The amendment to the Companies Act in 2013 made corporate social responsibility mandatory in India. A knee-jerk reaction to the obligatory nature of such an amendment is akin to the taxes enforced by the government on companies. But isn’t it beneficial for a company to be able to contribute to society, on which it depends for progress? By the same token, isn’t it the fiduciary responsibility of a company to weigh the cost-benefit tradeoffs of implementing corporate social responsibility (CSR) programmes?
These two viewpoints seem to be paradoxical, but they are not. The challenge is to devise a strategy that positively impacts society and enhances a firm’s value.
The seemingly complex paradox can be addressed if companies comprehend the goal of CSR, which is aligning a company’s social and environmental activities with its business purpose and values. Simply defining the fundamental goal of CSR is not enough. It is also imperative to define the success associated with the goal. Since creating value and achieving success are essential, firms must develop measures for the social or environmental value addition and generating positive business results.
There are several companies that administer CSR efficaciously. Take, for example, the guiding principle for Tata Consultancy Services’ (TCS’) CSR initiative: Impact through Empowerment. As part of this, TCS has initiated adult literacy programmes, forged university alliances and has created web health centres (Med Mantra). TCS has ensured that the communities engaged in their CSR programmes are empowered.
At a time when the world is battling climate change, many industries have aimed their CSR initiatives for ensuring environmental sustainability. They are working towards achieving zero waste to landfill, carbon neutrality, positive water balance, reduction in specific energy consumption and increase in utilisation of renewable energy sources.
Social and environmental CSR influences perceptions and makes consumers feel good about the brand and its products. Such positioning helps companies to gain competitive advantage and increases profitability.
Another area to focus on via CSR initiatives is education and developing socially excluded communities. The advancement of girls, youth, and farmers, through quality education and generation of livelihood opportunities, can transform lives. The CSR programmes can help in building a tolerant, healthy and a more connected society by providing quality education and fostering sustainable livelihoods for people from socially and economically disadvantaged communities. Dedicated CSR initiatives can earn laurels for a company, boosting its brand value along with the stock price.
These are some ways to resolve the paradox underscored at the outset.
CSR numbers in India are estimated to be around Rs 10,000 crore. To get the best results from this, companies should not get trapped in random acts of philanthropy, but align their social and environmental activities with their business rationale and values. That should deliver the biggest bang for the buck — for society and the stakeholders.
Faisal Patel is a social and business entrepreneur
The views expressed are personal