at large constitute the basic principle of CSR.

CSR activities are gradually being integrated into international business practices and hence are becoming the determining factors for market access. Thus a focus on CSR in Bangladesh would be useful not only for improving corporate governance, labour rights, work place safety, fair treatment of workers, community development and environment management, but also for industrialisation and ensuring global market access.

The fact that globally CSR is widely pervasive in a range of business activities is becoming increasingly evident. Bangladesh's exports had to suffer due to its failings and inadequacies in recent times in maintaining some of the basics of corporate business culture, particularly in respect of employer-employee relations, labour rights, environment issues, wage structure and so on. Companies, however, are now more careful than before to ensure that businesses do not suffer. But how far have our firms risen to address the corporate responsibility issues remains a question.

CSR is, thus, not just about targeting some social and economic backwardness in society but because of the wide-ranging objective of welfare and social responsibility, it is more about fair play, even-handedness and justice. It is time we looked at this broad aspect of CSR as an instrument of greater social welfare.

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