Corporate Social Responsibility in India – An eyewash or an eye opener?

 

CSR or Corporate Social Responsibility is an often used, but misused term, in corporate parlance. Almost everyone in the corporate world knows of the term. But what does it entail and how does an organisation go about it?

Scratch below the surface, and more often than not, most people would only know the full form of the abbreviation and little else. Does their organisation practise CSR? What are the various CSR initiatives the organisation undertakes? Is it the collective responsibility of the organisation as a whole or just restricted to the CSR Committees? The questions are many, but the answers are usually very few.

Why? Is it because Indian organisations practise CSR simply because it’s a mandatory requirement? Or is it because they truly understand the spirit of CSR and are desirous of giving back a small portion of their profits to the society, they got everything from? Let’s look for some answers…

 

What is CSR?

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.

To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment instead of contributing negatively to them.

 

CSR in India

On April 1, 2014, India became the first country to mandate rules around CSR. These rules were incorporated in the Companies Act to ensure strict compliance and cover a large population. The rules under Section 135 of Companies Act, 2013 made it mandatory for companies with certain net worth, turnover, or profitability during the immediately preceding financial years, to spend two percent of their average net profit for the past three years on CSR. Initially, till April of 2021, companies that were scoped in based on either net worth, turnover, or profitability, were required to spend the amounts but were only required to disclose the unspent amount and not make any provisions. However, post-April 2021, the Act requires the companies to make provisions for the unspent amount and any unspent amount is required to be transferred to specified funds after a particular period.

 

Advantages of CSR

·         Companies make a concerted effort to operate in ways that enhance rather than degrade society and the environment.

·         CSR helps both society and the brand image of companies.

·         Corporate responsibility programs are a great way to raise morale in the workplace.

 

 

CSR in Practise

While the law has been applied and made mandatory, the effectiveness of its application is to be seen. There are many corporations that are handling CSR activities through their foundations while some other companies are setting up internal teams to supervise projects carried out by their implementing partners. Many companies have also grabbed the easier solutions by investing in the government’s priorities or investing money into the Prime Minister’s National Relief Fund.

But how many organisations are truly practicing CSR not just in letter, but in spirit? In India, the majority of corporates view CSR more as a mandatory requirement they are obliged to implement, rather than a conscious social and environmental responsibility towards the people and the planet, that gives them everything they need to run their business profitably. Their CSR is merely and eyewash, something they do to ensure they are in line with the law.

Having said that, there are stellar examples of large corporates in India that take their corporate social responsibility with utmost seriousness and passionately give back to the people and planet. They undertake meaningful projects that positively impact society and the environment.  And these are not just one-off activities, but concentrated, sustainable efforts that have long term positive impact. Their social responsibility and consciousness are truly an eye opener in today’s corporate world.

 

What differentiates the Doers from the Preachers?

Organisations that have discovered and aligned with their ‘Purpose’ are the ones who usually walk the talk. Purpose is a unifying expression of the commercial and social objectives a business intends to achieve for its stakeholders profitably. Most organisations believe their purpose is to make profit. But profit is just a bye-product of their business. Every organization exists for a higher purpose and once they discover and align themselves with their higher purpose, everything including profits, people and planet fall into place. Companies that understand their higher purpose, also understand, and implement CSR in a meaningful manner, aligned with their purpose.

 

Does an Organization benefit from CSR?

As important as CSR is for the community, it is equally valuable for a company. CSR activities can help forge a stronger bond between employees and corporations, boost morale, and aid both employees and employers in feeling more connected to the world around them.

Not just this, companies with purpose are the ones that grow and thrive sustainably. Companies that adopt CSR programs have often grown their business to the point where they can comfortably give back to society. The Stengel 50 Report, which conducted an empirical study involving 50,000 companies, concluded that ‘Purpose’ driven companies saw 400% more returns on the stock market than the S&P 500.

In Conclusion

It is to the advantage of Indian corporates that they realise the long-term sustainable growth they can achieve through being socially and environmentally conscious and implementing these responsibilities in a meaningful manner. The first step is to discover and align to their higher purpose, and then act upon this purpose. Rather than implement CSR as an eyewash, they must open their eyes to its larger, long term benefits and reap dividends from their CSR initiatives.