By Abhishek Ranjan I
Corporate Social Responsibility (CSR) has come a long way from its early days. CSR practices have gained considerable acceptance over the years, growing in scope to benefit communities and corporations. For some, CSR represents sustainability, while others view philanthropy or social responsivity as a defining factor.
Either way, CSR has finally made its way to the boardrooms around the world as a valuable part of business strategy – or closer to home, helpfully mandated by a pioneering law. Corporates are increasingly recognizing the importance of sound CSR practices that enable meaningful and impactful programs that also reflect business value.
Corporate India and Mandatory CSR
Corporate America spends over 5 percent of its pre-tax profit on charity. It might surprise you to learn that this is not under any compulsion from the U.S. Government. By contrast, Corporate India had to respond to the creation of law mandating CSR practices in 2013, which came into effect the following year. The law demands a compulsory 2 percent spend on suggested CSR activities with monitoring mechanisms, overseen by a committee that includes independent directors. Previously, CSR in India was largely limited to social initiatives from corporate giants such as Birla and Tata. The Indian Government’s intervention by law pointed to the need for a bolder, more involved approach from Corporates, which – happily – has been the case ever since.
A recent survey of one hundred BSE-listed companies found that over a quarter (27%) of these businesses went above the prescribed CSR spend, while about two-thirds (64%) spent under the mandate[i]. This is a positive trend and certainly an improvement on the previous situation, but I see room for more. Not only does this trend challenge cynicism about the CSR potential of Corporate India, it could also be a sign of greater things to come. For many Corporates, the first year was all about understanding and implementing the new CSR law with the formation of policy and board committees to enable teams and systems, along with the selection of the activities to be undertaken. The Indian CSR law suggests and outlines a number of areas for CSR programs and we should adhere to the “rule of ten” to further this potential.
Challenges to the New CSR Law
Previously, a number of companies ran schools and hospitals for their employees. These initiatives do not officially qualify as CSR activities. The new law may compel some businesses to make a choice between such initiatives and compliant CSR activities. I wonder if this would translate to a rollback of some employee care programs.
It might amuse you that less than 20 percent of companies surveyed uploaded their CSR policies on their websites. While this can be viewed as an opportunity to drive conversations about brands through social engagement, it also points to the broader questions around CSR communication for those complying with the new regulations. I feel Global MNCs present in India could be given more flexibility around this, if not a full waiver.
Global MNCs tend to have existing CSR frameworks, and are bound to face some challenges when it comes to meeting the compliance requirements of India’s CSR law. Small and Medium Enterprises may also find it difficult to manage compliance, with limited internal resources and staff.
Corporate + Government = Collective Impact
The new government at the Centre has called for greater social engagement from Corporates. We have started seeing a surge in Corporates looking to collaborate with the government towards creating workable solutions. Corporate support for Clean Ganga and Swachh Bharat Abhiyan has made an impression. There is a growing belief that large scale change in India can be achieved through corporations supplementing the efforts of the government, as opposed to trying to substitute the government’s efforts. India’s fight against polio was one such exemplary success story where government, non-governmental, international and private stakeholders worked together towards a singular outcome. In 2014, the WHO finally declared India a polio-free nation.
Collaborative efforts thrive in a culture of innovation. Innovation can bridge the gap in capabilities and enable the creation of workable solutions for complex social questions. Of the many possibilities that this throws up, it is technology which will be a critical and beneficial disruptor. As a global hub for IT and related innovation, India is no stranger to the potential. There is a window of opportunity here (with a great view, if I might add!) for companies to deploy expertise and technologies to build outcome-based CSR models that truly impact their communities and help the government achieve common goals. For instance, the Smart Cities project is one such area that is ripe for exploring the full potential of CSR. Collaborative innovation through meaningful CSR partnerships can help shape the future of Digital India and bring the ambitious vision of Smart Cities to life.
Towards Better NGO – Corporate Partnerships
As it happens, there are 2 million NGOs operating in India, but only 10 percent have filed financial details with the government. How does one choose the right partner from such a number? There are many who believe that CSR has become a business by itself: CSR in India has already grown to an estimated spend area of $2 billion. Can we expect improvements to transparency through certifications, NGO ratings, etc.? How about an independent NGO evaluator along the lines of the U.S.-based Charity Navigator to help Corporates choose wisely? Or is self regulation the answer? These are important questions for the future of corporate-NGO partnerships in India.
I see considerable room for improvement to the nature and scope of partnerships between Corporates and NGOS in India. First, we will need to identify the roadblocks and arrive at the best possible way forward to create a collective impact. One of the solutions suggested to me was the creation of associations like CII and FICCI for non-profits. I think this could be highly useful.
We must also address the huge shortage of trained manpower in the social sector. A few institutions like IICA, Tata Institute of Social Sciences, IIM have started short-term programs on CSR capabilities. While these may marginally increase the availability of trained manpower for social initiatives, impactful CSR partnerships will demand more. On the other hand, Corporates can also supplement the training and skill development of the NGO workforce.
Nurturing Corporate Citizenship
The estimated $2 billion CSR spend in India, coupled with Individual Social Responsibility (ISR), will have a ripple effect. Youth are embracing CSR like never before. Globally, more than 3.5 million LinkedIn members have indicated on their profiles that they would serve on a non-profit board or volunteer their skills. This is great news, given that employees are the backbone of successful CSR. Of course, investment and latitude from the company are important; however, the success of CSR programs relies hugely on the committed volunteerism of employees. That’s why it is important to engage employees in such a way that they adopt a mantra of ISR. This way, employees invest their time and skills in community service actions that are supported and endorsed by all stakeholders.
From the ALS Ice Bucket Challenge to Giving Tuesday, we have begun to see more creativity in social engagement and awareness towards ISR. Corporates are looking to create sustainable ISR initiatives through their Corporate Citizens programs. I believe Corporates can encourage employees to become effective brand champions by creatively and effectively communicating Corporate Social Responsivity. This could give employees more reasons for pride and satisfaction in their organizations.
Business Value and Returns on Social Investment
As with everything else business-related, CSR also needs to have measurable outcomes. Does outcome equal impact? Most definitely not. Just as a business measures its success by its profits, mission-driven CSR programs need to be able to measure their success through their impact. Impact can only truly be measured when the CSR program is assigned well-defined milestones and specific goals. Corporates need to identify and outline the parameters or yardsticks to measure the impact of the money spent on the CSR initiative. This needs to be done in the early stages of the project.
This critical defining of milestones and quantitative/qualitative parameters for CSR success goes a long way towards making the jump from merely ‘feel good’ window dressing to actually facilitating good governance. At the end of the day, that’s what it’s all about: the impact. The BSE has proposed a CSR Index to help listed companies tighten the process and measure their CSR success. This will help measure impact, which in turn will be most significant for determining the Return on Social Investment. Corporates will also need to factor in a Satisfaction Index based on End Beneficiary feedback.
But what about the bottom line: profit?
While many believe that profit is a bad word when it comes to CSR activities, there are a number of success stories that prove otherwise. CSR activities make for great conversations to enrich brand storytelling. It can also do wonders for retention, and give aspiring recruits a view of the core values of the company. Zensar recorded a decrease in attrition from 11.4 percent in the previous fiscal year to just 8 percent among employees engaged in CSR.
Thanks to the growing popularity of sustainability and ethics in the corporate space, a sound CSR strategy does not just do good, it looks good too. The future is brighter for the integration of these two worlds: Corporates and communities – and there is every reason to believe that great things will come of it. Communities profit from CSR, and corporations profit from doing the right thing. That’s why CSR makes such good business sense – and that is the new bottom line.
(About the Author: Abhishek Ranjan is HEAD – CSR, Brillio Technologies)
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Disclaimer: The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of India CSR.