Businesses responded to the new Corporate Social Responsibility (CSR) regime in India with both alacrity and ambiguity. Evidenced by numbers, there is keenness to embrace the new law that makes a stipulated CSR spend binding on a large number of enterprises. From 2014, the year the Companies Act- 2013 came into force with its CSR provision in Section 135, corporate India’s monetary contribution to CSR has swelled from Rs. 6,552 Cr to Rs. 11,867 Cr in five years. A compliance gap still exists, but not all of it may be due to delinquency because the ambiguity around the space may have led to unintentional inaction.
Varyingly viewed as compliance, charity or investment, what companies make out of their CSR commitment differ from each other. Corresponding strategies vary from non-existent to transformational. When the law replaced ‘voluntary’ from the idiom of corporate social responsibility with ‘mandatory’, its implication for brands and their reputation demanded broader considerations.
Earlier, organisations which voluntarily engaged with CSR earned admiration for thinking public welfare beyond their business while the rest were seen quietly minding their own business, without courting any hostility. The new law categorised companies more drastically- into those who adhered to the law and those who didn’t. Since non-compliance is a serious issue, lack of CSR was damaging enough for corporate reputation.
That was when many companies quickly readjusted their compliance glasses to meet the minimal statutory requirement with some hasty contributions, only to be blinded about the larger opportunities that lay ahead. They did not think it necessary to have a strategy to power their CSR action. The easiest to do was to make some donations to eligible organisations and avoid any disrepute to the brand.
The thought that prevailed was different among those who were already investing in community outreach with a marketing intent: Now that the budget which was once discretionary has become obligatory and substantial, better be more ambitious about it, amplifying the publicity decibel around social action. Their strategy was to promote the brand more visibly attached to social causes, resulting in rigorous public relations (PR) and a hefty advertising budget to boot.
Now, these two approaches (compliance-centric and marketing-centric) need to be examined in the wake of widespread contention that CSR has yielded next to nothing for corporate reputation. Economists like Milton Friedman and corporate reputation advisors like Andrew Griffin have been dismissive of CSR. Griffin contends that if companies err in their social obligation, they are criticised and if they meet the obligation voluntarily, that is deemed only a half-hearted compensation for the social and environmental damages caused by their operations!
This defeatist sentiment often stems from placing CSR wrongly in the pursuit of reputation.
A strategic reputation framework defines the key stakeholders of an organisation and clearly pronounces its commitment to each of them. Corporate reputation relies on fulfilling those commitments consistently and exceeding them whenever possible. While all companies identify customers, employees and investors as their key stakeholders, only a few recognise society (read communities and environment) as their fourth stakeholder and fewer think of their commitment towards it. The investment that the society has made in one’s business may be unsecured through an agreement, but in enabling the company’s operations, it has let go of its land and local entitlements, readjusted its lifestyle, helped with utility services and labour like cabs and exchanged their livelihood for unfamiliar options, not to mention voting to power the government that stands for ease of doing business.
When an organisation recognises society among its key stakeholders, its commitment to the society is no different than to the others- customers, employees, and shareholders. It is ethical to do so and makes sense for sustainability and operational efficiency too. Business prudence demands it, even without statutory impulse.
So, when CSR becomes a commitment to the fourth stakeholder, its modus operandi will be derived from the overall business strategy, factoring in technology and domain expertise, money (grant making) and time (volunteer hours) as its key components.
In this stakeholder-centric approach, companies will not rush to measure their ROI of CSR because the meaning evaporates if it is about quid pro quo. Rewards for being responsible and conscientious are non-monetary. In life, they manifest in a greater sense of fulfilment and greater moral strength to measure up to tough situations. For businesses, there would be a great place to work, a community that cares, an environment that is cared for and customers who stay. Imagine doing business with less of these and rethink CSR!
It is time organisations ceased to seek immediate rewards of goodwill out of their CSR, and instead let their long-term reputation grow from consistently meeting and exceeding their commitment towards all their stakeholders.
The views and opinions published here belong to the author and do not necessarily reflect the views and opinions of the publisher.
He can be reached on Twitter @pksajan
This is a very great and Insightful read. The explanation is clear and brings out – on ground facts which makes the paper more dynamic and readable
As always, thanks for candid opinion on some of the limitations. corporate has to calibrate some authenticity of the channels where CSR is leading us and the same also needs to be addressed with urgency to expedite the intent on right path