The Hindu Business Line : CSR is not just a nice-to-do add-on

CSR or corporate social responsibility is no longer defined by how much money a business gives away. It hinges more on how that business makes money in the first place, writes Mallen Baker in Strategic Corporate Social Responsibility, by William B. Werther, Jr. and David Chandler, from Sage (www.sagepublications.com). CSR is not a nice-to-do add-on, reminds Baker, and the authors' preface begins by declaring, "CSR represents nothing less than an attempt to define the future of our society."

The need for social responsibility among businesses is not a new concept, say the authors. "Ancient Chinese, Egyptian, and Sumerian writings often delineated rules for commerce to facilitate trade and ensure that the wider public's interests were considered." A quote of Adrian Henriques is cited, that in the 17th century, "concerns about the excesses of the East India Company were commonly expressed."

CSR is more relevant today because of globalisation, the authors point out. Of the world's 100 largest economies, 49 are countries and the rest, companies! "General Motors has greater annual sales than the gross national products of Denmark, Thailand, Turkey, South Africa, or Saudi Arabia. Wal-Mart's economy is larger than that of Poland, Ukraine, Portugal, Israel, or Greece," reads a reference to the work of O. Lee Reed et al.

A triangle highlights the need for the triple bottom-line approach, where focus is not just on the financial but also on environmental and social aspects. Encouragingly, the idea of incorporating a CSR audit into the reporting process seems to be catching on. In 1992, only 26 standalone CSR reports were published, informs Ethical Corporation Magazine, cited in the book. In 2004, there were 1,791 PDFs on the subject, and 81 per cent of FTSE 100 companies produced a CSR report. Wonder what the numbers are here.

Of immense value are the scores of case studies included in the book.

Double-counting in trade

ON THE scale of per capita GDP, India and China "still have a long way to go to approach the levels of the leading economies," notes the UN's Trade and Development Report, 2005, from Academic Foundation (www.academicfoundation.com). The good news, however, is that the potential of both the countries to catch up is `enormous'. The report, produced by the United Nations Conference on Trade and Development (UNCTAD), has chapters on current issues in the world economy, income growth and shifting trade patterns in Asia, and evolution of the terms of trade and its impact on developing countries. It also explores `a new form of global interdependence'.

The report notes, "The rapidly growing South-South trade has often been identified as a major driving force behind the rising share in world trade of all developing countries taken as a group." Strangely, however, "Much of the increase in South-South trade in manufactures, as shown in trade statistics, is due to double-counting."

A schematic illustration explains triangular trade.

When goods travel across several locations before reaching final consumers, "total value of trade recorded in such products exceeds their value added by a considerable margin." An example given in the report is "the strong rise in manufactured exports from the Republic of Korea and Malaysia to China since the early 1990s" accompanied by "an almost equally strong rise in China's exports to the US."

One of the caveats issued by the report is that "the international community should review mechanisms to reduce price instability of a wider range of commodities, not just oil, so as to minimise its adverse impact on national income." Another caution reads, "It would be a mistake to treat the global current-account imbalances as bilateral problems."

Useful reference.

Offshore financial centres

OVER $1 trillion is estimated to be in offshore funds, says Asiamoney in Offshore Finance Handbook 2005, distributed by Bharat Book Bureau (www.bharatbook.com). "While offshore finance can be defined simply as the provision of financial services, such as the borrowing and lending of money by financial institutions to non-residents, each OFC (offshore financial centre) has its own unique strengths and areas of expertise."

More than a dozen OFCs are discussed in the book. You'd learn, for instance, that in Anguilla, "a private fund constitutes no more than 99 investors," and "a protected cell account refers to a separate and distinct account of a protected cell company." Do you know that Antigua and Barbuda was declared in 2000 to be `fully compliant with' the 40 recommendations of FATF (Financial Action Task Force)? Or, that "the world's largest and, arguably, most successful cruise-ship operators register their ships in The Bahamas"?

How nice to know that international business companies (IBCs) are exempt from all taxes in Belize! Also, "there is no requirement for keeping or filing annual accounts and/or reports". BVI or British Virgin Islands is "the world's 4th largest offshore domicile for captive insurance companies," and the industry has been growing at 20 per cent per annum.

"A Cayman Islands trust is attractive to a person who fears political or economic instability in his home country and wishes to make financial provision for his family," and such a trust mechanism "can also be effectively used to hold the assets of an employee pension or share incentive plan for multinational corporations."

Enticing options!

BooksOfAccount@TheHindu.co.in

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