Invoking Corporate Social Responsibility (CSR) quotient for all the right reasons

The recent Balasore Train tragedy, among other things, brought to the fore the importance and significance of Corporate Social Responsibility (CSR). Often, people are cynical about the extension of the corporate arm for help but for a moment think about a world devoid of any such concept!

The CSR arm of some corporates sent their disaster management team immediately on the ground with aid, apart from medicines, food and also announced employment opportunities. One Group extended a hand of help to sponsor the school education of students who lost their parents in the accident. It was not just big corporates, several non-profit organisations like Ramakrishna Vivekananda Mission, a non-profit organisation which runs a school in West Bengal’s Barrackpore, has taken responsibility of all children orphaned by the accident. There are many many more companies and organisations which have come forward to help in one way or the other. Such endeavours and acts provide a glimmer of hope to society and mankind!

Which brings us to the larger question of what exactly is Corporate Social Responsibility? Perhaps the best way to understand CSR is to know what it is not. It is certainly not something you do only to get publicity. No harm in letting the world know but if that is the sole objective then it would be seriously limiting the scope of what it is all about. Simply put, CSR refers to business practices involving initiatives that benefit society and environment. As per law, contribution to political parties or activities that benefit only employees are not considered as CSR.

While on one hand CSR helps to improve various aspects of society and, environment, it goes a long way in promoting a positive brand image of companies. Among other things, CSR programmes raise morale in the workplace. Poverty, Education, Healthcare, Literacy, Child and Elderly Care, Women’s Welfare, Environment and Sustainable Development are only some of the popular categories within CSR initiatives.

Is CSR Mandatory for companies in India? Yes, it is. India became the first country in the world to make CSR compulsory. In India, Corporate Social Responsibility has been made mandatory through provisions under Section 135 of the Companies Act- 2013. According to the law, a company needs to spend at least 2% of their average net profit made during the 3 immediately preceding financial years for CSR activities.

The CSR law, more popularly known as the CSR mandate, which came into effect from April 2014, applies to every company registered under the Companies Act, 2013, and any other previous companies law qualifying the following conditions -Having a net worth of rupees five hundred crores/more, or Having a turnover of rupees one thousand crores/more, or Having a net profit of rupees five crores/more, during a financial year.

So one may infer that companies partake in CSR because they have to. However, this can be a very narrow way of looking at it. Leading Indian companies like Reliance, Adani, Wipro, Tata Group and many others spend even more than the CSR mandate requires them to. CSR as a concept connects a company with the society in which it operates. In essence, it is the most humane face of a business entity.

Just to throw some data light on the magnitude of CSR – Since its rollout in 2014, CSR expenditure in India has continued to increase year-on-year. In fact, in the year 2017-2018, for the first time, the amount spent by companies exceeded the prescribed expenditure. The cumulative expenditure by the top-100 companies listed on the National Stock Exchange from 2014-2015 to 2017-2018 is about Rs. 26,385 crore as per a KPMG Report.

Increasingly consumers are looking at brands and companies not only for the product features or business financials but the values they stand for. In such a scenario, CSR assumes a prime importance as it reflects the walking of the talk on crucial and critical aspects that impact society at large.

Not only an enhanced brand image, a properly implemented CSR endeavour can usher in other competitive advantages, such as better access to capital and markets, owing to the perception of the company, increased sales and profits, operational cost savings, if planned accordingly, and more customer loyalty.  Last but not the least, is the value that it gives the companies and their management in terms of self-worth and relevance in society.

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Raja Ghoshal

Raja Ghoshal is a Business Journalist turned Senior Corporate Communication professional who is presently looking after corporate communications at the diversified Apeejay Stya & Svran Group. He was earlier working as a Deputy Director (Corporate communications) with industry chamber CII. An MBA in Marketing, Raja’s hobbies include creative writing, public speaking and writing poetry.