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.
The Mandate
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.
And in a bid to rapidly improve their workforce’s skill base, HCL’s Teach At Office program provides support staff with a range of workshops on basic etiquette, financial management, and health and hygiene. They are also taught basic computer skills and are trained in conversational English. This not only helps them become more dedicated employees, but empowers a section of society that is increasingly neglected in a tech-dominated world.
IBM, with the help of its Reinventing Education Program has integrated Information and Communication Technology and pedagogy tools in 50 government schools to make learning fun and simple. Aside from that, with the Transformed Classroom model, they have managed to empower over 600 teachers and given over 7000 students in 90 schools a better standard of learning.
Every company knows how hard it is to gain customers and retain them for a long time. CSR can help businesses reel in customers with relative ease, and keep them engaged for the long run. According to studies done in 2012 by Cone Communications and the results of the 2012 Corporate Social Return Trend Tracker, 86% of respondents were more likely to trust companies that reported the results of their CSR efforts. In addition, 82% of those surveyed were also more likely to purchase products or services from companies that demonstrated their CSR results over those that didn’t.
People want to support businesses that do good for the community, because if they help the organisation, they indirectly help themselves. Just to reiterate how important customer engagement is, 40% of those surveyed would not even consider purchasing from companies which didn’t publish their CSR results. If an organisation does careful market research, and involves itself—transparently— in a socially relevant cause, it could lead to a massive increase in its consumer base.
The beauty of CSR lies in the countless ways in which it can be implemented. You don’t always have to look for something on the outside to invest in. Allocating capital towards little things like recycling of waste or alternative sources of energy can save you a lot more money than you expect.
Smart businesses not only recycle waste but also try & use the waste to incorporate it in its business model. And if this happens in a manufacturing process it hugely impacts the bottom- line.
Energy costs are extremely high these days and any organisation can reduce this expenditure by implementing energy efficiency programs in their businesses. Not only do you conserve precious energy resources, you’re setting up a system that leads to huge savings at the end of the year.
A well-designed CSR strategy can be perfect bait for big investors. Being involved with a social cause outside your business domain makes you competitive and reduces the risk of sudden damage to your reputation, and your sales. Most investors will see this and readily invest in your company.
Adeline Hinderer, Trade Counselor for the European Union to the US, says, “Companies are actively demonstrating to investors that corporate social responsibility makes good business sense, and the firms are already seeing the benefits it can bring them in terms of risk management and attracting investment.” Additionally, investors are more likely to give money to businesses which are involved in supporting a cause they also support.
