The government has sought to use legislation to involve India Inc. in its Clean India project. The latest amendment to Schedule VII of the Companies Act 2013 brings corporate contributions to the Central Government’s Swachh Bharat Kosh within the purview of Corporate Social Responsibility (CSR) activities. The clarion call for sanitation has been accompanied by well-known personalities supporting the cause.
Such moves may indeed have some short-term impact. In the long run, however, the government may do better to ‘nudge’ corporates, as also people, to behave as ‘good’ citizens; this is in order to achieve its ultimate goal of a cleaner, more equitable India. Such nudges are the subject matter of Behavioural Economics.
The economist, Milton Friedman enunciated the behavioural underpinnings of CSR. According to him, only people— and not businesses that were artificial corporations — could have responsibilities. Thus, rather than wait for an ambiguous entity such as business to undertake social responsibility, CSR can be reframed as the social responsibility of individuals (corporate executives) in their role as agents of businesses.
How can such corporate executives be nudged into thinking responsibly?
B-schools could apply the mantra of ‘catch them young’ through well-planned and well-executed experiential programmes. Community-centred experiential learning can help future leaders perceive social responsibility differently.
They would be able to understand urban and rural poverty better, both in terms of their own endowments, as also the contrast provided by such communities to their own lives.
B-school participants mentor bright young slum kids – called ‘Sitaras’– for an entire year in the surroundings of the child. A component of ethnographic studies helps participants understand urban poverty and its dimensions, as also the business opportunities and challenges arising therein.
Further, the mapping of a “Sitara” to her B-school mentor becomes an example of an “Endowment” bestowed upon the latter, a prized possession that they tend to value highly.
Legislations such as the Companies Act 2013 tend to evoke merely risk-averse behaviour on the part of corporates. This results in a ‘Tick-in-the Box’ approach to fulfilling their CSR obligations.
Loss aversionNow, to individuals. Loss-aversion, the tendency of individuals to strongly prefer avoiding losses to acquiring gains, is an important principle guiding individual decision making.
Similar principles of loss aversion may be used to counter the effects of littering and open defecation. The reason why people, especially the poor, prefer open defecation is precisely because of the loss utility of using unclean toilets and the gain utility of using open fields. In urban areas, the lack of clean toilets, especially in public spaces makes women in particular expose themselves to the risk of unsanitised washrooms.
Constructing toilets, and more importantly, ensuring clean toilets at all times can provide a solution to the sanitation problem.
Nudges similar to the green footprints leading to the city’s garbage and recycling bins in Copenhagen can be tested to reduce littering.
The government may do well to understand the power of such nudges to encourage long-term changes. Else its attempts at a ‘Clean India’ may just be a thorough ‘wash-out’.
The writer is with the SP Jain Institute of Management Research, Mumbai. The views are personal