Strategic Corporate Social Responsibility:
Challenging Sustainable actions in India


By

Ms Nidhi Khurana
Asst. Professor
Asia Pacific Institute of Information Technology
Panipat
 


ABSTRACT

India is involved in Corporate Social Responsibility from past 20 years and it was ranked fourth in the list, according to social enterprise CSR Asia's Asian Sustainability Ranking (ASR), released in October 2009. But the initiatives that have been taken so far are not sustainably and responsibly focused towards balanced growth in India. Today CSR has become imperative management principle and more or less, nearly 90% of Companies are involved in CSR initiatives but benefit is not passing onto to the ground level where it is required in absolute terms. Looking at current economic condition of India, there is an immediate need of strategic CSR delivering value proposition to the masses. The paper focuses on the reasons to analyze the strategic gap between CSR implementation and CSR effectiveness and to identify the focused sectors where sustainable actions of strategic CSR are required to create synergies in India. The paper urges the Corporate not to look CSR as a non profit activity in fact in the long run, expenditure in CSR can help increase profitability.

Key words: Strategic CSR, Sustainable action, CSR effectiveness

INTRODUCTION

Today CSR is not discretionary and taking a shape of management principle as strategic imperative which is gradually spreading across all companies in India regardless of sector or size.  Corporate social responsibility (CSR) is an umbrella term for corporate responsibility, corporate citizenship, responsible business and corporate social opportunity whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment. This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.

In the year 2010, there have been so many talks, write ups, symposiums, conferences and research work published about CSR, Business ethics, societal marketing, cause initiative, conservation, go green…….and sustainability. This all has set the stage of CSR progress in the responsibility and sustainability domain in India.

Looking at the current global financial crisis and economic condition of India, CSR must be in the interest of sustained long term growth taking a strategic shape to deliver social change. Economists Michael Porter and Mark Kramer make a distinction between "responsive" and "strategic" CSR. The first is based on "good citizenship" and trying to mitigate harm from value-chain activities. These actions described above are almost sine qua non conditions of CSR, and thus another step is needed. Hence the second type of CSR, "strategic," entails gradually transforming value-chain activities to benefit society while reinforcing strategy. If the company invests in social aspects that strengthen company competitiveness, it will create shared value. A symbiotic relationship develops: the success of the company and the success of the community become mutually reinforced. The present crisis requires strategic CSR to tackle the emerging need that present economic downturn is likely to bring. Here is a time when company needs to go an extra mile to tie strategic CSR programme with its core competencies, which means, CSR activities need to help those in need the most to rebuild their lives and trust in Business.

Sustainability is not limited to a "green" product line, good intentions or a major marketing campaign. Sustainable development has to be evaluated from different perspectives to ensure that it is fulfilling the existing needs without compromising future generations' chances of fulfilling their own needs. Companies that work it into their business strategies will have a higher chance of being sustainable. This high correlation between investment potential and responsibility has led to the appearance of certain projects that include sustainability as an investment benchmark, such as the Dow Jones Sustainability Index (DJSI) or the Carbon Disclosure Project. Though, there have been several policy maker initiatives, evidences of a paradigm shift from charity to a long-term strategy and corporate reports on providing direction to CSR in India currently but still there is a need to have strategic role on CSR, an attitudinal change in people about the concept by having more coherent and ethnically driven discourses on CSR,' wrote Swati Piramal, president, ASSOCHAM, in CSR report 2010. Despite major progress in CSR, there is still a long road ahead in terms of linking socially responsible projects to the organization's strategy.

Undoubtedly several NGOs, government organizations and Public-private partnership are the emerging communities taking voluntary initiatives for CSR effectiveness in India but this is not possible without companies move towards strategic CSR. Businesses are known as the shaper of society and time has come when businesses can prove it by sustainable actions through strategic CSR. This paves the way where strategic CSR can work as an element of transformation, encompassing the complexity and tensions of the different and intersecting dimensions of sectors, levels, and structure that provide the setting within which CSR is negotiated.

Strategic CSR through sustainable actions provides real time customization rather than without vision and spontaneous ''good deeds" of the companies. CSR initiatives are merely quantitative instead of qualitative. So, this paper provides an insight on strategic focus of CSR Initiatives and effectiveness of CSR towards sustainable actions in India.

OBJECTIVES

The Present paper is basically concerned with the following objectives:

1) To understand the current trend of CSR initiatives in India,
2) To understand and analyze the need of strategic CSR embracing sustainability in India,
3) To examine the strategic gap in under tapped sectors of CSR that can lead to sustainable actions in Indian context.

METHODOLOGY

Looking into requirements of the objectives of the study the research design employed for the study is of Descriptive type, this research design was adopted to have greater accuracy and in depth analysis of the research study. Available secondary data was extensively used for the study. Different news articles, Books and Web were used which were enumerated and recorded.

LITERATURE REVIEW

Different researchers at different point of time have explained the changing paradigm of CSR in the developing economies like India. World Business Council for Sustainable Development defines Corporate Social Responsibility (CSR) as "The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large."

Corporate social responsibility has become a global agenda and this has been proved by benefits to company, community, general public and environment.(Nilesh R. Berad, 2011) CSR is not new in India and various companies such as Tata, Aditya Birla Group, Reliance Industries, Indian Oil Corporation have been involved in serving the community consistently. However with time, the scenario of CSR has changed from being philanthropic to being socially responsible to multi stake holders. The period of 1960s and 1970s saw an emergence of CSR activities being inbuilt in corporate philanthropy. (Mohan, 2001)

In a survey conducted by CSM (2001), the various dimensions of CSR valued by companies are national wealth, employment, environment and social programmes including health and literacy. A key finding of the survey conducted in June 2008, aimed at understanding of the role of corporations in CSR, carried out by TNS India ( a research organization) and the Times Foundation, revealed that over 90 per cent of all major Indian organizations surveyed were involved in CSR activities. Besides the public sector, it was the private sector companies that played dominant role in CSR activities. A study on the CSR activities of 300 corporate houses, conducted by an industry body in June 2009, revealed that Corporate India has spread its CSR activities across 20 states and Union territories, the study also identified 26 different themes for their CSR initiatives. Of these 26 schemes, community welfare tops the list.

India has been named among the top ten Asian countries paying increasing importance towards corporate social responsibility (CSR) disclosure norms. India was ranked fourth in the list, according to social enterprise CSR Asia's Asian Sustainability Ranking (ASR), released in October 2009. 'Sustainability in Asia ESG reporting uncovered' (September 2010) is based on four parameters viz. General, Environment, Social and Governance. In its study based on 56 companies in India, it observed that India is ranked second in country ranking in Asia. It is observed that reporting is strongly followed by companies and they seek international development standards. It could be attributed to the Indian government compelling the public sector companies to provide for community investment and other environmental, social and governance liabilities. Another study conducted by Economic Times revealed that donations provided by listed companies grew by 8 per cent during the financial year 2008-2009 and that 760 companies donated US$ 170 million in the same year, up from US$ 156 million in the year-ago period.

The Prime Minister's "Social Charter" called for inclusive growth & affirmative action from the corporate sector. In December 2009 voluntary CSR guidelines were issued by the Ministry of Corporate Affairs . Subsequently the Indian public sector was issued a set of policy guidelines by the Department of Public Enterprises which also linked to CSR and the Millennium Development Goals. One significant guideline in the public sector policy is that companies need to put at least 5 % of their Profit after Tax (PAT) into CSR.  Many companies set up their own Foundations, often run by an employee of the company, and work with civil society was minimal coming within the realm of "project implementation" than partnership. Management focused education is gradually seeing the writing on the wall and many institutions which target 'future managers' at a young age are introducing compulsory credits for CSR.

In the broader perspective, corporate responsibility was rarely practiced by senior management teams in a strategic way across sectors. Companies neither have a robust CSR programme nor were they known for responsible practices. India is facing poverty, lack of agricultural infrastructure, water crisis, income disparities, lack of access to basic necessities to people, wide variation between education and occupation. Presently, less than 50 Indian companies report on the Global Reporting Initiative (GRI). The 27 case studies included by KPMG in "First International summit on Corporate Social Responsibility 2008" are indicative of the CSR Preface being undertaken in India, and are by no means extensive. We are convinced that there is far-reaching CSR work being carried out by Corporate India but only few of these could be covered as illustrative cases.

Throwing light on the important fact is this that till now, very less CSR initiatives has taken place in the above raised concerns. Therefore, it requires calls for action from all stakeholders including the corporate sector which can respond with not just financial resources but also with strategies, tools & management techniques that can address development priorities in the country. With must of the western world now in deep recession, India can emerge as a global market place only through progressively work for sustainable actions.

The above verdicts of different researchers at different points of time entail that no doubt they have underscore the role of CSR for benefitting community as a whole but they have paid little attention on strategic aspect of CSR initiatives for sustainable actions in India, with this backdrop in mind present study has designed.

THE MODERN CSR – THE STRATEGIST

In order to understand strategic positioning of a company for CSR initiatives, it is important to understand its stage. When it comes to developing a sense of corporate responsibility, organizations typically go through five stages as they move along the learning curve.

STAGE

WHAT ORGANIZATIONS DO?

WHY THEY DO IT?

DEFENSIVE

Deny practices of outcome and responsibility

To defend against attacks to their reputation that in the short term could affect sales, recruitment, productivity, and the brand

COMPLIANT

Adopt a policy-based
Compliance approach
as a cost of doing
business

To mitigate the erosion of economic value in the medium term because of ongoing reputation and litigation risks

MANAGERIAL

Embed the societal issue in their core management processes

To mitigate the erosion of economic value in the medium term and to achieve long term gains by integrating responsible  business practices into their daily operations

STRATEGIC

Integrate the societal issue into their core business strategies

To enhance economic value in the long term and to gain first-mover advantage by aligning strategy and process innovations with the societal issue

CIVIL

Promote broad industry participation in Corporate responsibility

To enhance long-term economic value by overcoming any first mover disadvantages and to realize gains through collective action


(Sources: The path to Corporate Responsibility, Harvard Business review, 2004)

In the above diagram, we can see that corporations in India is at managerial stage and there is an immediate need to shift the corporations to strategic and thereafter civil stage.

In famous article 'Strategy and Society - the link between competitive advantage and corporate social responsibility,' Michael E Porter and Mark R Kramer (Harvard Business Review, December 2006) propose a fundamentally new way to look at the relationship between society and business. According to them, corporate growth and social welfare should not be treated as a zero sum game. Perceiving social responsibility as an opportunity, individual companies should identify social consequences of their actions and leverage them to the benefit of society and thus strengthen the competitive context.

This concept of CSR focuses more directly on day to day business practices which will evolve into long term and sustainable growth. By definition, business practices that adhere to the principles of corporate responsibility and sustainable development must take the long and multidimensional view of their outcomes. That is, they must manage for both private returns and societal returns, and do so with the view that the company will remain a growing concern for the indefinite future. This entails to a commitment to inter-generational responsibility, equitable development and environmental stewardship, the key building blocks of corporate responsibility as well as sustainability. By integrating socially responsible principles into their corporate strategies, companies have been able to make impressive financial gains while improving the communities in which they operate.

IMPERATIVE FUTURE TRENDS – CHALLENGING SUSTAINABLE ACTIONS

According to Chad Holliday (2001, p.134), chairman and CEO of DuPont: sustainable growth should be viewed not as a program for stepped-up environmental performance, but as a comprehensive way of doing business; one that delivers tremendous economic value and opens up a vast array of new opportunities. Capitalizing on these benefits may require relentless determination and tenacity, but ultimately companies will find that they can generate substantial business value through virtue sustainability, while both enhancing the quality of life throughout the world and protecting the environment. By of being self-sustainable, strategic CSR can become an integral and invaluable part of business strategy and operations, rather than merely off-the-shelf or spontaneous ''good deeds.'' Developing prudent CSR is thus much less a matter of organizational imitation than real-time customization.

With the shifting of the corporate social responsibility paradigm to a stakeholder centric approach, practices at the ground level have also undergone a radical transformation. In every aspect of corporate social responsibility measures the last decade has seen corporations innovating to increase efficiency, effectiveness and accountability. The focus has been on initiatives that are people-centric with active community participation at all levels. Further, the corporations themselves have moved away from the charitable initiatives like giving financial grants or sponsorships to providing products and services in a manner that would make a real difference in the target communities.

The first perceptible change has been the introduction of a host of innovative programs and schemes in several areas like education, healthcare, rural development, environment protection, protection of artistic and cultural heritage and disaster management that are customized to meet the specific needs of the target group and corporations devote not only financial resources but expertise, manpower, products and services for the successful implementation of these schemes.

IMPLEMENTING CSR - THE REVOLUTION FOR SUSTAINABLE ACTIONS

In order to leverage its CSR and sustainability strategy, an organization needs the advanced capabilities of organizational learning and sustainable innovation which are critical for building sustainable business models that will lead to future sustained competitive advantage. CSR initiatives are executed by corporate in partnership with Non-governmental organizations (NGOs) who are well versed in working with the local communities and are experts in tackling specific social problems. From responsive activities to sustainable initiatives, corporate have clearly exhibited their ability to make a significant difference in the society and improve the overall quality of life. In the current social situation in India, change is required at an enormous scale. Corporate have the expertise, strategic thinking, manpower and money to facilitate extensive social change.

Lupin India Ltd , India's third largest manufacturer of pharmaceuticals has started a project for providing sustainable development in 154 villages across Rajasthan. Cipla, another Indian pharma major has found a novel approach to sell a cocktail of three anti-HIV drugs, Stavudine, Lamivudine and Nevirapine, to the Nobel Prize-winning voluntary agency Medicine Sans Frontieres (MSF) at a rate of $350, and at $600 per patient per year to other NGOs over the world. Tara International produced Tara Tiny which is zero emission electric car and cost only Rs 99000! Tara tiny is projected to be world's least expensive car, which is less than Tata Nano. Ranbaxy, major pharmaceutical firm operates seven mobile healthcare vans and two urban welfare centers that reach over a lakh people in various parts of northern and central India as part of its corporate social responsibility initiative. Tata Consultancy Services (TCS) has set up a fully-equipped computer training laboratory for children from the Society for the Welfare of the Physically Handicapped and Research Centre in Pune. Bharat Electronics Ltd built cyclone proof houses for the victims of the super cyclone in with the help of the victims themselves so that the houses are built according to their needs.

Sudha Murtjy of the Infosys Foundation, the social initiative arm of the IT major Infosys, explains the great efforts by corporation to ensure that the projects they are involved with are actually genuine and serve a purpose. Several organizations like Gas Authority of India Ltd. (GAIL) have introduced benchmarking exercises for their CSR activities and industry bodies like Confederation of Indian Industries and FICCI have introduced cross-sectoral programs, for the first time, in CSR related areas.

The above mentioned companies strategic CSR initiatives has proved that strategic CSR is focusing on the emerging social and environmental needs to attain sustainable actions and business outcomes, rather than diluting organizational resources. Though, the percentage of strategic initiative is very less in India, companies need to focus on CSR effectiveness with their limited resources and capabilities. There is now requirement of greater evaluation and stricter accountability and transparency norms for social initiatives along the lines of norm set for mainstream projects and ventures. Prioritizing in this way strategic CSR is the only way for real time customization providing sustainable actions such as making Business case for CSR, linking it to core organizational competencies and providing quality of life to the masses while generating profits.

Major concerns in India today include leveraging diversity to drive performance, realizing responsible business practices in SME, reporting and issues management, benefitting from  socially responsible investment funds, how to make business NGO partnership work, developing effective business tool to develop Biodiversity supportive ecosystem services, understanding product based lifecycle assessment and foot printing, adapting to climatic change, unlocking entrepreneurial potential, urgency of strategic community investment, identifying ways to benefit people at the bottom of the pyramid through businesses, sustainable supply chain, food securities, better governance and corruption. CSR can serve as a tool for handling basic amenity, clean drinking water, sanitation, health care systems, social security systems, level of corruption, Black money and scams require the CSR intervention.

The industry as a whole must utilize its power to innovate the model of CSR. This has been limited to education, sports and health care but CSR intervention is required in many other sectors as discuss above. It is not like that help is not coming but there is a big gap in the demand and supply and a gap which corporate needs to fill in.

RECOMMENDATIONS

CSR in SME: SME implement CSR practices better than the large companies due to shorter decision making process, closely linked to the stakeholders and can contribute to the GDP better than before. CSR can make competitive advantage and better market position for SME.

Internalizing CSR as Initiative of HRM:   It is evident that many companies are involved in CSR but benefit can not be passed till the time CSR initiatives are not aligned to value chain, value network and benchmarking. To do that social responsibility needs to be embedded in an organization's culture to bring change in actions and attitudes in which Human Resource can play a significant role.

CSR in Rural Sector: Companies can not achieve sustainability even though companies are taking serious efforts for the sustained development without passing the benefit of CSR initiatives to rural India. Moreover, people in rural are deprived of minimum needs. Hence CSR major focus should be on providing quality of life to the people in the rural sector and one such example can be by developing agri- SEZs in India.

CSR focus on the Bottom of pyramid: There is huge consumer potential in rural India and addressing this segment is a win-win partnership for both companies and the people. The companies benefit by widening their consumer base and selling more products; the rural people benefit by getting quality goods and services, which motivate them and raise their self-esteem. So, there is a need for companies to design and develop innovative products and services, and help the poor prosper.

A step ahead from triple bottom line: A triple bottom line includes people, planet and profit.  In the private sector, a commitment to corporate social responsibility implies a commitment to some form of TBL reporting but in today's scenario corporate need to move ahead from people, planet and profit to partnership, progress and prosperity for taking a shift towards strategic CSR . In a nutshell, companies should take people together with them to reach to the ground level, seek ways for progress on the planet and most importantly not only work for profit but should also work for prosperity of the community. Effective partnerships between corporate, NGOs and the government will place India's social development on a faster track.

Strategic focus and Learning Organization: CSR practices involve some obstacle such as lack of Time and financial resources so Organizations strategic focus needs to be on such sectors which are under tapped that means focus should be on that sector which can deliver value to masses using new mind set of value proposition, rarity, uniqueness, and building dynamic capabilities of Corporate to have learning organization in India. That means corporate should focus on such areas in which CSR initiative has not been taken instead of following the same initiatives which has already been taken by the other companies.

CONCLUSION

Sustainability has never before been as high-flying on the corporate agenda and the indications are that it will become even more critical to company strategy and operations in the coming years. The majority of companies studied for this research are trying to embrace CSR to one degree or another and the experiences of executives from companies leading in the field of strategic CSR provide a number of insightful lessons for other managers embarking on a move towards sustainable practices. As they do so, CSR practices are moving from the domain of corporate affairs and corporate communications into the mainstream of the company. Not only few but  if many companies  incorporate CSR into the heart of corporate strategy for sustainable actions, then sustainability cannot be separated from the company's core business objectives in the direction of taking a strategic turn for long term growth in India.

REFERENCES

1. ASSOCHAM CSR Team, KPMG India, Corporate Social Responsibility - Towards a Sustainable Future, 1st International summit on Corporate Social Responsibility, 2008

2. Berad, Nilesh R., Corporate Social Responsibility – Issues and Challenges in India, 2011

3. Heslin, Peter A.;  Ochao, Jenna D., Understanding and Developing strategic Corporate Social Responsibility, Organizational Dynamics; Vol. 37 Issue 2, p125 – 144, 2008

4. Mahapatra, Sudip;  Visalaksh, Kumar; Emerging trend in Corporate Social Responsibility: Perspective and Experiences in Post- Liberalized India,

5. Ministry of Corporate affairs, Government of India, Corporate Social Responsibility voluntary guidelines, 2009

6. Prasad, V. V. S. K., CSR initiatives of Indian Companies – A study, 2009

7. Porter, Michael E.; Kramer, Mark R.; Strategy and Society – The link between Competitive advantage and Corporate Social Responsibility, Harvard Business Review, 2006

8. Times Foundation, the corporate social responsibility wing of the Bennett, Coleman & CO. Ltd, TNS India, IRRAD, Corporate Social Responsibility Practices in India, Jan 2011

9. Urmila, Moon, Corporate Social Responsibility in India, 2011

10. Watts, Christopher, Managing for Sustainability, Economic Intelligence unit, ENEL, 2010

11. Zadek,  Simon, The Path to Corporate Social Responsibility, Harvard Business Review, Dec 2004
 


Ms Nidhi Khurana
Asst. Professor
Asia Pacific Institute of Information Technology
Panipat
 

Source: E-mail November 9, 2011

          

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