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It has been over a year since corporate social responsibility (CSR) became a legislative mandate for companies. The voluminous 294-page act necessitates companies to set up a separate board committee and allocate 2 per cent of net profits in the last three years to CSR activities. This sounds simple and empirical, but leaves plenty of room for ambiguity. While NGOs are eagerly waiting for the floodgates to open, corporates are wondering where to start.
The act raises questions regarding the very role of CSR in the context of a company's business functions and social responsibilities. CSR in its proper context is beyond giving. If companies look beyond cheque book charity and adopt initiatives that are in natural alignment, by minimising operational risks and in line with their business expertise, they can establish a strongly differentiated offering for all stakeholders.
What companies should focus on, in order to be responsible, is to start CSR from the inside. A responsible company is one which operates its business with care on a day-to-day basis -be it consumers of its products or services, employees, suppliers, the environment through the energy or water it uses and the waste it creates, shareholders who expect a return, the government through timely payment of taxes, and a myriad other stakeholders it impacts depending on the scale and scope of the business. The company can, for example, encourage better work-life balance amongst its employees, move towards zero waste status, zero corruption policies and so on.
This approach is far from the knee-jerk philanthropy that we often see such as building homes for the flood-affected, or protecting the environment with short term tree planting campaigns. Rather, it's about conducting business in a way that minimises the negative impact on society and the environment of one's daily business operations, whilst maximising the positive impacts. It is about being proactive, not reactive.
The reality is that CSR should be approached holistically and it must be integrated with the core business strategy for addressing social, environmental and economic impacts of businesses. It must address the well-being of all stakeholders and it must be remembered that philanthropic activities are only one small part of CSR, which otherwise constitutes a much larger set of activities entailing strategic business sustainability and responsibility.
An example of how this has been done successfully is ITC, which has managed to embed responsibility into its business philosophy. It has been able to generate sustainable livelihood opportunities for around six million people through its community initiatives and has been carbon positive for nine successive years, water positive for 12 consecutive years and solid waste recycling positive for the last seven years.* Many may say that ITC undertakes more CSR initiatives than its due share because of the business it is in, but that still does not take away from the work being done by the company.
Mahindra & Mahindra embeds sustainability in the culture of the group. Their philosophy, 'Rise for Good' clubs governance, community, environment and people through a holistic approach. They have even built some businesses like Mahindra Rural Housing Finance and invested in electric cars to support the concept.
Body Shop says it is an ethical cosmetics company that pioneered natural and ethically produced beauty products. It shunned animal testing which was an industry standard at the time. The company actively advocated self-esteem amongst women (even shunning the overly thin female models), supports fair trade, defends human rights and is sensitive to the protection of the planet throughout its global operations.
The shift from sporadic social service to strategic CSR is important for companies not just to convince their stakeholders about their commitment, but to genuinely do business as a responsible corporate citizen for their own sustainability.
* http://goo.gl/sgCm8X
Lulu Raghavan
Managing director, Landor India
Ruchi Gunewardene
Managing director, Brand Finance Lanka
Managing director, Landor India
Ruchi Gunewardene
Managing director, Brand Finance Lanka
