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Corporate social responsibility -A Strategic Methodology

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     on  02 April 2010    

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Corporate Social Responsibility as an expression was used perhaps for the first time in 1953 when Bowen raised the question “What responsibility to Society can business people be reasonably expected to assure”.

 

Crudely put, the notion of CSR involves the expenditure of Company Resources at the discretion of management on doing ‘good works’ for the community (like sponsoring community projects or funding charities). The European Commission defined CSR as a “concept whereby Companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”

 

In a speech at the Johannesburg World summit for sustainable development in 2002, the then UN Secretary General, Kofi Annan explained to the assembled business leaders,

 “I hope corporations understand that the World is not asking them to do something different from their normal business, rather it is asking them to do their normal business differently”.

 

That probably sums up the current thrust of the business-centric CSR drive to promote achieving corporate profit ends through legitimate and socially acceptable means, partly laid down in the law of the land and partly described by best practice expectation.

 

 

The CSR Spectrum in India

 

Many of the Corporations in India have taken a lead in following high principled policies relating to business ethics, child labour environmental protection and so on. In India some of the conspicuous example of proactive leadership  in this field are the Tatas in Jamshedpur who run a township that other public municipalities can learn from. Infosys is known for its massive efforts at transparency and comprehensiveness in financial reporting. Wipro has a reputation for its ethical business culture. Titan has an inclusive workforce that facilitates employment of the disadvantaged and encourages women’s self-help groups.

 

Creating a Separate Fund for CSR

 

One of the recommendations of the Voluntary Guidelines for Companies issued by Ministry of Corporate Affairs is to create a separate fund for their Corporate Social Responsibility (CSR) activities in the interests of greater transparency. The Ministry has suggested that a specific amount should be set aside in the annual budget that is linked to profit after tax. This would clearly demonstrate a Company’s CSR commitment and allow shareholders to compare programmes.

 

 

 

 

Every year Indian Oil Corporation sets aside a fixed portion of  its profits for spreading smiles in million of lives across the country through a comprehensive community welfare and development programme. About one-fourth of the community development funds are spent on the welfare of scheduled caste and schedule tribe beneficiaries.

 

 

 

Making the most of CSR- A STRATEGIC METHODOLOGY

 

Executives often view corporate social responsibility (CSR) as just another source of pressure or passing fad. But as customers, employees and suppliers and society place increasing importance on CSR some leaders have started viewing CSR as a creative opportunity to fundamentally strengthen their businesses while contributing to society at the same time. They view CSR as central to their overall strategies, helping them to creatively address key business issues. Some innovative Companies have managed to overcome this hurdle with smart partnering emerging as one way to create value for both the business and society simultaneously.

 

Addressing rural distribution challenges in India and “Ensuring sustainable supplies of critical raw materials” illustrate smart partnering initiatives at Unilever. Both address long term specific challenges facing the Company and help in building creative partnerships that accrue significant benefits to both sides.

 

 

Focusing on CSR choices: Many Companies start with pet projects, philanthropy or propaganda because these activities are quick and easy to decide on and implement. The question is how to move towards CSR strategies that focus on truly concentrating value for the business and Society.

 

1)      Concentrate your CSR efforts: management time and resources are limited, so the greatest opportunity will come from areas where the business significantly interacts with and thus can have the greatest impact on society.

 

2)      Build a deep Understanding of the benefits: The need is to find symmetry between two sides and being open enough to understand issues both from a business and a societal perspective.

 

3)      Find the right partners: These will be those that benefit from your core business activities and capabilities –and that you can benefit from in turn. Partnering is difficult but when both sides see win-win potential there is greater motivation to realize the substantial benefits.


Applying these principles to choosing the appropriate CSR opportunities prompts additional questions-namely: What are the one or two critical areas in our business where we interface with and have an impact on society and where significant opportunities exist for both sides if we can creatively adjust the relationship? What are the core long term needs for us and for the society that can be addressed as a result? What resources or capabilities do we need and what do we have to offer in realizing the opportunities?

 

Plotting Benefits: CSR initiative by Unilever- The Benefit matrix

 

PROJECT SHAKTI

 

A Successful CSR drive

 

 

Social Responsibility                                                             Organizational Benefit

 

 

1. New Rural Distribution System                                 1. Enhancement of loyalty brand

 

2. Health and living standards improvements             2.Support for Rural entrepreneurship

 

3. Employment for 42000 rural women                        3. $ 100 million sales growth

 

In smart partnering, mutual benefit is not only a reasonable objective, it is also required to ensure long-term success. For this it is required to define an array of potential benefits for both the business and for society. The benefits can be assessed across the following three dimensions

 

  1. Time Frame: To be clear on both short-term objectives and long-term benefits. In smart partnering, the time-frame is important, as initiatives can be complex and take time to realize their full potential.

 

  1. Nature of benefits: Some benefits will be tangible, such as revenue from gaining access to a new market. Others will be equally significant, but intangible, such as developing a new capability or enhancing employee morale.

 

  1. Benefit split: Be clear about how benefits are to be shared between the business and society. If they are one-sided, be careful you are not moving into the philanthropy or propaganda arena. If the aim is to create more value from partnering than you could do apart, then benefits must be shared approximately.

 

 

As you develop a clear array of benefits, a business case and a story to communicate to all stakeholders ask:

 

Q1) Do we have  a clear understanding of the entire array of benefits, and the associated business case on which we can focus, assess and manage the potential CSR activity.

 

Q2) Does the activity focus on fundamental value creation opportunities where we can really partner with society to realize simultaneous benefits.

 

Q3) Are the opportunities significant, scalable and supportive of our overall strategic priorities

 

The present circumstances point to the need for Companies to embrace strategic CSR programmes that are tied to their core competencies and that are designed around long term commitments to deliver social change. Strategic programmes are poised not only to deliver most effective and efficient social programmes but also to provide the strategic returns to the business. At the end of each day, each Company wants to see his investments in the Community have a direct complementary impact on its business,

 

What a Corporate leader should do?

 

When it comes to CSR, there are no easy answers on what to do or how to do it. A Company’s interactions and interdependencies with Society are many and complex. It is clear that approaching CSR as a feel good or quick fix exercise runs the risk of missing huge opportunities for both the business and society. Taking a step by step approach and following the principles outlined here offers leaders a way to identify and drive mutual value creation. But it will demand a shift in mindset. The smart partnering view is that CSR is about doing good business and creatively addressing significant issues that face business and society, not simply feeling good. Smart partnering obviously requires greater focus, work and long term commitment than do many standard CSR pet projects, philanthropic activities and propaganda campaigns, but the rewards are potentially much greater for both sides.


Suhita Mukhopadhyay
Company Secretary

Published in Corporate Law
Source : Newspaper clippings, Other books on CSR
Views : 4281

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