Joy Mukherjee, Head of Global Corporate Communication, Angelique International Ltd.
CSR – the new currency of Reputation Capital in India
If responsibility is the price of greatness, we must take pride in the fact that India is leading today in CSR spending growth than anywhere else in the world. It has become a new pay-off paradigm of Indian stakeholders, as corporate involvement is taking deep roots.
CSR has gained unprecedented importance globally and has become imperative to any company’s strategic decision making in positioning, re-positioning or global outreach. It has gained stellar prominence in India from all quarters and huge corporate mindshare. Organizations have realized that government alone will not be able to stand out from the crowd in its endeavor to uplift society or edify the activists. With the rapidly changing corporate environment and more functional autonomy, many organizations have set up separate CSR wings as a strategic tool for sustainable growth.
There are scores of CSR organizations and business associations promoting social responsibilities in India across all diverse industries much like a plethora of platforms there are, for Indian corporate houses to showcase how development concerns can be met with social commitment. In the developing world, governments and businesses understand that their respective competitive positions and access to capital increasingly depend on being able to respect the highest global standards. India, leading by example in the world proves a vital point that, Ethics and Responsibility are a new competitive environment. Encouraging enough, the last financial year, 2014-15 had seen an increase of 27% in India’s total CSR reporting, the maximum among 45 countries surveyed by KPMG. This elevates the tone of the fact, which attests empirical dynamics of Indian CSR, where the performance of Indian companies stands in vivid contrast against the foreign-based companies operating in India in 2015. Our Indian companies had a CSR target of Rs. 5780 crores and they ended up spending Rs. 4708 crores. The foreign-based companies set their target at Rs. 710 crores while they managed to spend only Rs. 407 crores.
Going by the new Company’s Act, companies with net worth of over Rs. 500 crores or ATO of over Rs. 1000 crores or PAT of over 5% have to mandatorily spend 2% of average profit of the previous three years on CSR activities specified by the Government of India, which does not include political funding. This ensures that the companies will have latitude in designing project-based CSR interventions within the framework and, this flexibility will mean more proactive resource management and engagement. The GOI has encouraged the companies to invest more generously and report on social activities although, CSR in India still tends to focus on what is done with profits after they are amassed. It constituted Empowered Action Group (EAG) under the Ministry of Health and Family Welfare following 2001 census to combat socio-economic concerns in eight Indian states, which are called the EAG states. Being one of the highly industrialized states, Maharashtra having 205 projects in the pipeline emerged as one such state, where nearly 50% of the companies are implementing CSR initiatives, followed by Karnataka, West Bengal and Tamil Nadu. Please note, the launch of the Swachh Bharat Abhiyaan (Clean India Campaign by the GOI) has made sanitation a national priority; creating ripples of a strong revolutionary sentiment across the country and bringing in an inpouring of support from the organizations, social development agencies, foundations, philanthropists and the general public.
A liberal structure of organic unity between human and environment, CSR is also objectively discerned through another school of logic that supports it as a key driver, that minifies the gap between economic and social progress and, a way through which a company achieves a balance of economic, environmental and social imperatives (Triple-Bottom-Line Approach), while at the same time addressing the expectations of shareholders and stakeholders. A successfully implemented CSR strategy calls for aligning these initiatives with business objectives and corporate responsibility across the business principles with an agenda to make CSR sharper, smarter, and more focused to the central edifice of responsibility and the challenge of sustainability in strategy, practice and influence. This further recounts how CSR and business ethic in India are looking to focus primarily on capacity building, empowerment of communities, more inclusive socio-economic growth, environment sustainability, promotion of environmentally benign and energy efficient technologies, development of underdeveloped regions, and ways to uplift the marginalized and underprivileged sections of our society. When all global CSR summits are seen most predictably addressing on an agenda for sustainable inclusive growth, look at what our very own Mahindra & Mahindra (M&M) has done to fan our pride. As a case in point, way back in 2005, M&M launched a unique kind of ESOPs – Employee Social Option in order to engage and involve its employees in socially responsible activities of their choice. A message there to other corporate biggies, rise!
When The Economic Times conducted the first “Best Companies in CSR” study in 2013-14, 115 companies had participated. In 2014-15 the number went up to 216, for the growing competition had set the wheels in motion for increased contribution and more socially responsible behavior to lead to inclusive growth. CSR study in 2014-15 shows that many companies have scaled up operations in CSR and are looking at it as a priority through their holistic approach. M&M leads the pack here in 2014-15 and compared with the previous year’s study, M&M has jumped two ranks ahead of Tata Steel and Tata Chemicals. There are four Tata group companies in the top 10 list; GAIL replacing SAIL in the public sector honors while Bharat Petroleum joins the top ten list with Infosys and Jubilant Life Sciences finishing 9th and 10th respectively. Interestingly no foreign players made it to the top 10 list in 2014-15 like Coke and Siemens did in previous year!
It is a pressing need of the hour that businesses indispensably should support inclusive growth and equitable development, while they must respect and promote human rights and the wellbeing of employees as well. From responsive activities to sustainable initiatives, Indian corporates have clearly demonstrated their ability to make a significant difference in the society and improve the overall quality of life in a responsible manner. In order to leverage its CSR or sustainability strategies for competitive advantage, corporate India has also started realizing the peremptory need for advanced capabilities of organizational learning, creating the networks of “change champions” and sustainable innovation to build sustainable business models, which can drive stakeholders’ delight in larger measure. This will not only work wonders in adding new business acquisitions to the list and increasing customer retention and loyalty; but also in increasing brand recognition, improving business reputation and, providing access to investment and funding opportunities.
As the report reveals, the Indian private sector has performed miles better than the public sector in 2014-15 to provide substantial value to its customers, consumers and stakeholders. Further, according to the Ministry of Corporate Affairs, as many as 460 companies including 51 PSUs spent a little over Rs. 6337 crores on CSR last fiscal. The sources added that Indian PSUs utilized about 71% of their mandated CSR fund, while that of private sector companies was 79%. The companies in energy and power sector accounted for the highest expenditure under CSR in 2014-15 which is approximately 39% of the total spending followed by banking, IT, mining & metal and consumer goods sectors (FMCG, FMCD and electronics). Public health, being a priority goal in its own right, as well as a central input into economic development and poverty reduction, tops the category with regards to CSR spending followed by education, community, environment and other areas. There’s no denying the dictum that, a tremendous social responsibility comes with being a tremendously successful public performer. Set up by Anand Mahindra, CMD of Mahindra & Mahindra Group in 1996, Project Nanhi Kali supports the education of over 11 lakh underprivileged girls in ten states, providing material and academic support, while their Mahindra Pride Schools provide livelihood training to youth from socially and economically disadvantaged communities and have trained over 13,000 youth in Chennai, Pune, Patna, Chandigarh and Srinagar. Look at Aditya Birla Group – their focus areas of sustainable involvement are healthcare & family welfare (medical camps, community hospitals, mobile clinics, blood donation etc.), education (computer & digital education, girl child education) social causes (mass marriage, widow re-marriage, women empowerment), infrastructure development (schools in villages, roads, rural electrification, homes for homeless etc.) and sustainable livelihood (microfinance for women & farmers, microenterprise development, integrated livestock development, vocational training & skill development). It indeed gives a great feeling, when we talk about Dabur Nepal’s ground-breaking eco-friendly project on medicinal plants in Nepal to provide the modern technology for cultivation of the medicinal herbs of the Himalayas to the farmers. Goodness is classified as the only investment that never fails and Reliance Industries, one of the top CSR spenders with Rs.760 crores, initiated a project named as “Project- Drishti” to bring back the eyesight of visually challenged Indians from the economically weaker sections of the society which has already brightened up the lives of over 5000 people so far. Tata Steel’s goodness campaign, Maternal and Newborn Survival Initiative (MANSI), a public-private engagement since 2009, is a flagship program implemented in 167 villages in Jharkhand district aiming to reduce child and infant mortality, is now all set to scale up the project to cover 1500 villages. Leadership is not only an opportunity, but an enormous responsibility when GlaxoSmithKline’s CSR programs primarily focus on health and healthy living through their active work in tribal villages, where they provide medical check-up and treatment, health camps and health awareness programs. They also provide money, medicines and equipment to non-profit organizations that work towards improving health and education in under-served communities. When it comes to agro progress, ITC sets an example by raising agricultural productivity and helping the rural economy to be more socially inclusive as its major CSR drive, while Jubilant Bhartia Foundation (JBF) focuses on elementary education, improving health indices (reduction of malnutrition), employability and promoting social entrepreneurship.
You can see now, myriads of organizations in India are working as responsible corporate citizens towards water issues, sanitation, rural health, literacy, obesity and the likes. And how can we turn a blind eye to Vodafone’s commitment to environment by replacing 3,000 desktops with laptops to reduce carbon emissions; working closely with its suppliers to curtail plastic packaging for SIM cards, and for several long-term initiatives to support a cleaner and healthier environment. No wonder, why such drives are able to attract best industry talents, increase employee motivation and ensure retention for socially responsible companies, where CSR is both a value and a strategy for maximizing “Reputation Capital”, an indispensable matrix of long-term market protection and value creation for the stakeholders.
In the traditional business culture where bromidic noise of profit and competition was predominant, social welfare issues were marginalized into merely a peripheral pursuit. But long gone are those days and such high myopic outlook. Even as India is a country of magnificent contradictions and is grossly inflicted with mystifying economic disparity among urban, semi-urban and rural populace, CSR in India has sprung up as an inescapable precedence for the forward thinking business today and, a response to new conditions, new changes, and new opportunities. Instead of asking “Where are we now?” organizations are planning ‘Where do we go 10 years hence?’ A shift from ‘profit maximization’ to ‘profit optimization’ has changed the game by shifting serious accountability from ‘shareholders’ to ‘stakeholders’.
So, the disclosure of mandated CSR funds is one such area where most companies with the principles of participative management are seen to focus and evolve mechanisms to regularly document the development of CSR programs and prepare reports to share at the public domain for all stakeholders as they need regular communication and updates on CSR goals, however small or incremental the progress is. Employees too need to hear about that progress even more frequently. It has certainly broadened the scope of strategic communication through different lines and created opportunities for transformational leadership committed to developing new channels of outreach along with confidence, trust and ethics.
Companies that promote their ethical behaviors and environment sensitive approach are often seen filling a niche market. CSR adds most value to business when environmental and social objectives are aligned with business objectives. This sets financial performance of the firm on a higher scale and generates consequential societal benefits to boot, as a glorious example of CSV (Creating Shared Values) in a fast-changing competitive environment. CSV is not a social responsibility; philanthropy or even sustainability in modern outlook; but a smart new way to achieve economic success. Please note, it is not on the margin of what companies do but right at the center! So the companies that are most effective in integrating sustainability in their core values, business, brand differentiation strategy and, competitively innovative in finding solutions to global challenges (such as climate change, energy, economic development, education, healthcare, human rights, and protecting ecosystems) are the most successful ones in increasing shareholder’s wealth. We often see companies that are socially responsible by objective, make their brands more attractive to consumers and are more appealing to high quality potential employees, don’t they? It highlights their reliability, credibility, quality and honesty in high resolution in consumer perception. Check out how M&M, RPG Group, Reliance Industries, Infosys, L&T, Airtel, Aditya Birla Group, ACC, Tata Power, Yes Bank, Essar Oil, JSW Steel, Adani Group, Asian Paints, ITC, Apollo Tyres, Bajaj Auto, SAIL, BHEL, Oil India, IOL, ONGC etc. are contributing to the community, society and environment. CSR in India has indisputably bumped up business billings in the PR and brand-com industries as well for there’s a growing need for story-telling with the statistical review of sustainable campaigns to sensitize the local population to overall perception. This is what the well-organized, high profile, creative and profit-maximizing CSR programs can do to the social justice agenda of the day for its fulfillment in worthwhile fashion. It is even believed that it can give rise to the next major transformation of thought leadership!
A study that, most companies see higher CSR spending next fiscal, is itself in step with the times. Around 95% of the participants confirmed their CSR projects are aligned with the government’s development initiatives, including Swachh Bharat Abhiyaan, Skill India and National Health Mission. Recently FICCI revealed that 83% of the participating companies reckon on good increase in their CSR spending in 2016-17. Ground-breaking CSR plans are taking Indian organizations ahead of compliance with legislation and the road ahead is free, fast and wide. The size of philanthropic endowments in India has conspicuously changed over the decade, making the rest of the world sit up and take notice!