CSR Not Just An Option

Suresh Kr Pramar

 

Five Indian Corporates  made it to the Asian Correspondent 2017 CSR 50 Index for excellence in Corporate Social Responsibility. The five; Tata Group, Mahindra & Mahindra, Aditya Birla group, Arvind Limited and Dr Reddy’s Laboratories, are well known names in India for their responsible social investment programmes.

The areas investigated to decide who qualified for the Top 50 include: Resource management: Energy, carbon, water, waste; Employee management: Safety, diversity, ethical labour practices, incentives; Financial management: Innovation, supply chain, CEO pay, taxation and Philanthropy: Volunteering, donations, foundations, community work.

Stressing on the need for CSR the authors of the Index have said ''In order to remain current and engage with increasingly varied stakeholders, business must grapple with CSR. Doing nothing is not an option. Indeed, as investors and consumers grow more aware of the need for sustainable development, they are demanding that companies step up to contribute. This is true around the world, and Asia is no exception.”.

Since 2013, when the Company’s Act was passed, there has been a substantial shift in CSR activities from the ‘nice to do silo’ to become a strategic priority for businesses big and small. There has been an increase in the spread and tempo of CSR spending. Unfortunately a good number of companies, which come within the purview of the CSR legislation, continue to ignore their legal responsibilities. Early this year it was disclosed in Parliament that as many as 4,195 companies, of the 7,334 companies surveyed by the government, had not spent any money on CSR.

According to these reports the Registrar of Companies has sent out show cause notices to 530 firms for their failure to comply with the various provisions of Section 135 of the Act. In an answer in the Rajya Sabha the Minister had said the government was serious regarding implementation of CSR and would ensure that companies seriously comply with their responsibilities. There are provisions in the law for imposing penalties on companies who fail their responsibilities.

What is Corporate Social Responsibility? The European Commission defines CSR as “A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” Yet another definition says “Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”

CSR is not and cannot become a solution for all the community’s problems. It, however, can do at least two things. One it can help create better understanding between the company and its stakeholders and; Two: make a slight, but significant contribution, for the well being of the society and community. Additionally active CSR will provide the company a social license to operate.

Each business, small or big, needs to have a CSR programme in place. Companies ignoring CSR practices are likely to lose the trust of the people who are important to your business There is a very strong case for business to involve itself in Corporate Social Responsibility. The benefits cover the whole gamut of its activities including the sustainability of its business. I list six major reasons as they come to my mind.

1.    Satisfied Employees are the strength of the company. They are the company’s goodwill ambassadors in the community and help to create a positive image of the company and their employers. A satisfied employee will remain loyal to the company and not seek better employment elsewhere. This will reduce attrition and the constant need to advertise for replacements Additionally a responsible company will attract talent because more job seekers would like to work for the company even at wages lower than those available elsewhere.

2.    Satisfied customers A strong record of CSR improves customers’ attitude towards the company. Customers who believe and like the company will buy more products or services, repeatedly, and will be less willing to change to other brands. Surveys among business executives have revealed that CSR is giving their companies a competitive advantage mainly because of favorable response from their customers. A majority of satisfied customers say that they are likely to buy from companies that support and engage in activities to better their communities. CSR can help you engage with  customers in new ways. Since the message is about something “good,” it can often be an easier way to talk to  customers. This is a very underused tool for business-to-business company communication

3.    Costs Reduction A well planned and implemented CSR programme can help to bring about reduction in the cost of production. This is possible through more effective hiring and retention of staff, adopting and implementing innovative energy saving programmes, managing potential risks and liabilities more effectively and investing less on brand and company promotion. Instead the employees and clients would provide free publicity from word of mouth One of the ways companies can start by engaging in CSR is to use it to cut costs; whether it is using less electricity or less packaging material these add up to a substantial sum of money saved.

4.    More Business Opportunities A successful CSR programme opens the doors for increased business opportunities for the company. With satisfied customers and employees acting as brand ambassador the company is likely to be the first to learn about new business opportunities in their areas of operations. To make sure of these opportunities the company needs to inform people at large about their efforts to improve society. Companies strong on the dissemination of information of their CSR activities are able to attract increased attention for business.

5.    Long Term future of the company. CSR is not something for the short term. It is about long term goals and business continuity which large businesses phrase as “shaping a more sustainable society.” CSR or running a business responsibly, is to ensure longevity, or sustainability, of its operations. According to Unilever’s Vice President for HR and Sustainability, Geoff McDonald, “the only reason we’re doing sustainability is to drive the growth of Unilever. CSR is an effort to look at the company’s long term interest and to ensure that the company’s future is sustainable.”

6.    Legal Provisions: An important reason for CSR in India are the legal requirement in the Company’s Act 2013. Section 134, in the Act, makes it mandatory for companies to spend a small part of their profits on CSR activities. India is the only country in Asia, and possibly the world, which has a law mandating Corporate Social Responsibility for profit making companies. The Companies Act of 2013 mandates that companies with a net worth of Rs 500 crores or more or a net profit of Rs 5 crores or more are required to spend at least 2 percent of their average net profits on corporate social responsibility programmes. The Act also requires companies to disclose their CSR spending. The Act specifies that companies should give preference to local areas and areas surrounding their operations.

Giving back to society is not an alien concept in India. It earliest form is reflected in approaches similar to corporate philanthropy and the Gandhian Trusteeship model. Business  made donations in cash or kind, community investments in trusts, and provision of essential services like schools, infirmaries etc.

In recent years people feel positively that companies should be held responsible for bridging the gap between the rich and the poor, reducing Human Rights violations and solving social problems along with increasing the economic well being of the people they impact. There is a growing realization among the people that companies should be held fully responsible activities over which they have full control. These include providing quality products at reasonable prices, ensuing that their operations are environmentally friendly, their employees are treated fairly  without any discrimination based on sex, religion and race and applying global labour standards.

Companies need to realize that greater transparency is essential if they want the retain the trust of the people and the credibility of their business. CSR is no longer charity. It is an important part of management strategy. Corporate Social Responsibility is a concept which benefits the companies as much as it does to the society and community. For Indian companies CSR is no longer an option.