CSR: an underrated approach to sustainable progress

The term corporate social responsibility (CSR) might have become popular in recent years, but it has existed in India, in different forms, for many decades now. For example, in the late 1800s, much before the multinational corporate system was in full swing in India, affluent merchants and businessmen shared a part of their wealth with the poor by helping them in times of drought and famine or by constructing temples. It was charity back then; it is responsibility today.

CSR is a commitment on the part of companies to contribute to the development of society as well as ensure ethical and sustainable business practices. In the years leading up to Independence, CSR as we know it today began to take shape with foremost industrial enterprises setting up trusts for education and research. Companies went from simply donating to a cause to starting institutions and programmes for development themselves.

A corporate organisation actively involved in the betterment of its stakeholders and the community at large tends to have a stronger public reputation. It is beneficial not just to the society but the company as well, which will attract more consumers and investors. The extent of CSR activities depends upon the size of the company as well as their profit. The greater the profit, the larger the scale of such projects. Regardless, the efforts of corporate organisations, big or small, can go a long way in the sustainable improvement of communities.

For a long time, CSR activities were voluntary. Several major community projects, which are functional even today, were started before CSR was made binding by law. For example, Tata Chemicals introduced the ‘Save the Whale Shark Campaign’ in 2004 to create awareness about the vulnerable species and conduct scientific research for their survival. The project helped save close to 200 sharks since its inception. Similarly, Mahindra & Mahindra set up Project Nanhi Kali under the K.C Mahindra Education Trust in 1996 to provide primary education to underprivileged girl children in the country. Today, more than one lakh girls have been educated through the programme.

With the passing of the new Companies Act 2013 however, CSR has become mandatory for businesses with a specific annual turnover, worth or profit margin. Two percent of their profit after tax has to be directed towards issues like education, health, women empowerment, poverty alleviation, ecological sustainability or the Prime Minister’s National Relief Fund.

Corporate establishments now have separate CSR committees that are responsible for the planning and execution of such activities. Compulsory CSR is an assured and additional line of funding for state development. When the government falls short, corporates can help make up for it. In fact, after the act was implemented, the average spending of public sector firms on CSR saw a tremendous rise from 25 million rupees in 2012 to 147 million in 2013. Companies too can increase their profits by linking CSR initiatives to their products and services. For example, a company that uses eco-friendly methods of production or donates a certain amount of money from each product to a charity or NGO is likely to do better than its competitors.

The Tata group, which is one of the largest MNCs in the world is known for its CSR, especially for its strong commitment to sustainability. In the 2013-14 year, the company spent 1,000 crore rupees on its social projects. Its key areas of interest are education, skill development, environment, education, infant mortality and protection of girl child. Unilever’s initiatives are also a leading example of the positive impact corporates can have on sustainable development. The company’s Sustainable Living Plan aims to enhance the health and hygiene of over a billion people by 2020 and reduce its impact on the environment by 50 percent by 2030.

Unfortunately, not all companies meet their requirements for CSR. According to a study by Futurescape, IIM Udaipur and the Economic Times, only 18 percent of the 216 surveyed companies fulfilled the two percent mandate. The CSR law has definitely increased the pressure on businesses, especially those who weren’t involved in it earlier. Lax monitoring can result in the bypassing of rules or inclusion of non-CSR spending under that of CSR on paper by some companies. Hence, the government should strictly ensure accountability and transparency in all CSR transactions for it to be a success.

Corporates need to understand their responsibility to the environment and society as well, because ultimately their survival depends on the existence of a sustainable world. United Way Worldwide, a non-profit organisation that mobilises citizens to take action for development, encourages companies to be socially responsible and partners with them to implement community development programmes. Its Bengaluru chapter’s flagship campaign ‘Wake the Lake’ has successfully brought together the civic body, businesses and citizens to save the city’s dying lakes.

CSR has great potential when it comes to sustainable progress and is capable of revolutionising the landscape. Corporates can relieve the government of a part of its burden as well as successfully involve the community in its progress. An ideal partnership between the government, citizens, NGOs and corporate companies will surely bolster inclusive growth and development in our nation.