Integrating two worlds: Global Business with Local Communities

India’s large population facing socio-economic challenges provide an opportunity for social innovation to MNCs. Every local challenge is a global challenge in the light of the SDGs.

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India CSR Cartoon Award 2nd Prize Winning Cartoon by Raghupati, Banglore. Copy Right: Cartoon Watch & India CSR Network.

Corporate social responsibility (CSR) observers weigh up how CSR in India is different from the rest of the world.

By Rusen Kumar & Abhishek Ranjan

A majority of Fortune 500 companies have a base in India and according to a Bain analysis report, between 1991 and 2012, the number of MNCs in India more than quadrupled. And over 20 years, total MNC revenue grew at a compound annual rate of 18% — faster than the overall economy.

Isn’t it a great growth story? But when we talk about the triple bottom line, we also need to understand how these MNCs have done social good for the communities. William Clay Ford [Ford Motor Company] said that creating a strong business and building a better world are not conflicting goals – they are both essential ingredients for long-term success.

The important factor is how global companies are solving local community challenges and here it comes to our mind how CSR in India is different from the rest of the world. We strongly believe that the future of India is linked with pace of social development and the Sustainable Development Goals (SDGs). Population facing socio-economic challenges for a long time provide an opportunity for social innovation for multinationals working in India.

Every local challenge is a global challenge in the light of the SDGs. The age of technology has broken the physical boundaries, i.e. nation, region and time zones. Everyone is a global citizen in this age of globalisation and liberalisation. Solving global human and ecological challenges are shared responsibilities of people and institutions.

CSR is seen as voluntary internationally; India is one of the few countries that made it mandatory. Corporate America spends over 5% of its pretax profit on charity. It might surprise you to learn that this is not under any compulsion from the US 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% spend of pre-tax profit on suggested CSR activities.

Global MNCs have an existing CSR framework, and they had initial hiccups when it comes to meeting the compliance requirements of India’s CSR law. Global companies operating in India have played an integral role in solving the socio-economic problems of the nation. MNCs are actively participating in various development initiative of Govt. of India, and they are positive to take it forward for a larger impact. MNCs have heavily invested here, see India as a long-term strategic partner and they are also committed to solving community challenges where they work and operate.

These quotes from some MNC chief executives reflect this:

  • Canon India’s President and CEO, Kazutada Kobayashi, once said on India’s CSR Mandate Move: I think the philosophy is good and matches our corporate philosophy of kyosei (living and working together for the common good).
  • Canon has a flagship CSR initiative, Adopt a Village and the company has adopted four Indian villages for an overall development of the people and community infrastructure.
  • H.C. Hong, President & CEO, Samsung Southwest Asia, said: Samsung is proud to help impart technical skills to youth of this country. We are totally committed to the government’s Skill India mission. Our collaboration with the ministry of MSME [Micro Small and Medium Enterprises] has enabled us to tap the potential of youth and make them job ready with the help of the Samsung Technical School initiative.
  • Rakesh Srivastava, Director – Sales & Marketing, Hyundai Motor India, noted: Hyundai is a responsible and caring organisation. Happy Move- Save our Heritage is a unique initiative in association with the Archaeological Survey of India. We are thrilled to mobilise an enthusiastic group of Happy Move volunteers from different backgrounds and cultures to jointly work and make this a mass movement towards a common goal of preserving India’s rich cultural heritage; while also raising the awareness level of school students as well as contributing to the welfare and development of school facilities.
  • Venkatesh Valluri, Chairman, Ingersoll Rand India, said: For direct interventional projects, we plan to focus on a PPP model where we will allocate resources in education, sustainability, healthcare-sanitation, skilldevelopment and livelihoods as part of CSR spend mandated by the Companies Act, 2013.
  • Richard Northcote, Chief Sustainability Officer, Covestro AG, said: Covestro aligns its CSR activitiesin order to contribute to improving the lives of those less fortunate in the societies in which we operate. We believe these centres will benefit the youth of this area and contribute significantly to better enable these schools to build our children’s future, enabling them to make the world a brighter place tomorrow.
  • Dr Akshay Bellare, Vice-President of Honeywell Technology Solutions India, said: I’m delighted to meet the brilliant design students at the Aerospace Design Challenge 2017. They are India’s future for building human-centered software industrial solutions for our country.
  • Global FMCG giant Unilever plans to spend €100 million by 2019 on sanitation programmes in India while it looks to become a key partner in Prime Minister Narendra Modi’s Clean India campaign.

These testimonies clearly indicate the seriousness with which global companies are meeting local community needs. With changing consumer preferences, corporations have to meet the expectation of new-age employees/customers – so-called Millennials – and increasing investors’ concerns and demands.

The invisible stakeholders and social license to operate is making it more difficult and that is why global corporations are increasingly recognising the importance of sound CSR practices that enable meaningful and impactful programs for the local communities that also reflect business value.

Benchmark for Corporate Performance

Corporate Social Responsibility and Sustainability reporting have become a key corporate performance parameter in India. The organisations are required to evolve the CSR model in the exponentially dynamic corporate world to ensure maximum productivity by optimal utilisation of resources.

As CSR is becoming increasingly important, so is a globally acceptable performance benchmark by the corporate and financial entities across the world. The Company Act, 2013 is a significant step in the direction of CSR. With the growing connect between big business and corporate social responsibility, the Bombay Stock Exchange (BSE) has set up a CSR Index. As per a recent BSE analysis, there were 1,294 companies listed on its exchange that were required to spend nearly Rs 7,800 crores ($1.15bn) on CSR activities in FY’16.

SDGs and role of Corporate + Government = Collective Impact

Governments and Corporations tend to align and measure social impact based on the United Nations’ 17 Sustainable Development Goals, which range from no poverty and zero hunger to peace, justice and strong institutions. 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.

Innovation and Digital India will lead to significant impact on communities

Looking at the future, digital stands to be our great enabler, our most potent driver of change as we move forward, culturally, socially, politically, and economically. 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 we 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.

Integrate CSR with Brand Strategy

Sound CSR practices are also about making a sound, resonating, driving dialogue and conversations to deliver returns – in terms of social progress, the bottom line (profit) and brand perception. That is why we see reputation returns as critical to sustainable and effective CSR. CSR is actively contributing to brand loyalty. Never before has CSR played such a vital role in helping customers form brand perceptions. At a time when battered investors, customers, and employees are wondering whom they can trust, the ability of a familiar brand to deliver proven value flows straight to the bottom line.

In India, corporations have started debating on Strategic CSR models and how it can become a sustainable and advantageous synergy soon. Organisations have understood that sustainability is profitable, but they need to go beyond the Triple Bottom Line and make it Cultural. The mutually beneficial relationship between global corporations and the community will begin to throw up promising outcomes if it is aligned with changing local needs. Remember, the India CSR Act is just a hardware. To make it successful, it needs the software of Vision, Values, Culture and Engagement.

(The article originally appeared in India Investment Journal, published by India Inc

India Investment Journal is India’s foremost magazine for foreign investors. It is published by India Inc. in London and circulated globally. India Inc. also publishes India Global Business magazine, focussed on India’s outbound investments and policy analysis. 

About the Authors: 

Disclaimer: The views and opinions expressed in the article are solely of the authors in personal capacity and do not in any way represent views of any institution, entity or organisation that the author may have been associated with.

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