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December 22, 2006
The Inside Game Won't Work in India
I had lunch today in Delhi with a group of NGOs, academics and business leaders, arranged by the International Business Leaders Forum (IBLF). This discussion comes in the wake of the dispute between the provincial government in Kerala, then the Indian Government and two large multinational soft drink makers, Coca Cola and Pepsico, over allegations of excessive pesticide levels in their products.
I came away from the lunch convinced that the business community can no longer rely on its strong ties with the central government (The Inside Game) to sustain its point of view in the face of consumer or civil society activism. There is sufficient skepticism about business motive and malign role in society to suggest that employing local people, selling a good product and making a decent profit are not enough. According to Dr. Raj Singh of Nestle India, "You must engage with the community, to construct a win-win situation, to fix important problems while making a profit."
The consumer movement is becoming more radical in India, said Dr. Shriram Khanna of the SRC Delhi School of Economics. He notes a tradition of anti-business sentiment in the country, with the business man even portrayed in the local puppet shows as the bad guy. He added that 2.7 milllion cases have been brought against business in the Consumer Court system since it was introduced in 1986.
Indian companies are given the benefit of the doubt, while foreign multinationals are viewed with great skepticism, said Ms. Amita Joseph, director of Business and Community Foundation India. This is especially true of Indian companies founded since the 1991 liberalisation of the domestic market, often in the IT sector.
The best model for business is to get beyond philanthropy and charity into a sustainable project based on a market need. Dr. Singh of Nestle described the milk district model, in which the company provides technology, financial support and education to farmers in Punjab so that it can source milk locally. "Engage where you have expertise," he added.
Business must consider the possible consequences of misuse of its products. Ms. Joseph claimed that manufacturers of ultrasound equipment, GE and Siemens, had sold the product to unscrupulous radiologists. The last census indicated a substantial decline in the percentage of females born, suggesting that families had been aborting unborn females. Now there is legislation in place, written with the assistance of UNICEF and the manufacturers, with severe sanctions for radiologists, while GE has given sales targets and social goals to its distributors.
There is palpable resentment toward MNCs that have a "double standard" between East and West. Mr. Viraf Mehta, CEO of Partners in Change, a CSR consultancy, said that Coke and Pepsi should not have been shocked by the ban on their products earlier this year. "You cannot have a double standard on pesticide levels...there is no commitment to collect plastic waste...they won't put a warning on the label about caffeine for pregnant women. Everything has to be extracted from the companies by NGOs and consumer activists...Don't take Indian consumers for granted and make your behavior as good as in the West." He added that companies may want to create "steps between the private sector and the community to reduce suspicion," such as the Satyam Foundation that provides funding for broadband, electric generators and training for promising young people in rural India.
As a convinced capitalist, a proponent of the business can do a lot more, faster and cheaper than government school of thougt, I came away from lunch today a bit shell-shocked. Business has no choice but to earn credibility by engaging where it has expertise. Trust has to be earned over the long run (note that Nestle has been working on the milk district concept for the past 40 years). It is the kind of reputational "cotton" that can shield a company from a headline-seeking politician or unfair accusation by an NGO. But understand that this is a very different market, which takes to heart a quote from Mahatma Gandhi, "Business without a conscience is a sin."
Addendum: Edelman works for GE in India (as well in other countries around the world) so I’ve had the opportunity to discuss the comment that GE has sold its ultrasound equipment to unscrupulous radiologists, with our client manager. I would like to note that even before GE’s support of Indian public opinion and the Government’s efforts to strengthen protection against sex determination and misuse of diagnostic equipment through the Pre-Natal Diagnostics Techniques ("PNDT") Act, Wipro GE Healthcare had taken measures including cautioning customers, product manuals and stickers on the equipment. To support PNDT, GE has undertaken a series of measures, including requiring its employees to terminate all sales discussions with customers when there is reason to believe a potential customer is not committed to complying with the law in India. This appears to be an important example of how a MNC is being responsive and helping to ensure the safe use of its equipment in India.
Posted by Edelman at December 22, 2006 10:22 AM
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Comments
Some of the NGO feedback has to be taken with a pinch--or a few spoonfulls--of salt. Why isn't contaminated water a public health issue than just a Coke or Pepsi issue? Why are companies expected to solve some fundamental problems, including weak laws and non-enforcement of such laws, while the government is not held accountable for making sure the macro issues are being handled? Are we a nation that will be governed by free markets and freedom of choice or a nation where populist calls for boycotts and bans often circumvent rule of law? Sure companies have a long way to go in terms of social responsibility but we ought to hold the mirror up to ourselves often rather than simply go after the soft targets that many of these brands represent.
Posted by: raju narisetti at December 23, 2006 12:39 AM
Hi, I am from India and the issue is much simpler. It's really cause and effect, nothing about anti-business feelings as a prejudice. Enforcement is weak in India and businesses routinely get away with a lot of things they wouldn't be able to in a mature regulatory environment, because they can. So the scepticism is healthy.
There is widespread adulteration and India and scant attention to quality, health and environmental issues. It is sometimes speculated that upto 20% of medicine is adulaterated. Milk adulteration is rampant because of bad packaging to save costs and this is just scratching the surface. Thousands of chemicals banned in the west, food colourings for instance, continue to be widely used in India.
Coke and Pepsi have been brazenly polluting the ground water in Kerela, and bottling soft drinks with high levels of pesticide content. That's the cause, the timely exposure of this criminal behavior by an NGO and the public outcry is the effect. They need to behave like responsible businesses rather than merceneries. the double standards inherent in their behavior, they would never try this in the west and get off so lightly as they have. Thats all.
Posted by: Raul at December 23, 2006 5:14 PM
“I work very closely with GE Healthcare in India, so I was immediately struck by Ms. Joseph’s comment that GE has sold its ultrasound equipment to unscrupulous radiologists. It highlights the impact misinformed opinion can have.
Misuse, especially of technology is unfortunate and a matter of concern. But we should not lose perspective.
Do we (should we?) blame GM or Toyota or Maruti or TATA Motors for the number of road accidents in India? Do we attribute the increasing number of deaths due to rash driving in India to the sales force of these car manufacturers? Who do we expect to police misuse in the case of cars? The car manufacturers or the law enforcers?
Why should the yardstick be different for other technology?
It is especially unfair to a life-saving technology like ultrasound, which plays an essential role in cardiology, radiology (liver, gall bladder, pancreas, kidney, etc), surgical and obstetrics & gynaecological applications. It is unfair to patients who benefit from the use of this technology, unfair to doctors who use the equipment for the right purposes. It is also unfair to a manufacturer like GE who makes every effort to ensure strict compliance with a law (the Pre-Natal Diagnostics Techniques Act, or PNDT Act) that is very stringent.
I know that GE fully and unequivocally supports Indian public opinion and the Government’s efforts to strengthen protection against sex determination and misuse of diagnostic equipment through the PNDT Act. In fact, even before the amendment to the PNDT Act came into effect, Wipro GE Healthcare had taken pro-active measures including cautioning customers through terms and conditions of sale, product manuals and stickers on the equipment.
To ensure strict compliance with its own rigorous policy as well as the PNDT Act, the company has several steps and processes:
1) It is mandatory for a diagnostic centre to have a Pre-Natal Diagnostic Techniques (PNDT) certificate for an order to be processed by Wipro GE Healthcare. For example, in spite of a Kerala court providing an interim order to some Kerala health institutions allowing them to procure equipment without the PNDT certification, GE has refused to supply them the equipment till they have the certification.
2) Purchasers of GE ultrasound products in India are advised in GE sales documentation that Indian law prohibits the use of medical devices to identify the gender of a foetus.
3) GE employees are required to terminate all sales discussions with customers when there is reason to believe a potential customer is not committed to complying with its policy and the law in India
4) Compliance Training is conducted for internal sales teams as well as dealers and channel partners
5) A PNDT Audit is held in GE's ultrasound department in every quarter for direct sales, dealer sales and refurbished machines.
6) Every quarter, the list of ultrasound equipment sold by Wipro GE Healthcare and installed in each state is sent to the appropriate State Authorities and the Central Authority as required by the PNDT Act
7) GE sales and service teams receive on-going training to ensure their commitment and compliance with this policy
The facts show that GE's sales in the North of India where gender discrimination is most rampant, are actually down following the PNDT Act because of strict compliance with the law.
When a company is firmly committed to making every possible effort for the responsible, legal and safe use of its equipment in India, it deserves to be highlighted as an example of what good compliance can achieve.
Posted by: Sachin Talwar at December 23, 2006 10:29 PM
Raju
I learned that the traditional view of Indian businessmen in the villages is as money lender and exploiter. I got this from the Bunker Roy puppet show which tours around Rajastan. This needs to be turned around.
Posted by: Richard Edelman at January 2, 2007 3:43 PM
I have posted my comments based on work in the field & articles that have emerged from 2 decades of work on the issue by Dr.Sabu George who was one of the petitioners in the case in the Supreme Court. Kindly post the article as it responds to Mr.Talwars comments & I reiterate that my observations are based on facts & not misinformed. In fact we are presently engaged with UNICEF in a partnership on the issue of preventing foeticide. Amita Joseph
Posted by: Amita Joseph at January 7, 2007 11:13 PM