From Tatanagar to triple bottom-lines
Hardly a day goes by without some mention in the media of corporate social responsibility (CSR) and its growing significance on good business practices. CSR, as it is commonly known, is becoming increasingly important to corporations as well as individuals.
Perhaps, the need for CSR was best summed up by Jamshetji N. Tata when a he said about a century ago: “In a free enterprise, the community is not just another stakeholder in business, but is, in fact, the very purpose of its existence.”
In 1907, Jamsetji Tata set up a steel plant in Jamshedpur, now in Jharkhand. Unknown to many, Jamshedpur –also called Tatanagar sometimes -- grew to be the first instance of CSR at work from an Indian company.
The city created the concept of developing a ‘command area’, where all the employees and downstream industries of the main factory, Tata Iron and Steel Company (TISCO), would not just put up, but make their homes in, for a long time in the future.
“The intent of CSR, by design, should encourage inclusive growth like it happened in the days of Jamshedpur, which became a model for so many “ Purs” to be set by many large business houses. That was true CSR, promoting growth and impacting quality of life in the real sense,” says Bhupendra Sharma of Erehwon Consulting, an organisation that works to encourage innovation in large Indian companies.
Historically, CSR itself has gone through several phases from mere philanthrophy in the ’50s to the the concept of “conscience cleaning and give back to society” in the new millennium, as corporations faced charges of profiteering, environmental damage and an anti-social bias.
In India, unfortunate the Bhopal Gas tragedy in 1984 and the resultant civil society outbursts and government regulation made Corporate India sit up and take CSR seriously, not as an incidental activity, but as a specialised focus.
Malini Thadani, Head Group Communications and Corporate Sustainability, HSBC India sums up the new mood in which corporates are taking up causes, although their eyes remain on profits.
“It is no longer just about positioning, it is about taking a position,” she says.
Increasingly, the buzzword for corporates is the triple bottom-line –taking off beyond the idiom of describing the net profit as the bottom-line of a company.
Triple bottomline is a concept that goes much beyond the balance sheet of the company. It includes financial responsibility, social responsibility and environmental responsibility.
While financial responsibility refers to economic profitability, competitiveness and job creation, social responsibility involves social well-being of everyone both inside and outside the corporation. Environmental responsibility, on the other hand, involves efficient use of natural resources.
“It is important establish synergies to create impact. For the corporate sector, the triple bottom line approach results in business value for the community, transformation of lives and blending economic and social benefit,”said Jay Sehgal of the Insitute of Rural Research and Development.
Gayatri Paul of realty giant DLF said that for the success of any corporate social responsibility effort, it is imperative that it is spearheaded independently of the commercial initiatives of the organization.
“For the credibility of any CSR initiative, it is imperative that the project is conceived and identified keeping in mind the need and requirement of the community and solely on the strength of the benefit which it is likely to give to the community,” she said.
Some see CSR as not just an add-on to business or carrying out philanthropic work, but living a philosophy.
“It is also being responsible, in the way we do our business, in the way we encourage our staff and customers to be responsible so that we build a sustainable business and a legacy for generations to follow,” Thadani said.
Real estate giant DLF has divided the company’s CSR initiatives into six different verticals: rural development, urban community development, capacity building, health, education and environment management.
Erehwon is closely associated with the Marico Innovation Institute, an organisation supported by Marico Industries, the Indian fast moving consumer goods major.
Many Indian companies have taken up CSR in the definition of inclusiveness. Mahindra & Mahindra, the Mumbai-based automobile to realty major involves every rank of its executive in thinking about the betterment of its employees, says Rajeev Dubey, President (Human Resources & Corporate Services).
At M&M, managing director Anand Mahindra is part of an apex committee that is continuously evaluating the performance as well as the well-being of the company’s employees. M&M, putting a spin on the concept of employee stock options, has started something called Employee Social Options, under which the company agrees to bear the cost of social work each employee is willing to do.
On the other hand, more conventional CSR can often fail, says Sharma.
Take the example of Union Carbide Corporation, the multinational chemicals company that suffered ignominy in the wake of the Bhopal Gas Tragedy.
The company has since spent millions of dollars in trying to clean up the wake of devastation left by methyl isocyanate (MIC) gas leaked from its plant.
“I find the mindsets governing CSR are either ‘Charity’ or ‘ Guilt’. Both result in crippling rather than enabling the recipients of grant. How would you expect anyone to start improving their state by getting used to grants of sorts?” asks Sharma.
It would be very limiting for companies to admit that the purpose of business is just economics and shareholder value, he feels.
He cites a global petrochemicals corporation he declines to name, which is finding it extremely difficult to involve local communities, as they feel they have been exploited over the years. The company has given away millions of dollars and yet finds itself on the receiving end of anger of the community.
Apparently, it pays to derive a good image right from the start. Adopting CSR as a window-dressing exercise, a tax-break ploy or a simple trick to lure shareholders and employees may not go far enough.