With the passing of the Companies Act 2013, corporate laws in India have been given a much needed update. One of the key changes introduced by this legislation is mandatory Corporate Social Responsibility, though not a new concept to corporate India, the Act does bring more companies into the fold.
While there are multiple definitions and connotations to ‘Corporate Social Responsibility’ given its emergence in the global sphere since the 1970’s, the main theme circles around sustainable development and achieving a balance of economic, environmental and social imperatives (Triple Bottom Line Approach) and the responsibility of businesses for their impact on society (European Commission).
An examination of the current CSR landscape in India and recent legislative events (including the Draft National Guidelines on the Economic, Social and Environmental responsibilities of Business released for public comments by the Ministry of Corporate Affairs in June 2018) clearly indicate the intent to move from a philanthropic and community development approach in CSR to a more strategic, holistic and business integrated one. While the Companies Act, 2013 has been successful in bringing CSR to the forefront and encouraging greater transparency and accountability through its comply-or-explain mandate, the focus is now on Corporate India to see how they evolve CSR in India from the approach of what is done after the profits are made to how sustain-ably and responsibly are the profits made.
Growing global influence and increasingly vocal consumers are leading to a discernible trend of convergence of CSR with sustainability in India. CSR has to cease to been seen as philanthropy or a mere extension of the government’s ongoing developmental efforts. Strategic programmes that link sustainability with corporate strategy will not only drive profitability in the long-run but also show clear Social Return on Investment (SROI). Well structured and integrated CSR initiatives bring a host of greater benefits to companies – conquer consumer trust and loyalty, communities and consumers become enablers for business, weave ‘goodness’ into the corporate DNA and create a positive corporate image, attract and retain employees with a greater sense of belonging.
An effective CSR strategy should address sustainability across economic, societal and environmental factors and have goals that are tightly embedded into a company’s larger business plans. A multi-stakeholder approach that gives CSR a seat at the strategy table and weaves together the functions of CSR, branding and marketing, while ensuring documentation, implementation and monitoring of CSR activities are as effective and stringent as those of business is the way to go to unlock the full potential of CSR.
Several consumer behaviour studies indicate that there is a clear co-relation between corporate image or perceived “goodness” of a company and positive consumer attitude and purchasing behaviour.( The Impact of Corporate Social Responsibility on Consumer Behaviour, University of Milan, 2013)
Traditionally, CSR has been associated with large corporations and there is an assumption that CSR approaches are based and predominantly developed in and for large corporations. While Small and Medium enterprises (SMEs) do in reality stand to gain immensely from having strategic CSR initiatives. SMEs occupy that critical space in the economy that has a direct and immediate influence on their stakeholders – employees, suppliers and consumers all mostly from the sections of society that are the targeted beneficiaries of development and inclusive initiatives. The engagement of SMEs in CSR is very critical since they help create employment opportunities, drive economic growth and provide opportunity for equitable distribution of income in society.
From the perspective of the SMEs themselves, CSR is often understood as being a drain on valuable capital and allocation of critical resources, including manpower, outside of the main business purposes of the company. However, simple and strategic initiatives can aid SMEs capitalize on the unique position they occupy to further their brand penetration, secure consistent contracts from larger and international companies (that usually require higher compliance with social and environmental practices to be part of the qualifying criteria), better employee loyalty and community support.
Implementation of CSR by SMEs doesn’t necessarily have to be capital intensive or deal with deferred long-term rewards. An effective CSR strategy for SMEs should rely heavily on collaboration with other enterprises and organisations similarly situated as the SME and is involved in complementary services/industry(ies). This collaboration enables social initiatives that can have depth and scale, but at reasonable costs, into causes that directly affect and involve the SME and its stakeholders.
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