Time To Make CSR More Strategic

The current global financial crisis has impacted Corporate Social Responsibility in India adversely. Business houses, trying to restructure their resources, have run the red line through CSR budgets. CSR managers claim that managements have issued instructions to put on hold all new CSR projects. Budgets for many on going projects have also been curtailed.

It was expected that in 2008 CSR would become more widespread and would find greater acceptance as a viable business proposition for sustainable development This expectation was strengthened by several surveys. The Times Foundation-TNS Survey in early 2008 showed that Corporate Sector involvement in Corporate Social Responsibility had increased substantially since 1991. These hopes have been belied. The global financial crisis has helped strengthened the belief that CSR, for most Indian business houses, was not a very serious issue.

A study by Rajat Panwar and Eric Hansen, of the Forest Business Solutions, reveals that most Indian business houses feel that CSR was only possible if profitability was high. They have quoted an Indian manufacturer who said that “no social activity was possible without at least 25 per cent profitability.”

Corporate responsibility is still not an integral part of business strategy in most Indian companies. While a large number of Indian corporate houses swear by CSR their support for the concept is largely philanthropic. For them investment in CSR is still charity to be given out as a favour to the unfortunate. In times of a crisis charity/philanthropy is the first casualty, as has happened today.

A study by Tatjana Chahoud for the German Development Institute reveals that “India’s economic reforms and its rise to become an emerging market and global player has not resulted in a substantial change in its CSR approach…Indian CSR is still in a confused state.” The study indicated that “Indian understanding of CSR seems to be shifting from the traditional philanthropy towards sustainable development. Nevertheless, philanthropy continues to be widespread in many Indian companies,” since community development still plays a decisive role in the CSR agenda of most companies. All the PSUs included in the survey indicated that their CSR was philanthropic.

The financial meltdown has shown that for a majority of companies, including the MNCs, Corporate Social Responsibility is nothing more that a PR exercise for brand promotion. Business houses in India continue to look at CSR as charity and not as their responsibility towards the community which provides them the license to operate. Companies that see corporate responsibility as PR tend to cut anything that doesn’t look like core business.

ndian Business needs to use this opportunity to strengthen and streamline their CSR agenda rather than to slash their CSR budgets. There is urgent need today for Indian business houses to relook at their CSR interventions and determine their effectiveness. Surveys have clearly indicated several loopholes in the infrastructure and implementation of CSR in most companies.

The Tatjana Chahoud’s study revealed that “CSR is firmly rooted in the top management” While understanding of the concept at the top management level is strong little of this trickles down to the implementation level. Few companies have CSR managers who have the required levels of knowledge and awareness about various aspects of CSR.

The present crisis offers an opportunity to make CSR more strategic to tackle the new and emerging needs that the present economic downturn is likely to bring. Cutting CSR budget at present will worsen the plight of the vulnerable sections of society. It will send out the message that CSR is a fad to be indulged in only when the going is good. The present is the time when CSR activities need to be increased to help those in need the most to rebuild their lives and trust in business.

The financial crisis has hit business but has affected most intensely the poor and vulnerable sections of society. While business has the government to bail it out with subsidies and concessions the poor have no such backup. To make matters worse governments, both state and central, are slashing welfare budgets to finance economic recovery. Governments are throwing money about because they believe that if only people could be persuaded to spend again, then the economy would be all right.

Business has a very decisive role to play in helping the vulnerable and poor to tide over the current crisis. Those who continue their CSR commitment are likely to reap substantial benefits. The present is the time when there is need to enhance substantially CSR activities. There is need to target those most in need and try to rebuild some of the trust in business that has inevitably been lost. The present crisis is the result of the loss of credibility and trust in business.. The common feeling all around is that people at the top in business have been greedy and have neglected their responsibility towards society.

As the financial crisis plays itself out over time it will show in very uncertain terms that Corporate Social Responsibility is not a fad but the need of the hour. Indian business needs to shift its attention a little more to their responsibilities towards the society. While the financial bottom-line is important there is also need to consider the needs of society and create goodwill.

There are four areas which require urgent attention to improve CSR performance in India.

First: Management needs to pay greater attention to the need for training persons responsible for CSR. A 2006-2007 Partners in Change survey revealed that the lack of knowledge and awareness about CSR was one of the three important hurdles. It also pointed out the need for increased levels of awareness among all employees and need for training for CSR and Human Resource staff. Well trained, knowledgeable staff will help to ensure greater spread, penetration and effectiveness of the company’s CSR agenda.

Second: Companies need to raise the levels of transparency through improved communication. Preparing Sustainability and CSR Reports should be given serious thought. Companies need also to think of tailoring their corporate advertisements with increased social messages highlighting their responsible activities.

Third: Employees at all levels should have the knowledge and the responsibility to contribute to the company’s responsibility programmes. A top down approach does not create a sustainable CSR programme Disseminating the company’s CSR mission among its employees should start from the very beginning, at the time of recruitment.

Fourth: Companies should build effective partnerships with civil society organisations to implement their community development programmes. They need to learn from the best of the voluntary sector. Companies can help create social enterprises which can operate in a competitive market environment and still deliver valuable social services to address the needs of the vulnerable sections of society A successful social enterprise offers a much more sustainable solution than aid dependent charities.

Surveys show there is growing awareness of corporate responsibility among the people A majority feel strongly that companies should be held responsible for bridging the gap between the rich and poor, reducing human rights abuses, solving social problems, and increasing economic stability.

More and more Indians now feel that the business sector must play a wider and more expansive societal role. A majority say that companies should be held fully responsible for roles over which they have direct control. These include providing quality products and cheaper prices, ensuring that operations are environmentally friendly, treating employees fairly without discrimination based on gender, race, or religion, and applying global labour standards.