India Inc and CSR: A Complicated RelationshipGuru Prasad | June 8, 2015
The relationship between Indian corporations and CSR activities has taken a complete U-turn over the past decade; the importance of social contributions has skyrocketed.
Every major company today is finding creative and unique ways to implement CSR directives. Glaxosmithkline, for example, exclusively focuses on health and healthy living. The company establishes programs in tribal villages where they offer medical check-ups, treatment, health camps and health awareness drives. They also provide money, medicines and equipment to non-profit organizations that work towards improving health and education in underprivileged communities. The Reliance Industries’ ‘Drishti Project’, focuses on treating visually challenged people from economically weaker sections of the society.
Traditionally, most Indian companies have been known to be very stingy with their contribution to society in terms of Corporate Social Responsibility. This changed with the passing of the Companies Act, 2013. The act makes sure that every corporate earning a net profit of more than INR 5 crore, or a turnover exceeding INR 1000 crore, spends at least 2% of its average net profits, from the last three fiscal years, towards CSR activities. This initiated a barrage of CSR initiatives by major companies in the country, which not only provided much needed development to weaker sections of society, but also helped create a favorable corporate image in the mind of the consumer.
A Change In The Tide
While CSR wasn’t a very big part of running an organisation back in the day, it has proved integral to the growth of some of the biggest companies in our country. Tata is well known for being actively involved in giving back to the community, and the development of infrastructure. When other organisations were trying to find ways to escape spending money on sustainability and social work, Tata was busy setting up hospitals and research stations.
Let’s take ITC as an example. Being a highly-varied conglomerate, they needed to isolate the taboo associated with their tobacco units and make sure it didn’t stain their image across different sectors. To do this they introduced a unique CSR strategy in the form of the 1 Rupee scheme. Classmate, ITC’s line of stationery products, gives INR 1 towards the education of underprivileged children from the sale of each Classmate notebook. Through this scheme, ITC ended up contributing over INR 214 crore towards CSR in 2014-2015.
Not only did this scheme increase the sales of Classmate notebooks, but also managed to substantially dilute the cigarette taboo linked to their products. This is just one example of how CSR can be seamlessly incorporated into company operations. It’s arguably one of the best ways to increase stakeholder retention, as it is a visible effort from the organisation to give something back to society.
Why Invest In CSR?
A study by Hewitt & Associates found that morale was 55% better, business process were 43% more efficient, public image was 43% stronger, and employee loyalty was 38% better in organisations with strong CSR programs. Many organisations don’t see how easy things like customer engagement become, if they put in a little effort into designing and implementing new and innovative CSR strategies.
For example, Walmart is one of the loudest voices in environmentalism. They’ve run ad campaigns to raise awareness about sustainable product choices that customers can make while shopping at their stores. With minimum expenditure, they found a way to do something ‘good’ which helped them grow their consumer base on the side.
You can even use it as a tool to differentiate yourself from your competitors. PepsiCo and Coke have been relentless in trying to up each other with their CSR activities. Coke has a tie-up with WWF, where they engage in protection of fresh-water sources, and replenishment of ground-water. PepsiCo too runs sustainable agriculture programs which not only help small farmers, but also help secure a supply of raw material to the company’s manufacturing plants.
Companies actively involved with CSR find it easier to recruit employees, even in tight labour markets. Employees tend to stick around longer with such organisations, leading to increased employee retention, which also cuts down largely on recruitment and training costs. In fact, a survey by Net Impact found that 35% of workers would take a pay cut to work for a company committed to CSR.
How Can CSR Work For You?
The Reputation Institute’s 2011 ‘Pulse Survey’ found that CSR is responsible for more than 40% of a company’s reputation. At Vardaan, we specifically deal with CSR management and offer all-round solutions on how to achieve CSR objectives. Trust us when we tell you that the days of simply donating a cheque are absolutely over.
Even with hundreds of corporations actively investing more time and resources into their CSR initiatives—some with full-fledged social responsibility departments—there are certain firms that are relatively apathetic about creating real social change. What needs to change is the mindset that CSR is just another scheme to drain money out of the company, without any tangible short-term or long-term benefits.
An effective CSR system not only helps society, but can also increase profit margins and generate immense goodwill. It may not be the only way to get the same results, but is definitely the easier and more socially responsible way of taking your organisation where you want it to go.